Small business environment in the DMV: A look forward

2020, 2021 and now 2022. The pandemic continues to affect the economic landscape, as do other economic challenges with 2023 on the horizon. Our small business community, so vital to the region’s local economies, has been particularly hard hit.

How can small and medium-size businesses across metropolitan Washington, D.C., Maryland and Virginia navigate these complex challenges, thrive and grow?

Jack McDougle, president and CEO of the Greater Washington Board of Trade, and Nicole Quiroga, president and CEO of the Greater Washington Hispanic Chamber of Commerce, sat down with WTOP Business Reporter Jeff Clabaugh to give us insights on the status of the current local small business environment and offer some tactics for growth going forward.

It’s the kickoff of WTOP’s Small Business September.

Interview transcript:

Jeff Clabaugh: It’s been an interesting two years. We like to say, whether it’s completely true or not, that the Washington economy seems to be more recession-proof than others because of the federal government and private business ties to the government. I don’t know if that’s entirely true. But do you think we’ve been pandemic-proof more than some areas?

Jack McDougle: I wouldn’t say that we’ve been pandemic-proof, particularly in hospitality and retail and leisure industries. They were hit pretty hard during the pandemic, and so they’re starting to rebound now. But I wouldn’t say that we were pandemic-proof in those industries.

Nicole Quiroga: I tend to agree. As a representative of the Greater Washington Hispanic Chamber, we’ve been privy to see what’s happening with minority-owned businesses. In the region, specifically, to your question, I would agree with Jack. I don’t think we were pandemic-proof in many ways.

Jack McDougle: I would say though, what was interesting at the outset, of course, the uncertainty was huge. Nobody knew what was coming, or if we were going to be back in a month. And then it started to drag on to month two, month three, month four. Now, we’re more than two years into this.

But what I would say is the resilience of industry and the business sector was pretty amazing — their ability to transition and deal with the changing circumstances. A lot of industries and businesses did quite well during the pandemic.

Jeff Clabaugh: We like to talk a lot about what wasn’t done right. There were some things that were done right. It was a “learn as you go” experience for us — and still is. What were some of the things that the business community got right?

Jack McDougle: Well, I think one is that businesses are very adaptable. I do think that business leaders and company owners at all levels, at large companies and small companies, were very quick to react and figure out, “What do we have to do to take care of our workers and our employees? But what do we also have to do to continue to take care of our customers?”

And so the ability to react very quickly is something that was done quite well here — and was very impressive in many cases. I would add an example. It also accelerated a lot of things.

So for example, a lot of companies that were contemplating moving call centers to a remote environment, some of them had plans to do so over the course of two years. Well, the pandemic forced them to do it over the course of two or three weeks, and so you saw that rapid pace of transition and innovation. And those are things that will stay with us for a long time. I think they did a lot of that very well, I would say.

Jeff Clabaugh: We shouldn’t talk too much about this, because it’s a topic in itself. But it’s remote work versus in-person work, and what a debate that has turned out to be. And we also tend to think that a lot of people could work at home, but there are people who are in retail, or hospitality or education or health care, that don’t have that option. They have to go to work. Were their lessons learned from that — that remote work just can’t be done by everyone?

Nicole Quiroga: I think so. And again, the small businesses were the ones I think that kind of led that charge, understanding and realizing that there’s no way they can work remote because that’s not their business model.

I think the lesson learned there is that the small business owners realized, “OK, when we get through this,” and many times, “If we get through this,” sadly, but “When we get through this, we’re going to have to reorganize our financial house. We’ve got to put it in order. We’ve got to make sure that we are never going to go through something like this again.”

When we went through the crash in 2008, small businesses, many of them closed. They didn’t have the financial wherewithal to get through that. Ten years is really not a long time for small businesses to regain their financial agility and strength. So those that made it and that will make it through this, know that firsthand. They have to look at their finances, adapt their business model and make sure that they have a long-term plan in order for this to never or to at least have less of an impact in the future if and when it happens again. That’s a lesson learned that will do justice for years to come.

Jeff Clabaugh: How did you guys feel about the Paycheck Protection Program? Was it was it handled appropriately?

Jack McDougle: I have a couple of thoughts on that. Overall, yes, an extremely valuable program. What was amazing is that they were able to put money into the economy as quickly as they did at the levels that they did, working through the Small Business Administration, which usually puts out a mere fraction of those sums over any course of time.

