2021 Annual Alaska Small Business Survey Report Released
Economy shows signs of recovery, but some challenges still remain
Posted & Edited By MARY KAUFFMAN
February 07, 2022
Almost 700 Alaska businesses responded to the 2021 survey, providing one of the most complete overviews of how the state’s small business sector has fared during the COVID-19 pandemic and the more recent economic recovery.
“Overall, this survey found that businesses were much more optimistic about the economic future,” notes Alaska SBDC Executive Director Jon Bittner.
Bittner said, “In 2020, for the first time since the Alaska SBDC launched the survey, more businesses thought the economy would get worse rather than improve in the next 12 months. In 2021, the trend flipped back into more positive than negative outlooks.”
There are still a variety of barriers that businesses will have to overcome, however. Shipping costs, the rising cost of goods and finding employees were all listed as significant roadblocks to recovery.
Almost all of the businesses surveyed indicated they were looking to grow or maintain their current workforce in 2022. Unfortunately, they also indicated it was difficult or very difficult to find anyone to fill those positions. They listed several reasons, including: a lack of qualified applicants, not being able to pay enough and seasonal issues, as the biggest challenges to hiring. While all areas of the state are having difficulty finding employees, some regions are particularly hard hit. The Kenai Peninsula had the most difficulty of any area surveyed due to a lack of qualified applicants.
The survey noted the last two years have seen a significant increase in the number of businesses seeking and receiving funding, primarily due to the creation and deployment of a variety of relief funding through the Coronavirus Aid, Relief and Economic Security (CARES) and American Relief Plan (ARPA) Acts.
Moving into 2022, the survey sees indications that businesses are recovering financially from the COVID-19 driven economic slowdown with over 45% indicating this year’s revenues were higher than last year. Unfortunately, the survey is seeing a higher-than-normal number of businesses indicating that they will close in the next six months without new funding or a significantly improved economic situation.
“Alaska needs to help its businesses transition from a hunker down to a sprint forward mentality. The rest of the country is beginning to recover and we can’t afford to be left behind,” Bittner said.
Securing funding, growing the available workforce and economic stability were all listed as things businesses needed to thrive and grow in 2022. Quoting a news release, the Alaska SBDC joins our businesses in their optimism for the future and looks forward to a year of growth for our industry sectors and communities.
The top challenge in 2021 was supply chain issues/shipping costs which increased from 5% in 2017 to 50% in 2021. COVID-19 related issues was the next major challenge, with 45% in 2021 compared to 80% in 2020. Rounding out the top three challenges, and making its first appearance on the survey, was inflation/cost of goods.
All of these factors are causing businesses to struggle to stay open. While the percentage of businesses that said they were likely or very likely to fail within the next six months did drop from 26% to 18%, this still represents a large number of Alaska businesses at risk. As shown in graph G2 (above), when looking at the responses by region, businesses in Ketchikan and Fairbanks are particularly concerned with their economic futures.
2021 Survey Conclusions:
The data from this years survey is an unusual mixture of optimism and pessimism. There are clear indications the economy both, statewide and nationally, is moving to recovery, but there are also some clear barriers standing in the way of that recovery. Some of the issues are localized and have been present to some extent long before the COVID pandemic happened. Small population, difficulty finding employees, and operational costs have been on the barriers to business list for several years.
Some of the issues, however, are national or global in nature and there is little that can be done on the local level to address them. Global supply chain issues, rising inflation, increasing interest rates, and the continuing impacts of new COVID-19 variants are difficult to predict and even harder to plan for as a business owner. It’s important for policymakers to identify what issues can be addressed and mitigated versus which ones are beyond our ability to change when determining how to respond to the business sectors changing needs.
The survey conclusions noted that there are other large pulses of federal funding that are going to be deployed in the near future through the recently passed infrastructure bill and potentially though other relief bills being considered on the federal level. While these bills contain a variety of funding that will be extremely beneficial to the state, its residents and the businesses that make up our economy, it could also result in the already difficult workforce situation becoming even more strained. As every state in the nation starts trying to use the infrastructure funding they receive, skilled workers will be at an even higher demand than they currently are. Construction supply chains could become strained again and even non-construction related businesses could feel the workforce issues as workers start to move towards trade jobs and away from other professions.
As the state moves into its recovery phase, there is still a lot of work that needs to be done to help our businesses position themselves in the best possible way to take advantage of that recovery. Identifying ways that can help people get back into the workforce, unlock supply chain delays, lower costs, and unlock more private sector funding will all be necessary to help Alaska's entrepreneurs go back to growing Alaska's economy.
According to the survey conclusions, going into the third year since COVID-19 first appeared, Alaska is seeing significant signs of hope and prosperity on the horizon; Alaska just needs to ensure that our public and private sectors are prepared for the transition from hunker down to sprint forward.