If you want a better community, you need to put your money where your mouth is.
In other words, you need to have a hard look at where you're spending your money. And according to Eric Groves, founder and CEO of Alignable, it better be on local businesses.
In a recent conversation with Ramon Ray about Alignable’s State of Small Business Report, Eric illustrates the significant impact of the pandemic on small businesses. As a result, many small businesses are in dire straits.
On the other hand, he explains that the significant problem posed by the massive slowdown in business is solvable. He also shows how, as well as the fundamental reason behind the plan.
Since March, more than 500,000 responses have been captured by Alignable as it seeks to continuously understand the small business landscape.
What it finds is that COVID-19 continues to have a serious impact on small business. Some 75% of small business owners say the pandemic is still negatively impacting their business, Eric says. At its peak, 85% said the same.
The Small Business Administration ran the Paycheck Protection Program (PPP) well, Eric says. The program also injected money into the sector. However, it missed a vast majority of small businesses.
Eric explains: “81% of small businesses are sole proprietors and independent contractors. For some reason, they felt that the money wasn’t really there for them. So they struggled enormously throughout this process.”
He adds that there were also problems in that Alignable noticed that black-owned businesses were rejected at twice the rate of white-owned businesses.
Small businesses tend to run with hardly any cash on hand, Eric says. He explains that his data shows that 68% of small businesses that did not get PPP funding also had less than 30 days worth of cash on hand.
Most revealing is the following, Eric says. Alignable asked businesses their sales expectations for the year. They find that 69% expected a decline, with 33% expecting less than half of last year’s haul.
Asked what is needed to stay in business, 64% say they need the same sales figures from last year this year to survive into 2021. That means 35% of Main Street businesses are not going to survive the fourth quarter of 2020 into the first quarter of 2021, Eric says.
“That scares the hell out of us,” he tells Ramon.
While the future looks ominous, Eric says the fix is actually straightforward. And it starts with a realization that consumers must make.
He says that when the pandemic struck, everyone went into survival mode. People began to prefer that all the products and services they need be dropped off on their doorstep.
“We shifted all of our expenditures from our local community out to companies like Amazon and others that could deliver products to our doorstep,” Eric says. “It sucked all of the money out of our communities.”
“If we’re going to actually survive this and recover, what we need to do is we need to all as consumers shift our behavior back. We can do it. It’s not too late,” he explains.
The payback for that small action can be huge.
“If you think about small businesses, if you spend $100 at a small business, roughly $66 of that gets recirculated in your community,” Eric says.
If you spend on Amazon, only a fraction comes back to the community. And that is, if the delivery driver happened to also live in your community.
“We’re making Jeff Bezos even richer through our behavior. And that’s fine. Nice guy, but he’s probably got enough,” says Eric. “It’s time for us to actually take care of our communities because they take care of us.”
The reasons to spend on local businesses are fundamentally personal, according to Eric.
It may be easier to push a button and just wait for a door-to-door delivery. However, you just have to think of your quality of life to give you a bit of pause, he says.
Supporting local business maintains your real property’s value. It also maintains the services you enjoy and the community itself.
“At the end of the day, you need to realize that each time you’re pushing that button, your house value is declining. The services that you have in the community are declining. Your school system is declining,” he says.
“So go ahead and push that button, but recognize the implications of everything that you do.”
Eric shares that what small business leaders can do is to create a safe environment.
“The number one concern that small businesses had in the July report was a fear of customers not feeling safe in returning,” he says.
It’s a way to take control. He says that support is coming from the federal government, but don’t expect a prolonged period of assistance.
That leaves it up to the community and its small businesses to band together to get through the challenge.
“I know that for our economy to recover, it’s going to be driven by small businesses. It always is,” he says. “Sixty-five percent of all new jobs are created by small businesses. They are the life force of our economy. As consumers, we should be asking ourselves how we feed that engine.”
Rithipul is a private limited company on a mission to empower Cambodian people and enterprises with the knowledge, skills and leadership in financial management.
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