Goldman Sachs’ Joe Wall of the Office of Government Affairs explains why small business owners’ sentiment has turned sharply negative as the pandemic continues and host Allison Nathan speaks with three business owners about their current experiences.
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
This exchange is common sense. And I'm Allison Nathan, a senior strategist Goldman Sachs Research as the pandemic has continued to evolve, so have a challenges faced by small business owners. for today's episode were speaking with three of these owners, who are wrestling with the continuing disruptions, ranging from workers, shortages, supply chain delays and the rising cost of goods all three business owners, Korea, Parker Corner of key These chicken and while falls in Maryland, rose mice work. President of direction instruction and Crystal Lake Illinois and Ruby Boogeyman CO owner of Marguerite S and Pepys Mexican restaurants in our area are graduates the firms, ten thousand small businesses programme, which provides entrepreneurs with access to education, capital and support for, the directive on the specific challenges that small business owners are facing. We also spoke with joy,
while from the firms officer, government affairs, Joe work under the programme. Thank you Robin don't you and your team just released a new survey sponsored by the advocacy arm known as the ten thousand small Business Voices programme to start off? Can just give us a sense of some contact, behind the survey and the voices initiative. What's that the initiative and what are some of the highlights of the survey, So we want ten thousand small businesses voices in April of two thousand and twenty to just about a year and a half ago over time, as we engage with members of that ten thousand small businesses community, we quickly learn that the small business community really well. to be engaged in the policy making debate at the federal level, but also at the state local level, but they really in feeling They had a seat at the table and they really did feel like they have ways in the process. In fact, now we Sir made this data last year
and only nine percent of small businesses that, like they had a very strong voice in the policy making process and only seven percent felt like the federal elected officials, prioritized policy issues impacting small business over larger businesses and to put it into another scope, there were fourteen presidential and obviously one vice presidential debate during the twenty twenty election cycle. That including, of course, the Democrat primary and the general election- and there were only two questions- asked over the course of those fourteen debates that reference small business so was clear to us that there was an open space here to try to help the ten thousand small businesses community, a real voice in the policy making process and also make sure that there is room, whether in the U S, capital or end, stay capitals, war with their local city councils, wherever it may be, but it's very important they have active engagement at all levels of government
when it comes to our most recent survey. This is just by way of background the ten survey that we ve done dating back to the beginning of the pandemic, so we ve had kind of real time data every sixty eight weeks or so through the roller coaster of the pandemic. So we most reasons. For me I would say the big take away these of here prior survey which occurred in the early part of June is we saw a significant sentiment shift among small designers. We ask you a very simple question at ass in a lot of national surveys and a lot of state they surveys that is, do you think the unites AIDS is moving in the right direction or is the country on the wrong track? Founded June? There was hostility sixty seven percent of small businesses thought that you asked was moving in the right direction. That number draft by twenty nine point: thirty, per se and our survey in September, something that was kind of the big
line take away, is that there has been a pretty dramatic drop in Cinema just in the last three months? The? What do you think is behind that drop and sentiment well there's three being buckets of issues? I did not state the obvious, but the delta variant is obviously having a dramatic impact across the country and particularly for a lot of small business days, especially those that are obviously consumer facing. We also found in this was by trend line that we ve been watching closely since the spring time that inflation and workforce issues are only accelerating and few more challenging times for small businesses. Some on inflation. We found that eighty one percent of small businesses say inflationary pressures have increased since June. Eighty four percent
have seen an increase in operating costs and about three quarters. Seventy four percent say inflationary pressures have negatively impact at their businesses, financial else and when it comes to workforce issues, I would say a good news from the surveys that seventy three percent of small businesses are hiring full time and part time employees, but of those hiring. Eighty seven percent say they are finding it difficult to accrue qualified candidates and percent are saying that the difficulty with hiring is having a real impact on their bottom. Why? We also ask why she died Visa, the pre co, bad behaviour force challenges gotten better. worse than a kind of state, the same and two thirds sixty four percent say that their forced challenges have worsened during the pandemic, which is not surprising. Given the data that worsening,
I would say, the final issue, which will talk about a little bit later. I think that's also significant burden for small businesses. Right now is access to capital. We found that only thirty one percent of small business owners are very confident that they would be able to access capital if they need to and forty four percent of small businesses say that they have less than three months of reserves in the case of whether it's an emergency or you know, another pandemic related whether it full, shut down a temporary shut down or a business disruption bud. That's easy, alarmingly high number that do not have a lot of cash set aside. We ve broken be blue, green, a small business owner who runs to mexican restaurants and allay area. Her restaurants are back to imprison, dining but she's spending most of time, scrambling to find key ingredients and other products necessary in her business. What are the biggest pain points that your personally experiencing with your restaurants?
