Small Business - Big Opportunity®
May 12, 2021
This Wednesdays with Woodward program is proudly presented as part of the Travelers Institute’s Small Business – Big Opportunity initiative, helping business owners become better equipped to manage risk.
How can small businesses stay ahead in today’s uncertain environment? Tom Sullivan, Vice President of Small Business Policy at the U.S. Chamber of Commerce and Eric Nordquist, Executive Vice President and President of Small Commercial and Business Insurance Business Centers at Travelers identified actions that small business owners can take to access capital in the current environment, explained how insurance coverage can help prepare small businesses for today’s complex world and shared how to create a culture of safety to reduce workplace injuries.
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Slide. Wednesdays with Woodward (registered trademark), A Webinar Series. Small Business - Big Opportunity. Logos of U.S. Chamber of Commerce, Travelers Institute, Travelers, Small Business and Entrepreneurship Council, and Accion Opportunity Fund. A woman appears in a video call at the top right corner of the slideshow
Hello, everyone. Welcome, and thank you for joining us today. My name is Joan Woodward, and I have the honor of leading the Travelers Institute, which is a public policy and educational arm of Travelers Insurance. Today's program is part of our Wednesdays with Woodward, a series we developed last year to really help us explore those issues, those critical issues impacting our personal and professional lives during these really uncertain times. And I hope you're all well out there my friends.
Slide, Join Mailing List: institute@travelersdotcom. Connect: LinkedIn, Joan Kois Woodward. Watch replays: travelers institute dot org. Hashtag Wednesdays with Woodward
We're pleased you're here with us today. We hope you'll stay engaged and connected with our Wednesdays with Woodward series and the Travelers Institute. So please join our emailing list. As you can see there on the screen, email@example.com. Connect with me directly on LinkedIn or watch any of our webinar replays. We've had now about 25 of them during this past year. And those are available on our website as well.
Before we get started with today's program, I'd like to share our disclaimer about the webinar. So there it is on your screen.
Slide, About Travelers Institute Webinars. Wednesdays with Woodward is an educational webinar series presented by the Travelers Institute, the public policy division of Travelers. This program is offered for informational and educational purposes only. You should consult with your financial, legal, insurance or other advisors about any practices suggested by this program. Please note that this session is being recorded and may be used as Travelers deems appropriate.
We really do have a great program for everyone today. And always we're going to save time at the end of our guest and our discussion period, for your Q&A. So just go ahead and, on the bottom middle of your screen, there's a Q&A function there. And if click that, go ahead and type in your question. If you don't want me to read your name, you can click Send Anonymously.
So today's program, we're really thrilled to be joined by some terrific partners, including the US Chamber of Commerce, the Small Business and Entrepreneurship Council and Accion Opportunity Fund, which is a microfinance organization. So according to the Small Business Administration, 44%, almost half of all economic activity in the United States, is driven by small businesses. They drive job growth and really are an important part of our local communities.
Travelers had a long history of supporting small businesses. And we were thrilled to host these events today to explore solutions to the challenges they face. As part of our commitment to small business, the Travelers Institute launched a dedicated series to support small business owners back in 2011, so 10 years ago, And we launched that, it's entitled Small Business Big Opportunity.
We've hosted nearly 40 events and symposium across the country, over the past 10 years, to explore these issues, which really impacts small business owners. And we've engaged with advocates from the public and private sectors to help them solve problems.
Slide, Speakers. Pictures of Joan Woodward, Executive Vice President, Public Policy; President, Travelers Institute, Travelers, her guests, Eric Nordquist, Executive Vice President and President Small Commercial and BI Business Centers, Travelers; Thomas M. Sullivan, Vice President, Small Business Policy U.S. Chamber of Commerce
Today I'm excited to be joined by two of my good friends, who are both passionate about small business and are advocates for them.
So first let me introduce Tom Sullivan. Tom is Vice President of the Small Business Policy at the US Chamber of Commerce. He works with the National Network to advocate for policies on Capitol Hill that support business owners and entrepreneurship. Tom also runs the US Chamber Small Business Council.
He collaborates with members of the council to elevate small business issues to the attention of the US Chamber board and to national leaders, in the White House and on Capitol Hill. Prior to his role at the Chamber, Tom served in the George W. Bush administration as Chief Counsel for Advocacy at the Small Business Administration. Also, Tom was one of my co-authors on the very first paper we wrote about Small Business Big Opportunity. So welcome, Thomas, to our discussion today.
Next, we have Eric Nordquist. Eric is Executive Vice President and President of Small Commercial and Business Insurance Centers at Travelers. In this role, he oversees different business areas that support small businesses. And he really has a unique perspective on the challenges facing small business owners. Eric joined Travelers in 2011 and has worked in the insurance industry for more than 25 years.
So with that, I am going to turn over the stage to Thomas Sullivan. And he is going to speak for a bit on what he's working on, on Capitol Hill and in Washington. And then we're going to hear from Eric Nordquist.
And then get ready, get your questions in the Q&A function. I know there's going to be some terrific content over the next 45 minutes or so. So Tom, take it away.
Thomas and Eric join the call
Well thank you Joan. It seems like just yesterday when you and I were writing that original paper. It's hard to believe you had over 40 sessions kicked off after that initial effort. So it's good to be back with you.
Thank you for including me in this series. And also, thank you for all the work that you do with the US Chamber of Commerce and our foundation. You truly are dedicated, not only to helping the business community--I'm a little bit biased--you're also dedicated to helping small business. So thank you.
I'd like to actually just briefly touch on three things. The first is how small business is doing right now. Second is some of its short term challenges and some of the things that we're seeing are helpful. I'll give you a little bit of a spoiler alert, has to do with hiring or trying to hire employees.
