Altman sees opportunity in the logistics sector as companies reinvent their supply chains, including investment in new delivery hubs. But Welch Equipment’s revenues are down from last year — partially a result of the sales cycle, but also a slowdown for some clients’ facilities.
“What has curtailed us is the companies who have really not been able to operate during COVID,” Altman said. The drop-off was most common among smaller customers, he said.
Ted Sarenski, CPA/PFS, CGMA, has seen the same damage to small companies in his work as a wealth adviser in Syracuse, N.Y., with Capital One/United Income. The shift to online shopping and the pain of shutdowns are squeezing people out, he said.
“The big companies are OK. It’s the mom-and-pop shops, the locally owned restaurants, the tour guides — those folks aren’t coming back for a long time, if at all,” Sarenski said. “I feel that anybody who’s 55 and up who was running a business is wondering, ‘Do I want to invest all over again and start over?’”
But that hasn’t stopped a modest rise in optimism among business owners. Forty-one percent are now optimistic about their organization for the year ahead, compared with 30% in the previous quarter.
Domestic economic conditions was the top challenge cited by respondents for the second consecutive quarter. Domestic political leadership moved up four spots from the previous quarter to second on the top challenges list, followed by employee and benefits costs.
Opportunities for entrepreneurs
Sarenski said he has seen sparks of entrepreneurship flying among younger people, especially as new consumers move into smaller cities and rural areas. “I think some revolutionary things will come out of this,” he said.
Janet Long, CPA, has already seen it happening in greater Houston, where she and her sister co-own Peerless CFO.
“I see that there are people starting new practices, new businesses. I feel like there’s a lot of opportunity,” she said. For at least the next six months, she expects her company is going to be on an upward trajectory.
Peerless CFO, which provides financial management guidance and tax services, is building a roster of new clients, who are jumping into everything from home repair to chiropractor businesses and, in one case, a pet hotel. One client, a seamstress, turned her small business into $120,000 in projected revenue for the year by selling thousands of masks.
Peerless CFO has been swamped by demand for its help on the ever-changing menu of tax-deferral options and government relief programs, and it has struggled to hire new staff.
A new reality because of remote work
Meanwhile, the shift to remote work is creating new challenges and opportunities for many businesses. As a result, FriendsOffice, an office supply company in Columbus, Ohio, has seen its business drop sharply.
“We’re selling a lot of PPE [personal protective equipment] products, but office supplies, which have been our bread and butter, are down a good 30% from people working from home,” said Ken Schroeder, CPA, the company’s longtime chief executive.
“Fall could be very slow,” he predicted. He has avoided laying off any of his 90 staffers despite the revenue drop, but he worries it could be necessary later. About 16% of respondents reported they have too many employees — a slight reduction from the previous quarter but far higher than pre-pandemic levels. A year ago, for instance, 25% of respondents said their companies planned to add staff and just 9% said they had excess workers.
Still, Schroeder is hopeful about the long term. There are signs that remote work won’t be permanent for many companies. While most companies are offering a work-from-home option, the largest portion are still primarily doing their business in the office, according to the AICPA survey. Meanwhile, FriendsOffice has developed new revenue streams.
“Because we’re learning to do so much better at the janitorial cleaning aspect of the business, we may even be stronger at the end of this,” he said.
A few lucky companies have seen a boom, not a bust — which is bringing its own difficulties.
Pebble Technology sells a material used to finish pools. It has been hit by a huge surge of demand as consumers have canceled vacations and instead spent the money on home improvement, according to CFO Brian Hollrah, CPA. It has resulted in double-digit revenue growth for Pebble Technology, with headquarters in Scottsdale, Ariz., and Hollrah thinks sales would be even higher if the pool installation industry wasn’t stretched to capacity.
“Our plants have been running six days a week. They’ll run six days a week in a busy time but normally not every single Saturday,” he said. “Some pool builders in our industry already have jobs booked well into 2021 and are no longer accepting new jobs with their subcontractors’ labor constraints. While unemployment is perilously high nationwide, skilled workers are a rare find and have been for a number of years.”
Beyond the ups and downs of the quarantine economy, there’s the question of when — and whether — life in the United States will return to normal.
“I think we won’t see a real recovery really until the end of 2021,” said Justin Puckett, CPA, the director of payment transformation at Hawaii Pacific Health.
He believes the health care sector is “severely at risk and will likely need additional federal intervention,” especially for smaller providers. But he, too, is optimistic for the long run. He’s working on an initiative to switch the not-for-profit hospital chain from a fee-for-service to a value-based model with capitation, an effort that has only become more important amid pandemic disruption.
At the same time, Puckett, a new father, finds himself wondering more broadly about the future for his family.
“I think there’s definitely anxiety: What will the world and the U.S. economy look like as we continue to make our way through COVID?” he said. “I’m overall optimistic that we will find our way through this … but it’s going to be a very tough road.”
— Andrew Kenney is a freelance writer based in Colorado. To comment on this article or to suggest an idea for another article, contact Neil Amato, a JofA senior editor, at Neil.Amato@aicpa-cima.com.
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