Are you ready for some COVID-related stats that won't spin you into anxiety or depression? We are too!
At the Chamber, we've been watching some of the emerging trends related to business -- from local to global. We decided to share some of the more interesting findings in this brief round-up.
New Business Boom
According to the US Census Bureau, over 111,000 applications to start a new business were filed during the week of August 10th. That's a 69% increase over the same week a year ago. And it's no fluke: 113,000+ filed the week before. In fact, third quarter new business tax IDs have surpassed second quarter numbers in just the first eight weeks.
Saving for a Rainy Day
The average savings rate in April jumped to a record 32%, up from an average of 8%. The average savings rate in May was also significantly higher than average at 23% -- and it's remained higher than average since.
Business Growth in Online Sales
Nationwide there has been a 49% increase in online retail sales. Much of this increase has, of course, gone to the big internet players such as Amazon but not all. While some view Amazon as a retail giant, over two million small businesses in the US view Amazon as a sales and delivery channel, along with sites like Etsy, Ebay and others.
Home Sales Climb Nationwide
Realtor.com reports that July real estate prices were up 8.5% over July 2019. And the National Association of Realtors (NAR) shared that July 2020 home sales were up 24.7 percent from the month before. July was "among the strongest (months) the housing market has ever seen." These home price increases are partly due to a shrinking supply of houses on the market (down 32.6 percent nationwide), low interest rates and pent-up demand from potential home buyers putting off house hunting during the uncertain spring season. Speaking of demand, the NAR noted that home ownership, in general, is at a reported 12-year high.
Economic Development Collaborative Awarded $2.45M in New Loan Capital to Support Ventura County Businesses
On August 5, 2020, the Economic Development Collaborative (EDC) secured $2.45M in new loan capital from the U.S. Department of Commerce/Economic Development Administration's CARES Act Fund to help support Ventura County businesses negatively impacted by COVID-19. Set to be allocated as an EDC Revolving Loan Fund (RFL) over the next 24-months, qualifying Ventura County businesses can apply to receive between $10,000 to $250,000 of working capital.
With this new $2.45M award, the EDC now controls $5M total in loan capital set for distribution specifically in Ventura County. Fixed with a 4.2% interest rate, all RFL recipients are reasonably expected to repay in full within 7 years.
"The Economic Development Administration (EDA) is one of the EDC's oldest partners," states Marvin Boateng, EDC Director of Lending. "We greatly appreciate their more than 24 years of continued financial support and are excited that this new grant will expand our opportunity to lend to small businesses within Ventura County. We know that many have been hard hit by COVID-19 and additional capital is a lifeline to businesses with limited cashflow."
Ventura County businesses interested in learning more about or applying for an EDC loan are encouraged to contact Marven Boateng directly via email at email@example.com or phone at (805) 409-9156.
The impact of COVID-19 will go well beyond the pandemic itself, with serious effects expected on the global economy as well as on people's lives. During periods of economic downturn, people's incomes are limited, and their spending habits change significantly. To stay afloat and retain customers, some businesses will choose to revise their prices and fees downwards. Naturally, with the stiff competition that characterizes many markets, you may be tempted to follow suit. Even as you strive to make the right decisions for your business and customers, it would be important to understand the visible and hidden negative effects of lowering prices.
The negative effects of lowering prices
The negative effects of lowering prices can be categorized into visible and hidden outcomes. The visible effects related to profits and sales volumes. While a good number of business owners think that lowering prices will help to drive sales, the move can lower your profits by a significant margin. Reduced profitability will have a huge negative impact, particularly on startups and small businesses. For any business to enjoy the same level of profitability after lowering prices, they will need to sell more products to customers. In a shrinking economy, it may be difficult to sell more than you used to do previously.
Apart from the visible effects, the hidden ones can have a huge impact on your business. Cutting your prices may lead customers to believe that they will get lower quality from you. This notion could affect your reputation as a business that sells high- quality products or services. Another possible outcome is that long-term customers will feel that you have been overcharging them, a factor that could see you lose some of your current customers. In addition, customers who feel that they overpaid will not refer others to your business. You may also not end up attracting more new customers if your competition lowers their prices as well since things will still be the same.