I will give you an example. Just from today I was talking to an employee and he was saying all now we're having issues with our have plants. Containers for are to go orders and we had to order this. Other weird amounts, and then we also having problems with our soup containers and we had to or another kind, that's more expensive. So we, and to those issues and because our to go orders and deliveries had been so much higher because the pandemic, we really need access to those materials and sometimes Heaven or they don't have the legs, they will have the containers or vice versa. So it's very challenging because we really need access to those because people, They say. Oh yes, just give me the bag or bring young tupperware whatever its are tools for our business and when we're done, how? Then they really challenges us today shortages extend to your ingredients, I mean talk a little bit about the broader experience your having in terms of operating right now and the issues are facing shore put it better
Lately crab meat has been set so. We generally have few distributors come to deliver to our businesses, because it's really hard for me. I wouldn't be able to see their higher cylinder myself run around to the allay vegetable markets or each individual lay. So we have a duty to be that comes and delivered to us while we, had to run around inside me at restaurant depot. I do friend stores ticking time away from our employees and labour already high enough for us. Oh, that's a challenge. A recent challenge in just over all we ve had No sometimes are now the revised on. It knows that an item we saw a lot of, but then we do have it as an option, are a menu and, like you said, not only shortage, but also because it that it span the increase in prices wait two week that recently, the applicable prices. That means always gonna been fluctuating noise map endemic really needs Maybe it is at this moment, but it went from forty dollars a case from
others to eighty five in America, two or three weeks. It's gone down to sixty. I mean it still higher than are forty dollars a case and that in the bottom line, because we are there ten to twelve cases a week for restaurant, because baser overcrowded with everything really much right, and we can't raise prices We can see market raider, depending on whether we charges were going to charge you for that amount raids. Can't do that. So that's been a have you experience anything like this before or is this in certain key just entirely now? at this level. I mean yes, like I said the other kind o sometimes thought through these pretty fluctuations and price tomatoes. If there's something going on weather, related or etc, but not all of them in time we haven't had it no issues worth like the other guy. has been too expensive and then you no shortage of two go containers and labour shortages is everything's ban stepped upon the At the same time. So that's been the challenge:
as you know, were used to preventing and now being flexible in many different cases. Could that's what happens? Sometimes you have in place. Shoes are customer issues because we see the range of people up community in restaurants were used to being able to pivoted kind of adapt to different things. But now it they can be nice? I'm only and went off, because I'm trying to balance everything on my hands. I don't know it just makes it a little crazy or to run its more challenging and here Korea, Parker Corner of colonies, chicken waffles in Maryland. We run into a lot of supply chain issues and we go to our distributors and say: hey you know how come you are unable to get the products that we need. We here We have driver shortages and were unable to get so. What happens? Is price goes out, because the demand is increase If it, the supplies lowers, of course the price goes up. So give you one specific example: plastics. Some chicken for some reason, blasted Carson Chicken the two of the hardest things for us to get a prepared, an uprising, the price of
again have roles, I'd, say, probably twofold, and it's just so difficult because on one hand as business owners, you know you never want to raise prices. When customers, unless we absolutely have to that's what We provide valuable, haven't, affordable prices that are somewhat assisted, so nobody with access plastic cops has also heard is tremendously because this time we had to drive out farther defined somewhere there we are. I've heard from a fellow business owner that may have thought so that limited our efficiency, but the fact that the price of chicken has increased save that's, put a tremendous impact in our business, because you'd rather placid cops in you just may not have adopted, serve for an hour or two, but we're of checking the Thai Chicken waffles. You become parties waffles just doesn't have the same ring to it. So it doesn't rosemary work as president interacts John Construction, which The commercial general contractor and Crystal Lake Illinois or heard the supply chain
these are doubling the time it takes to deliver projects which is forest. Her to renegotiate terms with her suppliers and our customers. So you mentioned supply chain issues as being one of the biggest obstacles your face. You re now talk to us but more about what that looks like and how its affecting you with regard to supply chain issues working with our clients, has been a big challenge and getting them to understand. Despite best efforts, bad getting some of the material on site was problematic, their help and plans that have because this is also paid in huge cost increases in materials and in labour. They have acted to put their projects on war, and so reading untold thing said about that, and I, like you, were in my two years ago
you a specific example by half about projects and about the engineer, and these are buildings that are engineers in advance, and they showed that your job site, like an erector, set and prepared boy engineer buildings from the timing, it could be and saint in twelve to fifteen weeks. Now that same project is taken twenty five to fifty two, with necessarily guarantee with that something ventures that all down to their price. We got some that will guarantee the deliveries. There is huge. So the question is: how does it happen, businesses that need to bring engineer by the bullets and will look back at the last recession? How remain pictures deal with that?
