Small business confidence inches up in Michigan. Will sales follow?
Michigan’s small business owners are expressing more confidence that they’ll survive the coronavirus pandemic, but also say pressures facing them remain acute.
Six months into the global health crisis, the state’s smallest employers say their biggest worry is lost sales, according to a recent survey by the Small Business Association of Michigan.
Economic developers say that’s creating a constant pressure for many owners.
Many “are barely hanging on as it is now,” said Jim Van Doren, executive director of Lenawee Now, the economic development office for the county on the Michigan-Ohio border. “One hiccup could set them back.”
SBAM asked about 700 business owners in mid-September about concerns and expectations for the coming months. In April, after a similar survey, 1 in 7 small business owners said they worried about surviving the pandemic.
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Results from this fall’s survey showed that 10 percent now fear for the survival of their businesses. More, instead, are sounding alarms about sales declines.
Fewer sales lead to lower revenue, in turn raising questions about staffing, purchasing and how to forecast for coming months.
For 17 percent of small businesses, the expectation is a drastic change: They expect sales to be down by more than half because of COVID-19.
“About 1 in 5 are projecting pretty catastrophic impacts to their sales,” said Brian Calley, president of SBAM.
The group’s survey last spring came at a time when the economic shutdown from coronavirus was expected to be temporary. Over the following months, many small businesses either closed -— or they adapted.
That’s playing out in communities across the state.
“The businesses that have survived this long have figured out how to survive,” Calley said. “As a result this fall, confidence levels are outpacing the sales projections.”
“My overall impression is that those that have made it this long are past the survival stage and trying to figure out how to operate in this environment.”
Jill Bland, executive vice president at the business development group Southwest Michigan First, agrees. She’s also seeing the increased business confidence, even amid other concerns.
“We saw a lot of our companies doing some really innovative things to be able to stay open and operate,” Bland said. One example is the wave of businesses that shifted to making personal protective equipment in spring.
That gave owners a sense of control amid the changing economic climate. Business safety nets also increased, with many more businesses receiving help from the state to pay rent, utility bills and payroll. By mid-September, 11,300 received a combined $69 million from the Michigan Small Business Restart Program. A total of $100 million from federal CARES Act funding will be distributed. That followed a $20 million round of small business grants and loans distributed by the state in spring.
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In southwest Michigan, 1,434 businesses received $5,000. Among them 60 percent were minority-, female- or veteran-owned.
About $273,000 in Restart funds have been distributed so far in Lenawee County, said Tim Robinson, director of operations for Lenawee Now.
The grants, worth up to $20,000, are going to “smaller shops where it makes a difference,” said Van Doren. “They operate from day to day and week to week.
“They may need the cash flow to have inventory for the next week.”
Van Doren said the ongoing uncertainty surrounding the virus — and fears that outbreaks could prompt more restrictions — keep small businesses and their customers on edge. With fewer people walking in his community’s downtowns, like Adrian and Tecumseh, many shops and restaurants are exposed to fewer potential customers.
That’s one reason that most business owners don’t see an upswing on the horizon, according to SBAM’s survey. Among those surveyed, 73 percent anticipate a sales drop in the coming months, raising concerns about economic recovery.
“It ties back into the ability to employ people and to provide competitive wages and benefits, and to be sustainable,” Calley said.
Nationally, Yelp data of small business closings showed that at the end of August, 163,735 businesses indicated that they had closed, 23 percent more than six weeks earlier. Permanent closures have reached 97,966.
Unclear so far is how many have closed permanently in Michigan.
Meanwhile, some small businesses expect to grow, according to the small business group. About 25 percent in the recent survey expect some growth or the same sales revenue as last year. Those seem to be centered among businesses selling durable goods, groceries or mail-order products, all of which have sold well during the pandemic, Calley said. Manufacturing and construction companies also are doing well.
Others are challenged by government restrictions or fallout from the pandemic, such as office market leasing. Those are not likely to recover until the overall economy improves.
Entertainment businesses that can open on Oct. 9, such as movie theaters, “are still in a pretty precarious situation,” Calley said. “It takes money to restart. How many can successfully relaunch … is still a big question.”
His group will encourage the state to review capacity limits to aid restaurants as outdoor seating dwindles over the winter. Twenty percent of Michigan’s restaurants say they may not survive until spring.
Yet health remains a focal point of this recession, Calley said. According to the recent survey, 84 percent of small businesses have a COVID response plan in place. Calley said he believes many of the businesses without one involve sole proprietors or the 12 percent of businesses that are still fully remote.
One key to helping businesses remain open, Calley said, is flu shots. He encourages owners to have all employees get one. “It’s the simplest, most effective thing we can do to minimize extra disruption.”
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