And then lastly, I'll cover some of the longer term priorities before Congress and the White House, on behalf of small business for the coming year, year and a half. And I should probably set the stage a little bit by explaining who the US Chamber of Commerce is, because we represent three million businesses. We're the largest business Federation in the world.
About 96% of our business members have fewer than 100 employees. 75% have fewer than 10 employees. And that actually includes the membership of about 500 trade and membership organizations. And then the membership of between 1,600 and 2,000 local, state, and regional chambers of commerce.
So we try to take their temperature as often as possible, to try to keep up with what's going on with small business. And we also have a quarterly survey that we take, that we turn into a small business index. So that's probably a good place to start, because that gives us a sense of how small business is doing right now.
So I'll pretend to be an economist, good news, bad news. The summary of our latest index, basically, is that there's light at the end of the tunnel, that light being vaccines. Now, what we see from a tunnel perspective is that it's a really long tunnel.
So let's focus on the positive. The positive is that our index rating right now is 55.9. And the number isn't as important as how it's trending up or down. And so very positive news is that 55.9 is up 3 percentage points from the end of last year, which is great news.
Now when you talk about the length of the tunnel, a little bit of a different perspective, because we still have a long way to go to get back to 71.7, which was the index rating pre-pandemic. Still, things are looking positive, things or the outlook is looking positive. And when we look at small business right now-- and we get this from both our index and from our relationship with our business membership--we we're in the middle of what we characterize as a K-shaped recovery. If you have neat and tidy penmanship knows that there's that upper part of the K and then the lower part of the K. Now that upper part of the K represents businesses that are doing pretty well in the small business sector. The business sector that has been doing the best, over the past 12 to 13 months, is construction. Now home-based construction is doing a little bit better than commercial construction. But overall, that small business sector is doing pretty well.
On the lower part of that K, we see hospitality, restaurants, lodging. And we also see that this K-- there's some folks say that it's a K within a K--it also breaks down based on small business demographics. And the lower part of that K, from a demographic perspective, are minority small businesses. They are not doing very well. And quite frankly, data showed that they have been hit the hardest during the pandemic.
Look at our latest index and you see a 14% greater impact on minority-owned businesses, than white-owned business competitors. And so you see this uneven effect on the minority business community. To make it even worse, data show that minority businesses are going to have the hardest time getting capital to recover.
The Federal Reserve just put out a report about three weeks ago that showed that among businesses that all have good credit, Black-owned businesses have twice as difficult a time to get credit or a loan than white businesses. And so when you look at that K-shape, it breaks down not only in sector, but also on demographics.
Now the government aid has helped. PPP in particular, has helped. And over the past 13 months, we see the PPP loans coming, facilitated by SBA but actually lent by the private sector and nonprofit lenders. We see over eight million small businesses receiving loans. So that has had an impact.
Now as time has gone on, and you get closer and closer to present day, you see that aid becoming more targeted, which is actually a good thing, because you're targeting it on that lower part of that K. How do you get that lower part of the K up to the rest of the economy? So that approach, that targeting is based on the sectors and on the demographics.
So from a sector perspective, the program that is going on right now are grants for shuttered venues, which is basically live music and theaters, and restaurants, the Restaurant Revitalization Fund Grant Program. Both those programs are being run out of SBA. The applications are coming in. I heard an announcement just yesterday from the White House that the first grants are being issued this week with the Restaurant Revitalization Fund. So they're targeting in on the sectors.
Now what about the demographics? So on the demographics we see increased attention of getting PPP dollars to minority entrepreneurs. And we have one of the largest community development financial institutions, Accion Opportunity Fund is a sponsor of this program. They're certainly a major part of getting capital to minority entrepreneurs.
As of yesterday, there's still $7.7 billion, or just over $7 billion, left to loan to minority entrepreneurs, entrepreneurs that are the clients of Opportunity Fund and other community financial institutions. That PPP program lasts through the end of May. And so we're very hopeful that money getting out to under-banked and non-bank small businesses that need it the most-- I mean data is very, very clear, they need it the most--will be available for a few more weeks. And we're hoping that makes a difference.
Now, what about short term challenges? That's kind of the landscape, what about the near-term challenges? What we're hearing--and we've actually been hearing for over two months--is that small businesses, as the economy is reopening, can't find workers. And this isn't simply just a reversion back to January and February of 2020. The small businesses that I talk with every day are saying, this is a lot worse. And it kind of makes sense.
There is a phenomenon that, again, makes sense, that we would call job hesitancy. It's the number of factors contributing. Is it safe to go back to work?
I've got two teenage boys, one of them still taking school from home. So there's a responsibility, many times, by folks in the workforce, at all wage levels, to be at home. Either they're taking care of a child who's doing remote school or, quite frankly, an older parent who may be sick or may actually have COVID. That's leading to job hesitancy.
And last, certainly not least, is, unfortunately, one out of every four workers is actually earning more on supplemental unemployment than they were being paid at their old jobs. It's a pretty major disincentive to come back to work. The US Chamber of Commerce on that last piece, we, just this week, have called on Congress to remove the federal supplemental unemployment insurance, as an incentive to get employees back to work.
We think that vaccines and school re-openings will help on those other parts of the job hesitancy. We're actually very, very pleased to see a number of governors announcing that they're ending their reliance on federal supplemental unemployment. And we believe that will bring more folks back, back to work. But it is all about trying to get job applicants right now, for small business. That is at the top of the list, from a recovery, reopen perspective.
Now I gave you a little bit of a teaser on, what are small businesses doing about it? And what we're finding from small business owners is what we would call talent pipeline management. It sounds like a really, really big term. It involves HR professionals, recruitment professionals.
