Six Small Business Leaders on What It Takes to Survive the Pandemic Economy
From Florida to San Francisco, six managers went through the biggest challenge of their professional lives this year. Here's how they’re adapting and learning to rethink growth.
Building a business is never easy, but 2020 has been a unique calamity. In the U.S., which has suffered more Covid-19 deaths than any other nation, the economy entered its worst downturn in generations. Although central bank stimulus and government programs such as the Paycheck Protection Program have helped cushion the blow, a return to growth will depend on the creativity and resilience of millions of entrepreneurs and business managers.
For a glimpse at how it’s going, Bloomberg Markets talked to leaders of four small businesses and two arts organizations over several months. Their journeys have all been different, but they share a spirit of perseverance often lost in economic statistics. These are their stories.
LENORE ESTRADA Owner
Three Babes Bakeshop
HEADQUARTERS San Francisco
PRE-CORONAVIRUS EMPLOYEES 26
EMPLOYEES NOW 13
YoY REVENUE -42%
PPP LOAN $143,000
PPP RAN OUT July
When Google shut its offices in March, Lenore Estrada lost her biggest client. Her artisanal baked goods company, known for its $40 pies, supplied the tech giant’s cafeterias. More cancellations followed.
The timing couldn’t have been worse. After a decade sharing a rented industrial kitchen, Three Babes Bakeshop had started construction on its own kitchen and retail space in San Francisco’s Mission District. It was scheduled to open by May.
Instead, Estrada is $500,000 in debt, has cut her staff in half, and has taken over management of the construction site after a series of mistakes and delays. Her once-profitable company is racking up losses of $15,000 a month, and she’s running everything alone—Three Babes is down to one after two co-founders left in the past decade.
Estrada has overcome difficulties before. Now 37, she beat cancer in her early 20s after a year of aggressive treatment, only to lose both parents soon after.
“I’ve always been in a low-resources situation,” says Estrada, one of seven kids. “It’s challenging, but what choice do I have? After all that I’ve been through, you know, I think I can keep going.”
The pies are selling well online and at farmers markets. Estrada is experimenting with new offerings: pie-making kits, online baking classes, and selling packaged items through local bodegas and grocery stores.
Her goal is to open the new kitchen before she gives birth to her second child in early October. But things keep going wrong: The floors were poured incorrectly three times, and a leak in the industrial freezer spoiled $10,000 worth of pies and local farm produce one weekend in September.
She borrowed from the Paycheck Protection and Economic Injury Disaster Loans programs, through banks, and from friends—most of it personally guaranteed. “My fear is that I’ll spend the next 15 years paying it all off,” she says.
She’s eager to make good on her investment, but she says she’s driven by other factors as well. “Even if what happens is I pay my workers still working for me through November or December, whenever, and we fail, I’ve allowed them to continue paying rent, feeding themselves, supporting themselves.”
That spirit also led Estrada to start a nonprofit in March with a friend. SF New Deal connects more than 100 local restaurants with organizations that are providing food to marginalized people during the pandemic. (To avoid a conflict of interest, her company doesn’t participate.) A dozen employees helped supply at least 800,000 meals for people who otherwise would’ve gone hungry, providing stable work for local kitchens and their staff.
“It was an inspirational thing for me to work on,” she says. “I could keep working at my own small business, or I could also help a lot of businesses having the same problems and have an impact on the city.”
LINDSAY GIBSON Chief Operating Officer
HEADQUARTERS Waterloo, Ont.
COVID IMPACT ON 2020 REVENUE PROJECTION -36%
COSTS CUT $18 million
JOBS ELIMINATED 19
ESTIMATED SAVINGS ON EMPLOYEE PERKS IN 2020 $500,000 to $750,000
TOTAL NUMBER OF EMPLOYEES 111
Over a decade, TextNow built its business, an app that allows users to send and receive calls and text messages for free, by hosting ads for hotels and airlines and the like. Within weeks of the Covid-19 pandemic hitting the U.S. and Canada, one-quarter of TextNow’s revenue disappeared. The company closed its Waterloo headquarters, as well as offices in Portland, Ore., and San Francisco. All employees started working from home.
Lindsay Gibson, the chief operating officer, stayed relatively calm. A 16-year career at cellphone maker BlackBerry Ltd. taught her how to navigate an organization on “a downward slope,” as she puts it. At BlackBerry, she once had to cut 250 jobs on her first day in a new role. She remembers it as the beginning of five years of doing more with less.
