COVID small business impact: ‘Left with just Walmart and McDonald’s?’

Above: The Studio Phoenix operated as a small boutique fitness studio since 2011. Business News | 6 Dec, 2020 |

The Studio Phoenix operated as a small boutique fitness studio since 2011. Then, the deadliest pandemic in 100 years reared its head around the corner and The Studio had to close down twice. The business, for unknown reasons, did not qualify for stimulus from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and its revenue decreased by 80% according to owner Tarra Sachedina. 

The Studio has permanently closed its in-person facility and now runs classes strictly online. Sachedina was one of the many small business owners whose entire livelihood was interrupted by the COVID-19 pandemic. 

The United States’ Small Business Association states that small businesses encompass 99.9% of U.S. businesses. Brookings Institute has reported that aggregate small business revenue across all departments has decreased 20% from January.

Dennis L. Hoffman, Director of the L. William Seidman Research Institute at the W. P. Carey School of Business at Arizona State University, said much of the decreased revenue can be attributed to fear from clients of the virus.

“Your customers and clients do want to consume your products and services but many simply don’t feel safe in doing so. When they are convinced it is safe they will come back,” Hoffman said.

Hoffman said another round of federal stimulus could help with the monetary harm to small businesses.

“The amount was sufficient but unfortunately aid was not targeted to those most in need.   healthy vibrant small businesses were able to get aid – and many did. While businesses in need did get help, more is needed for them.  hopefully in round two the govt can do a better job targeting aid to those most in need,” Hoffman said. 

New businesses, such as Justice Java in Downtown Phoenix had ambitious plans that were put on hold by the COVID-19 pandemic. Justice Java opened in late 2019 as a coffee shop that employs formerly incarcerated citizens. 

Dustin Campo, the owner of Justice Java, was incarcerated between 2010 and 2015. Having served his time he was met with difficulties keeping a job as he would be repeatedly terminated upon his managers discovering more details about his record.

“I’ve always loved coffee, and I’ve always made a good cup, so I decided to start Justice Java not just to give myself employment but to solve that problem for other people and give people who have paid their debt for society the opportunity to come out on the other side,” Campo said.

In March when shutdowns began, Campo said there was no business for at least six months. When COVID numbers started to decrease in Arizona in early Summer, Justice Java opened back up only for COVID cases to rise again in June. Campo says the business has mostly stuck to farmers’ markets since. 

Justice Java did not qualify for any CARES Act benefits aside from an individual $1200 check for Campo. They were rejected on the grounds that they weren’t a business for a long enough time.

“They needed you to project what your losses were going to be and we weren’t in business long enough to project any trends or patterns, so we had no idea what those numbers would like like,” Campo said.

However, Justice Java eventually received a loan from Dreamspring, a company with the goal of providing assistance to Small Businesses. Campo said this likely saved the business.

“They were very generous, without them we likely would not have been able to make it through. We probably would have had to dissolve the business just to stay afloat,” Campo said.

Campo feels hopeful by February business will pick up once access to COVID therapeutics and vaccines becomes more widely available. Campo said they will be investing in a food truck as the new method for mobile operations.

The Garden Bar Phoenix in Downtown is another new business that was faced with the unexpected challenge of the pandemic. Kevin and Kim Haasarud were slated to open the Garden Bar Phoenix this fall. However, the pandemic delayed that opening and Kim Haasarud says it will likely open the first quarter of 2021. 

Kim Haasarud said the delayed opening was the better option instead of opening in the middle of the pandemic, due to the uncertainty involved with closures. 

“I take a look at this pandemic and I’m kind of fortunate that we hadn’t opened, because we would have to lay off employees, we would have to do what every other business has had to do unfortunately, so in a way we were lucky that we hadn’t opened yet,” Kim Haasarud said.

The business currently primarily operates online and sells to-go cocktail kits and grazing boxes. 

Kevin Haasarud said their business qualified for the PPP loan from the CARES Act, however it was difficult considering the amount was tied to workers’ wages, and they were the only two workers at the time of the distribution. 

“I think it was a good short-term stop gap, it was a good first try, but I think something of much larger magnitude is going to be needed especially for people that work in hospitality or travel,” Kevin Haasarud said “Most people I think are going to go under or do a significant pivot to see how they can reinvent themselves unless they can get some kind of significant stimulus again.”

However, small businesses with no brick and mortar operations also saw negative effects from the pandemic. One example is Elev8ted Cre8tions, a business that sells specialized travel products for families. Their signature item is a diaper bag that also serves as a travel and laptop bag.

Due to the pandemic decreasing travel worldwide, owner Deileta Kamhunga says there was a noticeable decrease in sales.

“We see the decrease in sales because a lot of families aren’t traveling right now because of the pandemic,” Kamhunga said.

Kamhunga said their business was primarily online but this year they also lost access to opportunities to travel to trade shows across the country to sell and promote their products. 

While sales noticeably decreased, the business did receive an Economic Injury Disaster Loan from the CARES Act. Kamhunga said another stimulus package would have been helpful but they were not in dire need of another one.

“It was really helpful, we were able to use it to stay afloat during the month where there were pretty much no sales at all,” Kamhunga said “If we had received another one I can only imagine how positive that would have been but no negative effect.”

However, there have been innovative steps taken to bring local businesses into the virtual world. Local First Arizona, a non-profit organization aimed at helping local businesses, has started an online website called Shop Arizona Marketplace, where local Arizona small businesses have a platform to sell their products online. Elev8ted Cre8tions was one of the businesses that this platform launched with.

“I already had a couple orders come through in three days which is fantastic,” Kamhunga said “I am very optimistic because Local First is a fantastic organization. They are really great when it comes to pushing the needle forward for small businesses around the state.”

Sachedina said in spite of The Spirit’s physical location shutting down, she is happy that the pandemic forced her hand into implementing online classes.

“I had wanted to be able to offer virtual classes and online classes for a long time. I always had one excuse after another like I’m not ready, I don’t have the equipment etc. This really forced me into offering what I offer in a different medium, now I have potential to reach people beyond just my demographic,” Sachedina said.

With vaccines from Pfizer and Moderna showing promising results, Hoffman said these vaccines have the potential to reinvigorate the economy provided they show results.

“Provided the vaccine is both effective and used widely, we have a real possibility that the economy will recover rapidly and even those small businesses hit the hardest will see customers and clients returning,” Hoffman said.

In spite of losing the physical aspect of her business, Sachedina expressed gratitude that this year has allowed her to reconsider many aspects of her life. However, she wants there to be a national plan to ensure small businesses can survive the pandemic.

“What’s going to happen to these businesses, and as a nation what’s going to happen? Will we be left with Walmart and McDonald’s as the only places to go to? There has to be some sort of plan or action steps,” Sachedina said.

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