It's what businesses don't have, an HR department. They don't have a recruitment team. It's the business owner themselves. But what it gets at is building a pipeline, continually, so that when there is a downturn, you actually have a system to come in.
Now this is analogous to an issue that Joan and I have talked about a lot, about access to capital. There's an old saying that small businesses that say, the worst time to ask for a loan, the worst time to ask for credit is when you need the money, desperately. And we saw that actually play out in PPP. Those small business owners that had relationships with the banking community were able to get PPP loans very quickly.
The same can be said about talent. The same can be said about employees. Obviously, it's not that simple.
But when we look to leaders like Traci Tapeni, who runs a sheet metal fabrication company just North of Minneapolis, her talent pipeline means that she's talking with middle schools. She's talking with high schools. She's talking with community colleges. She's talking with the superintendent to create partnerships that eventually lead to folks wanting to work for her.
And it really pretty amazing, because this is not something that happened during the pandemic. This has been an ongoing talent pipeline that she's built up for 10 to 15 years. She's very proud of it. And quite frankly, she's a national role model for other small businesses developing that.
But what if you don't have 10 years to start talent management or a talent pipeline? There are some things that you can do now. And one is, listen to the folks who are running the job boards. There's a difference between advertising a per hour job, and an annual salary job.
We were just talking with a recruiter up in Maine the other day, who explained to me that there was this management position open at a restaurant. They couldn't get any applications, because they were advertising it as a per hour job. Well as soon as they did the math to convert that per hour into an annual salary, all of a sudden, they started getting qualified applicants. So a lot of times it's the language you use.
Going back to Traci Tapeni, who runs Wyoming Machine just North of Minneapolis, Minnesota, they actually are really keen on not focusing on technical backgrounds, but instead looking at hobbies and extracurricular activities that would lead to the interest of becoming a machinist or an industrial engineer.
And I'll give an example that is a little bit closer to where I grew up in Massachusetts, I was talking with a manufacturer in Worcester, Massachusetts. And it's almost all robotics and computerized. And I ask them, where do you get your employees?
And he chuckled. And he said, the high school gaming club. He said, you give me any high school state student who loves gaming, I'll have them come into our team. I'll have them come in, do a tour of our facility. And he'll fill out a resume right there, because, basically, you look at these complex machines, it's very similar to the gaming that they're doing--I have two teenage boys--they're doing constantly.
And so it's rethinking about the attractiveness of what you do. And then have some confidence in a great environment, so that you can keep those employees and build them into the positions that, perhaps, a couple of years ago you thought you automatically would attract through resume and applications. So that's what we're seeing now, a long term, a little bit longer term.
And then I'll close out and hopefully get at some of these during the questions. But a lot of our agenda for this coming year with Congress is to convince Congress to give small employers the flexibility to succeed. And we like to ask one question. We like to ask a lawmaker, what is one thing you can do to make it easier for a small business to hire one more employee?
And all of a sudden they start thinking, well, what if I gave them the flexibility to set their wage rate to be competitive in their neighborhood? What if I give them the flexibility to reinvest tax savings, instead of saying, this is your higher tax rate. And you're not going to be able to reinvest any money.
Would that lead to the ability to hire another employee? Most of the times, yes, but if we can answer that question, the policy solutions to get there will come. And that's how we're approaching it for small business in this coming year.
So with that I'll close. I hope I'll get to a lot more discussion in the questions and answers later on. But in the meantime let me hand it over to Eric.
Thank you Tom, that was really interesting. And I really appreciate everything you do for small business owners. And for being from the great city of Worcester, which really looks like "Worchester", which has about 15 colleges, right? That's got to be the most famous thing out of Worcester, right?
OK, so Joan had mentioned my title, which is a very fancy title. But what I like to say here at Travelers, my job here for the firm is really to be the advocate for the small business owner and to meet their insurance needs. And really, meet them where they're at and give them what they need from a small business perspective.
And while for sure, I am a paid advocate for Travelers, small commercial. And we believe we should be the number one choice for small business owners, ok, amongst the industry. I would tell you, I think actually, the industry as a whole, we have a higher purpose as a group and in society. And that's to keep the economy moving forward, right?
And the insurance is the backbone of what helps our economy keep moving, which keeps society moving forward. And what we like to say at Travelers, our company, is we ensure the GDP, right? We ensure the GDP. That's what we do.
When the GDP grows, we do well. When GDP doesn't grow, we have more challenges. You know, there's obviously been a lot of puts and takes within the GDP growth over the last couple of years, in particular with COVID. But amongst friends, you're talking about a $22 trillion GDP that comes out of the US.
And best we can tell, there's about 32 million businesses in the US that are really meeting the needs of consumers for that $22 trillion. So maybe an unknown fact here, but businesses that are from zero employees--like sole proprietors--to 19--so under 20 employees-- that's about 31 million of the 32. So the vast, vast majority of businesses out there are small businesses.
And so I say, the role that I have at Travelers, the role that we're trying to do that Tom is an advocate for, really, is the backbone of GDP. And if you use the math that Joan had said, about 44%, you're talking about $8 trillion that small business owners are driving for the economy. And so I view it as a noble cause. I do also believe Travelers is the number one choice. But that's a whole other conversation Joan. And we'll go there some other day.
So we did a recent study. We were looking at a recent study here. And it's estimated, of those small businesses--remember, 31 million small businesses out there, a quarter of them are uninsured or under-insured. So thinking about that, as the backbone of our economy, about a quarter of them don't have the proper insurance.
So what does that mean? That means that that backbone is vulnerable, for things that are unknown, to keep us moving forward. Certainly COVID, while it you can argue, was it known? You can see the impact it has had, when we stumble a bit in the small business owner space. And so our job is to keep moving on the 75%.
