With COVID-19 cases surging and a new wave of restrictions looming, challenges persist for small business owners according to data from the Q4 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 consecutive quarter, respondents most frequently ranked the loss of business or closings because of the impact of COVID-19 as their top concern. Attracting new business, worries about financial stability and reduced cash flow were the other top concerns.
“With COVID-19 numbers hitting new high-water marks across many states, 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%) 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%, but 33% felt it was continuing to slow, while a combined 38% said it was in a recession or depression.
When asked about the timeline for economic recovery, 28% said it would not come until the second half of 2021, while 34% 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, 55% 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. Payment is no exception. The pandemic’s effects were particularly highlighted in the data showing that 25% of owners said they have stopped or reduced their acceptance of cash or check via in-person payment, though 74% continue to accept it. Credit and debit cards continue to be a staple for direct online payments (25%) and those through an online payment provider (43%), as well as in-person payments at a terminal (38%) or with a compatible mobile device (37%).
Business owners also have 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% 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. We continue to operate with a customer-first mindset and focus our support on helping business owners not just survive but thrive.”
Sixty-nine percent of business owners rated their company’s current financial situation as good or somewhat good, and the measure lifted to 73% when asked about 12 months from now. With the shifts and changes small businesses have had to quickly make this year, 46% reported decreases in revenue, but 53% expect revenue to increase over the next 12 months.
Indicators showing a very deliberate approach to weathering the storm in 2020 include only 23% of owners acknowledging investing in their businesses this year, and only 13% reporting adding employees. Yet for the next 12 months, business owners hope to increase those numbers with 30% investing in their businesses and 25% adding to their staff.
“Owners seem to be acknowledging the challenges COVID-19 continues to bring to their business, particularly with the resurgence in cases across the country,” said Mark Vitner, senior economist with Wells Fargo. “With that said, given the myriad factors that have affected the small business landscape, the continued recovery in optimism indicates these owners see brighter horizons ahead.”