They were able to do that and doing that with their banking partners and others was really, really critical. I think from that perspective, it was good. Again, anytime that you’re doing something at that scale and that level, there’s going to be some problems.

I do think there were a lot of organizations and companies that applied for those funds that shouldn’t have. A number of them returned it, which was the right thing to do. I think we have to keep cleaning that up. At some point, you know, maybe there was too much money getting into the economy. But when the federal government is just trying to respond to a crisis, that’s the approach that you take. And then you try to clean things up later,

Jeff Clabaugh: For very small businesses, it could have been a lifeline, but they didn’t want it because of the strings that were attached to it, right?

Nicole Quiroga: I will disagree a little bit with that comment. I’ll say, with the small businesses, they didn’t know how to get there. It wasn’t so much that it was strings attached. It was that they were uninformed.

That was part of, again, lessons learned. And the challenge of the PPP was that, as Jack mentioned, it went to some organizations that really didn’t need it. And the community banks, the community development financial institutions, should have done a better job reaching out to the underserved communities to let them know that those resources were there.

Going back to getting their financial houses in order, many people just didn’t know. They saw it as this huge program, but they didn’t understand how to access the money. They didn’t have the relationships with the traditional financial institutions. They didn’t know about the community development financial institutions. So it was more so that than being afraid of the strings attached.

Jack McDougle: I saw a study that showed that the vast majority of those funds actually did get to organizations that were members of chambers and other businesses because they were getting that information out. And that was a significant value-add that was delivered to businesses. … But to your point, how do we reach more broadly and how do we make sure that we’re getting to those companies and those employers that really need that kind of help?

Jeff Clabaugh: What about local jurisdictions? They seem to have stood up, particularly for retail, restaurants, bars — there was a lot of grant money floating around from county governments, from jurisdictions. They seem to have done pretty well — very creative and, as you’ve mentioned, thinking on their feet.

Nicole Quiroga: I think so too. As you know, the Department of the Treasury works in partnership with the Small Business Administration on a national level, and they filter in funding to each state. And then each state filters it to their economic development programs and community development programs, a department of housing and community development, for example. Those states then have outbound communication to their vulnerable communities, through their nonprofit organizations, their community banks and whatnot.

I think that was very well done because they have more access on the ground. And to the extent of sometimes even doing the guerrilla marketing type information, going to the small communities and letting them know, through their supporting organizations, that this funding was available. I thought that was very well done.

Jack McDougle: In a region that sometimes struggles to collaborate — if I could put it that way — there was significant collaboration. I mean, the two governors and the mayor were in frequent contact with one another. There was a great deal of coordination, and so it really was a regional response. And I do think that made a difference.

Jeff Clabaugh: I’d like to talk about the state of local business now and going forward. But before we get there, we should talk about mission. What’s the mission of the Greater Washington Hispanic Chamber of Commerce?

Nicole Quiroga: Our mission, obviously, is to help small businesses right now stay afloat, and in general, survive and thrive. And we do it basically through education, through advocacy, through networking. We provide them with technical assistance, which is backed by funding from the Small Business Administration.

That’s our mission: to gain a membership base that trusts us, let’s say, as a business hub. Whatever assistance they need — financial, if they want to change their business model — we provide them with that technical assistance at no cost to them. That’s the key.

Jeff Clabaugh: How do you effectively communicate the resources that are available?

Nicole Quiroga: Our database is quite large; our subscriber list is quite large. But we also have significant partnerships with the surrounding media, both Spanish-language and English. By having these partnerships, we’re able to get the word out that these are the resources that we have to offer.

Jeff Clabaugh: And the Greater Washington Board of Trade, I imagine, is one of the larger board of boards of trade.

Jack McDougle: We were a little different than a board of trade. We have a regional focus, and so we focus on Northern Virginia, D.C. and suburban Maryland. And for our members, what we really focus on is convening leaders across the region, from the public sector, the private sector, universities, nonprofit sectors and really looking at, how do we foster better, inclusive economic growth in the region? And how do we improve the region’s global competitiveness?

Our region’s interesting. Our annual economic output is about $560 billion. If we were a country, we’d be the 23rd largest GDP in the world. But we don’t always think that way. And we don’t act that way, which really holds us back. So we try to focus on, where is it that we can take advantage of greater regional opportunities?