Her strategy then, and now, was to make plans. Plan A at TextNow was to slash revenue targets and cut expenses. The company eliminated 19 jobs, froze hiring, and ended employee perks such as personal trainers and free lunches. Biweekly companywide Zoom meetings were instituted to keep staff up to date and fortify plunging morale. For three months the mood became “very conservative, very heads down, and very focused,” Gibson says.
The company quickly found opportunities for growth. With so many people unable to visit friends or relatives, TextNow started testing a video chat function. Amid the economic downturn, hundreds of thousands of people could no longer afford to pay their AT&T or Verizon bills, so TextNow’s appeal increased. As school moved online, teachers began using TextNow to communicate with parents and students.
By July, TextNow was growing again. It lifted the hiring freeze and recruited a chief growth officer to beef up marketing and help win customers. TextNow is on track to meet or exceed its new revenue targets, Gibson says.
BRIAN BUTLER President and Chief Executive Officer
Vistra Communications LLC
HEADQUARTERS Lutz, Fla.
PRE-CORONAVIRUS EMPLOYEES 84
EMPLOYEES NOW 94
YoY REVENUE +10%
PPP LOAN $1 million
PPP RAN OUT June
Brian Butler is used to dealing with disaster. The Gulf War veteran—who still suffers from injuries and hearing loss sustained during his Army service—oversaw a munitions plant in Virginia at the time of the Sept. 11 attacks, helped coordinate Hurricane Katrina relief from the Pentagon, and started his marketing and communications business just before the 2008 financial crisis.
So in January, when he first read about a virus sweeping China, he started to prepare. In February he ordered five laptops for a core group of employees and by March had purchased 35. When other companies found themselves struggling to find equipment, his staff was settled and working from home. “I was a planner in the military,” Butler says. “I heavily rely on my ability to think and plan before I do.”
Still, in just a few months, Vistra lost two clients and three major contracts, including a hospital, a large beverage company, and a tourism agency that canceled events, contracts, or big projects. The company responded with an online campaign it called “V Positive.”
“We put up positive messages on a weekly basis,” Butler says. “That generated more good leads for us, just by doing that. So while in some areas we lost a few customers, in some areas we gained a few.”
Since the beginning of March, unattended folding tables have begun popping up at intersections and the end of people’s driveways, offering everyday goods like rice, a jar of jam or bread. Take what you need and leave what you can, the signs say.
Barter, the trade system prevalent in the Middle Ages, is back in the time of coronavirus pandemic, with a modern twist.
Social networks Facebook and Nextdoor are flooded with posts from neighbors and friends seeking to swap eggs for toilet paper. Small and midsized businesses, whose cash trade has dried up from the economic fallout of shelter-in-place orders, are turning to online barter exchanges.
“When cash is extra tight, it behooves us to buy as much as possible on trade,” said David Yusen, director of business development for Seattle-based Heavy Restaurant Group, which recently bought 56 cases of Malbec wine for $15,000 worth of barter credits. The company’s 10 restaurants have closed, but some locations will start offering pick-up and delivery this week. “It saves us money, it helps cash flow.”
In normal times, the roughly 200 barter exchanges in the U.S. let roofers fix leaks and get paid in restaurant takeouts or accounting services. With tens of millions of Americans under lockdowns, those cash-free trade systems are seeing an influx in participants.
In late May, the video of George Floyd’s death led to worldwide protests against police killings of Black Americans. Butler is Black, and 48% of his employees are people of color. Vistra started a new business line that offers tailor-made diversity training to customers.
As the months of working from home passed, Butler says he focused more on his staff’s well-being. He gave each employee $150 to “buy something that will help them work better.” The company, which already holds weekly and monthly video calls for staff, started including more informal Thursday morning coffees and Friday afternoon sessions with his father, a chaplain. Butler says the idea stemmed from his experience in the Army, where every battalion has its own chaplain. “And I thought, Hmm, why does it have to be different in the workplace?”
By late August, most of the clients the company had lost in the early days of the pandemic were back on Vistra’s roster.
Butler says he’s working from his home for the foreseeable future, just a few miles from the office—and a few feet from the bedroom where he founded his company 13 years ago.
NANCY UMANOFF Executive Director
Mark Morris Dance Group
HEADQUARTERS Brooklyn, N.Y.
