How are small businesses going to survive the Coronavirus crisis?

[TravelTime]

I am wondering how other small business owners are dealing with the Coronavirus crisis? I am concerned my business may go bankrupt during this crisis. I own a small business and have 8 employees. The way my business works is we only generate income if employees see clients. We are seeing a decline in new clients calling and having cancellations. We have been offering a video option to clients if they do not want to come in but many clients do not like video. I am keeping the office open for now but I am super worried that if an employee or client comes in sick that I will need to shut down the office. I have a year left on the lease and many business expenses that I will be personally liable for if the business goes bankrupt. I am concerned about the new law where small businesses will have to pay 2 weeks of paid sick leave to employees who get sick or need to stay home to take care of kids. Most of my employees could qualify for the staying home to take care of kids. When they are out, no revenue comes in. I understand there will be a tax credit but I am unsure of how that will work, whether we will really get it, how soon we would get it after paying out sick leave and just overall worried about the uncertainty around all of this. I have some business savings in my business bank account but not sure how long it will last. I never imagined something like a pandemic could happen and am realizing how vulnerable my business is to this. I imagine that many small businesses are vulnerable and could be wiped out. Large companies are probably going to have layoffs too. I can’t imagine this crisis improving anytime soon. While getting sick is bad and scary, the economic impacts are going to affect everyone as much as getting sick. I hope I am wrong and some miracle happens where this crisis can be turned around quickly, both for our physical and mental health as well as the economic hardships it will cause.

 

[goaliedave]

Many won't. USA announced SBA loans so apply early. You'll need 24 months worth of cash flow.

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[Panina]

I am wondering how other small business owners are dealing with the Coronavirus crisis? I am concerned my business may go bankrupt during this crisis. I own a small business and have 8 employees. The way my business works is we only generate income if employees see clients. We are seeing a decline in new clients calling and having cancellations. We have been offering a video option to clients if they do not want to come in but many clients do not like video. I am keeping the office open for now but I am super worried that if an employee or client comes in sick that I will need to shut down the office. I have a year left on the lease and many business expenses that I will be personally liable for if the business goes bankrupt. I am concerned about the new law where small businesses will have to pay 2 weeks of paid sick leave to employees who get sick or need to stay home to take care of kids. Most of my employees could qualify for the staying home to take care of kids. When they are out, no revenue comes in. I understand there will be a tax credit but I am unsure of how that will work, whether we will really get it, how soon we would get it after paying out sick leave and just overall worried about the uncertainty around all of this. I have some business savings in my business bank account but not sure how long it will last. I never imagined something like a pandemic could happen and am realizing how vulnerable my business is to this. I imagine that many small businesses are vulnerable and could be wiped out. Large companies are probably going to have layoffs too. I can’t imagine this crisis improving anytime soon. While getting sick is bad and scary, the economic impacts are going to affect everyone as much as getting sick. I hope I am wrong and some miracle happens where this crisis can be turned around quickly, both for our physical and mental health as well as the economic hardships it will cause.

I feel bad for you that you have to worry. Hopefully soon they will give you info on the tax credit. Imo For every dollar you pay for your staffs sick time you should get it back. They also need to give small business no/very low interest loans to be able to survive.

The impact is severe and I hope you get answers soon that can help you. As a taxpayer I am okay with having to pay more to make sure businesses like yours survive. We all need to contribute to help those affected.

 

[Fredflintstone]

Unless you convert your office to a toilet paper/hand sanitizer business effective immediately, i am truly not sure what most small businesses would do.

In all seriousness, I am sorry this is happening to you. You are certainly not alone. My guess is that small business will be able to tap into very low rate credit lines to tide them through this mess.

Now, small business owners may need to think of front and centre approaches like a business continuity plan and ways to craft an emergency saving account that equals 6 months of operating expenses.

I do see many small businesses folding if this crisis lingers on to long. Sadly, what cannot be predicted is the after fear of folks even when all clear is announced. The problem with social media as well as a basket of other media sources is that fear can be heightened to a frenzy. Just today,I have received covid 19 emails from over 30 businesses I deal with.

Who would have thought a virus could unleash such massive damage?


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[TravelTime]

Many won't. USA announced SBA loans so apply early. You'll need 24 months worth of cash flow.

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I only have a few months of cash flow. I would not take out a loan to stay afloat as that would be worse for me in the long run. If I run out of cash, I need to lay everyone off. I also need to save some of my cash to pay a year’s rent as well as all the business expenses I would still have even though no revenue is coming in. This is catastrophic for my small business and my employees. The employees are not used to me having any financial problems since I have managed the business very well for the past 10 years. They are going to be in for a shock when they find out.

