Before the pandemic the economic climate was generally positive with many businesses showing solid growth in 2019 and expecting to have more of the same or better in 2020. Dale Caldwell, executive director of the FDU Rothman Institute of Innovation and Entrepreneurship said there was a lot of hope in November and December of last year, and while the political landscape was still not as favorable to small businesses as he would like, it was generally more positive than it is now.
Caldwell was one of four panelists participating in a Sept. 14 discussion titled NJBIZ Conversations: Startups And Early Stage Investing. Moderated by NJBIZ Editor Jeffrey Kanige, Caldwell, along with Andrew Frazier, founder of SmallBusinessLikeAPro.com; Jill Johnson, chief executive officer of the Institute for Entrepreneurial Leadership; and Wendy Oliveras, founder of Shess Global Alliance LLC provided insight, tips and tools on how small businesses can cope with the pandemic.
Johnson said her focus at IFEL is to work with entrepreneurs who are dealing with limited resources. Many were struggling before the pandemic, but even more once the outbreak hit and they were faced with trying to find ways to pivot those resources and weather the storm.
Back in March and April the problem of limited resources worsened and small businesses faced a struggle to survive. Many were left with a multitude of uncertainties and they needed to re-envision their business. Johnson said that was not an easy task.
At first, many owners thought the shutdown would only last a few weeks; then maybe for three months. But as the pandemic grinds on, the problems are mounting.
Government funding was one way small businesses were able to weather the economic climate. Frazier said that money from the Coronavirus Aid, Relief, and Economic Security Act was a godsend for some of these small businesses and many would not have survived without it.
According to Frazier one of the best programs available – one that many businesses would not have been able to get in other circumstances – was the Economic Industry Disaster Loan (EIDL). There were also a lot of alternative products coming out – and small business owners found themselves relying on the new Small Business Administration programs.
Oliveras said many business owners were unsure of what programs they were qualified for and her company provided them with guidance on making the right connections and where to turn.
Caldwell agreed, adding that many business owners suffered because they didn’t have the affiliations with financial institutions or access to information. He did praise Tim Sullivan and the New Jersey Economic Development Authority for its programs and funding, but said it is still not enough. He called on government officials to focus on the needs of small businesses, rather than large corporations.
Johnson said there are opportunities now especially for fintech and edtech companies. Other businesses, such as retailers or restaurants, need to figure how to reach consumers. Fundamentally, they need to do business differently, so that in case of another shutdown they are ready to pivot. From time to time she said these startups can’t even see their way to a new direction. That’s why she believes strongly in having necessary resources in place for startups. Citing the difficulties that many small businesses had demonstrating economic hardship to receive grant money, Johnson said some missed out on their chances, and she has witnessed too many businesses that were caught in the middle.
“There are a lot of folks who have pivoted. They’re producing completely new products, or doing things in a different way. I think it’s been a little tough … I’ve seen some businesses that have been caught in the middle where there actually is an opportunity and they want to pivot and move in a new direction, but the resources aren’t there for them,” Johnson said.
Frazier recommends businesses do three things to address the challenges they are facing. He said small businesses need to look at the trends, learn what trends to take advantage of by understanding its strengths and finally have a plan to move forward in this environment.
On the question of whether it is even possible for a small business to start in this economic climate, the panelists expressed optimism. “There’s always downturns,” Caldwell said. “And you know the time to get into the stock market is when it’s going down. And so this is actually an incredible time to really start, but not so much when you need investment capital.”
Many businesses will not have access to capital because the return won’t be high enough, especially among those in urban communities. However, says Caldwell, there are companies to invest in that will hire people and help get people out of poverty.
“Even if you look at our national economy, it’s largely technology firms. The Dow Jones Industrial Average … there’s not an industrial company in it. And so it’s all technology. So a lot of it is smoke and mirrors,” Caldwell said. “Those are the jobs that really helped sustain us. And so we need to really kind of realign the way we think about small business, not just what you need to survive on your own, but as an essential component of the economy.”
Watch the full panel discussion here:
Caldwell pointed to a cyclical problem and believes creativity is required to support these business. But he stressed that the problem that government is having now is that small businesses aren’t making money.
“So they’re not paying taxes. The government doesn’t have money to support small businesses, and they can’t survive. The money is not there. But there is money and investment in the investment world, you look at the stock market and other things. But as we said that people are only going to invest, probably in technology now because the returns are going to be good. But government has the capacity to allow tax credits to allow people to invest in businesses. And the poor sections of the community such as opportunity zones … well, sometimes the tax credits are enough. So even if they lost money on that investment tax credit is worth more than even losing money on that investment.”
Frazier agreed and added that both the government and large businesses should help struggling small businesses by becoming customers. “Because at the end of the day, the business owners want to deliver their products and services—they just need a chance. There have been groups out there, and towns who have done marketing and done communications, especially around restaurants. And gotten people to do more ordering and focusing on local, but there just needs to be more of that across the board, especially in minority communities.”