PRE-CORONAVIRUS EMPLOYEES 240
EMPLOYEES NOW 122
COVID IMPACT ON REVENUE PROJECTION -35%
COVID IMPACT ON EXPENSE PROJECTION -31%
PPP LOAN $1.1 million
PPP RAN OUT July
When New York City went into mandatory lockdown, the nonprofit Mark Morris Dance Group instantly lost its two biggest sources of revenue: performance fees and dance-class tuition. At first, Executive Director Nancy Umanoff tried to hold on to her staff. She took a 50% pay cut, and Mark Morris, the celebrated choreographer who founded the dance company four decades ago, waived his entire salary. But it wasn’t enough. More sacrifices were needed.
In early April part-time teaching artists at the dance school, which serves 2,000 children and 600 adults annually, were furloughed. A dozen members of the facilities team followed a week later. The stress kept Umanoff awake night after night, playing Wordscapes on her phone.
On Friday, April 17, she woke up anxious. She was ready to announce the third round of furloughs and finalize the details of 10% salary cuts for the remaining staff. But Umanoff got a reprieve. A loan from the Paycheck Protection Program came through. She could call off the latest job cuts.
Then more bad news hit. Some 1,200 miles away in Boca Raton, Fla., her father was rushed to the emergency room for a worsening heart condition. Umanoff drove off with her sister at dawn the next day. Her father’s decline colored much of the spring, and the family buried him on June 21, Father’s Day. “What Covid did was to deny us the ability to mourn in a way that traditions and customs make meaningful,” she says.
At work, the drumbeat of challenges remained constant: keeping dancers—working from home—healthy and socially distant in an art form that requires physical proximity and movement; helping performers afford to keep living in New York.
Umanoff also had to figure out if reopening the dance center at a reduced capacity made financial sense. She says she concluded that it didn’t. “With the increased cost for sanitization, for disinfection, for monitoring, it becomes impossible to make that financial model work,” she says.
Fortunately, the growth curve of new infections and deaths went down and then flattened in New York, and the city’s restrictions began to ease. Some furloughed workers returned in September, and the 10% salary cuts were reversed. Teachers started providing online lessons from the dance studios again, improving the quality. In January some students may be able to return, alternating in-person and remote practice.
Budgets and class offerings remain down, but Umanoff says there are silver linings and new areas of growth.
On May 28 the company premiered Dance On!, four short dances choreographed by Morris and rehearsed via Zoom. The video event was viewed by 4,400 people, some as far away as Australia—more than twice the number who attend the dance group’s live theater performances.
“Technically that was the largest premiere we’ve ever had,” Umanoff says.
From March through August, the company gained 1,400 new donors, who gave from $5 to more than $5,000. In the same period last year, there were 300 donors. Online programs, including Dance On!, added about 6,000 names to the company’s mailing list.
Virtual classes for people with Parkinson’s disease attracted more than 1,200 participants from 38 countries—twice the number of in-person students in New York before the pandemic.
From now on, some of the company’s dance instruction will remain virtual, Umanoff says, and the company is looking for ways to monetize these new online offerings.
“Mark said a couple of months ago, ‘You can’t keep thinking, When this is over, we get back to life,’ ” Umanoff recalls, quoting her boss. “ ‘This is our life. This is it. And this is what we’ve got to live. This is what we’ve got to embrace.’ ”
MELISSA WIRT Founder
Latched Mama LLC
HEADQUARTERS Midlothian, Va.
PRE-CORONAVIRUS EMPLOYEES 30
EMPLOYEES NOW 32 (only 15 per shift)
Y o Y REVENUE +30%
PPP LOAN $148,000
PPP RAN OUT June
Melissa Wirt thought she knew about juggling responsibilities. She founded Latched Mama to provide affordable, functional clothing for nursing mothers six years ago, when she had just two children. Today she’s the mother of five.
Then in February, the coronavirus shut down the factories of some of Latched Mama’s suppliers in China. It took a few more weeks before it hit her team—most of them working mothers—in Virginia. “So many moms’ lives, within a 24-hour period, were turned upside down,” she recalls. “Kids stopped going to school on a Friday and didn’t go back on a Monday.”
Wirt’s mother came up from Florida to help take care of her kids. Another mom couldn’t come to the office anymore when school and day care closed. “So her husband is now coming into work” and is on Latched Mama’s payroll, Wirt says, and the woman is doing social media work for the company from home.
In other ways, the work-from-home lifestyle proved a boon to Latched Mama’s business. Women are treating themselves to more comfortable clothes, boosting sales from last year, Wirt says.