regions, workforce and alarming venture spot when did happen, bad, it was gonna impacted Italian, something for a world people. They lately, and yet, when demanded light, not they were quick to bring these people back. For these people went to other jobs So now the deficiency in qualified workers in a bad with the supply, Jane. You are mad imports soup and look at the ports right now. They are overloaded with parliament at the burned at the barge, with literally tens of thousands of containers that are sitting there, but they entered the distribution cycle, for instance, a shortage of labour, the point the shortage of available containers, the shortage of available traverse the shortage of available trot,
all of them. He knows knowing impact than impacts. So many this is where even hearing about twice for Christmas, if you don't get your purchase, is now an early bad, it's very likely. The shelves will be empty. That's unprecedented! in my lifetime beyond the supply chain. Delays, staffing shortages are continued to hamper the recovery for small businesses, cryptography chicken waffles says: he's spends up to three hours a day, interviewing people or dealing with staffing issues stems back to staffing so Where is our ability to get our products? from our benders. They have staffing issue, so they have issues of giving us our progress when we needed we spend out of time interviewing every day and One thing we found is I'm team members, they understand, is a severe shortage, so
on one hand. We have some tea members who you know we'll have to a new job, because big, pay more economic, some small business don't allow. The paper so much ended The team members will understand that there is a huge need for workers within the workforce and they don't always do the best performance was prepared. I will say we probably spin on average about thirty forty minutes a day. What was staffing I'll say now, during the pandemic? No less than two and a half to three hours a day on average spanned either a first round interviewing falls a second round. Anyone thoughts, so is there the considerable amount of time there were spending nowadays and
too, dependent- and I think we had at any given time of thirty five to forty team members right now present day today. I think we have about thirty when every week outnumbered middle up or down by two or three here their base. Our business needs a performance of things like that, but right now I say were probably about seventy five, eighty percent of where we used to be that some interesting. Every week you ve got a two or three please swaying out of thirty employees. That's not insignificant. The staffing shortages are also result, in sharply higher wages for small business owners. Here's rosemary work of direct steel Thompson was a little bit more about the worker issues you mentioned in terms of the wage, Greece is. What have you had to do to attract workers in this period, no cylinders definitely wage inflation going out, and I think that the were now is labor migration. I can definitely see
people moving, there's a lot of moving parts, and that's channel I did have won t member who had worked years ago for another company and they offered a substantial amount more than I was paying him. He was very happy with what is being paid to correct, but he said he was just too that in Britain has not. There was a forty percent increase over when I was paying them, and I dont think that situations in me a wage inflation is not just five percent that ten percent it is substantial and hears really big, green right. Now. We're ok, but we ve had to adapt in the sense that we could use another cook at each restaurant because working overtime to those who are with us right now just to come
while the ships and has been a challenge trying to find experience. Cooks who want to work because we ve had issues were one would work a week and then never come back or we had one guy just for one day and then leave so that's why we ve had to pay homage to some cooks just to cover our ships and keep him happy too, and we ve had to increase our limits to two three or four dollars in our compared to a year or two ago, so that impacts of vine and wine too so make us it, especially in the kitchen notice. Washers in books have been in short supply. The problems happened. Equally cute for black owned small businesses. According to the ten thousand small businesses, voices survey, as Joe explains, did The survey reveal any challenges that were particularly overlooked. Under estimated for small businesses. The hidden costs in all this couple data points: we saw in the cross Tabs first inform