But also, we need to make sure everyone is informed on where there needs to be proper insurance. And so Travelers, in small business, we handle--let's just think about property insurance. We handle tens of thousands of property claims every single year. About two thirds of them, roughly two thirds, give or take, are what we would call non-weather claims.
So these are fire in a restaurant, or a slip and fall, or things that, in theory, together as a team, we've got to find a way to, maybe, we can control those more, right? These are things that happen. They're mistakes but we can maybe control them more.
Over a third of the claims are what we call weather. Whether it's a major catastrophe, or it's just some sort of minor weather event, a third of them. And so in a lot of ways, there's less control over those, because the weather doesn't care if it's very well put together business or not. It's going to have damage to the livelihood of those small business owners.
And so that, to me, brings a pop quiz to the table. So if we can put that slide up, I have a question for Tom, given those factoids.
Slide, Guess the Location. A picture shows a neighborhood, with the streets obscured with snow
There's a beautiful picture here.
We're now in the spring. Nobody wants to think about snow anymore. And I put this picture up here. Tom, if you were to take--I give you one guess without phoning a friend--what location is this picture?
It looks like a community, a golf course community in Minnesota.
OK, that is incorrect. And I even gave you the answer ahead of time, Tom. So I'm disappointed that you didn't know the answer to this one. Just kidding.
So this, of course, is Dallas, Texas. OK, so if you can go to that next page,
Slide, 20 Year Average Number of Days Below Freezing, a map of the U.S., with dark blue across the northern states, lighter blues in the center, and green and yellow in the southern states
I'm not sure how familiar if you do not live in the Texas area. If you're not in the insurance industry, maybe this didn't hit your radar. It was certainly all over the news over the wintertime.
But the winter storm and the freezing temperatures that we had in Texas was something that we consider a tail event, in some ways, or one in a many year event. And seeing snow and freezing temperatures in Galveston Bay is something that we, as an industry--but I know our friends down in Texas are not familiar with.
What this picture shows--this is kind of, all public data here--is that bluer you get is the more days of freezing temperatures per year, across the country. And when you see that yellow and that light green, you can see it on the far right, that means that these areas get, on average, one day of freezing every four or 5, up to 10 years. Dallas, Texas, in that eight day period of freezing, that's the most freezing temperature they have seen since 1983. In Houston, it was one day below freezing. It's the most they've had since 1989.
And the February of this year was the coldest temperatures we've seen since 1970. So what does this tell us? What does this tell us about insurance and small business owners is, you have to be prepared.
You can take the slides down now. You have to be prepared, even for things that you think are remote. You have to do an assessment. And so we're going to go through some questions. And we can talk about some of the things that you can be prepared. We have a tremendous amount of information on our Traveler's website.
So I encourage you, if you're a small business owner, take a look and see some of the materials that we have, some helpful hints that we have on ways to protect yourself. I would argue, while there was lots of things that may have been out of small business owners control in the state of Texas, for sure, with some of the grids and things like that, but there are ways that you can protect yourself, even for winter weather in places that you don't typically get it. And so you have to find ways to mitigate, and mitigate where possible.
We're trying to partner with a lot of our small business owners on tools, and techniques, and even coverages within the insurance business that we can protect, that we can talk about. And then always test that you have the right insurance. And talking to a local broker or agent, this is what they do all day long. The local insurance agent, or a broker, or call an insurance company, this is what we do.
And we can give advice on the right ways, the right insurance, the right levels of insurance, because as much as it's--when you don't buy insurance it's one thing. A lot of times we see small business owners who have insurance. They think they're OK. But they don't have a proper amount of insurance.
So ask questions, be curious. This is your livelihood. And so, as much as that we want to sell insurance-- and obviously that's what we do for a living--we do think we have a higher purpose here of protecting small business owners, which we do believe is the backbone of the economy.
So that's all I had from an over the top. We'll have to answer questions and engage in a discussion, Joan. I think I turn it back over to you. Is that right?
Yeah, thank you so much, Eric for that over the top and then Tom, for your granular detail about getting those PPP loans, et cetera, through the Small Business Administration, and what you guys are really working on Capitol Hill for now. So let's get into some questions. And we're going to get into the weeds here a bit folks.
And please also, we want to take your questions. So put it in that Q&A function. Just type your question in that Q&A at the bottom of your screen.
So Tom, you mentioned, you know, a lot of this recovery is going to depend on vaccines and people's willingness to get vaccines. We know there is increased hesitancy out there to get the vaccine. But what is the distribution, in your mind, mean for small businesses And also, again, mean for hiring. You talked about, people are hesitant to go back to work because of COVID. But what are small business owners kind of facing now? And do we have to get to that herd immunity? herd immunity, like Dr. Fauci talks about, when a lot of governors are, frankly, reopening entire states with 100% or 75% in restaurants, et cetera. So what are your thoughts with vaccine hesitancy and distribution, and what small businesses can do to encourage employees and customers to get their vaccine?
Well, thank you Joan. This would be an example of why I have the best job at the US Chamber, because you have, obviously, this sense of optimism that, with vaccine deployment--and this has shown up in our index--that small businesses will do better. So there's this optimism based on the assumption that folks will take advantage of vaccines.
That's not where it stops, though. And what makes my job so fun is that I now see small business owners taking leadership into their own hands, because these aren't just small business owners who care about the community from eight o'clock to six o'clock, when the lights are on in their store. These are the little league coaches. These are the PTA volunteers, the school board folks. These are the small business owners.
And what I've seen is that it's not so much that they say, you should get vaccinated. They're saying, we care about you. And we're going to provide you with an example of leadership. I'm going to get vaccinated.
