2021 State of Small Business Report – Insights for Strategic Advisors


In 2020, small business owners and entrepreneurs simultaneously faced a public health, economic, and management crisis. But through it all, they persevered. They found solutions and adapted to not just survive, but thrive. Now they are looking ahead to the future of their business, and the help they need from strategic advisors.

We talk so much about adapting and pivoting, but what did businesses do in 2020? What are they doing now? How will the impact of COVID-19 affect current and prospective small business owners this year? And how can you, as a strategic advisor, better serve their evolving needs?

To find out, the LivePlan team asked our community of small businesses and soon-to-be entrepreneurs to share how they’ve been impacted and their expectations for 2021.

Sample size and methodology

We reached out to our LivePlan readers and subscribers with a 40-question survey distributed through the LivePlan blog, email, and in-app messaging. 283 people across 27 different industries completed the survey.

User breakdown:

survey user breakdown

Top 5 industries selected:

  • Business & Professional Services
  • Food & Dining
  • Arts, Entertainment & Recreation
  • Health, Medicine & Social Assistance
  • Agriculture, Forestry, Fishing & Hunting

Impact of COVID-19

Everyone has felt the effects of the coronavirus. Either directly or residually in the form of safety regulations, shutdowns, and other forms of economic disruption. And it’s likely no surprise that small businesses have experienced the brunt of it.

Impact of Covid-19 on businesses

73% of respondents stated that their businesses were affected in some way by COVID-19.

Top negative effects

For those that stated they were negatively impacted by COVID-19, these are the top effects:

  • More than 60% experienced a reduction in customer demand
  • 42% had to delay launching their business while 39% had to make plan revisions
  • 36% experienced temporary closures
  • 27% had to make layoffs, furloughs, or pay cuts

Top positive effects

For those that stated they were positively impacted by COVID-19, these are the top changes:

  • 67% saw an increase in demand
  • 29% transitioned to working remotely and adapted their businesses to sell online
  • 35% also had to rethink their business plan or idea
  • 27% hired more full-time, part-time, or contract employees

For the 25% that found the impact to be negligent, they still experienced increases and decreases in demand, the need to transition to remote work, as well as delays and closures. In every case, it was far less impactful.

For example, only 5% (no obvious positive or negative impact) temporarily closed their businesses, while 36% (negative impact) temporarily closed their businesses.

Industry breakdown

eCommerce and digital services have been the shining stars throughout 2020. But what about other industries, how have they fared?

  • The hardest hit by COVID-19 were Arts, Entertainment & Recreation, Food & Dining, and Agriculture
  • Top growth were educational services, construction and contractors, and Health, Medicine & Social Assistance
  • Industries such as Business & Professional Services, and Food & Dining, displayed mix results. Some businesses in these industries experienced dramatic growth, while others experienced steep losses

Established businesses experienced a greater negative impact

Those that operate a well-established business (1-3+ years) are 16% more likely to have seen a negative impact compared to a new business (less than 1 year). In fact, established businesses fall much closer to the totals we listed above — with customer demand, workforce reduction, and temporary closures falling within 1-2 percentage points.

New or emerging businesses, on the other hand, fell 7% below the negative impact average. Reductions in customer demand, workforce, and temporary closures were far less common, with new businesses falling around 66% below the average. However, delays in launching a business did increase by 3%.

Maintaining sales, budgets, and forecasts were the primary challenges for those surveyed

While the impact may have been different depending on the industry and business stage, the difficulties that faced businesses were rather consistent.

These difficulties didn’t change no matter how you sliced the data. Even experienced small business owners or seasoned veterans in their field struggled with maintaining their business health and trying to make strategic decisions about the future.

The bottom line is that we can’t broadly base success or failure in 2020 on one singular factor. It has more to do with how businesses adapted to their current environment.

What this means for strategic advisors

Any business that was hit hard by COVID-19 experienced relatively similar struggles. Maintaining cash flow, stabilizing customer interest, and retaining their workforce were all prevalent issues that remained consistent no matter the business size or industry. And while we like to paint broad pictures of success with the likes of eCommerce and digital services, it’s difficult to mark clear industry winners or losers this year.