one of which is something we ve seen very clearly dating back to a role of twenty twenty, and that is. We have consistently seen that there is a real uneven recovery for black small business. So when we surveyed in early September, overall sample media and employ was tat. We also asked obviously let there be no media employ was pre covered in it was eleven sow. The overall sample is close to back to being fully staffed, but if you look at black small business owners, their pre coveted employ media number was nine the only at six today and we ve consent, only track that over time and that sadly not uprising, because we see that kind of lagging meeting employ number pretty much every six day weeks sooner dating back to last year, the other
three areas. In the survey where we saw a pretty big disparity for black small businesses, only twenty percent of black small businesses are very confident that they would be able to access capital they needed versus. Thirty one percent of the overall sample fifty one percent of black small business owners have less than three months of calf reserves versus forty four of the overall and fifty four percent of small business owners expecting me to take out alone wore a line of credit for their business. This far winter burst Twenty nine percent of the overall population is a huge gap the other area which is more about macro issue, is mental health and we ve sir, made this a couple of times. First, this past February, and then most recently in September, and we found a forty. Nine percent of small business on the same day or their employees have been impacted by mental health related issues stemming from the damage. I would point out if you like Layer, deeper women under the age of forty five, who are small,
business owners. The numbers The seventy percent, which obviously, I think, speaks see a multitude of issues that women small business owners are facing weather? stealing whether business from dated eight dealing with increased childcare challenges as a result of the pandemic. I suppose kids last year were learning from home and depending on where you live right now, a lot of school districts are having disruptions due to the Delta Burien. So there's a turbulence not only in your small the centre in your businesses, pathway to recovery, but also at home. What are you doing with your kids or elderly parents who are struggling is just that. The multitude of mental health related issues is terribly overworked and having sound waves, gonna be one of the big negative implications of a pandemic, many small business owners say they lack the necessary resources that larger companies have to address. Issues such as mental health in the workplace
here's rosemary work. Do you feel like you have the resources to be able to address the toll. This is taking on mental health Y know. Your businesses have councillors on style, no other Marge general contractors that say that nothing had unprecedented demand for their Einstein councillors. We don't help those singly. Sorry, as we have created an atmosphere where people feel comfortable around This is naturally very conducive to social, distancing policies and procedures of important points very much in line with oceans, efficiency requirements, and yet there was a cover up overstep where they felt very comfortable being lockers, and so I think that here
less than the destruction for our immunity? But we see it with benders, we fear, will subcontractors and it's not something that we have now soon skills which will set. tools with which to navigate most efficiently or effective. And here's ruby booty in one of the topics. I wanted the charge on is just a short views that people haven't. I know I've seen that no you read about no in aeroplanes, whatever people just set up with the whole in the pandemic rate, but at the same time we're going through the same issues too, as employees and noise restaurant workers, but we can't to say get the hell outta here Et Cetera, centre right when their being rude about might not want to wear their mass. Or you know different things that we have no control over, because we're now policing that right so we're the enforcer so we're that bad cops and it's not so sometimes not everyone. Obviously there's a subset who are like
You tell me what to do or whatever right. So. And then there is one particular place. She was worried about. You know in the future if they travel do restaurants need to enforce vaccine at the door or if people are vaccinated or Covid nineteen, so she was just freaking out about that. She said I don't want to have to deal with it. I already have to deal with the people. Don't want to wear mask right. So that's a fear. I'm a genuine fear, so just in general, some people just on edge now and then they take it out on the employees and employers carefully to anything about it right where's carry Parker on the challenges black business owners are facing when it comes to capital, were the same as that thing. You know time and time again folks say: hey. You know we're going out to get laws. We can't you know you can't access capital within our industry specific we have other mechanism solar, safer answered, because we are restaurants. There is different point of sale systems do offer small amounts of working capital sold the deck gonna helps us