But that's not where it's going to stop. We're going to actually provide you with the opportunity to get vaccinated. We're not going to necessarily force you.
Examples like Jeff Good, who's an incredible restaurateur down in Jackson, Mississippi, he just hosted a vaccine clinic in the parking lot of his bakery for his employees, his employees' family, and any of the neighbors of these employees who wanted to show up, and made it about the community. He didn't make it about, oh my gosh, we've got to reopen, because I'm 13 months in the hole of lost revenue.
He made it about, I care about you, because you are part of my team. And I want you to be healthy. And I, ultimately, want our business to be successful, because I want our community to be successful.
So whether it's Jeff Good in Jackson, Mississippi or this great local Chamber of Commerce in North Central Ohio, who, on Cinco de Mayo, gave free Margaritas out to the first 100 folks who got vaccinated. We're seeing that leadership in main streets all across the country. And I think it's that type of leadership that is going to start breaking down vaccine hesitancy across all sorts of different demographics, to get the economy fully reopen.
Good, OK, kind of like more of a carrot than a stick, right?
So convening people, making it easier, maybe giving them a free margarita or donut et cetera, all right. So Tom, what sectors--you see across all sectors of the chamber. What sectors are really still struggling? I know you talked about the K-shaped recovery and those in the tourism industry or airlines, et cetera. But what are you advocating right now for in the state and federal governments, for some of these sectors that are still struggling.
Well, we certainly see--the way it's been told to me is, the closer you are to a human face-to-face interaction, the worse off it's been and the reliance on that. And so theaters, anyone who has been blessed enough to visit a theater in New York City knows exactly what I'm talking about. And what this pandemic has opened our eyes to is that it's not just when you walk into a theater and see the amazing production.
It's all the ripple effect. It's the person who makes the costumes. It's the company that does the lighting. It's the company that actually makes the tickets that get printed out, that you go and you get your seat.
The ripple effect of these in-person theatrical productions has been devastating. So in the theater world, live venue world, and in the restaurant world, without a doubt, those are the two hardest hit industries. And we're grateful for Isabelle Guzman's leadership at SBA to be focusing on those sectors right now, so that they can participate in a reopening recovery.
All right, so Eric, back to you. And let's talk about what Travelers has done during the pandemic, in terms of helping small businesses, because we did pivot, and expanded some of our offerings to help them during these uncertain times. There's a provision, I think, that Travelers put out there, in terms of an expanded coverage or, actually, just paying for helping some stores during the social unrest period, we saw last summer. And can you share some examples of what Travelers is doing in that space?
Yeah, the first thing I would say before we got to that expanded coverage, immediately, when we saw the economy really, really slow down--obviously, last March and into April--we realized that we need to be here first, for our customers, our employees, our customers, for sure. That's where we focused, and our agents, quite frankly.
And so we sprung into action. And immediately, what we realized, if there's going to be a lot of small businesses that aren't having income in, they're going to have a tough time paying their bills, flat out. And we didn't want to lose these customers. They've been with us through the thick and thin. And we wanted to keep these customers.
And so we actually did a whole grace period where we said, you know what? We're going to forgive the billing for a certain period of time. And that was very well received. So even some little things that's not necessarily an insurance coverage, we did that.
We also assisted our agents, a lot of our agents, if they needed some remote help with laptops and things like that. So we were very in tune. We talk about it, many of our agents, our agents are small business owners and so helping them get on their feet as well. So that's a way, the power of Travelers, a lot of others in the industry did that to keep things moving.
When we took a step back and said, OK--particularly, when the social unrest really started that discussion and what we were seeing out there in the marketplace--what's advantageous to all of us is to have your property protected. And so if there is going to be some civil unrest, if there is going to be a riot that happens, having your property protected, we see it, we saw it with claims, obviously, that makes a big deal. If you have one storefront that is boarded up and you can't get in, the other one is open, things are going to happen.
And so we actually developed an innovative coverage. We call it Protection of Property. And so if you have an imminent threat that you see an imminent threat company, and you spend some cash to actually protect the building and have a service come, and actually make sure it's boarded up and no one can get in, we're going to indemnify you for that. And that is something that we heard, from all levels of businesses, really applaud to have that out there, because it's in the best interest of for Travelers for that to happen, as well as the industry.
So those are just some examples where we take it serious when we say, we're here for our small business owners. It's not just about the insurance. We're here we're here to be advocates for them.
OK, so Eric I'm going to stick with you for a minute here. So you talked about a lot of small businesses are not covered to the extent they should be covered. They've been missing some pieces in their coverages, so they're under-insured. So at a high level, can you talk about what insurance policies a small business owner should make sure they have in place? What are the three, or four, or five, you must do these different policy insurance?
Yeah, you know, I actually believe in a sequential thought process that, I think, customers should consider, first when they're thinking about the insurance carrier that they want to partner with, and then in business insurance, what type of coverages you need. And first on the thought process, I really believe the company you partner with for your insurance--I can't emphasize that enough--that the quality of the company, the strength of the company really matters.
And we've learned that, especially through major catastrophes, when the rubber meets the road and you are depending on that claim adjuster to get into an area that is not easy to get into, is the company you're partnering with, do they have the capabilities to do that. So yes, there's the financial strength but your ability to pay claims, this is what we do. And so think about the carrier that you're with. Are they going to be able to do that in your time of need.
And then, you want to carrier that has options. It's not one size fits all, because one thing's for sure about small business owners as well as larger businesses, this is a heterogeneous industry. So that not every floral shop is the same, not every restaurant is the same. And so you be, have to have many options to consider.
