BARBOURSVILLE — Small business owners struggling to survive during a pandemic that seems to be getting worse instead of better makes it difficult to be very optimistic, according to Erin Downard, owner and operator of the HWY 55 Burgers, Shakes & Fries restaurants in downtown Huntington and Barboursville.
“I don’t want to say I am pessimistic, but it’s pretty difficult to be optimistic in the restaurant business right now,” Downard said. “We had to close our downtown Huntington location for the second time during this pandemic because we just didn’t get enough business to remain open.”
The Huntington location on 3rd Avenue near the Big Sandy Superstore Arena first opened in 2016. It first closed in March last year when the coronavirus hit the region, but reopened during the beginning of summer after the number of confirmed virus cases began to drop. However, numbers began rising again by July and Downard said people started staying home again. The lack of business led to a second closing in August.
“We merged the staff to our Barboursville location at Tanyard Station and have managed to stay open there throughout the pandemic due in part to having a drive-thru window option that we don’t have at the downtown Huntington location,” she said.
Phyllis Pinson, an octogenarian living in Barboursville, said she doesn’t feel comfortable dining inside due to the pandemic and orders from local restaurants, like HWY 55, and has the food delivered to her home by GrubHub.
“I mostly stay home and have as much stuff delivered as I can or I might have my grandson take me to a place that has a drive through,” said the 82-year-old Pinson.
State COVID regulations currently limit indoor dining to 50% capacity and tables must be at least six feet apart.
“We went from 22 tables to nine,” Downard said. “All of these challenges continue to add to the lack of optimism by many restaurant and other small business owners that I have spoken with recently.”
This lack of optimism from small business owners is supported by a recent survey from the National Federation of Independent Business.
The NFIB’s “Small Business Optimism Index” declined 5.5 points in December to 95.9, falling below the lowest average index value since 1973 of 98.
“This month’s drop in small business optimism is historically very large, and most of the decline was due to the outlook of sales and business conditions in 2021,” NFIB Chief Economist Bill Dunkelberg said regarding the survey. “Small businesses are concerned about potential new economic policy in the new administration and the increased spread of COVID-19 that is causing renewed government-mandated business closures across the nation.”
Nine of the 10 Index components declined and only one improved, the survey showed.
One of the key findings showed owners expecting better business conditions over the next six months declined 24 points to a net negative 16%.
While state-specific data isn’t available, West Virginia NFIB Director Gil White says small business owners need certainty.
“They’re not going to spend the money to expand their businesses or hire and train new people unless they’re confident the economy is not only stable but heading in the right direction,” he said.
Downard said while she is always looking for opportunities to expand, now might not be the best time.
“We are just much more cautious right now,” she said. “What we have learned is we have to be even more diverse with the locations we currently have now.”
Downard’s sentiments match the NFIB report that showed a 4-point decrease to only 8% of small business owners thinking it’s a good time to expand.
Other key findings in the survey showed the net percent of owners reporting inventory increases decreased 2 points to a net negative 6%, while those viewing current inventory stocks as “too low” increased 2 points to 7%, which was a record high.
A net 4% of owners plan inventory investment in the coming months, down 1 point from November, but also historically high, according to the survey.
It also showed the net percent of owners raising average selling prices decreased 2 points to a net 16% (seasonally adjusted). Price hikes were the most frequent in retail (30% higher, 6% lower) and wholesale (26% higher, 13% lower). A net 22% are planning price hikes (seasonally adjusted).
“We are trying to keep prices the same as they were before the pandemic, but our costs have went up tremendously,” Downard said. “The cost of food, packaging and PPE (personal protective equipment), like masks and gloves have all went up. The cost of gloves has increased about 200% since the pandemic started.”
Adding to the lack of optimism, sales expectations over the next three months declined 14 points to a net negative 4%. Earnings trends over the past three months declined 7 points to a net negative 14% reporting higher earnings.
Seasonally adjusted, a net negative 2% of all owners reported higher nominal sales in the past three months, down 7 points from November. The net percent of owners expecting higher real sales volumes decreased 14 points to a net negative 4%.
The frequency of reports of positive profit trends decreased 7 points to a net negative 14% reporting quarter on quarter profit improvement. Among owners reporting weaker profits, 55% blamed weak sales, 11% cited usual seasonal change, 6% cited a higher cost of materials, 6% cited labor costs and 3% cited lower prices.
For owners reporting higher profits, 69% credited sales volumes, 16% cited usual seasonal change, and 6% cited higher prices, according to the survey.
“Regardless of sales or signs a good economy, I think every business has good reasons to be pessimistic right now,” said Bill Bissett, president and CEO of the Huntington Regional Chamber of Commerce. “As I talk to the member companies of our chamber, the responses are a mixed bag. While some companies had a strong fourth quarter in 2020, there are concerns as to what 2021 could bring.”
Bissett says these concerns go beyond the sale of services and products, as they connect to how to prepare for potential customers with the ordering of materials needed for their business.
“If business remains good for the company moving forward, failure to order enough resources will result in a lack of sales, and customers will likely go elsewhere. If business in the first quarter of 2021 drops, having too many resources on hand will make a financial downturn all the more painful, especially if those materials are perishable,” Bissett explained. “While we all hope the vaccine deployment will return commerce to the way things were or close to it, there’s still a great deal of uncertainty as to what will actually happen.”
Bissett said while the local economy could be worse, the uncertainty for businesses that cannot change business models are in trouble and need help.
“We also hear that individual West Virginians who were struggling financially before COVID-19 are facing greater hardships now,” he added. “While it’s good to see some businesses staying in business, the future remains uncertain for all of us.”
Bissett says the pandemic has also led to the chamber changing its business model.
“We want to change in a smart and effective way,” Bissett said. “By polling our board and membership, we can understand what services provide value to their businesses and what services need to be changed. Simply put, as business changes, business organizations like our chamber need to change as well.
“The best way to know the condition of businesses in our region is to talk to them,” he said. “While you want to protect any proprietary information, this collection of the anecdotal information can be of value as we try to not only monitor the condition of the local economy, but also how we can help.”
Both Downard and Bissett said it will be interesting to see how the current West Virginia legislative session that began Wednesday unfolds in regard to potential legislation to help small businesses in the state.
“It would be good to see some kind of additional relief for West Virginia businesses as our business community work to weather the ongoing challenges of COVID-19,” Bissett said.
“We have used the state and federal grant and assistance program, and I am hopeful those will continue,” Downard said. “Anything is helpful.”
Delegate Sean Hornbuckle, D-Cabell, is on the Small Business Economic Development and Entreprenuership committee and says it is his wish to take up legislation this session to help small businesses.
“Especially restaurants, bars, pubs and other small businesses that are hurting the most due to the pandemic,” Hornbuckle said. “We continue to have discussions in a bipartisan fashion and with small business leaders to find out the things impacting them the most so we can bring sensible legislation to the Capitol quickly. Small businesses are the backbone of our economy, and we must do everything we possibly can to help them.”
On Wednesday, the U.S. Small Business Administration announced a second round of the Payroll Protection Program (PPP).
“A second round of PPP could not have come at a better time, and the SBA is making every effort to ensure small businesses have the emergency financial support they need to continuing weathering this time of uncertainty,” SBA Administrator Jovita Carranza said. “SBA has worked expeditiously to ensure our policies and systems are re-launched so that this vital small business aid helps communities hardest hit by the pandemic. I strongly encourage America’s entrepreneurs needing financial assistance to apply for a first or second draw PPP loan.”