A free email newsletter breaking down the issues that affect Kansans and Missourians the most.
Delivered every Tuesday and Thursday morning
Last fall, when Lyndsey Gruber-Chatfield launched a service called PEPPR that connects parties to caterers and event spaces, she never imagined there would come a day when dine-in eating would be virtually obsolete.
But as COVID-19 shut down social gatherings, Gruber-Chatfield was suddenly met with no business.
“No one thinks there’s going to be a global pandemic, even when you’re planning worst-case scenarios,” she said.
The novel coronavirus pandemic has ravaged the country for six months, impacting various facets of life, from the economy to the U.S. Postal Service to the labor force. As COVID-19 continues to spread in Kansas and Missouri, many small businesses have had to swiftly pivot their business plans to avoid shutting down. And some now see their prepandemic operations as a thing of the past.
During the week of April 26, 65.2% of small businesses in Kansas and 71.5% in Missouri experienced a decrease in operating revenues, according to a small-business survey conducted by the U.S. Census Bureau.
The restaurant industry was especially impacted. As social distancing protocols inhibited many restaurants’ capacities to host parties, PEPPR had to quickly create a new game plan.
“When it became clear that COVID wasn’t going anywhere, and that the business either wasn’t going to survive or we would need to pivot, we started coming up with just how we could make this work,” Gruber-Chatfield said.
PEPPR is now planning to launch a delivery service of party packages: curated four-course meals from Kansas City restaurants starting this October.
Sixty-nine percent of small businesses that temporarily closed because of the pandemic reopened in July, compared to 43% that reopened in May, according to a coronavirus impact poll conducted by the U.S. Chamber of Commerce.
The shift that PEPPR made was sudden, but Gruber-Chatfield believes it will work in the company’s favor. She plans to expand PEPPR’s delivery service.
“This is something that has more of an opportunity to really be a game changer,” she said. “I think this is where people are headed, honestly.”
Pivoting in a pandemic
Prior to the pandemic, LeAnne Stowe’s Overland Park, Kansas-based business, Annie’s Barn, sold wholesale and individual gifts such as wood coasters and mugs adorned with snarky original comments. Annie’s Barn usually makes 75% of its yearly earnings in the fourth quarter, selling at different holiday markets and shows.
But as COVID-19 continues to spread, the likelihood of a profitable in-person show is slimming. Stowe shifted gears.
“I found out that there was a niche that was not being filled,” she said.
Stowe now makes customizable masks she sells to businesses and organizations. Such a move has brought the company a whole new market. The summer is usually quiet in sales for Annie’s Barn, but not this season.
“Our numbers for July were something I’ve never seen before in my time of doing business,” she said.
Under normal circumstances, a show in Omaha, Nebraska, brings in about $6,000 in revenue. In June alone, Annie’s Barn made three times that in online mask sales.
“One hundred percent of our sales through June and July were masks, and just now in August we’ve started selling gifts again,” she said.
Overall, the negative impact that COVID-19 has had on small businesses is slowly decreasing, according to a survey conducted by the U.S. Census Bureau. The week of April 26, 82.7% of businesses surveyed in Kansas and 87.2% in Missouri reported being negatively affected by the pandemic. In mid-August, those numbers dropped but were still significant — 70.4% of Kansas businesses and 77% in Missouri saw a negative impact.
Risa Stein, who began her business during the pandemic, was able to reconfigure her business plan around the heightening number of cases.
Stein is the owner of Aamica, an app focused on spreading compassion through messages.
“We were able to leverage a unique opportunity to support individuals who wanted to provide a level of compassion that was previously not necessarily unwarranted, but previously unaddressed,” she said.
Aamica users download the app to share messages of support and encouragement with intended parties. The receiver can see their message on their phone screen by tapping their Aamica aamilet, a specialized band, against their phone. The company was meant to launch in March as a platform for family and friends to share personal messages, but as the pandemic worsened, Stein saw a better use of their mission.
“Since our platform is based on sharing compassion, we figured the most compassionate thing to do is reprioritize. That’s where we came up with our Thank You program that’s designed to support the COVID-19 workers,” she said.
“We take all of the messages that come in from around the world, intended for each of our four hero recipient groups. And we take all those messages and combine them so that we have a really powerful show of social support. And we share them with the individuals who are COVID-19 essential workers.”
Switching demographics from family to essential workers has come with a few challenges. For instance, schools no longer have the same amount of expendable funds to purchase bands for teachers. To address this, Aamica has partnered with various schools and organizations to turn their sales into a fundraiser.
“One of the primary problems that we saw with there being a lack of funding, we were able to flip and make a positive,” Stein said.
Encountering and overcoming obstacles
Not all small businesses have been able to leverage the pandemic to their advantage. Space Kansas City launched last October to provide office and event spaces for wellness professionals to work in.
