What it takes to reopen a small business right now
Patchwork of rules leaves many owners wondering when and how to return
Tiffany Turner had dinner recently in a restaurant the first time in nearly three months. She was greeted by employees in cotton face masks and seated at a table that was a socially distanced 6 feet from any other. Her return-to-society meal? Caesar salad, mussels and clam chowder.
“The thing I was surprised by as a guest is that it was less awkward than I expected and more human energy than I expected,” Turner said. “People’s eyes are starting to tell a story more than they ever did.”
It was a reassuring experience. Turner was preparing to reopen Adrift Hospitality, her group of five boutique hotels, a restaurant and a distillery on the Oregon and Washington coasts. She wondered if people would return to public life and if there would be any sense of human connection.
That’s the same question other small-business owners are asking themselves as more states allow restaurants, offices and retail businesses to reopen after being closed, some for as long as three months, to fight the spread of the coronavirus.
The percentage of small businesses that were open in early June was nearly 16 points higher than it was in mid-April, according to Opportunity Insights, an economic tracker developed by researchers at Harvard using anonymized data from credit card processors, payroll firms and others.
But with a patchwork of rules and guidelines being issued at the city, county, state and federal levels, many employers find themselves wondering when it will be safe to open and how to make that choice especially as some states are seeing an uptick in new cases of COVID-19.
The timing
Some businesses are taking a slow approach. At first, Chris Lynch and Michael Samer weren’t sure what to do about their ocean adventure tours business, Everyday California, when they got the go-ahead in late April.
“In the beginning, it was scary,” Samer said. “We wondered, ‘Do we even want to reopen?’”
But the two friends, who started the company in San Diego 10 years ago with just an iPad, an old truck and some kayaks, didn’t want to give up. They had been on a pace for a banner 2020: Sales were up 50% in the first two months, and March was looking just as good. And they realized the water might be one of the most socially distant places someone could be.
Lynch and Samer decided to reopen with curbside kayak and surf rentals only, keeping their retail shop and tour business closed. Then, as they felt more comfortable, they reintroduced tours at a 50% capacity with everyone wearing a mask. They also invested in their neglected online shop.
The bet paid off: They increased what had been a very small number of online merchandise sales by 710% in May, allowing them to bring back about 20 employees to help with shipping and marketing. So far, the bestselling items on the website have been hats.
A slow rollout isn’t happening only in places, like California, that have been COVID-19 hot spots. In Montana, which has the fewest cases in the nation, some owners are also taking a wait-and-see approach.
Gov. Steve Bullock allowed bars and restaurants to reopen in early May with 50% capacity limits and layout restrictions, but Brett Evje held out until the end of the month before bringing customers back into Plonk, the New American-style restaurant he co-owns. It has locations in Bozeman and Missoula.
He used the downtime to refresh the Bozeman location, updating the HVAC system, installing new bar equipment and doing all of the projects he said could never complete with a restaurant open 365 days a year.
“Everybody wants to return back to normal, but from my standpoint you’re already closed, so you might as well wait and see what the reaction is going to be,” Evje said. “There’s nothing as hard as remobilizing and bringing everyone back and then having to close down again.”
Evje also wanted customers to have as normal an experience as possible, so he decided not to require masks for employees or patrons. Montana officials only recommend face coverings.
“Our customers were really excited that we weren’t making the experience awkward,” he said.
The expenses
The cost of reopening is another challenge: With no revenue for months, small businesses must find ways to pay for the new sanitation regimens, thermometers, plexiglass, masks and other items necessary to open.
“None of the relief packages have included specific funding for safety retrofitting, purchasing of safety equipment or even helping business getting a handle on uniform PPE for employees and customers,” said Amanda Ballantyne, executive director of the Main Street Alliance, an advocacy group for small business. “The lack of those things creates a disparate recovery kind of landscape.”
Staying open has been an expensive proposition for Hanover Co-op Food Stores. The company, which is owned by its 24,000 members, has been open throughout the pandemic as an essential business at four stores in Vermont and New Hampshire.
That has cost nearly $400,000, said Allan Reetz, the company’s director of public and government affairs. The biggest expense? Staffing. The co-op gave all of its nearly 400 employees a flat bonus plus offered $2 an hour extra. It also went through with a planned cost-ofliving increase in April. Other expenses included equipment, signage, communications and plexiglass dividers.
Looking ahead
With capacity limited and demand uncertain, small-business owners, even those whose operations are larger, say it’s hard to know whether to spend the money to reopen now or to wait.
Elliot Nelson, who owns McNellie’s Group, with 20 restaurants in Arkansas and Oklahoma, is sifting through his spreadsheets daily to see what it’s going to take to keep going.
“It’s been a long time since I’ve gone through the financials like this,” he said.
Nelson started bringing his empire back online gradually in May, beginning with outdoor dining. But six weeks later, business is still slow; sales are about one-third their normal level. His sushi restaurants are doing well, but the breakfast joints are suffering.
“Our best-case scenario, maybe we’re 60 to 70% revenue by the end of the year,” Nelson said. “And that’s just a breakeven and only that if I’m not paying my debt service.”
He’s reconsidering every cost: rent deals with landlords, reduced menus, trash collection, monthly computer expenses. He and his wife even met with a lawyer to see if they should get a divorce as a wealth-preservation tactic.
“These are the mindboggling conversations we’re having,” Nelson said. “We need a stabilization fund or a superenhanced Paycheck Protection Program, or it’s bankruptcy.”