They say diseases don’t discriminate, but that’s not really true. Some people will
be more impacted by the coronavirus than others, medically and financially. And the same is
true of businesses.
Giant corporations might see their stock prices sag, but they probably have enough cash on
hand to weather the storm. Grocery stores and personal health suppliers have seen a
surge in sales. And even some small businesses are doing okay, like bike shops and farmer’s
markets, as people look for ways to recreate and shop away from crowds and enclosed spaces.
But those are the exceptions. According to the Census Bureau, retail sales fell a mind-blowing
8.7 percent in March--that’s 3 times worse than the previous biggest drop on record.
And unlike Amazon or Target, small businesses typically have very little margin for disaster.
According to one study, the “vast majority” of small businesses don’t have enough cash
on hand to pay for two months of expenses without revenue, and the median can’t go
two weeks!
This leaves a lot of owners in tight spots with limited options. We spoke with some
about how their businesses have been impacted by the pandemic….
Well, I'm a long-time entrepreneur. I've started businesses my entire adult life. 13 years
ago I started Fresh N' Local Foods with a real passion for trying to improve the quality
of food that our kids are eating. And we serve schools, small rural schools districts, charter
schools, boys and girls clubs, headstarts, anywhere kids eat, basically.
Wow, and normally, pre-COVID, how many people did you have on staff? How many schools were
you serving?
Yeah, we had 38 people. We had production people, delivery drivers, and we served tens
of thousands of meals throughout Oregon and Washington. Obviously, as soon as they closed
schools, it basically was like the rug was pulled out from under us. We went to, y'know,
that level of volume to essentially zero overnight.
Wow.
Initially, we were being told, "Oh, this is just a slightly longer spring break." So we
thought, okay, we can keep people employed for that time. And then the date was the end
of March, and then it was the end of April, and then it was May... Y'know, we kept on
those employees through that period. Because of that, we burned through a lot more cash
in a lot shorter amount of time than we had thought. Eventually, we did just have to let
everybody go, which was pretty devastating.
With the mandatory closing of “non-essential” venues where people congregate, food service
became one of the first and hardest hit sectors. According to the National Restaurant Association,
the industry has laid off or furloughed 8 million employees, and will lose over $50
billion in sales in April alone. Some restaurants are attempting to change their business model,
like selling meals to go, or even groceries, but it’s difficult to make even a fraction
of one’s previous revenue that way. People don’t go to restaurants for the food alone.
They go for the experience. The atmosphere, the service, the company. I miss company.
I've been cooking professionally for like 17 years. I think it took me a decade to get
to where I felt like taking on a restaurant of my own. And Olamaie's been operating for
six years.
So, how has coronavirus impacted your business?
I closed the restaurant on March 16th. And I chose to completely close the restaurant.
Leading up to that, I did some math. Many restaurants, the strategy they've chosen to
employ is pivot their model. So, they're going to a takeaway or delivery system. I did the
math and for me, to go to a takeaway and delivery system, I would have continued to lose money,
and in addition, I would have been in a position to compensate the team that works with me
at a lower rate. Y'know, I expect to be operating at some point in the future. But we chose
to let everybody go and put them on unemployment, because they would be making more money than
if I had to gone to takeaway or delivery. So, at this moment, everyone's on unemployment,
and I have continued to pay their health insurance.
To make even a modest profit margin, a small business must be a finely tuned financial
engine: balancing expenses and revenue, predicting supply and demand, knowing your customers
inside and out. Changing one’s business model can feel like taking apart a car and
trying to build an airplane out of the same parts.
Although mandatory closings are responsible for much of the lost sales, recent figures
show that the downturn has spread to retailers that could theoretically still be open for
business: electronics, sporting goods, books, furniture, cars, clothing--almost everybody’s
feeling the pain. Which isn’t surprising. With so much unemployment and uncertainty,
people are (understandably) cutting back wherever they can. Who’s going to buy a new car if
they don’t know when they’ll have a commute again?
To extend a lifeline to small businesses, Congress created a $349 billion loan fund
called the Paycheck Protection Program. It offers super-low-interest loans to companies
with fewer than 500 employees, which can be partially or totally forgiven, if the business
uses the money to keep their employees on the payroll.
What has come through for you as it relates to the stimulus bill that went through? What's
been your interaction and experience with that so far?
