Small Wins and New Discoveries in Tough Times

As we examined around companies like Snap, Stripe and Shopify (good things come in S’s), Covid-era lockdowns have a polarizing effect. High-touch businesses suffer (events and brick & mortar commerce), while quarantine-friendly fare sees usage spikes (e-commerce, video conferencing, and casual gaming).

But some high-touch businesses in the hardest-hit categories are finding small wins. That even includes SMB restaurants, as shown by a small San Francisco restaurant group I have ties to. A recent letter from the owner chronicles recent events that sit at the 3-way intersection of good fortune, creative thinking and agility.

The agility point is one we examined in a recent report. But that’s more about tech companies that pivot or fast-track products due to shifting demand signals. In the case of this SMB, they pivoted to a takeout and bottle service, which is showing strong gains and less overhead than standard full-service operations.

Though it’s not said explicitly, this business appears to be discovering operationally-efficient methods by being forced to think differently. If one good thing can come out of such difficult times, it could be SMB discoveries, perspective and stress-tested resilience. As we’ve said, shifting ground is where innovation lives.

The question for this business and all businesses: Will some of these discoveries, products and processes stick around after things return to normal? Will they represent operationally-efficient tactics that apply to normal times as well as strained ones? In those cases, they truly will be valuable discoveries and silver linings.

As for the “good fortune,” mentioned above, that came in the form of loans and grant money. The company was one of the few to successfully get Paycheck Protection Program funds. It also benefits from SBA forgiveness for prior loans, as well as pending relief from the Economic Injury Disaster Assistance program.

As we’ve done before on Fridays — offering SMB stories for strategic takeaways and lessons — the owner’s letter is below. This hopefully doesn’t trivialize the pain being felt by less-fortunate SMBs, but is a rare first-hand account of what’s working for one business. There could be valuable lessons in, and between, the lines.

For full context, this was sent to friends, investors and acquaintances to update them on the state of the business and thank them for support. We’ve removed names in the interest of privacy.

Hi everyone,

I hope you and your loved ones are all remaining healthy and safe during this very trying time.

Now that we’re a full 6 weeks into the Shelter in Place order, I wanted to provide an update on our status.

First, we are all healthy and safe — as are our families and our staff.

Secondly, [we’ve] been able to persevere and weather this storm remarkably well. The plan we laid out for you 6 weeks ago has, while slightly different than thought, worked far better than we could have hoped.

Within the first week of laying off the entire staff, we found ourselves with too much Delivery and Takeout business to support on our own, and so brought back 6 employees initially in order to keep up. That, coupled with the liquidation of a good portion of our beer cellar, allowed us to find stable footing by early April.

From there we set to work streamlining the burgeoning new business model of Takeout & Bottle Shop, while also being one of the lucky few to receive a PPP loan from the SBA in the first go-around.

Since then, and with that funding in hand, we have hired back all of our former full-time employees in order to use the funds as they’re intended: Payroll / Benefits, Rent and Utilities. Which will also allow the entire loan to be forgiven — essentially turned into a grant.

And because we are open and operating, it will allow us to continue to generate revenues (which are now about 50-60% of former levels) while not needing to pay for any of the above mentioned costs — which comprise about 60% of total operating costs.

In addition, one of the lesser known benefits from the SBA during this crisis is that all SBA loans, in good standing and current, will be paid in full by the SBA for 6 months of payments. Meaning the prior SBA loans we have with Bank of SF will all be paid, principle and interest, for the next 6 months by SBA.

The combination of those two things, especially because we are open and generating better than expected revenues, has given us a solid lifeline in order to not only sustain through the current iteration of this crisis, but also a significant advantage in adapting to whatever comes next.

Lastly, we still have an application in to the SBA for their Economic Injury Disaster Assistance Loan program (submitted end of March), and are hopeful that the recent $60 billion infusion to that program will allow the SBA to at least process the applications already in the cue, such as ours. Should we receive that loan as well — as was our initial goal with SBA funding — we will be very well situated for both the short- and the long-term, wherever this crisis leads.

For now, we will simply continue to work to refine the current operation, and prepare ourselves as best we can for the eventual slow reopening of the economy, whenever that may come

We’ll provide ongoing updates about this business if we hear them…

Stay ahead of the curve and get the latest on Local straight to your inbox.

By submitting this form, you agree to receive communications from Localogy. You can unsubscribe at any time.

Related Resources