The impact of COVID-19 on Maryland’s economy and quality of life has been significant and will cause the state’s economic recovery to be fragile. That’s because, unlike many states, there are more small and mid-size businesses in Maryland, with roughly 90% of people working for companies with 500 or fewer employees. Big public companies are well capitalized and have access to capital markets, credit facilities and cash. The smaller companies that drive Maryland’s economy tend not to have these resources.
Further complicating the situation is the fact that key state industries — health care, hospitality, tourism, education, technology and services — are among the industries that have been hardest hit by the economic fallout caused by the pandemic. Compared to other states where large corporations make up the bulk of businesses and big tech firms, agriculture, oil and gas, mining and automotive industries often drive the economy, Maryland’s economy is more locally based. Even government contracting, a vital state industry, will ultimately be impacted as the bills come due to pay for the fiscal stimulus measures being implemented by the government.
The CARES Act, the bipartisan federal $2.2 trillion economic relief plan, will be an essential lifeline, especially for Maryland’s small and mid-size businesses. The legislation will provide badly-needed help to millions of American businesses and industries if it’s well executed. But to address the emergency — and take full advantage of the government funding that will be pumped into the economy — Maryland businesses must be nimble and think strategically about their missions and what may lie ahead. Businesses must begin thinking of new, innovative approaches to better serve their customers in the current environment and be proactive in strategically planning for the future.
We’re already seeing many Maryland businesses innovate ways to keep their cashflow alive and retain some employees on their payroll. Local restaurants are not only providing curbside pickup of the meals they once served in their dining rooms, but are also selling unprepared foods like produce, meats and fish. Grocery and liquor stores are offering online ordering and home delivery. Family farms are offering contactless pickup of fresh vegetables and fruits. Veterinarians are picking up pets from their owners’ cars to limit contact yet still provide the needed care.
What the stimulus package will do for Maryland households and businesses is provide a cushion to help soften the economic blow and buy some time as we slowly work to revive our economy. A return to what we once considered normal is not going to happen right away. In fact, we may not ever get back to that normal and instead we’ll be navigating a new normal. And for the most vulnerable individuals, small businesses and nonprofits in our state, the support the stimulus package offers will not provide enough resources and protection.
For the middle-market businesses that drive a lot of Maryland’s economic activity, cash flow is key. Right now, businesses are trying to keep employees on payroll, or at least provide benefits, if they’re unable to operate or have severe cash flow issues currently.
Through expanded unemployment measures in the CARES Act, the state can provide some level of benefits to laid-off or furloughed employees as workers can get four months of increased unemployment payments. This will allow people to pay bills and rent, provide for their families and preserve their credit ratings while they’re temporarily out of work. For many small businesses, this may indirectly be the most significant piece of the stimulus package since it supports the purchasing power of consumers.
What business owners can do now is move quickly and manage their operations in a way that will ensure that they are poised to thrive in the future. That means focusing on near-term survival and cutting costs where possible while at the same time rethinking their business model. It also means taking advantage of the assistance offered through the CARES Act, including loans to businesses, payroll tax deferment, favorable tax filing regulations and expanded unemployment benefits.
The good news is that we learned from the 2008 recession and the U.S. Congress put together a stimulus package that will do a better job of injecting money into the economy at varying levels to provide stronger support for businesses and individuals. We won’t be able to solve all our problems through the stimulus package, but it will help many people keep their jobs and support their families while helping Maryland industries survive.
When the emergency abates, we’re going to see structural shifts in a lot of different industries nationwide and globally. E-commerce, virtual learning and digital workplaces will become more commonplace due to their flexibility, scalability and cost efficiency. Colleges and universities may shift toward more online courses, while K-12 schools will need to reevaluate how they teach and have plans in place for the next crisis.
The service sector will expand remote operations, telework and cybersecurity systems will grow, and commercial real estate will face changes as more employees work from home. Some industries will inevitably slow down and others will ramp up. We will need to be nimble and willing to continually assess and revamp our approach to how we’re doing business to survive.
Ultimately, the changes we are making today to adjust to this new normal will not just affect us in the interim, rather they will have long-term implications and will even offer new opportunities.
Jeff Rosen (email@example.com) is co-managing partner of RS&F, a business consulting and accounting firm that supports middle-market businesses. Mike Gill (firstname.lastname@example.org) is chairman of Evergreen Advisors and former Maryland Secretary of Commerce.