With COVID-19 cases surging and a new wave of restrictions looming, challenges persist for small-business owners as they continue to weather the pandemic, according to data from the fourthquarter Wells Fargo/Gallup Small Business Index. While the index score rose 12 points for the second straight quarter, overall optimism levels remain just over half of what they were in late 2019.
For the third straight quarter, respondents most frequently ranked the loss of business or closings due to the impact of COVID-19 as their top concern. Attracting new business, worries about financial stability and reduced cash flow were the other top-ranked concerns.
“With COVID-19 numbers hitting new high-water marks across many states as we exit the important holiday season, small businesses are facing another steep round of challenges,” said Steve Troutner, head of small business at Wells Fargo.
The Q4 survey highlighted that the journey to economic recovery for small businesses is not a short one. Almost half (46 percent) of the respondents continued to report decreases in revenue in the past 12 months. The number of owners that felt the economy was growing climbed nine points to 29 percent, but 33 percent felt it was continuing to slow, while a combined 38 percent said it was in a recession or depression.
When asked about the timeline for economic recovery, 28 percent said it would not come until the second half of 2021, while over one third (34 percent) did not anticipate a recovery until after 2021. More specifically, when asked how long recovery from the impacts of COVID-19 for businesses like theirs would take, over half (55 percent) said it would not be until the second half of 2021 or beyond.
The pandemic has required many businesses to establish safer ways to engage with customers. Payments is no exception. The pandemic’s effects were particularly highlighted in the data showing that 25 percent of owners said they have stopped or reduced their acceptance of cash or check via in-person payment, though 74 percent continue to accept it. Credit and debit cards continue to be a staple for direct online payments (25 percent) and those through an online payment provider (43 percent), as well as in-person payments at a terminal (38 percent) or with a compatible mobile device (37 percent). Business owners have also heard that more customers would like the ability to make payments over the phone with a debit or credit card. This being said, cash and checks remain the largest method of payment, with 74 percent of businesses continuing to accept them.
“As we think about how to serve our small-business customers amid the current COVID environment, it’s critical that we support them with new payment techniques which in turn allow them to operate safely and efficiently,” said Liz Ryan, executive vice president and interim head of Wells Fargo Merchant Services. “The data tells us that for a large number of business owners, both their current circumstances and their customer preferences are dictating a hygienic approach for payments. As we observe the current shift toward innovative solutions like contactless payments, the pandemic is accelerating the adoption of these capabilities as consumer buying behaviors and preferences change.”
Though COVID-19 continues to weigh on small businesses, owners are focused on staying positive and continuing to make thoughtful decisions. Sixty-nine percent of business owners rated their company’s current financial situation as good or somewhat good, and the measure rose to 73 percent when asked about 12 months from now. With the shifts and changes small businesses have had to quickly make this past year, 46 percent reported decreases in revenue, but 53 percent expect revenue to increase over the next 12 months. Indicators showing a very deliberate approach to weathering the storm in 2020 include only 23 percent of owners acknowledging investing in their businesses and only 13 percent reporting adding employees.
