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Darla Moore School of Business

Small businesses are struggling most with pandemic social distancing restrictions, Moore School experts say

April 22, 2020

In everyday life, consumers visit small businesses like restaurants, boutiques, salons, barbershops and a host of other independent retailers. With the COVID-19 pandemic severely impacting these consumer-facing businesses, some of them may not survive the abrupt shutdown. Moore School faculty weigh in on the impact the pandemic may have on small businesses and what they can do to try to survive the disruption.

“Small businesses will be among the most severely affected by the ongoing disruption and contraction in economic activity,” said Joseph Von Nessen, a Moore School research economist.

Von Nessen said the economic impact on small businesses affects the whole state “because the majority of South Carolina’s workforce is employed by small businesses, that is, by firms with fewer than 50 workers. Small businesses often have fewer financial resources to draw from to minimize any given disruption in cash flow resulting from a decrease in demand.”

During his career, senior lecturer Joel Stevenson successfully started, grew and sold four companies in the hazardous waste industry. Two of Stevenson’s companies were sold to private investors, one was taken public and the fourth business was sold to a Fortune 500 company. Formerly a professional football player with the Cleveland Browns, Stevenson learned how to be a successful entrepreneur and what it takes to create a business and see it grow.

Stevenson came to USC in 1999 to begin the Technology Incubator in partnership with the College of Engineering and Computing. During his 12-year tenure leading the Technology Incubator, they supported the startup of 135 companies.

“We offered the new companies mentoring, less expensive services like rent, phones, computers, etcetera, and we arranged for the companies to meet with larger companies they cannot usually get a meeting with,” Stevenson said. “In my case I also raised the money for the incubator. According to the South Carolina Department of Commerce, [my colleague Agata Chydzinski and I] grew the largest incubator in the state of South Carolina. We were in the right place at the right time.”

The Technology Incubator began as a partnership with the City of Columbia, Richland County, Lexington County, Midlands Technical College, some local law and accounting firms, among others, Stevenson said.

In all the years Stevenson owned and operated his own businesses and helped grow the Technology Incubator, he said he learned two valuable lessons that small business owners need to keep in mind as they weather the COVID-19 pandemic.

“I think leadership and communication are the keys to surviving this pandemic,” he emphasized.

Stevenson recently spoke to three of the CEOs of companies that began with assistance from Stevenson when he was the director of the Technology Incubator.

John Denise (’86 finance), CEO of Advanced Automation Consulting, a technology business, said his business is steady despite the pandemic.

“His people communicate with their customers on a regular, weekly or sooner, basis,” Stevenson said.

Kim Neel, president of Alala, a prosthetic company, said her business is steady, though they have begun to cut hours. They are constantly communicating with their employees about the state of their business, Stevenson said. 

Tim Davis, CEO of Advanced Care Management, a care coordinator for seniors and children with disabilities, said his business, too, is steady, and he and his staff communicate the flow of the business to their employees as well.

“The thread that runs between these three companies is constant communication with their employees and constituents,” Stevenson said.

In addition to communication, Stevenson said now is the time for small businesses to innovate and look for creative ways to make up some of their losses.

“If I were a small business owner faced with this situation, I would start looking for other things we can do, thus entrepreneurship,” he said. “The process by which individuals pursue opportunities without regard to the resources they currently control.”

Stevenson said the $2 trillion federal stimulus package recently passed can also help businesses who are struggling with cash flow while social distancing measures are in place.

Von Nessen said small businesses can minimize layoffs if they take part in some of the federal stimulus package programs.

“The stimulus package in its current form established lending programs specifically aimed at small businesses to help them maintain the current size of their workforce throughout the current economic contraction, [a drop in real personal income, industrial production and retail sales]. Further, these businesses may also have the option to receive cash-flow assistance structured as federally guaranteed loans,” he said. “By keeping the South Carolina workforce employed and maintaining the payroll of small businesses, these workers will continue to be able to spend their wages locally and thus prevent consumer demand from being further reduced.”

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