Part of the reason clients hire me is to give them an outsider’s opinion of the challenges or opportunities facing their businesses.
I take this very seriously, so I’m constantly scanning the economic horizon for changes that could have an effect on these leaders and their organizations.
Over the past few months, I’ve been talking to more people than usual from around the globe in my quest to determine the changing impacts of the COVID-19 pandemic on small business.
I believe there are several unintended impacts businesses face that nobody is really talking about but will affect us all as consumers.
Lack of product
Early in the pandemic, we heard of factories closing to protect their workers from disease. Most have long since reopened. However, if you’re planning to buy your favourite game or toy for someone this Christmas, you might be in for some empty shelves.
Unfortunately for many retailers, there’s a lack of products to choose from.
Not only was the supply chain disrupted by factory closures, shipping products from Asia has been severely hampered because few ships are available to carry everyday products to fill the shelves of your favourite stores.
Suppliers are explaining to retailers across all sectors that shipping of their products is being disrupted due to the amount of personal protective equipment (PPE) required to fight the pandemic.
Not only are you going to have trouble finding parts for your car, Christmas gifts or your favourite clothing made in a sweat shop, the costs of these goods are going to be higher.
In many cases if suppliers have access to products, the shipping costs have increased substantially.
Also, because there has been a contrived shortage due to factory closures, demand is high.
Your local restaurant faces the same challenge. There’s a lack of available space in most restaurants due to new government requirements keeping patrons separated. In order to make ends meet, many operators have had to raise their prices. The law of economics is that higher demand and lower supply equates to higher prices.
The government may be telling you that inflation isn’t increasing. However, your pocketbook will tell you otherwise.
Higher prices aren’t just dictated by supply and demand. They’re also affected by labour costs and a lack of labour.
A couple of factors affecting labour will cost you directly as a consumer.
First, government subsidies to workers during the pandemic have disrupted the labour supply. Many businesses need employees. However, in many cases they can’t find people willing to work for starting wages because these people are happy to collect government subsidies and unemployment insurance payments.
Additionally, in government or bureaucratic organizations where people have chosen to work from home, many feel it’s now their right to work remotely. But research shows that work from home results in lower productivity, higher costs and technological risks.
As well, remote workers often feel marginalized and less loyal.
In 2017, IBM recalled many remote workers after 20 quarters of losses, citing lower productivity as one of the reasons.
Main street closures
While the stock market has rebounded, many small businesses are struggling to keep their doors open. Work from home, combined with fear, affected foot traffic in many locations. This has resulted in lower than expected sales.
A report by the Info Credit Group this year found that a 10 per cent drop in sales will result in 70 per cent of businesses being unprofitable. And 81 per cent of businesses will have net losses if sales are down by 25 per cent.
Businesses in many locations are quietly closing their doors without fanfare because they can’t make ends meet.
While most businesses haven’t been directly affected by sick employees, they have been affected by the pandemic and the restrictive measures put in place by health officials.
The lingering and substantial effects, including higher debt and higher taxes, will take years for many to overcome.
Dave Fuller, MBA, is an award winning business coach and a partner in the firm Pivotleader Inc. Impacted by the pandemic? Email firstname.lastname@example.org