For example, restaurants and food trucks are widely reported in the news as businesses fighting for survival as they face closures, health regulations, layoffs, and diminished interest. While we have seen these news stories ourselves, in our study more than 50% of respondents reported a positive impact or no impact at all.

So, at this point, it may be worth having those initial explorative conversations with your clients once again.

Revisit qualifying questions around what they’ve done to adapt so far, how they think they’re performing, and what they’re struggling with.

  • Are they on track for recovery?
  • Is it time to think past survival and focus on growth?
  • Are there specific line items they should be focusing on?

There’s never a wrong time to revisit how your clients are doing and establishing a baseline to work from. The important thing is that you refamiliarize yourself with their unique situation and avoid making broad recommendations.

How small businesses adapted to survive

Businesses were anything but complacent when facing down an uncertain future. 75% of those surveyed stated that they made some changes to their products or services. For those that were negatively impacted, more than 80% made some sort of adjustment. But these changes were far more cautious, with only 22% noting them to be major changes and 44% as minor adjustments.

While only 65% of those in the neutral category made changes, they did make more dramatic adjustments. With 77% stating that changes made to their products or services were either moderate or major.

How small businesses adapted

The goal? Develop new streams of revenue

27% of those surveyed used those changes to develop new streams of revenue. In fact, those that experienced positive traction were 5% more likely to create an additional revenue stream. And those that were hit negatively by COVID-19 were 3% more likely to develop new streams of revenue.

Unsurprisingly, established businesses explored additional streams of revenue more than new businesses. 39% created additional revenue sources, with a positive impact once again driving more businesses to take this course of action. The real story here is how many businesses are planning on exploring new revenue options in 2021.

Over 33% of those surveyed plan on adding new resources of revenue this year. Again, those affected positively are 3% more likely to do so, but more new businesses (31%) are planning to explore their revenue options.

What was the impact of disaster relief funding?

We can’t talk about adapting to survive without covering disaster relief funding. We asked those surveyed their current application status for the Paycheck Protection Program (PPP), the Economic Injury Disaster Loan (EIDL), and local assistance programs. Here are the results:

  • 56% applied for the PPP
  • 54% applied for the EIDL
  • 32% applied for local assistance programs
  • 62% applied for multiple relief programs

For those that applied to the PPP or EIDL programs, only 49% actually received funding. The remaining 51% were either denied or received no communications regarding the status of their application. For those that did not receive funding, they stated that the primary reasons were:

  • Their business had only been operating for a short time
  • Poor personal or business credit history
  • Missing loan documents
  • Lack of thorough financial documentation

What this means for strategic advisors

Small businesses did not stand idly by and hope for relief. They were active and making adjustments to their product and service offerings in order to expand the value of their businesses and potentially bring in new customers. It’s also likely that many businesses were attempting to solidify their relationships with customers they already have, especially if their product or service is considered to be nonessential.

businesses taking risks to develop revenue streams

Possibly the most interesting aspect is that those who were gaining positive traction were more likely to make drastic changes and develop new sources of revenue for their businesses. Yes, the negative impact of COVID-19, did drive more businesses to make changes, but they were typically minor. However, those that were already succeeding, were far more likely to take more drastic risks.

As an advisor, you can help your clients plan for their funding needs and manage the spending of that funding once received. Help them determine the amount of risk they can handle at a given moment as well as what the impact any business model changes will be. Helping them forecast for these adjustments, and develop different scenarios, can provide greater clarity and assurance that they’re making smart decisions. And by setting expectations, you can be ready to help them adjust their strategy if things don’t work out like expected.

More than likely, the need for immediate reactionary changes has passed. By helping them take stock of their current situation, gauge risk, and understand potential outcomes, you can encourage them to begin planning for long-term initiatives. And still, have financial models and strategies in place in case things go sideways once again.

