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Supply chain disruptions harming small businesses

Written on Sep 27, 2021

The National Federation of Independent Business Research Center released its latest COVID-19 survey on how the pandemic has affected small businesses, and half reported that supply chain disruptions have had a significant impact.

That number is up from 32% two months ago.

The survey was conducted Sept. 1-6 with 586 responses collected. This is the 19th survey in the series and includes updates on supply chain disruptions, staffing shortages, sales levels, and more. Some takeaways:

Supply Chain Disruptions

  • More than half (55%) of owners impacted report that the supply chain disruption is worse than it was three months ago.
  • The vast majority (86%) of owners anticipate supply chain disruptions will continue for at least the next five months or more.

Staffing Shortages

  • More than one-quarter (27%) of small employers are experiencing a significant staffing shortage and another 18% are currently experiencing a moderate staffing shortage.
  • Of those small employers experiencing a staffing shortage, 25% are experiencing a significant loss of sales opportunities and 27% a moderate loss of sales opportunities because of their inability to fill open positions.
  • About half (49%) of small employers are receiving fewer job applications for their open positions than they received one month ago, and 36% are receiving about the same amount.
  • Small employers are adjusting to attract employees for open positions. Seventy-seven percent reported increasing wages, 17% increased paid time off, 16% offered or enhanced hiring bonuses, 18% offered or enhanced referral bonuses, and another 21% offered or enhanced health insurance benefits.
  • Small business owners are also making business operation adjustments to compensate for the staffing shortage. Forty-one percent of owners are offering more hours to part-time employees, 64% are offering overtime to full-time employees, and virtually all (88%) of owners reported that the owner(s) are working more hours.

Sales Levels

  • Sales levels are 50% or less than they were pre-crisis for 15% of small businesses with another 18% at sales levels of 51%-75% pre-crisis levels.
  • Forty-one percent of owners are back or nearly back to where they were with sales between 76%-100% of pre-crisis levels. About one-in-four (26%) are exceeding pre-crisis sales levels.

The Economy

  • Twenty-one percent of owners report that economic conditions are back to normal now in their area. Another 6% of owners anticipate it taking until the second half of 2021 and 23% anticipate sometime in the first half of 2022 before economic conditions return to pre-crisis levels.

Vaccinations and Face Coverings

  • About one-quarter (26%) of owners are asking employees if they are vaccinated, up from 19% two months ago.
  • When asked about mandating employee vaccination, 83% of small employers have no requirement or have not considered requiring employee vaccination. Fourteen percent of owners have considered mandating vaccination and 3% require employee vaccination.
  • Twenty-five percent of owners reported requiring employees and/or customers to wear a face covering. Of those businesses requiring face coverings, 27% found it difficult to enforce the face covering requirement.

Childcare

  • Eight percent of small employers reported that childcare challenges are significant issues and 12% reported them as moderate issues.
  • Since the onset of COVID-19, 29% of small employers have had employees quit or reduce their hours due to childcare challenges. Additionally, 18% of small employers have had difficulty hiring applicants for open positions specifically because of childcare challenges.

Utilization of COVID-19 Programs

  • About three-quarters (76%) of small business owners reported that they received a Paycheck Protection Program loan in 2020 and the vast majority of them (94%) have submitted a PPP loan forgiveness application for their 2020 loan.
  • Forty-one percent of those who received a first-draw PPP loan received a second-draw PPP loan.
  • Ten percent of owners claimed the Employee Retention Tax Credit for wages in 2020. Only 8% of owners claimed the ERTC for wages in 2021.
  • A fifth of small employers applied for and received an Economic Injury Disaster Loan.

Other

  • Almost half (45%) of small business owners report that the recent rise in COVID-19 cases over the past two months has had a large (9%) or moderate (36%) impact on their business.
  • About a quarter (28%) of owners report that tariffs on Chinese products have a somewhat negative impact and 10% a significant negative impact on their business. Over half (54%) of owners report that the tariffs have no impact on their business.
  • Thirty-one percent of owners had a fraudulent unemployment insurance claim filed against their business.