What makes small business so critical to a post-COVID recovery? According to the Small Business Administration, nearly 99% of all U.S. firms are small businesses and employ nearly 50% of the total U.S. workforce. Small businesses also significantly contribute to the broader economy in three major ways: new job creation, product and service innovation, and big businesses support through providing component parts and services.
Small businesses were hard hit by COVID-19, as the ensuing pandemic drove over 30% of small businesses into a nonoperational state. This impact wasn’t the same across the board, as certain industry sectors and geographies were more severely impacted than others with Energy, Transportation, Health and Leisure, and Food Services seeing the largest impacts. While broadly affecting the entire U.S., pockets of geographic concentration became more visible including the south central region relating to Energy, as well as states providing a higher percentage of leisure and entertainment destinations including California, Nevada, the northeast and the southeast region. Geographies least impacted by COVID-19 were mostly tech-oriented regions including the west, northeast and the mid-Atlantic.
Once state and local economies began contracting, small businesses pulled back, hyper-focusing their efforts on cash conservation and maximizing customer retention. Investments in technology were highly prioritized based on three leading factors: Is the purchase critical to my business operationally? Will it drive incremental profit? Will it provide additional opportunities for improved customer retention?
According to NPD’s B2B Distributor and Reseller Tracking service, overall U.S. channel revenues during the pandemic period declined 7% (March- Aug.). Within the Small VAR segment, IT Hardware (representing 65% of total purchases) declined by 9%; however, Notebooks provided a significant lift to help minimize that decline - growing by nearly 30% aided certainly by Work from Home efforts. Networking, Printers, Storage and Memory all reflected significant declines, but segments such as Cloud represented some positive signs for small businesses as they embraced Work from Home and “as a service” efficiencies derived from digital transformation. Cloud sales for the same period increased 25% and saw the largest increase across all industry segments during the same period.
Critical to SMB’s future reemergence will be improved business agility and of course, resilience. Small businesses post-COVID will need to be hyper-responsive in identifying and capturing business opportunities more quickly and efficiently than ever before. Organizations will be flatter with priorities placed on critical problem solving and speed with maximum accountability. Technology will play a significant role in this optimization with the Cloud being utilized in new and expanding ways. Finally, with SMB’s providing such a critical contribution to the broader economy through new job expansion and innovation, the life blood of a post-COVID recovery will be access to available capital through government, private and public company programs and resources.