And again, either partnering with your agent or broker or the insurance company, we can walk you through all of that. And then, you want to make sure it's affordable and fair. And sometimes, I think it's been flipped, where it's like, you start with the affordability and you work your way down. And I really think you've got to turn it on its head.
Now when you talk about coverage, the very first thing, particularly if you're a very small or new to the small business world, the coverage that you want to consider first is general liability. Before you get into property coverages, or maybe you don't even have vehicles associated with it, you want what we call a GL in the business. But general liability insurance, that's the first thing that you want to think about, because you need to protect yourself from anything that you could get sued around, or an employee could sue you, or things like that. And so that is the very first thing to look at is how is my general liability insurance.
And then as your business grows, and you start to have property that you need to coverage and things like that, or you have certain revenues you need to replace, that's when you get into what we call a BOP, which is a business owner policy that will provide property coverage, as well as liability coverage. And then when you get enough payroll come in-- and a lot of this is mandated in states-- then you get into the Workers' Comp world, where you're actually you have coverage for employees and Worker's Comp. So I do think there's a sequential nature to that.
But if I was a brand new small business owner, I would be looking for that GL policy. And that in particular is where we see a lot of the under-insurance, where you got brand new sole proprietors who come in. And there's no liability insurance. They get sued. And then they're kind of out of luck. And so that's how I would rank it.
OK, and then also mitigating losses, so we have a huge risk control organization at Travelers. Give us a couple of examples of how we, or any insurance company but especially us, have this robust program around mitigating losses for a small business.
Yeah when you enter an arrangement with an insurance company, I've said partnership. It's a relationship. It's not just about getting an ID card and coverage card. It's about a relationship with a carrier that is going to help you in your business. And so loss control is a big deal.
And so that is a way that we can partner with you. Or not just Travelers, but the insurance company will partner with you around taking a look at, either virtually or in person, we can look at the operations. We can give you helpful hints. We can talk about areas of your business that is vulnerable, talk about coverages.
And then you can mitigate a future loss. Because again, yes you have the insurance. That's what we're here to do is to indemnify for loss. But there's much more pain that goes on within a small business owner, other than just getting the indemnification. It's in your best interest not to have that claim in the first place. And the safer that business, the better and more affordable the insurance is going to be.
And so yeah, loss control is a big deal. Travelers is an excellent loss control program. And then again, there's lots of things that you can do for your business without going to loss control. And again, I'd encourage you to go to the Traveler's website. There's all kinds of information in there. And talk to your insurance agent too, to how you can mitigate loss in the first place.
OK, Tom I'm going to shift back to you. So Eric just talk about some of these big losses that owners can face, obviously weather related and other. How does that line up with what you're hearing from small business owners? And how are they thinking about this area?
Well Joan, it's consistent with some of my earlier comments about access to capital, access to good employees. And now you're talking about preparation for disasters, quite frankly. And the answer is, there's no time better than when you're not in the middle of a disaster.
And I know you and I have talked about this in the past, is that Travelers and, as Eric had said, depending on who you choose as your insurance partner, there are resources available that have small business owners focusing on preparation when they're not in the middle of a disaster. Now we've seen this in some surveys that we've taken, having to do with cash reserves. And I think that that's probably the most analogous situation to what we're talking about is that unfortunately, very few small businesses have enough cash reserves to get past one payroll, if there's a disastrous event.
And that's just something every small business owner should try to overcome. So they look at the horizon, of a two month horizon, a six month horizon, or a one year horizon. And cash reserves have a lot to do with that.
OK let's talk about access to capital, because that's one area that is kind of really interesting right now. It seems that those business owners that may have gone out of business may have been serial entrepreneurs. So startup businesses activity in 2020 was up 24%, over 2019. So new businesses were created. There are 4.4 million new businesses that got created last year, compared to 3.5 in '19.
So how do you think about that? If someone's just lost their business, they're going to go and turn around and start a whole new business? How does that, I would not have thought that we had such a country of entrepreneurs Tom, in such desperate times. But they were and they started these new businesses. So how do you think about that?
Well I think about it constantly. And it is actually very uplifting to know that if you were to compare working our way out of the pandemic, compared to, for instance, the recession a decade ago, we're already past where it took three years to recover from the recession. I mean you're on top of those startup figures. It took 10 years to actually go into the net positive for small business, likely employer growth, after the recession. We're already surpassing that right now.
And as we talked about that lower part of the K, there's some parts of the small business economy that haven't recovered at all. So it is very encouraging. But that's not to say that entrepreneurship is for everyone. It's not easy.
I love hearing that expression that I heard down in Phoenix from an ice cream shop entrepreneur who left her Wall Street job. And she said, I gave up my Wall Street job to work 9:00 to 5:00. I leave my ice cream shop every night at 9:00. I show up every day at 5:00.
So, I think this is a great time to start a small business, mostly because we see pent up consumer demand that is off the charts, as far as money, desire to actually meet with people live in person, which vaccinations are helping. So it's a great time to start a small business. It's also a great time to be building those banking relationships, because you said how important access to capital is.
Never in our nation's history is there more focus on how to bank small businesses than right now. So those business owners that are thinking, or those entrepreneurs thinking of creating a business, A, it's a great time. But B, you've got bankers and lenders who are all ears. And you're going to see more options for those entrepreneurs to access capital than ever before in our history.
So if a small business owner does not have an existing relationship with a bank, they had a really hard time getting that PPP loan. And they weren't sure where to go. I heard a lot of different stories that were quite sad actually, because if you had a successful business and you weren't looking for capital, a lot of business owners didn't think to go get that capital just in case we'd have a pandemic, just in case they might need it after a major loss in their business. So what are you advising small businesses now, who don't have a banker perse, say a community banker or other banker, can they go straight to the SBA to get that loan? Or how does that work?
