Guest Blog: Small Businesses Survived the Crisis

One year ago, I was often asked by the press and opinion leaders how many of our members and small businesses we expected to fail due to the closed doors, reduced capacity, shifting consumer spending patterns and continued costs of operation during the COVID-19 crisis. Surveys of our 4,000 members from May of 2020 when closures were widespread indicated as many as a third of our members were very concerned, thinking they would not survive the health and economic crisis and be operating in 2021.

Step-by-step through gradual and limited openings, vital federal and state grant programs, masks and later on vaccines, buy local public information campaigns, and reinventions of operating and customer service models, countless small stores and restaurants were saved.

Massachusetts had some of the most restrictive COVID-19 restrictions of any state. Some of our “essential business” members such as grocers and hardware stores saw sales and costs skyrocket. While the limited consumer options meant high sales for the open sellers, costs for safety and compliance were very high, and inventory was disrupted due to supplier shutdowns, distribution alterations and for some products, consumer hoarding. Employee safety concerns and work pressures also pressed payroll up considerably.

Fairness was clearly an issue in the early months. While some of our restaurants quickly evolved into a curbside and delivery model which gave them the opportunity to stay open as essential businesses, most of our stores did not even have those options or internet alternatives under the government closure orders. Even our florist members could not operate until the week before Mother’s Day, unless the actual owner took all the phone orders, made all the arrangements and did the deliveries. Yet, prior to their openings, consumers could buy flowers at the local supermarket.

Open or closed, costs continued, including rent and inventory. Some suppliers were flexible with payments and orders, others were not. Likewise, about half of our members reported flexible arrangements with their landlords, while the others were not so fortunate.

By early June, everyone who wanted to be open and had the employees, customers and inventory to justify it could open and resume business. However, reduced capacities and consumer shifting spending patterns kept sales still off compared to the prior year by anywhere from 25%-75%. The first round of the PPP saved countless small businesses and 90% of our members did apply for and receive those vital funds.

Hope built throughout the summer as some sales increased, some occupancy restrictions were slightly relaxed and grant dollars prevented failure. However, the COVID-19 numbers started surging once again in the fall, and even more severe restrictions and public messaging made the situation more difficult by the end of the year, even as vaccines were approved for emergency use. A second round of PPP and a strong state grant program came at the right time to prevent what otherwise would have been a very large permanent closure trend as the calendar turned to 2021.

It wasn’t until spring that there was across the board, growing confidence by our members that they had made it through this unprecedented health and economic crisis, and that better days were ahead. The vaccines turned the health numbers around, which in turn made consumers willing to once again go out and shop and dine in person; as opposed to ordering online and dining at home.

But what consumers were willing to do, and how they were spending their dollars throughout the pandemic created a roadmap for small businesses to reinvent themselves. They met the consumer where they wanted to be met, and many of those new forms of service will not go away with normal times but will remain consumer choice options for service. RAM small business members doubled their internet selling presence over the course of the pandemic, while others created curbside pickup, delivery, outdoor dining, cocktails to go and by appointment-only forms of customer service. Changing consumer service options and buying patterns also mean a change for some on the number of store locations and reduction in existing footprints.

To this very day, many retail and restaurant sector employers remain closed in Boston due to the lack of customers. How many can come back or be replaced with similar small businesses remains to be seen on where employers land on remote and hybrid work in their Boston offices. And members across the state are struggling with continued supply chain disruptions and shortages, as well as employee shortages and inflation concerns.

Yet, the grim picture of a year ago projecting as many as a third of our small members permanently closing clearly was avoided for a variety of reasons. And although many members have closed some underperforming locations, and reduced their footprint in other locations, we feel confident that the overall closure number will ultimately land in the 6-8% range.

One thing was perfectly clear throughout the pandemic, that small business owners heavily relied on their CPAs and their trade associations. The complexities of the federal and state grant programs, from determining which programs to apply for, to the application process and federal and state tax considerations, our members clearly relied upon the members of the Massachusetts Society of CPAs. And I am sure that you relied as well upon Amy Pitter and her outstanding staff to keep you informed and coordinated throughout the challenging times.

And at RAM, we are refocused on delivering for our small business members effective employer benefits to keep them competitive with larger sellers as they compete for both customers and employees. For 31 years we have offered a nonprofit, cooperative workers compensation program, fully regulated by state Division of Insurance. Service levels are unmatched by large commercial insurers, and upfront discounts and back-end dividends represent the collective experience and profits of the group, and those dollars go back to the members rather than to an insurer. Well over $100 million in savings have been returned to our members from this program.

A nonprofit credit card program administered by another state retail association also saves our members important administrative costs, as electronic transactions continue to grow and particularly the more costly “card not present” transactions online. Discounted payroll and HR services also provide savings for our small business members.

And while the crisis of the pandemic and low consumer traffic is in the rear-view mirror, labor shortages, rising wages and competition for employees is the new challenge for small businesses seeking to provide strong service to returning customers. At RAM, we are also seeking to help our members provide the employee benefits to attract and retain their workforces. Joining in with our counterparts in other states, we recently rolled out a Multiple Employer Plan (MEP) allowing our members to offer high quality 401k’s at very little to no cost to the small businesses.

Similarly, over the last eight years, RAM has created the largest small business health insurance cooperative in the state for our members. Modeled after our successful workers compensation program, affordable choices with defined contribution options are important benefits to offer current and prospective employees. Upfront premium discounts, enhanced wellness financial incentives, free subscriber life insurance and free supplemental hospitalization coverage to pay for inpatient deductibles, are all provided to our members through our small business health insurance cooperative in partnership with Blue Cross Blue Shield of Massachusetts.

Running a profitable and competitive small business in the Commonwealth is always a challenge, but never more so than over the last year and a half. But it is also a good time for entrepreneurs to take that financial risk and open a new store or restaurant to replace one that has closed, or to seek new markets nearer to where customers are now living and working.

And as usual, these risk takers will rely upon their key advisors such as their CPAs as decisions and investments are made.

Jon Hurst has served as president of the Retailers Association since 1990. RAM was established in 1918.