The COVID-19 pandemic has wreaked havoc across the globe as economies are shrinking and businesses are failing. As a small minority business owner, the situation is dire as there are structural challenges faced as opposed to small non-minority business owners. These barriers have existed long before the pandemic and directly affect the health of small minority-owned businesses as they target the underlying financial fragility of underrepresented groups. Using factors such as profitability, credit scores, and propensity to use retained earnings as a primary funding source, 2019 research by the US Federal Reserve which shows that those small businesses owned by a person from a minority group were twice as likely to be at risk or distressed as compared to a small business with a non-minority owner. Elaborating upon that, the US Federal Reserve estimates that any business classified to be “at-risk” is three times more likely than a healthy business to not survive a two-month revenue shock.
To make matters worse, the concentration of minority-owned small businesses is in industries hardest hit by the virus, making for up 37% or more of the industry’s total number of small businesses according to McKinsey. These include service industries such as accommodation and food services, personal and laundry services, and retail. These industries cannot operate without often required physical proximity and on-site presence. And while the healthcare and social assistance sector is unlikely to experience business loss, they are also the two sectors most likely to have its employees contract the virus.
Two Solutions to Explore
Two solutions which are imperative to seek in the short term if a minority-owned small business wishes to survive the pandemic financially. Firstly, it is to secure immediate relief. This can be in the form of applying for the US Small Business Administration Paycheck Protection Program (PPP). While there has been much confusion surrounding the guidelines of such relief programs offered by the federal government, it is important that businesses continue applying in the hopes of getting some relief. Another avenue which can be explored to get access to relief is community relief-funds. A benefit of making use of such community development financial institutions, such as LISC, Hope Credit Union and Lendistry is that they work for the welfare of local communities and have greater understanding them and the needs of its members and their entrepreneurial ventures. A third option is utilizing grants by mega corporations such as Google by capitalizing on free advertising to promote the business and ensure that there is a wider customer base which can be catered to if the business has been able to adopt social distancing measures in the workspace.
This brings us to the second solution, pivoting the business model to add services which are compatible with delivery, introducing technology, and ensuring that workers are well-protected and adhere to strict protocols when on the clock. Integrating new technology might be the toughest at a time the business is struggling to stay afloat but adding new features which suit a mid-pandemic world can be done with relative ease. This can allow for some of the costs to be offset and revenue to continue trickling, with the focus on increasing cash liquidity to ensure that another wave of the virus does not spell the end for a small business.
About the Author
Renzie Richardson is an author and the CEO of BHFL Group which offers business coaching services to help small businesses survive, diversify and thrive in any economy. To schedule a free consultation, go to www.schedulebhflgroup.com or visit their website at https://bhflgroup.com.
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