Well a couple of things, I'm a little bit biased. I think this is a great case example for the value of a local Chamber of Commerce. We talk about networks. There is no Chamber of Commerce in the United States that doesn't have a lender somehow involved, either in their board of directors, or volunteer corps, that is part of that network.
That doesn't mean you have to be a member of a local chamber in order to access lending institutions. Most cities and areas in the countries have small business development centers. These are actually funded by your tax dollars. They're mostly based in universities and community colleges. And they provide counseling.
They should be that bridge to a relationship with a lender, whether that lender is someone from Chase, whether that lender is someone in a community bank or credit union, or whether that lender is someone with Opportunity Fund. The Small Business Development centers are there at taxpayer dollars to actually make that bridge, make that connection. So that's certainly a resource that continues to be really beneficial, especially for those entrepreneurs who have a great idea but just need some help in actually executing that idea into a successful business.
OK great audience question coming in from Christopher Maria. So do you believe the Democratic governors might be unwilling to turn down the federal supplements to unemployment benefits, as it might be unpopular, of course with voters? Would it be easier for them if President Biden simply stops the program as now no longer needed? And when does it actually expire, Tom? Do you know when that supplemental expires?
The supplemental federal unemployment insurance that is up to $300 additional per week ends second week in September. So the simple answer to Mr. Maria is, yes. The more complicated answer-- and this is what is so wonderful about working with close to 2000 local, state, regional chambers of commerce-- is these governors are coming up with innovative ideas on how to incent people back to work. And so part of our job at the US Chamber is to take these examples and then magnify them out across the country or to others to take advantage of what some of these courageous leaders are doing.
OK great. Eric this one's for you, I assume, from Derek Wilborn. He says, where would you direct a new startup business to go? There's so much in insurtech and other commercials online about small business insurance.
I'm confused, where should we go for just the general liability policy? Are these available online? Should I get an insurance agent? How does it work?
Yeah, should I give you the paid advocate answer. No, I am a big believer in the independent agency system. I would, if I was a small business owner that just started out and I need guidance across the board, you could look it up and Google it and find a local insurance agency. You could go on the Traveler's website. And we could recommend an agency for you.
An independent agent is going to represent many insurance carriers. And they are your advocate. And they are your counselor on the type of insurance that you need.
And so I truly believe the local agent or the broker that you can either talk to them virtually, you can go into their office. I think that's the way to go. That's what I would do.
And then you can get educated. And then down the road, you're going to make your own choices on how to transact with the insurance company. But that's going to be a great resource for you.
OK, and you can just go on the Traveler's website, put in your zip code, and there'll be a bunch of agents come up listed there? Right in our website, you can go in there and it says, "Find An Agent." You'll see it right there on the website. Tell it your zip code. And we'll give you some great agents that we stand behind and we partner with every single day.
That we partner with, we have relationships with, and they'll help you from there, OK great. Tom, back to you. What are you hearing from small business owners to the idea that business owners should just raise wages to fill those jobs that are having a hard time filling?
So that's true. You pay me more, I might get off my couch and come work for you, versus that unemployment supplemental is pretty good right now. And my kids are home. And I don't really, really feel like I need a job.
But if you pay me more, I might do it. What's your answer to that? Is this wage inflation? Are we worried about that or?
Well, I'm so glad that one of the attendees asked this question. The answer is, when a small business owner can raise a wage, they will. But many times they can't.
So let's take a restaurant owner, which is generally the easiest way to start. So all of the cost that goes into putting food on a plate take away from what you can pay the employee. And then you've got to look at the competitive situation. If they can raise prices, they will. And when they raise prices, that allows for them to pay their staff more.
But sometimes they can't raise prices, because across the street there's another business that has some different model that has a lower cost. And cost is king. I'm not the only one to have said that.
There's another dynamic at work here that I just learned about from our small business owners yesterday. And that is the limitations of what are called temporary hikes. Traditionally, if you have a spike in demand, you can hire temporary employees, pay them a heck of a lot of money.
And then when the spike is gone, you don't use those employees anymore. That's no longer a luxury many small business owners have, because these temporary staffing businesses, most of them have completely gone away over the past 14 months, for pretty obvious reasons. And so when a small business owner is faced with trying to raise their wages, that's a permanent cost.
They can't just say, oh, hey we caught up. And we're actually now putting money in the bank. And so all these people are applying for jobs. So I'm just going to pay everybody less. That doesn't happen.
And so it's a longer term than just overcoming a spike. And that's a consideration fresh on the mind of all small business owners. But the simple answer to that question, which I get all the time, is when a small business owner can, they absolutely will. And it's a great question to ask the small business owners themselves, because then they can detail out exactly what it costs to turn the lights on every morning.
OK great, Eric this is one for you now. OK, with the increase of small business units, SBUs, and the independent agency channel, what distribution service models has Travelers seen that appear to be best meeting the needs of these small businesses? That's question one. And what percentage of agencies are you seeing utilize carrier service centers for this block of business? And how do those benefit small businesses from your perspective?
Yeah, the vast majority of the transactions and servicing within the independent agency system still is traditional, with the agent, with the broker, meeting the needs, and then interacting with the insurance company as their advocate. But I would say, pre-pandemic, and then accelerated during the pandemic, was digital adoption, as well as an increase in the utilization of company service centers. And both of those is very intuitive.
It allows more interaction and servicing, and keeping you keeping your policy moving, without having to go with an independent agent and get transactions done faster. And our hypothesis is that we'll continue. That is not about having the independent agent do less. It's about giving the independent agent time to do what they do best, is what, answering the last question, you said about counseling and finding those small business owners that don't have insurance, making sure they're meeting. They're doing coverage counseling, doing all that, then actually getting the transaction done and processed, and faster, and getting a certificate of insurance fast.
