Pivot Or Die: How LA's Small Business Owners Survived 2020
Thousands of small businesses in Los Angeles closed permanently this year. Many more are limping along. So what do the ones that stayed open have in common?
I've been putting that question to local small business experts, as well as business owners themselves, and one trait keeps coming up: a willingness to try new things.
"If you want to stay in business, keep being innovative, flexible and responsive," said Colette Moore, who leads the Pacific Coast Regional Small Business Development Corporation in Koreatown.
A new survey bears that out. California's Small Business Development Centers polled more than 22,000 entrepreneurs during the early months of the pandemic. They found that between January and July 2020, over half of small business owners changed the way they served customers to accommodate social distancing. Another 40% began offering a new service or product.
Business owners unwilling or unable to innovate were more likely to be closed, temporarily or permanently, in July. The ones that stayed afloat were less likely to see sales rebound as the economy re-opened over the summer.
SELLING ICE CREAM ONLINE?
JP Lopez is one of the many California small business owners who realized almost immediately he had to change not only what he sells, but how he sells it.
Lopez and his wife, Adrienne Borlongan, own Wanderlust Creamery, an artisanal ice cream shop with five locations around Los Angeles County. Prior to March 2020, the in-store experience was core to their business model. Employees encouraged customers to linger in line, sampling as many unusual flavors (like sticky rice and mango or ube malted crunch) as they wanted.
When stay-at-home orders were instituted, Lopez realized that offering unlimited samples, indoors, was risky for his employees. So Wanderlust temporarily stopped offering scoops, instead selling pints of ice cream to go. Lopez also re-built his website so people could order pints online. He had no idea what to expect but it was shockingly popular.
"For four years, online wasn't even a thing on our radar," he said, "and now that the pandemic is here, I can have a conversation about e-commerce with people, which is crazy, because I sell ice cream!"
He estimates that 30% of his business now comes from shipping hand-packed pints of homemade ice cream around the country.
HARD TO SOCIAL DISTANCE
For businesses that, by their nature, require people to be indoors at close proximity for long periods of time, it's been harder to pivot. According to the SBDC study, more than half of the California small businesses surveyed in the "arts, entertainment and recreation" sector were closed by July -- the highest of any industry sector.
Jennifer Breakey, who owns Serendipity Spa in La Verne, has tried to be innovative, despite being in what she calls "the touch business."
Over the summer, she bought fans, misters and shade tarps so she and her staff could continue giving manicures and pedicures outdoors. She spaced out chairs to comply with social distancing. She even did a few virtual, guided facials for customers who are on a skin care regimen, but says, "It doesn't replace the touch, the whole experience."
Despite her efforts, she's temporarily closed due to the surge in coronavirus cases and L.A. County's latest stay at home order.
While the average small business owner lost 75% of their revenue between January and June, according to the survey, businesses owned by women and people of color have struggled the most.
Nearly 45% of Black-owned businesses in California that responded to the SBDC survey were still closed in July, compared to about 30% of white-owned businesses.
Businesses owned by women received smaller loans from the Paycheck Protection Program and the Small Business Administration's disaster loan program, known as EIDL, than those owned by men.
Black- and Latino-owned businesses also received less aid than white and Asian-owned businesses.
"Often African American and Hispanic businesses are under capitalized to start with," said the SBDC's Moore. That's a problem for two reasons: It means they have less cash available to use to pivot or invest in new supplies that will allow them to continue operating during the pandemic, and they may have a harder time qualifying for loans.
Black Angelenos are also far less likely to own their home than white Angelenos, which means they can't borrow against their house to get through tough times.
"The systemic problems, in terms of home ownership for African Americans, continue to impact business ownership as well," Moore said.
LA VERSUS THE REST OF CA
Small business owners in Los Angeles also seem to be faring worse than those in other parts of California. In July, just 22 percent of surveyed businesses in L.A. were fully operating, the lowest of any region in the state, and 30% were temporarily closed, the highest of any region.
The researchers conducting the study theorized that the LA regional economy, "has a higher concentration of businesses in the sectors most impacted by the pandemic," like arts, entertainment, accommodation and restaurants.
A DESIRE TO STAY OPEN
Despite the uncertainty of public health restrictions and months of lost revenue, many small business owners I spoke with were determined to stay open.
"I think I'm in too deep, and so I have to do what it takes to stay open to try to recoup my losses," said Breakey, the spa owner. She's hopeful that once the latest stay-at-home order is lifted, her customers, longing for social and physical contact, will come back.
This attitude is key to surviving the pandemic, says Moore, whose organization offers coaching to small entrepreneurs: "You gotta have some thick skin. Rejection is hard. And this is a form of rejection: you can't service your clients, you're being told no at every turn. If you want to stay in business, keep after it."