Yeah, so we did apply for the SBA disaster loan, gosh, three weeks ago now, and have
not heard anything back. As far as the PPP is concerned, I was really lucky enough to
have a banker through Bank of America who called me Tuesday night at like 9 o'clock
at night and said, "Okay, the link's gonna be live tomorrow." My banker had given me
a heads up as far as what type of reports and documents that were going to be required.
So I was ready to go as soon as that link was live. And then just got another call from
her last night saying that the PPP loan for Fresh N' Local is in underwriting now. So
I'm hoping that funding occurs within days.
Applying for PPP has been a struggle for a lot of people. A crush of applicants means
long wait times, and you have to apply through established banks and lenders. Since these
institutions tend to give priority to their existing customers, if you don’t already
have an account with one of them, you’re sent to the back of the line, and guess what?
All $349 billion is already spoken for. Congress is finalizing a bill this week to add more
money to the fund, but the sooner you can get your application in, the better.
We fortunately applied and received our Payroll Protection Plan loan. But I have chosen not
to spend any of that money--the money hit our account three days ago--but I'm not gonna
spend a dime of it until I understand how much of that loan will be forgiven, as well
as kind of, what the right strategy is for our team.
We've talked about just kind of sitting on it and waiting to use it until our natural
cycle and our school year comes back. We've talked about y'know, utilizing it for other
things that are really important right now and then just not asking for forgiveness,
and just kind of terming that out down the road. But, now that we have this new potential
operation that we're gonna be setting up in the next week to help supplement the Meals
on Wheels program regionally... if that all works out, we'll be able to bring back some
employees, then certainly I will utilize it for them.
Confusion about eligibility for loan forgiveness is widespread. According to U.S. Treasury
guidelines, any money you spend on rent, utilities, mortgage and payroll will be forgiven if you
don’t lay off any employees and use 75% of the loan on payroll. This is meant to encourage
businesses to keep their employees, but here’s the catch: you have to spend all of the money
within 8 weeks of receiving it. If you own a business that you know won’t be open in
that timeframe--like bars and restaurants--that puts you in a strange predicament. Do you
apply for the loan and use it to pay your employees to stay home? Or do you lay them
off so they can collect unemployment benefits that might be even better than what you can
pay them?
I'm involved in several calls across the country; we have Zoom calls with operators from both
coasts. I'm involved with the James Beard Foundation, who's been incredible. They've
pivoted and provided resources. Even though I'm lucky enough to be in those phone calls
and in those virtual rooms, I still don't have a clear understanding. The government
hasn't given us any other idea what further assistance we have. And the PPP is a drop
in the bucket in relation to what this industry's gonna need.
Uncertainty is like kryptonite for businesses, large and small, and this crisis is so unprecedented,
there are countless unanswered questions. Is this a recession or a depression? What
further government assistance will there be? Will the economy be open this summer? This
year? Entrepreneurs are expected to be resourceful and adaptable, but you at least have to be
confident that your industry still exists.
The challenge right now, I believe, for us as businesses, is that there are multiple
narratives from multiple places. Managing the narrative in a way that helps a huge portion
of our economy understand what's around the corner... would be really helpful.
The hard truth is that we are still in the early stages of this crisis. As economist
Paul Krugman puts it, the economy is in a kind of “medically-induced coma.” It’s
not until the infection is licked that we can wake the patient back up and see how much
damage has been done.
I'm curious how optimistic you are about the survival of Olamaie as it stands today.
I'm super confident. Olamaie's gonna be back. We're gonna be doing things differently. We
may be offering like a meal pack for four that you pick up at 5 o'clock, and then running
our standard dinner service but taking less reservations, so that we can make sure that
people are spread out.
I definitely am encouraged with some of the new partnerships that we've got with the food
share and I'm feeling very hopeful now that we can figure it out. We can be innovative.
Y'know, we've done it before, so we can do it again.
So far, the thing that I've learned through this process the most is that our community
is everything. Trying to find ways to help each other has been, I think, the most helpful
thing and what I would continue to push everyone to try to do.
Relationships and communication are key. Whether you have a staff of a hundred, or are an independent
contractor, find others in your same situation and start comparing notes. You could discover
resources and strategies you hadn’t considered, or learn from others’ mistakes. And solid
relationships with banks and financial planners will make it more likely that you’ll get
to take advantage of any government assistance down the road.
And if you have to make the tough decision to close up shop, you might find out how to
do it while limiting the financial damage.
Remember, this will pass. Things will return to a state of normalcy, and the more information
and relationships you have, the better your chance of rebuilding your business.
And that’s our two cents.
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