Lessons in resilience: 3 lasting changes modeled by small business

Business owners are wired to pivot and prevail on behalf of customers. We’ve seen this to dramatic effect in the last 18 months.

They’re also one of our best indicators for the overall health of the American economy. The 32 million small- and medium-sized businesses (SMBs, those with fewer than 500 employees) in the United States employ nearly half of the private sector workforce and create twice as many net new jobs as large businesses.[1]

During the pandemic, SMBs drove two-thirds of net job growth and 44% of U.S. economic activity. Entrepreneurs sprang into action: 4.3 million businesses launched in 2020, a 24% increase from 2019 according to the U.S. Census Bureau.

Innovation and grit have helped sustain these small businesses—traits that will be no less important in navigating a complex economic recovery.

Business owners are more than up to the challenge. I've been inspired by how they’ve responded to the pandemic. More than temporary tactics or pivots, I see these three changes as positive lasting trends for the financial security of all our communities:

1. Even greater emphasis on employee care

Businesses are thinking more broadly about how they take care of employees—wherever employees may work.

COVID-19 has fundamentally reshaped the benefits landscape, highlighting the need for employer coverage that protects health and well-being. Businesses are adding telehealth, financial wellness programs, and better mental health services.

More proactive outreach to employees through benefits makes sense in a more flexible and virtual workplace. Business owners see new ways for their employee care to extend far beyond the office.

2. More focused, intentional business culture

Many business owners in the pandemic took time to better articulate their mission and values as a company—many of them did it for the first time. There’s good reason: A business with a distinct company culture may have an easier time attracting and retaining top talent.

The pandemic churn in the labor market led as many as 66% of unemployed workers to consider entirely changing occupations. Recruiters see more job seekers making decisions based on how the values of a business align with their own.

A well-defined business culture, complemented with competitive employee benefits, has become crucial in a more digitally connected and publicly branded marketplace.

3. Reimagined, resilient business models

Nearly every business adjusted or improved operations at the height of the pandemic. They worked to seize opportunities in disruption—for instance, expanding their business through virtual events. They struggled with widespread shutdowns and many still struggle with a strained supply chain.

Business owners often surprised themselves with how quickly they activated e-commerce or adopted other new technologies. As online sales and service opened new markets, remote work maintained or even boosted productivity.

Technology plays a prominent role in all three of these shifts. A majority—71%—of growing SMBs credit digitization for surviving the pandemic.

Small businesses still face obstacles, but local and national economies continue to make progress. More than two-thirds of businesses in our Principal Financial Well-Being Index reported improved financials compared to a year ago. And 79% of small businesses said they were comfortable with their cash flow.?

None of us can turn back the clock to a pre-pandemic world. But business owners and their employees can do what they do best: Focus on getting results for their customers. We maintain that focus at Principal? on behalf of our more than 45 million customers worldwide.

The best business leaders see themselves as contributors to thriving communities as well as to their companies.

I see that reflected in how small businesses have risen to this historic challenge with their persistent resilience. ?

[1] https://cdn.advocacy.sba.gov/wp-content/uploads/2020/11/05122043/Small-Business-FAQ-2020.pdf