The prolonged economic impacts of COVID-19 are wearing on small and medium-sized businesses, particularly for those in rural communities, as owners report more uncertainty about when and how they may recover.
Highlighting the discrepancies between how rural and metro small and medium-sized businesses are being impacted, the most recent Principal Financial Well-Being Index shows that less than a quarter of rural businesses reported being fully operational, compared to nearly half of metro respondents.
Survey participants are also more concerned and cautious about the economic outlook than in September 2020, as the country grapples with the resurgence of COVID-19 cases and restrictions.
A third of rural businesses believe their local economy is declining in comparison to 18% of metro businesses. And 61% of rural businesses feel unsupported or impartial to federal government policies or initiatives designed to help their businesses, compared to 36% of their metro counterparts. Rural business owners also anticipate recovery to take much longer with a majority saying it could take two years or more. Among metro business owners, the majority anticipates recovery within the next year.
Moreover, about one in every four businesses say they are uncomfortable with their current cash flow situation, but as they consider the next 12 months, 71% expect some level of improvement in their finances. Some attribute this cautious optimism to the vaccine and government support that may alleviate the situation.
Amy Friedrich, president of U.S. Insurance Solutions at Principal, believes that while the vaccine will be a big help, it is not going to be a quick fix. “With just a few weeks of the new year under our belts, it’s clear that 2021 will continue to be a bumpy road,” says Friedrich. “Small business relief programs should continue to support stability, but certain sectors may need more support to see any 2021 growth.”
Benefit Shifts
Not surprisingly, business owners throughout the pandemic have remained focused on the health and well-being of their employees, but the findings show some slights shifts in benefit offerings. While 70% of the respondents said they made no changes to their benefits (81% were businesses with less than 500 employees), many indicate they are shifting priorities in 2021 by adding or increasing benefits such as telehealth services (31%), Employee Assistance Programs (28%) and financial wellness program (27%) and retirement benefits (23%).
As a result of these changes, some are considering decreasing or pulling back other benefits, including long-term care insurance (15%) and caregiving benefits (15%).
The findings also show that despite these challenges, rural businesses are investing like their metro counterparts in driving their business forward amid the circumstances—focusing on improving customer satisfaction (30%), offering a new product or a new line of service (22%), and creating or improving their website, apps and social media channels (15%).
The most recent wave of the Principal Financial Well-Being Index was conducted online by Dynata from Nov. 13–22, 2020. The Index surveys business owners, decisionmakers and business leaders aged 21 and over who work at companies with 2–10,000 employees. In response to COVID-19, the Index was transformed from an annual survey to a quarterly pulse in order to follow the impact of the pandemic on these businesses, how they are adapting and comparing results over time.