With these effects, adjusting your prices downwards could be counterproductive, effectively dealing a blow to your efforts to drum up business. As such, lowering prices during a recession would not be a smart strategy.
What you should consider doing
To help you get through the tough times, there are several steps that you can consider taking. With declining demand, you will need to come up with smart and innovative ways of keeping your business going. If you only handled big projects in the past, it would be time to consider taking on smaller projects with smaller budgets. Taking on smaller projects will not only keep you going but could also earn you new customers. Another option would be to provide free consultations while maintaining the prices of your products and services at the same level. Since the price is defined by the value that customer enjoy, you can also choose to increase price and value simultaneously. However, this will require that you pick the right time and decide how much to change the prices. In the end, you will want to make changes while ensuring you encounter the least resistance from your customers.
In the long run, the pandemic will ease off, and the global economy will rebound. However, adjusting prices can have long-term effects that will take a long time to rectify. Provided you deliver value to your customers, we recommend that you charge what you believe is a fair price.
No one has a crystal ball to see when businesses will start to open up again, but smart business owners and marketers are already planning for what lies ahead. If you wait until you get the go-ahead to open up to start to plan your business comeback, you may find all your competitors racing past you at the starting line.
As you make the shift from survival mode to comeback mode, take a look at these tips which we've pulled together to help you hit your mark, get set, and go.
1. Stay in Touch with Your Employees
No business thrives without a dedicated workforce who bring their skills and passion to the job every day. You have probably already been keeping your whole team up to date on your own company's situation, and as you prepare for your comeback, you need to confirm your concern for them. Be transparent with all developments, and let them know your plans as they come into shape.
2. Plan for Interaction with Your Customers
All brick-and-mortar businesses are likely to face new requirements when they reopen. While you definitely need to stay up to date on what your state, county, and city ask of you, you also need to make sure your employees are fully informed. Your staff may have to wear masks and gloves for a while, they may have to practice social distancing, and you may have other requirements you insist on for your customers' health and safety. Put your expectations in writing to make sure everyone's operating on the same page.
3. Get Your Finances in Order
If your business has been closed for a matter of weeks or even months, your balance sheet may not be in the best of health. Before you open up, take a long, measured look at your financials to determine how to approach the new normal. You may need to apply for a business loan to pay bills that have been piling up or to replace inventory. You also need to estimate just how much business you expect to do immediately if, for example, you have to limit the number of customers who enter your establishment and you experience hitches in your cash flow. Working with your banker and your accountant can help you make wise decisions while you have time to consider all your options.
4. Plan to Remain Flexible
Even when your local governments okay opening up again, you may not want to leap feet first into the fray. Check with your insurance company for guidance, especially if customers or clients enter your workplace. Social distancing guidelines are likely to remain in effect in many locations, so you may want to allow staff to continue to work from home — a situation which requires a great deal of trust between employer and employee. If you can create contingency plans now, you'll provide yourself with more options once it's time for your comeback.
We believe in the ability of our community to bounce back from tough times and to adapt to new environments, so we are optimistic about the future for our region. If you're ready to pivot and adapt as you begin your comeback, you should find your business in a position of leadership again.
On Saturday, the 4th of July, President Trump signed legislation that extends the deadline for businesses to apply for aid under the Paycheck Protection Program (PPP).
The bill extends the deadline for businesses to apply for PPP loans until Aug. 8. The program, set up to assist businesses impacted by closures related to the coronavirus pandemic, had expired on June 30 with roughly $130 billion left unused.
The Senate in a surprise passed the legislation by unanimous consent late on June 30, extending the program hours before it was set to expire.
The House took up the Senate bill and passed it by unanimous consent on July 1, sending it to Trump’s desk.
The lending program was established by the $2 trillion stimulus package negotiated by the White House and congressional leaders and signed into law at the end of March.
The program experienced a chaotic rollout but has been popular, with the Small Business Administration lending more than $520 billion in emergency loans to more than 4.8 million small businesses.
The extension comes as lawmakers on Capitol Hill prepare for negotiations over the next round of coronavirus stimulus. House Democrats passed a $3 trillion stimulus bill in May that included aid for state and local governments and another round of $1,200 direct payments to Americans, but the measure gained little traction in the GOP-controlled Senate.