But as a result of social distancing protocol, many therapists are working from home.
“It’s really hurting what we had planned on doing and providing to the city,” said Jae Edgar Bennett, the managing partner of Space KC.
Space KC has implemented many measures to comply with the Centers for Disease Control and Prevention guidelines. Alongside hiring janitorial teams and providing sanitation supplies, clients are issued a code they must use to enter the building that expires in an hour. Space KC has also created rooms to cater to virtual privacy-law-compliant mental health services, part of a dramatic surge in telemedicine as a result of the pandemic.
Even with the option of virtual services, Space KC cannot compete with the free option of working from home.
“Why spend X amount of dollars on an office space?” Bennett said.
While other businesses have been able to take advantage of their respective market shifts, several other issues arise from COVID-19. One common problem for entrepreneurs: delays in mail shipping and delivery.
“Shipments of the bands and the packing that the band comes in has been a little delayed,” Stein said.
Stowe has encountered similar issues receiving her mask materials from Los Angeles.
“We were shipping them via the USPS, but then they started having all kinds of problems, she said. “Instead of taking four days to get here, it could take 11 or 12 days, and my packages had been in the mud.”
Staffing businesses has also proved to be a challenge for many entrepreneurs.
“I’m immunocompromised, which means if I was to bring in extra help, I would have to bring in people who are living a safe lifestyle,” Stowe said. “There were lots of people who said they’d be willing to help me, but there are certain things they were doing that would put me at risk.”
In early April, 3.5 million of the nation’s 30 million small businesses said they might have to close permanently in the next two months, according to a survey conducted by Main Street America, a program of The National Main Street Center. It also found 7.5 million were at risk of closing permanently by September, and closures or staffing cuts could leave approximately 35.7 million Americans employed by small businesses at risk of unemployment.
“I think everybody’s finding that in order to survive, it’s going to have to be a lot more work upfront.”— Lyndsey Gruber-Chatfield, founder of PEPPR
Making it work
As part of the Coronavirus Aid, Relief, and Economic Security Act, Congress on April 3 launched the Paycheck Protection Program, a $525 billion package encouraging small businesses to retain their employees by administering loans that pay up to eight weeks of payroll costs.
The sharp increase in businesses in need of assistance has had a direct impact on the number of lenders working with the Small Business Administration, which approves the PPP loans after small businesses apply.
“We had a relationship with about 2,500 lenders around the country at the beginning of this pandemic, and now our relationships have expanded to over 5,000 around the country,” said Tom Salisbury, regional administrator for the SBA’s Region VII states, which include Missouri and Kansas.
The SBA approved over 5 million loans nationally through Aug. 8, according to a PPP report. In Kansas, 53,755 loans were approved, with $5 billion distributed. Missouri distributed over $9 billion after the approval of 95,599 loans, according to the report.
“I’ve been all over the four-state region that I’m responsible for, which is Missouri, Iowa, Kansas and Nebraska, and there isn’t anywhere I go where somebody doesn’t say to me, that with the PPP program, they were able to stay open,” Salisbury said.
Between March 13 and Aug. 15, 69.9% of small businesses in Kansas and 76.1% of small businesses in Missouri requested assistance from the PPP, making it one of the most popular small business loans applied for, according to the U.S. Census Bureau. By the same week, all of the businesses in Kansas that requested assistance had received it, while 75.9% of businesses in Missouri reported receiving the funding, according to the bureau. The PPP closed Aug. 8.
While other loan options exist, the smallest of businesses are still bearing the brunt of financial hardship. Gruber-Chatfield has applied for pandemic assistance but did not qualify, as her business was too small and too new.
“We basically survived because of our unemployment benefits that were extended,” she said. “If it weren’t for that, we wouldn’t have been able to make interest payments on credit cards that we had to start the business.”
She’s not alone. According to a followup Main Street America survey, less than half of respondents who applied for federal relief dollars in the initial stimulus round received funding, and the smallest businesses had the least success with their applications. Of the business owners who applied and have fewer than six employees, 39% received funding.
Many businesses have shut down as a result. Out of 132,580 total closed businesses on Yelp in July, 72,842 businesses closed permanently. This is a 27.6% increase in permanent closures since March, according to Yelp Economic Average.
Gruber-Chatfield’s business pivot has brought PEPPR to a shore of new opportunities, but without funding or loans, expansion is limited. Due to limited funds, Gruber-Chatfield, who has just ended her maternity leave, will be carrying out all deliveries until PEPPR can employ more drivers.
“I think everybody’s finding that in order to survive, it’s going to have to be a lot more work upfront,” she said.
Mili Mansaray is a former reporting intern for The Beacon.