Rid­ing out COVID-19 puts strain on new busi­nesses

Most en­trepreneur­s feel­ing stressed about their fu­ture, new sur­vey sug­gests

Calgary Herald - - FRONT PAGE - AMANDA STEPHEN­SON astephen­son@post­media.com Twit­ter: @Aman­damsteph

Flux Fit­ness Stu­dio had been open for a grand to­tal of 13 days be­fore COVID-19 shut it down.

For those 13 days, co-owner Tina Chin ex­pe­ri­enced what it was like to live her dream. Now, the first­time en­tre­pre­neur is caught in a night­mare, not know­ing when she will be able to re­open, whether she’ll have any cus­tomers to re­open for, or whether her en­tire per­sonal and fi­nan­cial in­vest­ment will be crushed un­der the weight of the pan­demic cri­sis.

“I re­ally hate think­ing about it, hon­estly,” Chin said. “It’s re­ally scary to think about what I’ve risked. It is a huge amount of my life sav­ings that I’ve put into it, and I con­tinue to use these funds to see this busi­ness through. It makes me sick to my stom­ach.”

Cal­gary’s small-busi­ness com­mu­nity is reel­ing from the ef­fects of COVID-19 and a se­ries of strict pub­lic health or­ders that have been in place for more than two months.

While Al­berta leads the coun­try in the per­cent­age of small busi­nesses (47 per cent) that have fully re­opened as pro­vin­cial economies re­launch, in Cal­gary — which has seen a higher num­ber of COVID -19 cases — restau­rants, pubs and hair sa­lons are pro­hib­ited from re­open­ing un­til Mon­day. Even then, they must abide by new re­stric­tions on ca­pac­ity.

Many other busi­nesses, in­clud­ing fit­ness stu­dios, will not be al­lowed to open un­til Phase 3 of the pro­vin­cial re­launch plan. No date has been set. And with no inkling of when cus­tomer de­mand will re­turn, most en­trepreneur­s are feel­ing stressed about the fu­ture. A re­cent sur­vey by the Cana­dian Fed­er­a­tion of In­de­pen­dent Busi­ness sug­gested half of the coun­try’s small busi­nesses won’t be able to pay June rent, while 22 per cent fear evic­tion.

‘PAR­TIC­U­LARLY ACUTE’ RISKS

But the near-univer­sal stress and strain are per­haps be­ing felt most by new busi­nesses. Ac­cord­ing to the City of Cal­gary, 1,321 new busi­ness li­cences were awarded be­tween Jan. 1 and March 31. Many of these busi­nesses, in­clud­ing Flux Fit­ness, barely had the chance to get off the ground be­fore shut­ting down amid an un­prece­dented pan­demic and a se­ries of strict pub­lic health or­ders.

“It re­ally sucked the wind out of our sails hav­ing to shut down,” Chin said. “We had an open house the Sun­day be­fore we opened and it was so busy and so much fun. So I was re­ally op­ti­mistic and thought we were off to a good start. Shut­ting down was heart­break­ing.”

For any busi­ness, the reper­cus­sions of an unan­tic­i­pated shut­down can be se­vere. Stud­ies across North Amer­ica have shown busi­nesses forced to tem­po­rar­ily close be­cause of a nat­u­ral dis­as­ter or other cat­a­strophic event have a lower chance of suc­ceed­ing in the long run, and up to 40 per cent of those that are af­fected never re­open.

In Cal­gary, fol­low­ing the 2013 flood that forced the clo­sure of 4,000 busi­nesses, only one to two per cent of those af­fected never re­opened. Scott Crock­att, vice-pres­i­dent of the Busi­ness Coun­cil of Al­berta, said the pos­i­tive out­come was likely due partly to an ag­gres­sive “YYC Is Open” mar­ket­ing cam­paign that en­cour­aged Cal­gar­i­ans to sup­port flood-af­fected neigh­bour­hoods when the wa­ters re­ceded.

This time, how­ever, the con­tin­ued threat of the virus makes a sim­i­lar cam­paign im­pos­si­ble. It’s un­clear when, or if, con­sumer con­fi­dence will re­turn, and that means the risk of a tem­po­rary busi­ness clo­sure turn­ing into a per­ma­nent busi­ness fail­ure is real.

“I think the risk is par­tic­u­larly acute for new busi­nesses,” Crock­att said. “The days and weeks just count much more in the ear­lier days of a busi­ness. Prob­a­bly one of the riski­est mo­ments for any busi­ness is that mo­ment when you’ve in­vested all of your cap­i­tal in, and now you’re just turn­ing around to try to make money on it. You’ve sent ev­ery­thing out the door that you can, and if noth­ing comes back in, you can be in re­ally tough shape.”

