Omicron Is Pushing Small Businesses to the Brink
(Bloomberg Opinion) -- Imagine you were born in modest circumstances and spent decades shaking off the limitations of your rural hometown. You saved enough money to study in France, where you fell in love with food. You worked your way through college and then set your sights on the Culinary Institute of America. You later found mentors in the food business, and baking bread became your thing.
After taking online MBA night classes, you scraped together the money and courage to open your own shop in an affluent New Jersey suburb: Montclair Bread. As the line at the door lengthened and accolades and real money rolled in, it became possible to overcome other obstacles: self-doubt; a bad marriage; single-motherhood and a pelvis-shattering bicycle accident.
Starting in early 2020, Covid-19 threatened to unspool your life and business, and at first you beat that, too. But successive waves of the coronavirus, culminating in the omicron outbreak in December, have now left the shop so short-handed, you’re considering calling it quits.
For small business owners across the U.S. who have contended with the pandemic and scrambled to get federal support to stay afloat, some of this will sound familiar. For Rachel Wyman, the owner of Montclair Bread, it’s personal. With that store — and a companion shop she opened in New Paltz, New York — on the precipice because so many employees have been sick, she is now wrestling with the unthinkable.
“I’m waving my white flag,” she said in an email to customers on Jan. 6.
With federal aid channeled to small businesses through initiatives such as the Paycheck Protection Program long dried up, and with workers ill from the virus or simply hard to find, more entrepreneurs unable to go it alone may do the same.
Although small businesses nationwide faced an existential crisis during the pandemic, their prospects had recently brightened. During the last half of 2021, Dun & Bradstreet Corp.’s index of small business financial health had stabilized — below pre-pandemic levels, certainly, but above levels registered during the depths of the crisis.
The delta variant of the virus battered entrepreneurs, as did supply-chain breakdowns and inflation, and female owners and owners of color were hammered the worst. But PPP funds prevented a complete meltdown, and by June of last year small businesses were becoming more optimistic, according to data collected by the U.S. Census Bureau. That optimism may continue for some, but the arrival of the omicron variant has ravaged a significant number of small businesses and left many entrepreneurs despondent.
I wrote about Wyman’s challenges in early 2020, after the first Covid-19 onslaught forced her to lay off 20 employees and work 17-hour shifts six days a week to stay afloat. Her insurer had refused to cover pandemic losses, and she hoped PPP funds might resuscitate her business. But like many entrepreneurs in her position, Wyman lacked connections to banks that were distributing the funds. It took four tries on her own to get the federal government’s computer systems to accept her PPP application, and by then all the money in the program had been exhausted. After Congress approved a second round of PPP funding, she managed to get about $105,000 in aid, and this money saved her from bankruptcy.
Wyman still lost big orders for weddings and other celebrations, and had to drop lucrative coffee sales and made-to-order sandwiches from her menu, because serving them involved too much contact with customers. Baking classes and other promotional activities were canceled.
She also adapted. Customers were asked to place orders online, given time slots for pickups and spaced safe distances apart when they arrived. Her doughnuts remained as popular as ever, though, and she eventually wrote a cookbook. With determination, Wyman and her remaining team pushed ahead. She sold groceries, meal kits and DIY baking packages.
“I leveraged everything to keep the business going,” she said in a recent interview. “I still do.”
The delta variant arrived and then seemed to subside. Business continued to rebound, and by October Wyman felt confident enough to open her new doughnut shop in New Paltz. She went back to planning in months and years instead of days and weeks.
“It seemed like last year there were points that we were really coming out of it,” Wyman said, remembering a 5K race that Montclair Bread hosted on Dec. 12. “It was so emotional for everyone there because they were at this event, and for a lot of people it was the first time they had been in a big event since the shutdown.”
Then on Christmas Eve, one of Wyman’s employees called out sick. She found someone to cover the shift. Next came a cascade of omicron-induced call-outs, including one of her bakers on New Year’s Eve. She closed for a week so her employees could get tested and recover, but she also lost about 25% of crucial holiday sales. When she tried to carry out the local mask ordinance in her store, or couldn’t fill orders quickly, some customers screamed at her. Business started to fray again.
“I feel like everything is stacked against us and I don’t mean to be in this ‘woe-is-me’ mode,” she said, ticking off a list of the revenue streams she’s lost and the lack of communication and support she gets from the township. “I kind of feel like I just don’t want to keep fighting.”
Wyman doesn’t expect any more federal aid comparable to what she received at the start. “I’m not asking for that,” she said. “This is my project, it’s my business, and it’s up to me to take care of it.”
But she’s so short on money that she also has trouble making her own housing payments. Mondays, when her store is closed, are hard to get through. She’s updated her resume in case she has to look for work and is wary of taking on new debt. If she contracts omicron and can’t work, that might be the tipping point for Montclair Bread.
“There’s no rule book, there’s no playbook for us,” she said. “I have one bank account and that has to sustain my entire staff, two operations and my family. If there’s not money in that account, what do you do?”
A full accounting of how small businesses have fared as the pandemic’s course lengthens has yet to be done. Entrepreneurs of color and women are likely to end up disproportionately harmed. The smallest businesses, lacking the relationships or balance sheets needed to outlast the pandemic, are also likely to fare badly. Timing for small businesses is everything; some of those that wound up in Covid-19’s crosshairs may get replaced by new ones that simply had the good fortune to open later.
A complete picture of how well programs like PPP met the needs of the most vulnerable businesses also remains elusive. A recent National Bureau of Economic Research study found that about 75% of $800 billion in PPP aid went to the top quintile of American households, and most of it didn’t go directly to workers — as was originally intended. The study also found that PPP money successfully propped up a significant number of small businesses, but it couldn’t determine whether that boost was lasting.
No amount of taxpayer backing for small businesses could fully prevent closures without public health strategies to shorten the pandemic or blunt its impact. Covid-19 policy has often been scattershot, of course, and Covid itself, unpredictable. Some entrepreneurs are now discovering that the pandemic has greater staying power than they do.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Timothy L. O'Brien is a senior columnist for Bloomberg Opinion.
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