 

[Fredflintstone]

I only have a few months of cash flow. I would not take out a loan to stay afloat as that would be worse for me in the long run. If I run out of cash, I need to lay everyone off. I also need to save some of my cash to pay a year’s rent as well as all the business expenses I would still have even though no revenue is coming in. This is catastrophic for my small business and my employees. The employees are not used to me having any financial problems since I have managed the business very well for the past 10 years. They are going to be in for a shock when they find out.

I am sorry.


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[TravelTime]

Tax credits are meaningless to small business if they have no cash flow to pay for sick leave.

 

[Fredflintstone]

What I see as a compounding problem is many North Americans (Canadians and Americans) took advantage of the cheap rates and went into debt. This includes businesses, large and small, and individuals. The ripple effect could turn us back into deep recession. I feel especially bad for those in the travel industry. Many are 1 month away from bankruptcy if their cash flows (jobs) just stop.

You may need to close your doors to save yourself. This may be temporary to maintain survival cash.


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[HitchHiker71]

I see this as a very serious issue, not just for SMB but for larger enterprises as well. While corporate profits have been healthy the last several years, corporate debt is also basically at all time highs since interest rates have been near historic lows. So corporations are servicing more debt now than at any time in recent history (possibly ever).

We’re also living in times when roughly half of all Americans cannot cover an unplanned expense of as little as $500 out of savings, which means we are not prepared for any kind of major economic shock like this.

I can see new types of business insurance born out of this crisis that will pay at least a portion of business expenses - much like Aflac does for personal expenses today - to alleviate stress during crises like this in the future.

We are going to have to publicly support many people if this crisis lasts for more than a couple of months most likely. With all time national debt highs as well, this may also be challenging, particularly since the impact of this emerging crisis will be global. We may see sovereign debt crises that we’ve seen in the EU in the past, and other nations, start to rear their ugly heads again.

I hope this virus burns itself out with relative haste, I really do, but I’m not optimistic right now. The US appears to be on track to become Italy unless we get serious quickly about social distancing and lockdowns. Even then, it may be too little too late.

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[Fredflintstone]

I see this as a very serious issue, not just for SMB but for larger enterprises as well. While corporate profits have been healthy the last several years, corporate debt is also basically at all time highs since interest rates have been near historic lows. So corporations are servicing more debt now than at any time in recent history (possibly ever).

We’re also living in times when roughly half of all Americans cannot cover an unplanned expense of as little as $500 out of savings, which means we are not prepared for any kind of major economic shock like this.

I can see new types of business insurance born out of this crisis that will pay at least a portion of business expenses - much like Aflac does for personal expenses today - to alleviate stress during crises like this in the future.

We are going to have to publicly support many people if this crisis lasts for more than a couple of months most likely. With all time national debt highs as well, this may also be challenging, particularly since the impact of this emerging crisis will be global. We may see sovereign debt crises that we’ve seen in the EU in the past, and other nations, start to rear their ugly heads again.

I hope this virus burns itself out with relative haste, I really do, but I’m not optimistic right now. The US appears to be on track to become Italy unless we get serious quickly about social distancing and lockdowns. Even then, it may be too little too late.

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You couldn’t be more right.

Warren Buffett once said, “you know whose been skinny dipping when the tide goes out.”

The ripple effect on this one is massive. Businesses, government, individuals...those in debt are very vulnerable.


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[Fredflintstone]

When this is over, I hope businesses, government and individuals really rethink their positions on debt. Maybe they need to become David Ramsey listeners .


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[bluehende]

Is it possible to lay off your workers now. They can collect unemployment and if finances are better off than you think you can help them with a bonus. It would be better to have a business to come back to than to run it in the ground over the next month. Unfortunately these disruptions always inordinately affect small business. I put this out there knowing that you probably have already run these scenarios over in your head.

 

[WinniWoman]

I am so sorry. This is one thing I am really worried about for the small businesses in the communities across the country. I hope it doesn't come down to this.

 

[CalGalTraveler]

Not all small business owners are in debt. The problem is lack of incoming cash to cover current costs. OP has several months of cash on hand to cover. Lowering the burn rate will make that cash last longer.

Although it is difficult, I would cut staff to skeleton crew and hours immediately to conserve cash flow. I would also explore incremental revenue opportunities. As a small bus owner that's what I am doing. My business sells primarily to large corps. When the external spending drawbridge shuts - which it will, I am set to weather the storm with minimal burn rate. If I must take a loan, I won't because that makes my bus more vulnerable and digs a deeper hole. Time to get creative.

 

[bizaro86]

I'm a small business owner, but my only employee is myself. In the last two weeks I've had more cancellations of projects (with deposit refunds) than new bookings. I think it's very likely that my income will go to zero for at least a few months.

