The economy is top-of-mind for small business owners trying to emerge from the crisis and uncertainty of the downturn over the last year. Business owners in all industries are looking to the latest economic trends, financial forecast and business forecast information to help plan and strategize for future growth opportunities.
If you’re considering starting a business, here are some recent surveys and data-based insights that you can use for your small business planning for the rest of 2020 and into 2021 and beyond.
Experts Predict: Steady Economic Recovery Through 2021
The Congressional Budget Office (CBO) has released a report of “Interim Economic Projections for 2020 and 2021,” which says that America’s Gross Domestic Product (GDP) is expected to decline by 5.6 percent during 2020 and grow by 4.2 percent in 2021.
The economy is expected to grow steadily throughout 2021, but “real output is expected to be 1.6 percent lower in the fourth quarter of 2021 than it was in the fourth quarter of last year.”
Bottom line? 2020 is a hard year for everyone, and while there is hope for strong growth in 2021, it might not be enough to get us back to where we were in December 2019. But for new business owners who are just getting started, this small dip may not matter. If you are just getting started in business, you are totally new to your industry and totally new at finding customers. Rather than worrying about what the GDP is doing, worry about what your customers want and figure out how to make money for your business right now.
Small Businesses Are Surviving, But They Need More Sales
According to an August survey from the National Federation of Independent Businesses (NFIB), small businesses are still alive and fighting hard, but many have taken a big hit to their sales revenues and have not yet recovered from the economic downturn.
The NFIB found that sales totals for many small businesses are still hurting:
- 22 percent of small business owners said that their businesses’ sales levels are 50 percent or less than they were before the pandemic.
- 28 percent said their businesses’ sales are at 50–74 percent of pre-crisis levels.
- 50 percent reported that their sales are back where they were before the crisis.
- 14 percent said that their sales are higher than they were before the pandemic.
How soon will business conditions return to “normal” pre-pandemic levels? According to the NFIB survey:
- 19 percent believe business conditions will get back to “normal” during 2020.
- 52 percent of small business owners believe that it will take until 2021 for business conditions to improve to “normal levels.”
- 20 percent believe “normal” conditions will return in 2022.
- 9 percent say that normal conditions will not come back until after 2022.
If business conditions do not get back to “normal” anytime soon, how long can a business hold out? Despite the challenges, the NFIB survey found that while some business owners are facing the prospect of short-term business closures, many business owners are feeling confident about their survival:
- 21 percent of small business owners say they will have to close their businesses if economic conditions do not improve in the next six months.
- 19 percent will be able to keep operating for 7–12 months under current conditions.
- 61 percent do not anticipate any near-term problems and expect to keep doing business.
What should a new business owner take away from these statistics? Even though times are tough, many current businesses are still surviving and are hopeful for the future. There is never a “perfect time” to start a business, but sometimes recessions can be a good time for entrepreneurs to come onto the market with new ideas and new solutions to problems.
More COVID-19 Stimulus Relief Is Possible
As of this writing, Congress had not yet passed another round of $1,200 stimulus checks or other economic stimulus relief. However, another federal stimulus package, perhaps with additional support for small businesses, is still possible. Powerful voices in Washington are speaking out about the importance of additional stimulus funding to support the economy, keep consumers spending and keep money flowing into the coffers of small businesses.
Federal Reserve Chair Jerome Powell has been quoted as saying that the path ahead for the economy is “highly uncertain” and will need further support from the federal government. U.S. Treasury Secretary Steve Mnuchin has also said that the Trump administration is still willing to reach a bipartisan agreement with Congress to provide additional support for U.S. workers and businesses.
If your personal entrepreneurial “startup fund” could benefit from another $1,200 stimulus check, if your community and potential customers could benefit from additional stimulus funding or you would like to see Congress apportion additional funds for small businesses, you can contact your Congressional and Senate representatives and encourage them to pass a new stimulus package.
How to Start Small Business Planning for 2021
Reading big-picture economic projections and understanding the financial forecast for the economy as a whole can help you have a sense of where the overall country is headed if you are deciding to start a business. But your own business idea and your specific industry are a different story. There are many things you can do right now, and into 2021, to enhance your small business planning.
Here are a few quick tips:
- Update your business plan for the new realities and market conditions. During the events of the last year, have your assumptions changed about how you’re going to sell products, who is your ideal customer or how to target your ideal markets?
- Re-evaluate your sales and marketing strategies. What can you do to find new customers, sell more to existing customers or get into new markets?
- Embrace ecommerce. Online sales have been one of the biggest bright spots of a difficult 2020; make a plan for how your business can get into selling online with sophisticated ecommerce channels.
- Re-evaluate your cost structure. How can you start a new business with the lowest possible costs? What can you bootstrap, how can you avoid taking on a lot of overhead costs, how can you run your business as efficiently as possible without spending a bunch of money?
- Recession-proof your business and personal finances. Are you trying to start a business while not having a solid financial foundation for your life? That’s okay, but if you have credit card debt and you don’t have some cash in the bank, you need to make a plan to fix your personal (and business) finances. Make a plan to achieve profitability, get out of credit card debt, get paid faster and boost your cash reserves. It’s okay to take on some debt as part of starting a new business, but as soon as you can, be prepared to look for options to finance your high-interest business credit card debt with a lower-interest small business loan or small business line of credit.
Small Business Owners Are Resilient and Dedicated
A previous COVID-19 small business survey in April 2020 found that even though 87 percent of small business owners said that their business was hurting because of the pandemic, 79 percent said minimizing deaths was more important than reopening the economy. Even though so many small businesses have been hit hard by this economic crisis, small business owners have also shown a strong sense of community spirit, resilience and determination to keep serving their customers, creating jobs and growing the economy for the future.
New entrepreneurs and new business owners can be part of this spirit of resilience and building for the future. For almost everyone, 2020 has been a bizarre, frightening, frustrating, exhausting and unprecedented year. Just getting through this year will be an accomplishment for many business owners. But there are signs of hope on the horizon. There are financial projections for growth in 2021. If you’re starting a business, be prepared to adapt and pivot your business model and business plan to the new realities of our current situation and economy. No matter how long it lasts, try to hold on to that spirit of flexibility and resilience; it will serve your business well in the months and years ahead.