Her staff, many at home or working half-shifts, weren’t able to pack and ship fast enough to meet the elevated demand. One of her employees got Covid-19 during the summer, and fear of the virus remained high.
So Wirt recruited teenagers, including a 16-year-old neighbor, to work part time. She also hired two people to manage shipments and warehousing, scooping them up from a nearby distribution company that went bust during the pandemic. “In some ways it’s an amazing problem to have,” Wirt says. “But it’s also hard as a small business because you also have to keep your employees safe. It’s just a lot of balls in the air at the same time.”
In late July, ahead of World Breastfeeding Week—the company’s busiest time of the year—Wirt was working an early-morning shift at her warehouse when she got a text from her husband about Lilly, the family’s new goldendoodle puppy, and Ginger the guinea pig: “Lilly got Ginger.”
Wirt quickly pivoted from work to family: “I was trying to navigate it all from here because I couldn’t really leave.”
Productivity has ticked down. But Wirt says she feels that’s a small sacrifice in an unprecedented year.
“If we need to cut some profit to be able to make sure that people can relax and take a deep breath and be there for their kids and get through this pandemic together, then that’s what we’re going to do.”
AGUSTíN ARTEAGA Director
Dallas Museum of Art
PRE-CORONAVIRUS EMPLOYEES 266
EMPLOYEES NOW 266
PPP LOAN $2.5 million
OPERATING DEFICIT FOR FISCAL YEAR ENDED JUNE 30, 2020 None
PROJECTED REVENUE DECLINE FOR FISCAL YEAR 2021 15%
PROJECTED COST DECLINE FOR FISCAL YEAR 2021 9%
On March 11, Agustín Arteaga donned his “happy” bright-blue suit and headed to the Dallas Museum of Art. There he presided over a members-only preview of the exhibition “For a Dreamer of Houses,” which explores how the spaces we inhabit represent our values and desires.
It was a somewhat subdued affair. Covid-19 was raging in Europe, shutting down leading arts institutions there. In Dallas, elbow bumps replaced handshakes and finger food gave way to serving stations.
The following day, with the number of infections in the area rising, Arteaga called an emergency board meeting to notify the trustees of the museum’s decision to close. “What are your plans for the staff?” was the first question he was asked.
Although museums around the country were furloughing or dismissing employees—New York City’s Metropolitan Museum of Art eliminated 400 jobs—DMA succeeded in keeping all of its staff employed during the lockdown. It helped maintain morale as people worked from home and moved the museum’s programming and content online.
“I wanted to make sure that everyone would have a benefit of taking care of themselves and their families,” Arteaga says. “That people wouldn’t worry about being laid off.”
In the months that followed, Arteaga would visit the museum from time to time, using a flashlight on his phone to illuminate darkened halls.
Reopening was delayed twice. The first attempt coincided with protests following George Floyd’s death, in which some local museums were damaged and boarded up for their protection. Damage to the DMA was minor, but the museum decided to pause and digest current events. A second attempt to reopen was foiled when Dallas became a Covid-19 hot spot and authorities asked people to stay indoors.
The social and political tension led Arteaga to rethink the museum’s mission. “We used to be evaluated by how many visitors we have, how many works of art we acquire, how many articles in the press we get,” he says. Now it’s about slowing down and making a larger impact.
The museum owns Arthur Jafa’s seven-minute video Love Is the Message, the Message Is Death, depicting the variety of the Black experience in America. So one weekend in late June, DMA joined 12 other international museums in streaming the piece online, for free. And the DMA will keep it on view until March 2021, Arteaga says.
“The role of the museum is to provide the opportunity to learn about the other,” he says. “So we can find the common ground that we all share as human beings.”
On Friday, Aug. 14, five months after the DMA shut down, Arteaga put on his bright-blue suit again and waited amid the museum’s new sanitizing stations and orange signs explaining social distancing procedures.
As the 11 a.m. opening approached, a line formed outside in the 104F heat. The day’s 600 free tickets—each for a two-hour visit—were claimed quickly online. The first visitor drove for almost 45 minutes to get to the museum on her birthday.
Within hours, all of the opening-weekend tickets were taken. This was repeated in the following weeks, leading Arteaga and his team to increase daily visitor capacity to 900 people after Labor Day.
“We tried to open sooner, but I think we needed time to learn what we know now,” he says. “How to keep the museum safe.”
Dmitrieva covers economics in Washington. In New York, Kazakina writes about art and wealth, and Greenfield oversees coverage of diversity.