At Cu­ri­ous Bou­tique, a hair sa­lon in West Springs that opened for the first time in De­cem­ber, own­ers Ka­te­rina Tsakalakis and Tony Al­locca said shut­ting down in midmarch due to COVID-19 was like “get­ting the rug ripped out” from un­der them.

“We were just start­ing to get more ex­po­sure ... and then all of a sud­den, boom, we had to close,” Tsakalakis said. “You know, it was ex­tremely stress­ful just start­ing up. There were al­ways de­lays, is­sues with con­trac­tors and stuff like that. We were ac­tu­ally sup­posed to open in Septem­ber, and then we ended up open­ing in De­cem­ber, and then this hap­pened in March. So you feel like you just can’t catch a break.”

Tsakalakis, who is plan­ning to re­open Mon­day, said she is for­tu­nate that her land­lord has been un­der­stand­ing and of­fered a rent de­fer­ral. Clients, too, have been sym­pa­thetic, of­fer­ing to pre­pay for hair­cuts and or­der­ing styling prod­ucts for curb­side pickup.

‘ALL WE CAN DO IS MAKE THE BEST OF IT’

Laine Fe­drau and her part­ner Dar­ren Gustafson say they, too, have ben­e­fited from a kind-hearted land­lord and a sup­port­ive clien­tele. The cou­ple opened Ve­gan Street Kitchen & Lounge in a his­toric house on 7th Street S.W. in mid-fe­bru­ary, and tem­po­rar­ily closed to the pub­lic due to COVID-19 on March 19.

“It helps that we’re a niche busi­ness. Ve­gans don’t have a lot of op­tions for take­out these days, so we’ve got a bit of a loyal fol­low­ing,” Fe­drau said. “But it still would have been nice to build a solid foun­da­tion. We were still try­ing to fig­ure out ev­ery­thing be­fore things shut down. We were kind of stopped in our tracks when we were still smooth­ing out all of the kinks.”

Fe­drau said she and her part­ner — who op­er­ated a ve­gan food truck be­fore tak­ing the plunge to open a dine-in restau­rant — put all they had into the new venue and don’t have the fi­nan­cial cush­ion that older, more es­tab­lished busi­nesses have.

“It’s been scary,” she said. “We were on such a good tra­jec­tory with that first month, and now it’s go­ing to take a long while be­fore we get back up to 100 per cent ca­pac­ity, with reser­va­tions fully booked. But you can never pre­dict these things, and we are liv­ing this sit­u­a­tion along with ev­ery­one else, so all we can do is make the best of it.”

As dire as the sit­u­a­tion might seem for some, Crock­att said small busi­nesses have some ad­van­tages that more es­tab­lished busi­nesses do not. With­out a time-tested busi­ness model in place, new busi­nesses can some­times be nim­bler than their larger com­peti­tors — piv­ot­ing quickly to on­line or of­fer­ing new prod­ucts and ser­vices in re­sponse to the pan­demic.

“There’s also been a bit of a de­moc­ra­ti­za­tion of mar­ket­ing,” Crock­att said. “Al­most all mar­ket­ing has moved on­line, a lot of the sell­ing has moved on­line and that has ac­tu­ally de­creased some of the bar­ri­ers to newer com­pa­nies com­pared to those who had re­ally big es­tab­lished mar­ket­ing pro­grams.”

At Flux Fit­ness, Chin and her part­ner, Ingo Ionescu, are wor­ried that even when fit­ness stu­dios are al­lowed to re­open, they may not be able to make it work if peo­ple still aren’t com­fort­able with work­ing out in pub­lic places.

“We may only have one per­son com­ing in for our classes, but all the in­struc­tors will still need to be paid, rent will still be due,” Chin said. “So we’re in the dif­fi­cult sit­u­a­tion where it may be even more dam­ag­ing fi­nan­cially to re­open.”

Still, Chin said there is enough in the busi­ness’s con­tin­gency fund to ride out a cou­ple more months. And even though she has days where she is tempted to throw in the towel, she has de­cided to hang onto her dream for as long as she can.

“I’m very grate­ful we’re not in a sit­u­a­tion where we have to close just yet,” Chin said. “We still have a lit­tle fight in us.”

GAVIN YOUNG

Flux Fit­ness Stu­dio co-founders Ingo Ionesco and Tina Chin had the mis­for­tune to launch just as the COVID-19 pan­demic be­gan to shut down busi­nesses across the prov­ince in March. Many busi­nesses, in­clud­ing fit­ness stu­dios, won’t be al­lowed to open un­til Phase 3 — no date set so far — of the pro­vin­cial govern­ment’s re­launch plan.

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