As a result of that, that benefits our members because it provides them with greater opportunities, both from an enterprise perspective as well as an operating perspective.

Jeff Clabaugh: We’ve touched briefly so far on getting through the last couple of years. Let’s look forward. And here’s a thought, were there any new industries or businesses that were born because of the pandemic in our region?

Jack McDougle: I don’t necessarily know about new, but I would say the delivery industry — if I could call it that. Now, everything is available from delivery services: groceries and liquor, and healthcare, supplies, you name it. Everybody in this region that was providing any kind of a product or service almost now has the ability to deliver that. That’s created some pretty significant opportunities.

Nicole Quiroga: The other one, just to jump in, is the sanitation, the fogging, the cleaning. In terms of our members, the professional services — where you have your housekeeping services, you have your cleaning services — that went through the roof and allowed for opportunity.

And it also allowed for opportunities for people to collaborate because there was such a, and still is such a, need for those services — masks, anything that had to do with health or sanitation at all. Our members started working together to go after procurement opportunities. So that was a really great thing to watch and a success story that we continuously talk about.

Jeff Clabaugh: I have a question for you. Hospitality, obviously at the start of the pandemic just cleared out the house. There were a lot of people who lost their jobs. But now hotels can’t hire enough people back. Why is that? I think there’s 130,000 job openings in the hotel industry.

Nicole Quiroga: I will be very honest with you. I’m not sure, and maybe you have different perspective, [Jack]. I don’t know if it’s the competition. That everyone is now offering incentives or hiring bonuses, or there’s just so many asks out there for help, that there’s not enough to go around. That that could be my perspective.

I also think that a lot of times, people — when they have worked from home — they maybe don’t want to shift into something going onsite. So there are a couple of things.

But ultimately, I’m not really sure. There’s so much need, and people are being competitive in pricing. So I don’t know. What do you think, Jack?

Jack McDougle: It’s not just hospitality. We’re seeing that across industries. Most employers are having a difficult time finding the people that they need. And that’s going to be ongoing.

I think it’s a little too early yet. The data doesn’t really tell us what it is. But anecdotally, I think there’s some people that have just sort of checked out. If you think about nationally, workforce participation rates are at a 10-year low. A lot of people have either stopped just working, stopped looking for work. So they’re either burning through their savings, they’ve retired early, they’ve repurposed. In our case, quite a few folks have left the region and have gone to other places. I think there’s a number of different factors right now.

Jeff Clabaugh: As we move forward, and you mentioned this, if you’re a jobseeker, you’re in charge right now, particularly if your skills are in demand. Moving forward, how do companies compete, particularly those that really can’t be competitive with larger companies that have the resources?

Nicole Quiroga: Again, I think it’s going to be a hit-or-miss situation. … Even before the pandemic the companies or the small businesses that were selling necessary items, [like] Staples, had an earnings before interest, taxes and amortization (EBITA) margin of less than 5%. So hiring one staff member was a huge challenge. To that end, looking forward at this point, I don’t know that they can actually afford to be competitive. So it’s going to have to be a hit or miss and hope these small businesses make it

Jack McDougle: Particularly for small businesses on the pay side. I think that’s a real challenge. What’s emerging though, what you see out there, is more and more employees are looking for a sense of purpose. It’s mission-driven. And so I think organizations right now that have a really compelling mission value or a purpose value proposition are attracting people.

That’s true at the small business level, particularly in the nonprofits as well as at larger companies. And so there’s a real emphasis on that.

Jeff Clabaugh: Is that, because it’s the younger employees that are stepping up and saying, “I want to work for a company that shares my values?”

Jack McDougle: I don’t know if it’s necessarily just younger. I think it’s across the board.

One of the things that pandemic did for all of us is it just caused all of us to take a pause and rethink. Where are we at? What’s important to us? What do we want to do? You know, family, a whole host of other things. This is just sort of a period, from our perspective and what we hear, that people are just kind of reassessing.

Nicole Quiroga: Yes, it is the younger generation that will work for a purpose but will also buy products that stand for something or the company that stands for something. That might be some something that small business owners can look at when reassessing what their products are. Are they locally sourced? Do they come from the local farmer? Or is there a meaning behind the “Shop Local” campaign?

As consumers, the younger generation and across the board are also looking for products that have value and that have meaning to the environment, et cetera. So that could be something as well.

