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Pandemic-Related Disruptions Continue for Small Businesses

Bryan Pate, co-founder of 2007 Solana Beach-based startup ElliptiGO, the combination elliptical machine and bicycle, is one of thousands of small business owners seeking ways to thrive two years after COVID-19 brought on countless unforeseen challenges.

COVID-19 disrupted business models, business plans and business goals, adding additional hurdles to pre-existing obstacles, including lockdowns, supply chain disruptions and general uncertainty.

ElliptiGO, like many companies worldwide, is also dealing with significant challenges related to much higher cost of goods as well as substantial shipping delays and higher fees.

“Component costs, ocean shipping, ground shipping and warehousing have all increased dramatically,” Pate said. “For example, we went from paying $2,500 per container in 2019 to being charged more than $16,000 for our containers last year. In the past two years, our warehousing costs more than doubled for storing the same boxes the same period of time.

“Our manufacturing costs have gone up more than 25 percent since 2019. I could go on, but for our business, inflation is real and it does not look like it will dissipate anytime soon.”

San Diego resident Mervain Cutler, who runs a small business in San Diego that works closely with the U.S. Navy and specializes partly in command-and-control systems, says landing government contracts is a major challenge for his small business.

Cutler Engineering & Technology Services, which he founded in 2014, can’t offer the same benefits packages that other large businesses, and other larger small businesses, can offer.

“It’s hard for small businesses to compete in the world with large businesses,” said Cutler, a U.S. Marine Corps veteran. “Retaining and hiring are challenges, and it is easy to lose people to large businesses. It has gotten so difficult for small businesses to enter into government contracting, and it is so complex. Cost-wise, I am in an environment that I can’t compete in.”

Local small business owners like Pate and Cutler are now looking to U.S. legislators and officials to help them meet their needs, according to an in-depth report from a group that lends a collective voice to small businesses.

Goldman Sachs Report Calls on Lawmakers to Modernize SBA

Goldman Sachs released a report on March 14, in partnership with the Bipartisan Policy Center, asking for lawmakers to better support small businesses, and to modernize and reauthorize the Small Business Administration — for the first time in two decades.

 

The report, “From Pandemic to Prosperity: Bipartisan Solutions to Support Today’s Small Businesses,” calls on legislators to reimagine programs supporting small businesses and revisit ways to help meet the current needs of small businesses.

 

The report shines a light on more than a year of conversations with small business owners, as well as national surveys of small business owners conducted by Goldman Sachs 10,000 Small Businesses Voices, and discussions with current and former government officials.

 

Pate, Cutler and several other San Diego County area business owners are contributing members of the Goldman Sachs 10,000 Voices group.

The group’s report identifies four areas that activists say business owners need policymakers to focus on so they can recover, build resilience, create jobs and be positioned for growth and help the broader economy.

The key areas posing persistent challenges are workforce competitiveness, access to capital, affordable childcare and competing for government contracting.

“As I talk to many fellow small business owners in the San Diego area, it’s clear that doing so would help all of us,” Pate said.

The report says that a January survey conducted by the 10,000 Voices group showed that 42 percent of small business owners said they were struggling financially due to the continued impact of the pandemic.

While millions of small businesses received government support during the pandemic through loans, grants and tax credits, the report said that many continue to struggle and need additional support from Congress, federal agencies and the White House to boost recovery and growth.

Pate said his company was able to secure about two months’ worth of payroll through the Paycheck Protection Program through the SBA.

 

“This was a little less than we were entitled to, but because of how poorly the process was run, we decided it was better to take less and ensure we get something than to try to maximize the benefit and risk a miscalculation that would potentially result in us not receiving anything,” he said.

Leveling the Playing Field

 

Cutler and Pate both say they are interested in leveling the playing field for small business owners. That includes better access to 401K plans and better health care options. They agree that providing quality benefits is often much more affordable for larger businesses.

 

Childcare needs are also an important workforce issue. A number of employees have left Pate’s business over the years due to childcare obstacles, he said.

Although he said the average age of his 15 employees is just under 40 and his company’s childcare needs are not as dire, Cutler said he had spoken to Congressman Scott Peters about incentivizing small businesses to contract for childcare, with government oversight.

Cutler said the government needs to “get in the driver’s seat and show that they care about our children.”

“If we want to be a top workforce, the only way is to allow for our workers to have affordable childcare,” Cutler said.

Serving Small Business Owners Across Country

Launched in April 2020, 10,000 Small Businesses Voices builds on the Goldman Sachs 10,000 Small Businesses program, which has served more than 11,000 small business owners across the nation.

The 10,000 Small Businesses Voices group was formed to help small business owners organize and advocate for policies that matter to them and has given a space for direct advocacy with Congressional members and federal agencies.

Pate said despite the concerns raised by the 10,000 group and the continued push for government to make needed changes, he said he sees positives on the horizon for ElliptiGO, and other small businesses.

“My peers are generally reporting solid performance for the past few quarters with optimistic expectations for 2022,” Pate said. “I think this is going to be another good year for San Diego small businesses, especially in the sports, active lifestyle and biotech industries that are so core to the San Diego market.”

Pate said that after not being able to offer ElliptiGO’s complete catalog of products since March 2020, the company has finally been able to get everything back in stock. “We expect to be back at ‘normal’ inventory levels this quarter,” he added.

He said production is flowing more smoothly and the shipping delays once the ships offload have been greatly reduced.

 

“Other companies are experiencing the same thing, so by the middle of the year I am confident that consumers will not be facing the extreme delays in getting products like they have been dealing with for the past two years,” Pate said.

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