but I can definitely see how other type of businesses within other industries could definitely be strive for cattle, especially if their black on endemic has evolved, smile, business owners, have pivoted and adapted. But many are uncertain about the outlook ahead. Here, rosemary spark. When do you think this frightens up? So we heard you asked me a question we months ago. I would have said things like that. We are coming out of its address. This german Berkshire once Jaguar, when they still was gonna peep, they were told us in May, will then certainly doesn't happen. It now listen projections that this is Thursday another four months and that I believe, can. I have a major impact on small businesses and major detrimental in tat. Sense. Lobbyists and trained a managed through uncertainly is probably the most difficult position from which the man and here's Curry Parker
So how are you feeling, as we had in the winter months hopefully very concerned when we looked at him Thirdly, last year do uncle with professional rates when I'm gonna win a time, but we already operate in an industry that slows down gonna win its ask specifically I'd say from about November to about February. Every year we see the dew sales were. Very. sir, because we just don't know what to expect. So. a business. I know we always try to retain earnings. However, in this case a little bit different because the uncertainty of coal with along with the winner, it could be enough to take us under if a worst case scenario were to play out, so Try to do is must begin right now about finding efficiency within the business and send more aside as much as possible. That way in a worst case scenario, hopefully, will be ok a lot of other businesses. I think, is a wait and see kind of thing. Restaurant industry is low profit margins historically, so
when I really worked with. Must we run a very lean business? Wouldn't do all we can within our power to try to make it through. and here's Ruby Blue Green as a business owner, unjust proof, ring for a possible surge in the winter. I'm trying to have wait no tents and tables ready to rent in case. we need to cut back on indoor dining and put the patio back in our parking lot. Some trying to prepare for those possible outcome. You know what's gonna happen in future, I'm not sure. So all those things are in the back of my mind right. So are you feeling more optimistic now or still relatively pessimistic, as you think about the coming months? I'm feeling optimistic, but I tend to be more the optimistic side. Just because right now it feels more stable than it did at the beginning. No with all the different funding options and grants that the government had strolled out its will even help Just because I have friends and relatives from Mexico and there's been really that I know
Then he hoped for small businesses down there, so I feel really liked in that sense to be here and to have all this extra help. Because no you're ago I couldn't even came in so it was attire, and it was all hands on deck I mean bitterly. I feel we are always multitasking with just a very reduced number of employees, so that was very ably China inches. Even the atmosphere in the restaurant, all the lights were turned off. You noted very Miley restaurant, I mean when you're in the restaurant. It's like people all the time and I'm talking drinking eating else and it's all gone and it's silence and it's dark peanut was so depressing In addition, they everything that, what's going on and when you hear the views that you know he was is pretty dyer. So obviously, when at that point. Now it's more along the lines of ok, I hobbled
we re now financially world catering I'll be buried serve, it is in our distributions of profit to my brother and I my partner, so I've just been very conservative in that sense, because I want to have reserves, you never know what can come in the future. Obviously right so, but I'm feeling optimists sick that we have a better hold of this more people. Again, that's needed so issues the matter of being able, like I said, to prevent and see what's gonna go on, but I have more tools, renewing our arsenal, so that makes me feel better so where do small businesses go from here shares Joe. While we I have heard from several business owners on this episode who are dealing with many issues. You just mentioned the inflation, staffing issues and also the mental health. but this is all taking. So where do we go from here? What do you mean? you with their stories and findings from your surveys.