Jeff Clabaugh: Diversity, equity and inclusion emerged as an important issue for companies small and large. Is that going in the right direction?

Jack McDougle: Generally, it’s going in the right direction. But we need to continue to have some really in-depth conversations about what that direction is and what is it that we’re trying to do. It’s particularly acute in our region.

From a Board of Trade perspective, we define our region as the metropolitan statistical area. So it’s from about Columbia, down to Fredericksburg, Annapolis, over the West Virginia border. We have a population of about 6.2 million. There are 53 metropolitan areas in the country with a population greater than a million. We ranked 31st. In economic growth, we ranked 37th. We ranked 51st for racial inclusion. It’s really holding us back.

One of the reasons why that’s so acute in our region is that our Black population has doubled the national average. So if we as a region don’t figure out how to address that and to really figure out how to address some of the deficiencies and some of the socioeconomic barriers and figure out how to deal with the diversity issues, in the long run it will hold our region back. And it will impede our global competitiveness.

That is a real problem for us. I think that we are having a conversation at a different level than we’ve ever had before is a step in the right direction. There’s got to be a realization that it’s going to take really sustained work over a long period of time to fix that.

Jeff Clabaugh: A one-hour meeting with the staff once a month …

Jack McDougle: It’s not going to do it. … This goes way back into our educational systems. It goes back to early childhood development. There’s a whole host of things we have to work through here. I mean everything from just access to transportation, access to technology, access to healthcare, the socio determinants of wellness across our region.

I’ll give an example. Right now, one of the biggest healthcare concerns we have in this region is mental health. But yet you can’t deliver telehealth services across state boundaries because of licensing issues. We have to remove that barrier.

Jeff Clabaugh: Broadly speaking, diversity, equity and inclusion is hard to argue against. But as you mentioned, there’s so many different moving parts. What have you heard from your members that they feel is getting through to staff and that is working?

Nicole Quiroga: I represent mostly small businesses in the area. For them, it’s not so much getting through to staff in terms of equity and diversity internally. What they are liking is that organizations around them are also including them as vendors, and they’re being intentional about making sure that their choice of vendors also shows diversity across the board. That offers my members a vast amount of opportunities.

They’re liking that very much because the conversation for us is, “How do we bring more small businesses to our table, use them as vendors and suppliers? How do we do that? And what kind of training can we provide internally to get this kind of that kind of diversity going?”

Jeff Clabaugh: I want to ask one very important question, and that is the role that small business plays in D.C.’s economy. We tend to overthink it as a government town. But what is the role that small business plays in this economy, and what role can that be moving forward?

Nicole Quiroga: We constitute about 66,000 small businesses, Hispanic and minority-owned businesses, in the region and add about 12% into the economies of the surrounding jurisdictions. So it’s a big chunk if we were to go down.

Jack McDougle: Small businesses are responsible for a huge share of job creation. But I think one of the things to really understand is the business ecosystem. You need big business and small business because they integrate — their suppliers to, their customers of. You really need to have a very healthy business environment in order to make progress. But small business oftentimes is really the backbone of your economy.

Jeff Clabaugh: And in our region, is the very small micro business an emerging trend, as it is in other parts of the country — the gig workers, the freelance workers, the very, very small business owners?

Jack McDougle: Very much. Even just look at Uber and Lyft drivers. Those are all micro businesses. And like the delivery services we were talking about before, so many people do that on a on a part-time basis. So you see a lot of opportunities like that. That’s something that’s really emerging.

Jeff Clabaugh: Jack, Nicole, closing thoughts?

Well, right now, front of mind for everyone in the business community is inflation. But we will get through that. This region has a lot of opportunity ahead of it.

We have a lot of resources, but we have a lot of work to do. We have some real barriers that we have to overcome, but the long-term outlook here is really excellent.

It’s a good place to be. Locate your businesses here, keep your businesses here, and you will do quite well.

Nicole Quiroga: I would thank you all for doing this and putting attention [on this small businesses]. I think it’s up to us, the leaders in the community, to continue this kind of conversation and communication, specifically to the underserved communities. If they survive and when they thrive, it’s going to add to our overall impact and success. But it’s going to take a collaboration of economies to get there.

To discover more insights for entrepreneurs, startups and SMBs shared during WTOP’s Small Business September, click here.

EagleBank is an Equal Housing Lender and Member FDIC.


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