The COVID-19 pandemic is the most significant economic shock in modern history. Overnight, the country went from steady growth and full employment to a full stop. As quarantines were implemented, businesses shuttered operations. Since March 2020, we have developed ways to cope with the virus, but two years later, we continue to deal with supply-chain disruptions, virus variants and a remarkably changed business landscape.
Arguably, one of the most valuable but vulnerable areas of the economy is the small-business sector. Small businesses generate 44% of economic activity and have been the most important source of job creation for decades. While some businesses adapted to the pandemic—at least partially—many did not or could not. Even those that did have found a dramatically different playing field.
As the pandemic progressed through 2020 and 2021, stories surfaced about individual businesses closing permanently, raising questions about what factors might have affected small businesses the most. The Regional Economic Research Institute and the Lucas Institute for Real Estate Development & Finance at Florida Gulf Coast University surveyed small businesses across Southwest Florida to better understand these questions, advancing the Lutgert College of Business mission of conducting applied research directed at our community.
While other academic work examined small businesses at the onset of the pandemic, our study addressed how firms fared during the pandemic and after vaccines had become available. One of our questions was whether there were key relationships and resources that facilitated small businesses in SWFL being better prepared for the pandemic. Among our findings, business owners who took advantage of resources provided by Economic Development Centers held more cash entering the pandemic and were less likely to see a drop in 2020 sales. Additionally, owners using more than two resource organizations were less likely to need government assistance to meet cash flow needs.
While key relationships are important, we also examined whether there is a relationship between an owner’s basic financial knowledge and a firm’s ability to weather a significant economic event. We find that owners scoring above 90% on the knowledge test held more cash entering the pandemic; were much more likely to have sales remain unchanged or grow in 2020; and were less likely to seek government assistance.
The findings have very practical implications, providing insight for the development of continuing-education programs for business owners. One area of focus would be on understanding basic financial principles, especially the principles of risk and return. However, the results also show how enhancing small-business resiliency extends beyond providing specific know-how. Strategic partnerships can also benefit small businesses by building a safety network that operates during booms and busts, smoothing the negative impacts of such shocks while sharing benefits and costs.
It is in the continuing education space that FGCU and the Lutgert College of Business can help. While Lutgert College already provides for-credit courses, the university and the college are open to developing non-credit programs, such as microcredentialing, an FGCU initiative introduced recently to Gulfshore Business readers by Aysegul Timur. Using this approach promotes the creation of “on-demand” training to enhance business knowledge, but with very specific audiences in mind.
From its inception 25 years ago, an overarching goal for FGCU has been to serve the community in practical ways. Since that time, the Lutgert College of Business has embraced the goal of community involvement, even having it as a pillar of the college’s mission. It is in support of this mission that we undertook this study. It’s now time to roll up our sleeves, partner with community sponsors and develop programs that help build resiliency in the SWFL small business community.
Thomas Smythe is a professor of finance, Amir B. Ferreira Neto is director of the Regional Economic Research Institute and Shelton Weeks is director of the Lucas Institute for Real Estate Development & Finance in the Lutgert College of Business at Florida Gulf Coast University.