Survey Reveals the Impact of COVID-19 on New Jersey Businesses
2020 has been a year of many unwelcome surprises for businesses throughout New Jersey. The initial forced business closures and stay-at-home orders created near panic requiring many to expand credit lines or seek loans to survive. It seemed COVID-19 was relenting during the summer months, allowing a return to more “normal” operations. However, the second wave has brought back concerns about more restrictions that could stifle business operations and created adverse economic conditions.
Findings from the New Jersey Business & Industry Association’s (NJBIA) 62nd Annual Business Outlook Survey reveal just how severely the pandemic has impacted businesses. For example, 47% of respondents indicated it would take more than one year, or longer, to recoup the profits lost during forced business closures. 59% have reduced overhead expenses, including reduced salaries, layoffs, and furloughing employees.
About the Survey
The survey was conducted in September 2020 and included responses from more than 1,000 New Jersey business owners and managers. Most responses were from small businesses, with 66% of responses from companies with 24 or fewer employees.
Key Survey Findings
- 2020 Sales & Profits – The survey wanted to understand how sales volume and profits changed over the prior year. According to the findings, 62% of respondents indicated sales were down, 18% of sales remained the same, while 19% reported an increase in year over year sales. In terms of profits, 62% of respondents reported a decrease, 17% remained the same, and 20% reported increases.
- Employment Changes – Since many companies experienced a drop in revenue, it is reasonable to expect expense reductions, including overall employment. According to the report, 10% of respondents indicated employment decreased substantially, 23% reported a moderate decrease, 56% maintained existing levels, 9% reported a moderate increase, and 1% substantially increased employment levels.
- Pay Raises – The economic climate means that businesses also need to make tough decisions about pay raises. In 2020, 12% of respondents gave a pay raise of five percent or more, 20% three to four percent raises, 22% gave one to three percent raises, 40% no raises, and 6% decreased pay. Looking ahead to 2021, only 9% expect to raise five percent or more, 19% three to four percent raises, 28% one to three percent raises, 42% no raises, and 4% expect to lower pay.
- Biggest Concerns – While there are many concerns, the survey wanted to understand the top issues weighing on businesses’ minds. It was discovered that 30% are concerned about property taxes, 24% increasing the cost of doing business, and 14% cited the increasing cost of health insurance.
- New Jersey Economic Climate – A significant theme uncovered in the survey results is the growing concern about the state’s economic climate. The report found the industries experiencing a slowdown include manufacturing (non-durable goods), service businesses, wholesale and distributors, and healthcare organizations.
- COVID-19 Liability Concerns – Finally, the survey wanted to understand the level of concern about litigation arising from COVID-19 transmission at the business. It was found that 42% of respondents are somewhat concerned, 24% very concerned, 23% not concerned, and 11% offered no opinion.
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The survey findings reflect how the pandemic has impacted sales, profits, and expenses while creating new risk management concerns. To ensure your business is ready to face the unknown challenges of 2021, it is important to consider conducting a cash flow analysis, creating a cash flow plan, and carefully review liabilities and expenses. If you have questions about the information outlined above or need assistance with a tax planning or accounting issue, Klatzkin can help. For additional information, click here to contact us. We look forward to speaking with you soon.
©2020 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date and should not be construed as accounting, tax, or financial advice. Please consult your tax advisor concerning your specific situation.