Small businesses operating during the pandemic in 2020 faced a challenge like no other. Forced closures, employee quarantines, new health guidelines, and uncertainty about what’s coming next strained finances and prompted business owners to make significant changes in how they operate and find creative solutions to stay competitive.
Small businesses are innovative and resilient.
Despite all the setbacks and obstacles of 2020 and early 2021, small businesses have proven to be tough and resilient. According to a Bank of America study, 60% of businesses expect their revenue to increase this year, a number that is nearly double that from last year. Additionally, 62% of businesses polled implemented new digital tools to better adapt to conditions during the pandemic, many of which they expect will continue into the future. These business strategies include:
- Interacting with employees virtually
- Accepting more cashless payments
- Connecting with customers virtually
- Expanding social media presence
Other innovative strategies that enabled small business owners to survive include:
- Implementing innovations
- Reducing budgets
- Temporarily closing and/or limiting operating hours
- Implementing new practices like remote work / curbside pickup / delivery
It is estimated that at least half of small business owners in the U.S. took an EIDL or PPP loan to buoy their finances in the interim.
Ecommerce remains robust.
Shoppers have embraced online shopping. E-commerce grew an estimated 44 percent to $861 Billion in 2020, according to Digital Commerce 360.
Customers would rather give locally.
Americans have a lot of love for small businesses. When given the chance, 83 percent of consumers say they prefer to purchase from a local business, rather than a large corporation. Similarly, 84 percent of people said they’d pay more to support the local business.
Hiring is extremely difficult.
As the economy recovers, many workers have elected to stay home and wait it out, collecting government benefits instead. More than 40 percent of jobs are not being filled, despite companies offering higher wages, signing bonuses, remote options, paid leave, and flexible hours.
401(k) plans remain a top benefit.
The 401(k) retirement savings program is one perk that has remained consistently popular and almost expected. Next to health insurance, small business 401(k)s are the most common benefit – topping life and long-term disability insurance.
Almost half of small business owners offer retirement plans to their employees, and one-third of small business owners expect to introduce the benefit within the next 12 months. Not only do employers feel responsible for the overall wellbeing of their employees, but 76 percent of employees believe their employers bear some degree of responsibility to make it easy for them to save for retirement.
The past year has seen many ups and downs, but just 11.5 percent of small business plans reduced or suspended their 401(k) plan matching contribution. By comparison, four times as many small business employers made changes to 401(k) plans during the Great Recession of 2008-2009.
Suspending the match directly correlated with a decrease in plan participation and deferral rates; 72.9 percent of companies that suspended the match saw declines in participation, compared to 14.4 percent of companies that maintained a consistent plan.
On the bright side, 60 percent of those who reduced or suspended their 401(k)s say they plan to reinstate the contributions in 2021, and by May 2021, 30 percent had already done so.
It’s never been more affordable for small business employers to offer a retirement savings plan, especially when they work with Ubiquity, a leading administrator that works exclusively with small enterprises. Companies can receive up to $5,000 per year in tax credits for the first year to offset the cost of a new plan. They can receive another $1,500 over three years for choosing “auto-enrollment” as an option, as well as write off any matching contributions made to employee accounts from their taxable profits.
Contact Ubiquity to learn how to start a 401(k) plan for your small business. We have provided affordable, pay-as-you-go, flat-fee retirement savings plans to small businesses and solopreneurs for over two decades!