Startup & Small Business News: December 17, 2020
Small Businesses and Startups Begin Showing Positive KPIs
Recent reports indicate signs of optimism, with some trepidation, as Congress inches closer to a relief package for small businesses
Last week, I wrote about the latest economic forecasts calling for a new “Roaring 20s” after widespread vaccination takes place. Despite the rosy outlook over the long-term, the UCLA economists behind the study foresaw a rough few months for this winter and spring.
The National Federation of Independent Businesses (NFIB) recently released its quarterly report on small business economic trends, and frankly, things are better than any of us could have called for back in March.
Sales & Jobs are Up
A net of 5% of businesses reported higher revenue over the past 3 months. According to the report, “the improvement in sales was unprecedented.” Nearly 1 in four businesses increased its payroll over the past 3 months, and 1 in five expect to do so in the next three months. Thirty-four percent of small businesses currently have job openings they are looking to fill.
The survey compiles data based on earnings, capital outlays, inventories, and employment to develop its “Small Business Optimism Index.” The historical average of that index is 98, and currently, the index sits at 101.4.
New Businesses Applications Increase
While (sadly) many small businesses have been forced to close during the pandemic, there are signs that the small business community is beginning to rebound. A chart recently released by The New York Times shows that new businesses are on the rise, based the number of people applying for federal Employment Identification Numbers (EINs):
In the article, Steven Hamilton, an economics professor at George Washington University, is quoted as saying:
One of the few bright spots during the pandemic has been a surge in new business formations, reflecting those laid off taking up self-employment, but more significantly the strength of household balance sheets built up through the crisis putting them in a position to start new businesses. While these are nowhere near as large as the closures, we kind of have to take what we can get in a crisis of this scale.
Concerning Signs
While those trends are encouraging, there are still reasons to be concerned. In its weekly job report, the Labor Department today said that initial applications for unemployment increased to 885,000 workers, up from 862,000 last week. For reference, prior to the pandemic, the weekly number of new unemployment claims averaged around 225,000. Overall, 5.5 million workers are receiving state-based unemployment benefits, down dramatically from the peak of 23 million in May.
The recent increase in unemployment is a clear reflection of the surge in new COVID-19 cases necessitating reduced operations for bars, restaurants, and other businesses reliant on the service economy. According the localized data aggregation firm Womply, 41% of bars, 28% of restaurants, and 32% of hair salons are currently closed. Overall, 23% of local businesses are not currently in operation.
Early reports on the holiday shopping season are also disconcerting. The Commerce Department released its November report yesterday, citing a 1.1% drop in retail sales, the largest drop in that number in seven months.
Help is (Reportedly) On The Way
Congress appears to be close to releasing a relief package specifically targeted to help small businesses. The proposed bill calls for $300 billion to be allocated to the SBA to restart the Paycheck Protection Program. The program will be reserved only for companies that can show a revenue loss of 30% in any quarter of 2020. This ensures that the funding will go to companies that need the help and hopefully remedy some of the issues we saw in the previous iteration of the program.
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