It goes without saying that 2020 will go down in the record books as one of the most challenging years for the U.S. small business sector. According to a May 2020 Harvard study, more than 100,000 small businesses closed forever as a result of the COVID-19 pandemic.
Thankfully, the new round of PPP loans and the vaccine rollout effort is creating a light at the end of the tunnel for small businesses. However, in order for small businesses to fully get to the light, there is much more to be done – to ensure both survival and long-term prosperity.
According to a recent McKinsey study, 2021 will be a year of transition for many business sectors. The firm is predicting that a return of consumer confidence will unleash a massive rebound for industries most affected by the pandemic, which include restaurants and entertainment venues.
Many health experts are predicting that enough Americans will be vaccinated to achieve true herd immunity by August or September, which means many small businesses need to get through the next seven to eight months to truly feel the impact of this pent-up consumer demand – and see the road to potential recovery.
As the pandemic has been impacting our nation for almost 12 months now, another half year or more can seem both doable and daunting for many. The key is to continue fostering a resilient mindset, and truly understand that brighter days are ahead.
A key way to maintain resiliency is to take an approach that is similar to relaunching your business to the marketplace, almost as if you are starting from scratch. This will enable you to reexamine your business, gain a new understanding of the marketplace, determine the need for funding – outside of PPP loans – and much more.
For example, this may be a good time to reassess your business entity status, along with the tax implications. A sole proprietorship is the simplest business form under which one can operate a business. While not being a legal entity, it refers to a person who owns the business and is personally responsible for its debts.
Another option is a limited liability company (LLC), which is a corporate structure whereby the owners are not personally liable for the company’s debts or liabilities. In addition, an S-corporation, while being more ideal for larger companies, gives a corporation with 100 shareholders or fewer the benefit of incorporation while having some of the tax benefits of a partnership.
Consider developing or reexamining your overall HR strategies. For example, if you anticipate the need to hire contract workers this summer, now is an ideal time to focus on talent acquisition. For those employees who have weathered the storm with you, start considering ways to reward and incentivize them.
Develop payroll and accounting processes, if you have not already. For example, the right accounting software can help with recording payments, tracking expenses, invoicing customers, and reconciling transactions. These solutions can also help you analyze your overall business’ financial health, allowing you to generate reports that track your overall performance.
When launching a new business, it’s always good to have an endgame in mind, whether it be an acquisition, a self-sustaining lifestyle business or an IPO. With this new relaunching mentality, the goal should be all about sustaining your operations into the summer.
Of course, all of this is easier said than done. But the good news is that the light at the end of the tunnel is getting closer.
Laura C. Shuman, CPA, is a manager of small business at Gorfine, Schiller & Gardyn.