Reliance on emergency funding

The last big takeaway here is that no one solely relied on the emerging COVID relief programs to save their businesses. In fact, only a little more than half applied to the core programs, and less than 50% of those that applied actually received funding. In many ways, that speaks to the lack of clarity and organization that these programs rolled out with.

But, those numbers may look drastically different with the slightly more refined process on the new round of PPP funds. Some businesses that didn’t get a response may hear that they now qualify, and those that were denied may get a second chance at funding. What’s important, is that most small businesses appear to have used relief funding as only part of their recovery effort. They found other ways to adapt without relying on one source of relief.

Many small businesses are still looking for assistance in navigating how to apply, manage and plan for loan forgiveness. You can help them by understanding what changes are occurring, what documentation they need to have, and in setting up budgeting and forecasting scenarios to help them view and manage their funds.

Expectations for 2021

As much as we’d like to leave 2020 squarely in the rearview mirror, the economic, societal and public health effects are stretching into this year. While that’s not the news we’d like to hear, small business owners are somewhat optimistic. Yes, the next month, 3-months, 6-months, is still very much unknown. But there is a certain level of experience of how to manage this crisis that business owners are looking to leverage this year.

So, to gauge actual expectations, we asked our survey participants what their expectations are for 2021, here’s what they had to say.

Confidence in their businesses

To establish a baseline we asked business owners what their confidence level is in regards to their business, the industries they operate in, and potential growth. This graphic represents the percentage of individuals that marked their expectations as confident or very confident.

Business confidence level

Most businesses find themselves cautiously optimistic. Only 18% are very confident and 16% are unconfident in their business health. For those that experienced positive traction in 2020, 83% are confident in the health of their business, 88% are confident in their industry and 79% are confident that they’ll grow this year. For those that experienced negative effects in 2020, the confidence level drops a few percentage points. 48% are confident in the health of their business, 67% in their industry, and 54% are confident that they’ll grow this year.

Transitioning to remote work

While remote work became a hot topic, only 20% of those surveyed transitioned their team to work remotely. If they transitioned to remote work, the percentage of individuals confident in their business health jumps to 69%. 53% foresee this being a long-term change and 67% of new businesses are expecting it to remain as part of their business. However, the ability to work remotely does appear to depend on your industry:

Top industries embracing long-term remote work

  • Health, Medicine and Social Assistance
  • Information services and data processing
  • Arts, entertainment and rec
  • Business and Pro services
  • Finance and Insurance
  • Media and Communications

Top industries expected to transition back to in-office work

  • Agriculture
  • Business and Professional Services
  • Media and Communications
  • Manufacturing
  • Auto
  • Community and Government
  • Construction

How LivePlan Strategic Advising will help clients in 2021

Small business owners have weathered an enormous storm, and are still struggling to make sense of what 2021 will bring. At the same time, the majority remain confident in the health of their business and the stability of their industry. And while they are doing planning and forecasting on their own, they are looking for expert help to do the best job possible.

As a strategic advisor, you can translate their numbers to measure operational performance and reveal business opportunities. You can build a financial roadmap to help them manage their cash and predict and improve their profits. And you can be the collaborator and advisor they need in a tumultuous time.

Continue to educate your clients on how to navigate their finances and connect their current position to broader industry and market shifts. Are they staying in line with competitors? How is remote work affecting them? Is there an emerging opportunity within their industry that they should be considering? Are they in the financial position to take advantage of it?

Bring your services directly to your clients

Remote work may not have been adopted by everyone, and for some industries and positions, it’s simply impossible, but it did have a positive impact on those that did.

Owners were more confident, retained employees, and over half expect it to be a long-term part of their business. Even those that do intend to go back to a physical storefront or office, may still leverage remote work, but not embrace a full transition. Again, not every business is capable or desires to do more online, but this recent crisis has only accelerated its adoption by customers and employers.

For strategic advisors, this means aligning your practice to be ready to work remotely with your customers. As more and more businesses shift to these models, they’ll want to work with accountants and advisors who embrace remote work themselves.

