New Research Shines Light on Unique Struggles of Rural Business

Almost anywhere you live in this country, you’ve no doubt seen your local news covering area small and mid-sized businesses that are fighting for their lives.  In a new report from Principal Financial Group, their research is supporting what we’re all observing.  According to the Principal Financial Well-Being Index(SM), prolonged economic impacts of COVID-19 are wearing on small and medium-sized businesses as owners report more uncertainty about when and how they may recover.  And the report highlights even more difficulties for businesses in rural communities.

The research tracks how the latest surge of coronavirus infections is weighing heavily on small and medium-sized businesses and impacting how they’re preparing for the future. Principal® has been following the impact of COVID-19 on these businesses – and how they’re adapting – since the situation started in the spring of 2020.

While the United States continues to struggle with containing the COVID-19 virus and dealing with restrictions intended to mitigate it, survey participants are currently more concerned and cautious about the economic outlook than they were in September 2020. According to the survey, 46% of businesses reported to be fully operational with about one in four businesses saying they are uncomfortable with their current cash flow situation. As they consider the next 12 months, however, 71% expect some level of improvement in their finances. Some attribute this cautious optimism to the vaccine, which is beginning to be distributed more widely, and government support that may alleviate the situation.

Amy Friedrich, president of US Insurance Solutions at Principal, said that while the COVID-19 vaccine will be a big help, it isn't going to be a quick and easy fix. “With just a few weeks of the new year under our belts, it’s clear that 2021 will continue to be a bumpy road,” Ms. Friedrich said. “Small business relief programs should continue to support stability, but certain sectors may need more support to see any 2021 growth. Patience, creativity, and continued resilience will likely be key traits for businesses in what could be an uneven recovery year.”

The most recent results of this survey highlight differences between how rural and metropolitan small and medium-sized businesses are being impacted by the continued financial challenges of COVID-19. Less than one quarter of rural businesses reported being fully operational.  In comparison, almost one half of metro respondents reported the same. A third of rural businesses say that their local economy is declining in comparison to 18% of metro businesses. And 61% of rural businesses say they feel unsupported or impartial to federal government policies or initiatives designed to help their businesses compared to 36% of metro counterparts.

Rural business owners also anticipate that a recovery will take much longer, with most of them saying recovery could take two years or more. Among metro business owners, most anticipate recovery within the next year. Despite these challenges, rural businesses are investing like their metro counterparts in driving their businesses forward amid these extraordinary times.  For example, they say they are focusing on improving customer satisfaction (30%), offering a new product or line of service (22%), and creating or improving their website, apps, and social media channels (15%).

During this latest survey, top priorities included the health of employees and business owners themselves (42%), supporting employees emotionally and mentally during this time (32%), and paying employees’ salaries and benefits (29%).

Although 70% of the respondents reported that they made no changes to their benefits offering (81% were businesses with less than 500 employees), many indicated they are shifting priorities in 2021 by adding or increasing benefits such as telehealth services (31%), employee assistance programs (28%), and childcare support (27%). Because of these kinds of changes, some business owners are considering pulling back on other benefits. Those businesses with two to 499 employees say they’re willing to decrease or drop long-term care insurance (15%), while their bigger counterparts – those with 500 or more employees - are willing to give up benefits such as hospital indemnity (18%).

“When employers listen to employees and adapt, there are naturally going to be trade-off decisions. Part of the work business owners do is effectively make these trade-off decisions – and continue to make them as employees’ needs evolve and the environment changes,” said Kara Hoogensen, senior vice president of specialty benefits at Principal. “Employers are making changes to best position their business and employees for success. These adaptations are just one more way small businesses are demonstrating their nimbleness and resilience during these unprecedented times.”

All of these challenges are important to bear in mind as you deal with your business owner clients.  The ongoing impact will be with us awhile it seems, and understanding their challenges and concerns will make a huge difference in both their success and yours.

Charles K. Hirsch, CLU, is the president of Hirsch Communications Consulting, LLC, a communications consulting operation in Florissant, MO. For many years, Chuck was the editor and publisher of Life Insurance Selling magazine, and has published several of the leading life insurance industry magazines. Chuck continues to contribute articles on a regular basis to industry publications, in addition to providing a wide range of writing, editing, content development, and marketing services through his firm. He is a regular contributor to NAILBA Now e-Newsletter as well as to Perspectives magazine.