Paychex Snapshot: Small Businesses Are Cautiously Optimistic About Recovery

Paychex has been conducting weekly “snap polls” to gain insights into business attitudes during the COVID-19 pandemic. We asked 300 business owners across the U.S. about how they’re managing their business, supporting employees, staying financially fit, and planning for re-opening. Here’s what they had to say.

Our Data Sample

U.S. business owners with 2-500 employees were surveyed in three waves from April 17 to May 4. Each survey has a 5.66% margin of error. The findings in this article are from survey data collected May 1-4, 2020.

Business Outlook

Since research was begun almost a month ago, the business outlook has stayed relatively the same. On a scale of 1 to 100, with 1 being extremely pessimistic and 100, extremely optimistic, the median is 46. Fast-growing companies are more optimistic, at 67.5. There is no significant difference in types of industry. However, the smallest businesses are the least optimistic.

The second poll showed an uptick in business outlook and signs of economic recovery. Check out the results in our second snap poll.

Business Resilience and the Return to “Economic Normal”

With every passing week, businesses extend the amount of time they believe it will take for a “return to economic normal”. More than half of respondents think it will take seven or more months for the economy to get back to normal and for their businesses to fully recover.

A majority of businesses say they’re resilient but not invincible. On a scale of 1 (not at all resilient) to 100 (extremely resilient), the median rating is 70. The perception of “resilience”— the ability to bounce back and resume operations quickly—tends to depend on the current operational status of the business. Businesses rate themselves as less resilient if they have had to close temporarily (the median is 59), and more resilient if they have remained fully open (the median is 76.5).

The Paycheck Protection Program (PPP)

The survey also asked businesses about the status of their funding through Small Business Administration (SBA) loan assistance and the PPP. A little over a third have applied to the PPP (32%). The larger the company, the greater the chance they will apply for funding: 25% of companies with 2 to 9 employees have applied, versus 47% of those with 50 to 500 employees.

The most likely to apply? These include companies that are:

• Expecting to grow 10% or more this year (50%)
• Owned or run by millennials (47%)
• Making over $500K in revenue (44%)

What is the status of PPP loans?

The percent of applicants receiving PPP approval and payment is increasing week-over-week.

• 39% of applicants are still waiting for approval, down from 59% from just two weeks ago.
• 29% have received PPP loan payment, up from 15% last week.

Why didn’t businesses apply for the PPP?

There are numerous reasons why businesses didn’t apply for funding, including:

• No need for financing: 71%
• Couldn’t find an SBA-approved bank: 7%
• Chose to leverage a relief aid program other than PPP: 5%
• Couldn’t access required payroll information: 3%
• Couldn’t find expense records: 2%
• Couldn’t find tax returns: 1%
• Some other reason: 12%

What other sources of funds are businesses seeking?

In addition to federal funding, businesses are seeking other kinds of financial relief or lines of credit.

• 30% have applied for a grant, disaster relief, or some other kind of credit. 60% of companies with 50 or more employees have applied.
• 24% have applied for a loan or line of credit. Of companies with 50 to 500 employees, 49% have applied. Of urban businesses, 36% have applied.
• 43% have used their line of credit because of the pandemic, as have 47% of manufacturing firms.
• 37% have used their credit card to cover pandemic-related expenses. 51% of companies with 50 to 500 employees have used credit cards, as have 47% of manufacturing firms.

Spending and Hiring

3 in 5 respondents are spending less than a month ago. The biggest companies (50 to 500 employees) are cutting expenses the fastest. Doing more with less is the current mindset.

For the third straight week, roughly 3 in 5 respondents are hiring less than they were a month ago. Fast-growing and millennial-owned businesses are more likely to be hiring than their slower-growth or older peers.

For all businesses, the emphasis is on maintaining relationships with existing customers, managing their companies, and cutting expenses. Companies tend to be looking at maintaining the status quo than expanding or investing in innovation. The number of companies seeking capital has declined for each week surveyed.

Reopening Concerns

As businesses consider opening their doors, they have health, safety, and financial concerns. These include:

• Not enough returning customers: 32%
• Employees may become infected: 18%
• Inability to get supplies, parts, or inventory: 17%
• The potential legal liability of customers or employees getting infected: 15%

• Not enough tools to help employees get better access to information: 37%
• Unable to increase technology tools for workers working remotely: 26%
• Can’t institute training for remote workers: 21%
• No programs in place for additional employee benefits (e.g., TeleMed, flexible hours): 16%

Changing Use of Technology After Reopening

Almost 1 in 3 respondents plan to rely more on technology after re-opening. Those with a projected growth of 10% or more this year are the most likely to use technology. Their top reasons:

• To improve customer service: 47%
• To communicate/collaborate more effectively: 45%
• To improve record-keeping: 34%
• To boost sales: 32%

Millennial principals (age 24 to 39) are more likely than small businesses overall to use technology after re-opening. Their top reasons:

• To communicate/collaborate more effectively: 38%
• To improve customer service: 35%
• To boost sales: 32%
• To automate tasks more/boost productivity: 26%
• To improve record-keeping: 21%
• To improve employee management and payroll administration: 21%

In summary, although small businesses are cautiously optimistic about the post-COVID 19 recovery, they are also realistic about the challenges. Most think getting back to “normal” will take at least 7 months. Many are holding off on spending, hiring, or investing in capital. Many see technology as playing a key role in aiding in recovery, with the fastest-growing businesses and millennial owners being the most likely to rely on it.