Whenever you forecast the future, you take your feet, stick them in your mouth and chomp down hard. Anyone who tried to predict 2020 trends for small business last January ended up eating a considerable amount of anatomy.
But that doesn't stop us, does it?
Last week, I hosted a Zoom webinar for the Fairfield County, Connecticut, SCORE chapter called "How to Position Your Business for Growth and Profitability in 2021." Here is an executive summary of some of my observations from that program (for the entire one-hour program, go search "Cliff Ennico Growth 2021" on YouTube).
2021 Will Be a Transitional Year. We probably won't be seeing a lot of government-mandated lockdowns this year (the unemployment rate wouldn't be able to take it), but we're not out of the woods yet, not by a long shot (as in vaccine — get it?)
The vaccine rollout will take months, and mutated variants of the virus that causes COVID-19 may outpace vaccine development, leading to a "sine curve" with increases and decreases in deaths over time — kind of like last year. While there's a lot of pent-up demand in the economy right now, fear of the Grim Reaper is a strong countercurrent, and it will be a while before at-risk customers will overcome their caution.
If you doubt that, ask yourself: Will you ever again board an airplane without wearing a mask? Many theater seats on the Great White Way haven't been updated since the 1930s: Will you ever again sit in a crowded Broadway theater overlapping elbows with the person next to you even if you're sitting sideways? Enough said. If your business relies heavily on people standing or sitting in close proximity (such as sports arenas, theaters or commuter trains), you're looking at 2022 for relief. Or maybe never.
The Likely Prognosis for 2021. Like Julius Caesar's Gaul, 2021 can be divided into three segments when it comes to small business recovery:
Phase One (January to June): A lockdown mentality will continue to prevail while the vaccines are distributed to high-risk individuals (seniors over 75, first responders, teachers and health care workers) and the weather discourages outdoor activity.
Phase Two (July to September): The weather will warm up, leading to a replay of last summer. Outdoor dining will keep many restaurants on life support, and the vaccines will finally start reaching the general public.
Phase Three (October to December): Schools will reopen full time (the emerging consensus is that distance learning isn't working, especially in the lower grades). Most at-risk people will have been vaccinated, and people at low risk of catching or spreading the virus will be emboldened to take greater risks and join the herd (as in immunity), but people will still avoid "superspreader" situations such as sports events, concerts and cruise ships.
Some Pandemic Habits Will Stick, While Others Won't. If you run your own business, you want to know which of the new habits and customs people have adopted during the pandemic will stick for the long term and which will bounce back to pre-pandemic norms once the combination of vaccination and herd immunity hits a tipping point.
Here's my prediction: Those habits that are tedious, painful or get boring after a while will likely be rejected as soon as a return to normal living is feasible, while those habits that are fun, interesting or empower you to live your life on your terms will be more likely to stick.
For example: Cooking more at home; do-it-yourself construction projects; online learning (except perhaps at higher grade levels); and online dating are likely to take a hit once people can once again savor the joys of dining out (or eating cheap takeout); hiring a handyperson without a face mask; and meeting people face to face in places where alcohol and loud music play into the mood.
However, being more aware of your surroundings and the health and safety of the people around you; avoiding crowds and large gatherings; doing more with technology; working from home; shorter or nonexistent commutes; and focusing more on family and work-life balance are more likely to be long-term trends.
Even once we achieve full immunity, we will still be wearing masks, washing hands frequently and bumping elbows. We will never forget 2020.
Prepare for Higher Taxes. The incoming administration will be spending tons of our tax dollars and incurring huge deficits to keep people afloat. On top of that, they are proposing big-government solutions to issues such as climate change, infrastructure and income inequality. Bigger government inevitably leads to higher spending, bigger deficits and higher taxes to pay the bills. Look for massive tax increases in the near future, especially on people making six-figure incomes or higher, and more aggressive IRS enforcement of the tax laws.
Simply put, it's time to prepare now for less discretionary income in the future. If you have credit card debt, pay it down now. If you have less than $50,000 in the bank, try to double your cash reserves by the summer. If there is any fat in your overhead expenses, start wielding the meat cleaver.
And if you have engaged in creative accounting in the past, make sure your 2020 tax return is squeaky clean, with zero potential for a successful audit.
Cliff Ennico ([email protected]) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our webpage at www.creators.com.