Your customers need greater flexibility––the ability to communicate with you online or over a video call, and eventually have the opportunity to do more in-depth work face-to-face. The better you understand how to leverage online sales and remote work yourself, the more likely it is that your clients will trust your expertise as they make that same transition.

Business owners want expert help in forecasting

Early on in the crisis, the focus was squarely on finding ways to improve cash flow and stabilize sales funnels, but then it transitioned to a need to forecast and plan for future profitability. Many intend to continue this process, at least once within the next 12 months, and just under half intend to do it on a monthly basis. And over 50% want expert help in their forecasting and planning.

During the crisis, the actual use of these plan reviews varied from identifying new streams of revenue to preparing loan applications. Business owners responded strongly to wanting expert help in planning and forecasting. As much as they are doing active planning themselves, they also want guidance and support in these areas.

Type of help business owners want

Even though cash flow management ranked high as a desired need, it’s clear that business owners value strategic help even more — with business model updates and marketing support being the most desired expert help.

That may be the biggest takeaway from those surveyed: the desire to become experts. Not just in their given industry, but in strategically operating and analyzing business performance. Understanding the ins and outs of their financials and being able to correlate them with internal and external factors. But they want expert help to get there.

Again, this is where you come in as an advisor. You want your clients to become more familiar with the key performance indicators of their business. To feel comfortable exploring forecast scenarios and asking specific questions about results. For them, it minimizes risk and provides clarity and direction. And you can dig even deeper into different scenarios, adjustments, and potential solutions, without fear of your clients not understanding what they should be doing.

Helping small businesses find an effective accounting solution

We wanted to know, of the up and running businesses, what accounting software they are using. Here’s what those surveyed currently use for business accounting software.

small business accounting solutions

LivePlan small business customers generally start with LivePlan before their businesses are up and running. They use LivePlan to develop business plans and often to seek funding. So it’s not surprising that many of our small business users have not yet chosen accounting software. But that’s why it’s so important for them to find LivePlan Strategic Advisors to work with when they are ready to take the leap to expert help.

This data set does not include the pre-revenue businesses in our survey. For those, 55% stated that they don’t currently use an accounting solution for their business. This is even more of an opportunity to get your customers started right!

Provide small business owners a higher level of service

There is an enormous opportunity for accountants to advise small businesses in areas of business modeling and planning, financial forecasting and budgeting, and monthly performance review. Small business customers overwhelmingly want this help and most are trying to navigate their planning and forecasting on their own now. Even if you start off simply, you can grow your customers over time to higher levels of advisory service.

The LivePlan MethodFor the small businesses that start with LivePlan on their own, most reach a point where they want expert help to continue more sophisticated planning and forecasting and business performance review. They value the strategic nature of LivePlan’s system, but they need expert guidance to manage their businesses better.

There is also a great opportunity to advise and guide LivePlan small business customers regarding what accounting software and other necessary applications they should be using. You can get them started right with their systems and processes.

It’s also worth noting that more and more businesses are turning to live webinars and videos to research business topics. Articles came in close behind, and podcasts are slowly on the rise, but our respondents found live training and visual walkthroughs to be most helpful.

So, if you don’t have the bandwidth to start this education process with every client, it may be more feasible to take a broader approach. Run a webinar series, record yourself talking through specific PPP documentation, or outline the benefits of forecasting. Not only will this provide valuable insight for your current clients, but it provides an opportunity to bring on new ones

If you would like to become a LivePlan Strategic Advisor, get started in our program here. If you are already a LivePlan Strategic Advisor and want to be listed in our Expert Advisor Directory, to be found by LivePlan small business clients for advisory work, get started here.

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Kody Wirth
Kody Wirth
Kody currently works as the Inbound and Content Marketing Specialist at Palo Alto Software and runs editorial for both LivePlan and Bplans, working with various freelance specialists and in-house writers. A graduate of the University of Oregon, he specializes in SEO research, content writing, and branding.
Posted in Growth & Productivity, Working with Clients