Main Street firms were forced to reduce headcount quickly during the pandemic. But thanks to a potent formula of government stimulus and sheer grit, small firms led the recovery from the worst of the downturn.
The innovation muscle employers built up during the pandemic will be needed now more than ever as government aid ends and stimulus dollars dry up.
Small companies will need to rethink how to grow business. Investments made during the pandemic, such as new digital and online technologies, likely will remain Main Street fixtures. They’ll continue to face new obstacles — and new opportunities.
A new quarterly survey from the ADP Research Institute might help. The Small Business @ Work Survey, which I’m pleased to introduce here, will take the ongoing pulse of their economy.
Between May 10-25, 2021 we surveyed more than 2,000 ADP business clients around the country, employers with fewer than 50 workers across a wide range of industries. Here are key findings from our inaugural report.
Nearly one in three small businesses said hiring is their top challenge. Companies that had to reduce headcount during the pandemic now are struggling to find qualified workers.
One-fifth reported an increase in staff in the past six months. Nearly twice that number are planning to add employees in the next six months.
The larger the firm, the bigger the plans. Two-thirds of companies with 25 to 49 employees expect to grow payrolls in the next six months.
A few weeks ago we talked about the potential for labor shortages to hold back the jobs recovery.
The hiring rush we see now won’t necessarily translate into higher wages. Roughly half of companies don’t plan to raise wages, compared to 29% that do. Only 16% of employers plan special bonuses, down from 22% in the past six months.
On the other hand, almost none plan to cut wages.
A little more Facetime, I mean face time
Everyone is talking about the scramble for workers, but the majority of employers aren’t planning significant action to attract or retain them.
That means fewer bonuses and no increased leave in the near future. But it also means fewer layoffs, and no reductions to pay and benefits.
In the New York metro area, the first region to be rocked by the pandemic, Wall Street firms are recalling people to the office. Our survey found that a small but growing number of Main Street firms also plan to encourage — and in some cases, require — employees to work on site.
Thirteen percent of small businesses plan to call workers back to the office, compared to 9% six months ago. Another 13% said they plan to increase face-to-face interactions with customers.
Back to business
After hiring, the second most-commonly cited challenge, especially for businesses with one to four employees, was reduced sales. Cash flow, the economy, and increased production costs rounded out the top five.
Still, many employers see brighter times ahead. More than half expect higher sales and revenue in the next six months. Only 10% of firms expect sales to decline.
Even more reason for optimism: More than 60% of companies believe revenue will return to pre-virus levels within the year. Three out of 10 say it’s already back.
For Main Street consumers, however, these expectations might come at a cost. One in three companies plan to raise prices in the next six months. More than one in four are thinking about it.
At the beginning of the pandemic, it was easier to recall recently or temporarily laid off workers.
Now, more than a year after widespread layoffs, employers and workers are taking longer to find each other. Hiring challenges are likely to improve over the summer months as more people who left the workforce return and companies adjust to the new workforce landscape.
Practices such as referral bonuses can make hiring easier. Flexible hours and in-office perks (free snacks go a long way with me) can be an inexpensive way to reinforce loyalty and attract new workers.
To weather the pandemic storm, small firms had to innovate and adapt. The innovation muscle bulked up on Main Street in the past year will help small firms with the heavy lift of what comes next.