That's the type of stuff that we can do quickly for you, either in a digital way or within a service center. So what's the benefit to a small business owner? When you need something, we can get it to you, quickly. That's what we do. That's what we do for a living. And so that's the benefit of more digitizing the environment.
OK, terrific. Well listen, we are almost at the end here. I have a couple of teasers for our upcoming programs.
Slide, Additional Resources: U.S. Chamber of Commerce - www dot U S Chamber dot com slash Save Small Business. Travelers Small Business - www dot travelers dot com slash Small Business
If you just hold on, our audience, for a second. But let me thank a huge thank you to Eric and Tom today, for really your insightful thoughts and for all you've done for small business advocacy, Tom, especially over the years in Washington and Eric within the insurance industry. You are viewed as a thought leader, for sure, in our industry Eric, in terms of small business.
So the organizations, both Travelers and The Chamber are on the website now. It's also in the chat feature. If you want to go to those websites and get your resources, go ahead.
We also have a terrific lineup of programs in the next couple of weeks.
Slide, Upcoming Webinars. Register: travelers institute dot org
So on May 19, a Data Driven Enterprise, we have our Chief CIO at Travelers, Mojgan Lefebvre, talking about AI and talking about all sorts of digitization of your business. On May 26th, we are going to talk about the future of cities with Kathy Wylde, President of the Partnership for New York City, and Jim Wunderman, President of the Bay Area Council in San Francisco.
And then we have on June 9th, back by popular demand, former FDA Commissioner and my friend, Mark McClellan. He's going to talk about the vaccine rollout, where we go from here, vaccine hesitancy, and herd immunity. So please join me on June 9th.
All of those programs you could register on the Travelers Institute website. So please do connect with me on LinkedIn. Go on the website and register today. Those seats do fill up. We only have so much capacity on our Zoom calls, folks. So please register early. And again, Tom thank you so much. And Eric, we really, really appreciate you being with us today.
So stay safe my friends. Wear your mask. Get your vaccine. And we'll be together very shortly, take care. Appreciate your joining our session today.
A K-Shaped Economic Recovery
Sullivan opened the session by sharing results from the U.S. Chamber’s quarterly Small Business Index to explain the landscape for small business owners. “There is light at the end of the tunnel,” he stated, with the Q1 2021 Index score rising three points to 55.9. Still, there is a long way to go to reach the pre-pandemic score of 77.1. Complicating matters, the economy has experienced a “K-shaped” recovery which has meant that some small businesses are further along in their recovery than others.
Two major factors influence a small business’ recovery, according to Sullivan: industry and demographics. While sectors such as construction are performing well, industries such as hospitality and restaurants continue to struggle. Alarming demographic trends have also emerged, with minority-owned businesses being both hardest hit by the pandemic and slowest to recover, Sullivan shared. He noted that government aid has become increasingly targeted to reach those small businesses that need it most.
On top of the economic environment, small business owners are facing difficulties finding and hiring talent, explained Sullivan. He identified three major reasons for this:
- Job hesitancy, specifically whether workers feel that it is safe to go back to work.
- Responsibilities at home, such as children in remote school or taking care of an older parent.
- Disincentives to return to work, as a result of unemployment support being provided. According to Sullivan, 1 out of every 4 workers is earning more on supplemental unemployment than they were being paid at their old job.
Sullivan shared tips for small business owners to help combat these challenges, including:
- Build a talent pipeline. Foster relationships with local middle schools, high schools and community colleges to get your organization on students’ radar as a desirable place to work.
- Consider how you advertise a position Salaried positions may be seen as more desirable than hourly positions, even if the pay is the same.
- Be flexible in how you evaluate qualifications. Consider not only technical backgrounds, but also hobbies and extracurricular activities.
Small Businesses Claims
Nordquist emphasized the proliferation of small businesses, specifically those with less than 20 employees, which comprise about 31 million of the 32 million businesses in the United States. Of those 31 million, about one quarter are uninsured or underinsured, leading to vulnerabilities for those businesses and the economy more broadly. Finding ways to reduce causes of loss can help protect small businesses financially, explained Nordquist.
As a property casualty insurer, Travelers handles tens of thousands of property claims each year, according to Nordquist. Two thirds of these claims are non-weather-related, accidents that are more controllable or preventable, such as a fire in a restaurant or a slip and fall. The other one-third of claims are weather-related, which may not be as easily prevented, such as the winter storms in Texas in early 2021. Nordquist described the relationship between a small business owner and insurance carrier as a “partnership,” working together to find ways to mitigate damage and reduce claims, when possible, using tools and techniques to protect them. Many insurance carriers will have services such as risk control to help evaluate a company’s risks and exposures and provide tips and resources to mitigate those.
Choosing Insurance Coverage
Nordquist encouraged small business owners to engage a local independent insurance agent or their insurance carrier directly to understand their coverages and make sure their businesses are properly covered. He outlined a sequential thought process to consider when selecting insurance:
- The quality and strength of the company, including its financial strength and ability to pay claims.
- Insurance policy options available, rather than a one-size-fits-all approach.
He also outlined coverages that small business owners should consider, depending on their size, including:
- General liability insurance for smaller or new businesses, to protect small business owners in the event they are sued.
- Business Owner Policy which would include property coverage and liability coverage.
- Workers Compensation to protect employees in the event of a workplace injury.
Sullivan and Nordquist encouraged small business owners to visit their websites for more information and resources, pointing to www.USChamber.com/SaveSmallBusiness and www.travelers.com/smallbusiness.
Executive Vice President, President of Small Commercial and Business Insurance Business Centers, Travelers