Well, what we have found in the last year and a half is that the data points are incredibly powerful. Their stories are what makes the difference right in terms of moving the needle, whether its in Washington and were at stake capitals or at a local level when a small, business owner towels their own personal story. It's hard not to be taken aback by just about all of them and when they connect The policymaker weather congressman a senator, a cabinet, her Terry we have an incredible impact and humanising these issues and really adding a lot of perspective on it. challenges that are facing it's one thing to see: gosh. Oh my gosh. Inflation is really high when you, you're from a business owner about what it really means to their business and their customers. I think you figure it obviously just any much different light and it's all the more powerful. So there stories in the data during and cry
double job for sharing the consistent story line of the small business community as we try to get out of the pandemic salary As we look forward, it, probably all hopeful that things get better with sad were also very focused on making sure that the small business community continues to engage with the federal officials and the state local level, because you know the reality is: more relief might be needed. and where things are today and that the state and local level there is a lot of money from federal dollar that were appropriated through a multitude of relief has been passed through coin, was over the course of the last eighteen months that a lot of money is sitting on the sidelines, waiting to be dispersed still, so we ve been very much encouraging, whether its governors or meares, to try to get those dollars out and in particular to get them out. Also, the small business community is very much in me and at the federal level we saw the SBA, make a pretty well
a announcement two weeks ago when they announced that they were executing several very significant modifications to the poet idle programme. So by way of background covert idle programme was passed at the same time as the original PPP programme back in late March of two thousand and twenty, Time was a thirty year, three point: seven five percent fixed alarm: with a maximum amount of a hundred and fifty thousand dollars when the binding ministration took office. They quickly move that hundred and fifty thousand dollar cap up to five hundred it just a few weeks ago, they lifted the five hundred thousand cap. The two million and doing so they have created a mechanism to get real old time working capital in the hands of small business centres and even more importantly, also at a lot of flexibility in terms of what you can use those dollars for so in terms of answering the immediate need for working cabin.
all that is he incredible programme that small businesses can access with a very low fixed interest rate long duration, the date can put to use, which is terrific. However, that programme is going to come to an end at the end of the year. So it's a short term, great solution, but I think, as we think, the long term horizon of of the recovery, we may need another type of apparatus, gives small business hours your access, the gamma, because the basic we consistently you're back from this business community, is that if you try to go access a traditional line of credit or alone from a funny, it's all institutional Inter company, there naturally want to look at your financial for twenty twenty and foremost small businesses. That's not a rosy picture be outside of the covert idle programme is its looking at your twenty nineteen financial. So it's taking a much more favourable look at the small business hours verses. Looking at what was an unusual twenty twenty. Given the pandemic, L is that effectively
policy agenda for the voices initiative to get more capital into the hands of small business owners for longer. So that they can ultimately succeed our policy agenda this year has been very much focused on access to capital. We think I say, as I mentioned before, the covert idle programme is a great short term solution beyond that. I think we feel like it is necessary for the federal government to create a more durable long term below interest rate fixed alone program that small businesses can apply, for that will give them working. happen. All and much like the covert idle programme does for the next couple of months, The other issue we ve been very focused on is federal procurement reform for the small this community soldiers. By way backgrounds. Now. The SBA. goal of awarding twenty three percent of federal contracts to small businesses,
underneath that twenty three percent goal, they have a variety of goals within segments of the small business can be so women, small business owners, minority, small business sires across the board rhetoric in small businesses. While we found as we ve deeper into this issue, is that all the course of the last decade there has been a thirty eight percent decline in the number of small businesses that are providing goods and services to the federal government. So the pool of small businesses in the procurement space is really shrinking and if you get a number of new entrants from this. Business community in the federal procurement dating back to two thousand and five there's been. Seventy nine percent decrease, so We are trying to make meaningful reforms to the procurement space in order to make it more accessible for small businesses and also just left the playing field for small businesses and I get a fair shake at federal contracts. So this
is an issue that we ve been working very closely with the bipartisan policy centre on we co authored report with them back in late June. oh, it's why we're For that, the binding Administration and Congress Wall ACT on this issue. This is, then, I would say, a priority for the Vine Administration, so I think we are positive about the direction were added by more work definitely needs to be done being so much for you, is Joe and first sharing your insides from survey, which hopefully will used to ultimately improve the outlet for small businesses in this still difficult environment. That includes is percent of exchanges at Goldman Sachs things for and if you enjoyed the, shall we hope you subscribe and apple pie. Ass. We were and comment this podcast was accorded on Tuesday September, twenty first and Thursday September, twenty third, twenty twenty one.
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Transcript generated on 2021-10-13.