I'm very thankful I only have my own family to worry about and limited fixed costs. I feel for those of you who have to balance treating employees well with the ongoing survival of your business.

 

[Fredflintstone]

I'm a small business owner, but my only employee is myself. In the last two weeks I've had more cancellations of projects (with deposit refunds) than new bookings. I think it's very likely that my income will go to zero for at least a few months.

I'm very thankful I only have my own family to worry about and limited fixed costs. I feel for those of you who have to balance treating employees well with the ongoing survival of your business.

You are probably quite right. You are from Calgary where the financial crisis stems much deeper than just covid 19 (Indigenous issues, oil crash, companies exiting, massive loss of investment, high vacancy rate downtown, etc).


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[OutSkiing]

I feel sorry for OP and anyone in that position. I would consider the layoff option. Let your employees know the bind you are in right away. Some may have alternatives of their own. But where there is no alternative then the layoff notice is likely a good ticket for them getting government help.

There is some reason to believe that things will turn around quickly (warmer weather, higher humidity, seasonal nature of viruses, the decline of new cases in China). But hemorrhaging money has to stop.

Bob

 

[TravelTime]

I am going to give it a week or two to decide what to do. I could continue to operate just as a sole employee and lay off everyone. That might be what it comes down to if new clients aren’t coming in and existing clients are canceling.

 

[Fredflintstone]

I am going to give it a week or two to decide what to do. I could continue to operate just as a sole employee and lay off everyone. That might be what it comes down to if new clients aren’t coming in and existing clients are canceling.

Good call. It takes time to make those big decisions. It’s so nice to see how much you care for the well-being of your employees.


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[CalGalTraveler]

@TravelTime That's a good plan. What is difficult is that the new Calif AB 5 law combined with this epidemic is going to devastate a lot of small businesses and freelancers who will need a side gig to pay the bills.

 

[b2bailey]

Thinking ahead, and hoping this could be over in 90 days, it seems those who will be devastated financially will far outnumber those harmed by the virus.

 

[TravelTime]

Thinking ahead, and hoping this could be over in 90 days, it seems those who will be devastated financially will far outnumber those harmed by the virus.

Yes, I agree completely. Economic hardship is also bad for one’s mental and physical health so it might be as bad as getting sick from the virus. Most people who get the virus will be asymptomatic or have mild symptoms. But I think many more will be devastated financially. The burden of the financial downturn will be borne by those least able to handle it. I am not sure that the government’s plan that they unveiled this weekend is the right solution. For example, I think that the government should directly fund paid sick leave rather than offer through tax credit. What good is paid sick leave or a tax credit if small businesses do not have cash flow. In my business, I could lay everyone off to survive this crisis but that is hurting 9 employees’ livelihoods. I have 8 revenue generating employees and one administrative assistant who probably could not find another job quickly if this crisis gets worse.

 

[klpca]

I thought that small businesses under 50 people were exempt from the law?

Everyone (the rest of us) can help if they prioritize small local businesses when they shop or get services. In your situation I would draft a sympathetic email explaining that the video option is safer for everyone and also how important their business is to you. Can you call potential customers? Small businesses have the opportunity to offer personalized service and this is a great time to go out of your way to make your customers feel like they matter. Can you offer a discount for the video option just to keep cash coming in? Just some thoughts. Best of luck to you and your team.

 

[TravelTime]

I thought that small businesses under 50 people were exempt from the law?

Everyone (the rest of us) can help if they prioritize small local businesses when they shop or get services. In your situation I would draft a sympathetic email explaining that the video option is safer for everyone and also how important their business is to you. Can you call potential customers? Small businesses have the opportunity to offer personalized service and this is a great time to go out of your way to make your customers feel like they matter. Can you offer a discount for the video option just to keep cash coming in? Just some thoughts. Best of luck to you and your team.

I read that small businesses can ask for an exemption. No details are out yet so not sure how this would work. I would think most small businesses would need the exemption to survive this crisis. I think they should have exempted small businesses or have the government directly fund it like unemployment insurance. Instead, they exempted large businesses with 500+ employees even though many of those large businesses do not offer paid sick leave to all their employees.

 

[easyrider]

I am going to give it a week or two to decide what to do. I could continue to operate just as a sole employee and lay off everyone. That might be what it comes down to if new clients aren’t coming in and existing clients are canceling.

Maybe start calling for leads. In the last crash I started calling every one we had worked for asking specifically for their business or a lead. Once the leads started rolling so did the jobs. The man who started me in business told me people want to be asked for their business. I'm sure you will figure it out. Good Luck

Bill