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Small Businesses Repurpose Lessons From the 2008 Recession | Small Businesses Repurpose Lessons From the 2008 Recession |
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This article is part of Owning the Future, a series on how small businesses across the country are coping with the coronavirus pandemic. | This article is part of Owning the Future, a series on how small businesses across the country are coping with the coronavirus pandemic. |
In late 2008, as unemployment soared and consumer spending plummeted, the restaurateur Karl Franz Williams opened a stylish, low-lit cocktail lounge on a gentrifying stretch of Frederick Douglass Boulevard in lower Harlem. | In late 2008, as unemployment soared and consumer spending plummeted, the restaurateur Karl Franz Williams opened a stylish, low-lit cocktail lounge on a gentrifying stretch of Frederick Douglass Boulevard in lower Harlem. |
His timing, at the beginning of the global financial crisis, could not have been more inauspicious. With its pricey cocktails and global small-bites menu, 67 Orange Street was an ambitious prospect even during the most ideal economic conditions. And the Great Recession — in which nearly nine million jobs were lost from February 2008 to February 2010 — was hardly ideal. | His timing, at the beginning of the global financial crisis, could not have been more inauspicious. With its pricey cocktails and global small-bites menu, 67 Orange Street was an ambitious prospect even during the most ideal economic conditions. And the Great Recession — in which nearly nine million jobs were lost from February 2008 to February 2010 — was hardly ideal. |
“We knew we could not survive this period on our own, that we would have to collaborate with other Harlem businesses and promote the restaurant as part of a larger community effort,” Mr. Williams recalled. The result was Harlem Park to Park, a nonprofit organization Mr. Williams helped establish in 2009 to boost economic development in Harlem and support its independent businesses during the recession and beyond. | “We knew we could not survive this period on our own, that we would have to collaborate with other Harlem businesses and promote the restaurant as part of a larger community effort,” Mr. Williams recalled. The result was Harlem Park to Park, a nonprofit organization Mr. Williams helped establish in 2009 to boost economic development in Harlem and support its independent businesses during the recession and beyond. |
Over a decade later, in the midst of the Covid-19 pandemic, Mr. Williams says the need for Harlem small businesses to collaborate has never been greater. So rather than meet quarterly, Mr. Williams said, Harlem Park to Park is now gathering biweekly to help local businesses navigate pandemic-related issues like registering for the Paycheck Protection Program and qualifying for minority-focused relief initiatives like the TruFund. | Over a decade later, in the midst of the Covid-19 pandemic, Mr. Williams says the need for Harlem small businesses to collaborate has never been greater. So rather than meet quarterly, Mr. Williams said, Harlem Park to Park is now gathering biweekly to help local businesses navigate pandemic-related issues like registering for the Paycheck Protection Program and qualifying for minority-focused relief initiatives like the TruFund. |
Since the 2008 downturn, Mr. Williams has also become a board member of the NYC Hospitality Alliance, where he’s “been able to scale up this spirit of collaboration,” and advocate for Harlem on a citywide level during the coronavirus crisis. “So far we’ve negotiated a cap on restaurant delivery fees and secured (commercial) rent guarantees so business owners won’t lose their shirts if they walk away from leases.” | Since the 2008 downturn, Mr. Williams has also become a board member of the NYC Hospitality Alliance, where he’s “been able to scale up this spirit of collaboration,” and advocate for Harlem on a citywide level during the coronavirus crisis. “So far we’ve negotiated a cap on restaurant delivery fees and secured (commercial) rent guarantees so business owners won’t lose their shirts if they walk away from leases.” |
Joint efforts like Harlem Park to Park are among the many lessons small-business owners are repurposing from the last economic slowdown to survive in 2020. The need for such lessons is clear: According to a recent survey by the National Federation of Independent Business (N.F.I.B.), 92 percent of small businesses have been hurt by the pandemic, while half report that they cannot continue to operate under current conditions for more than two months. | Joint efforts like Harlem Park to Park are among the many lessons small-business owners are repurposing from the last economic slowdown to survive in 2020. The need for such lessons is clear: According to a recent survey by the National Federation of Independent Business (N.F.I.B.), 92 percent of small businesses have been hurt by the pandemic, while half report that they cannot continue to operate under current conditions for more than two months. |
“Small businesses simply have far fewer cash resources and liquid assets on hand compared to large corporations,” says Michael Chow, lead data analyst and economist at the N.F.I.B. “While every recession is different, as in 2008, small businesses today must focus on adaptability and prepare for timid consumers.” | “Small businesses simply have far fewer cash resources and liquid assets on hand compared to large corporations,” says Michael Chow, lead data analyst and economist at the N.F.I.B. “While every recession is different, as in 2008, small businesses today must focus on adaptability and prepare for timid consumers.” |
As Mr. Chow suggests, flexibility — both in product lines and operational structure — will help vulnerable businesses survive. The key, owners and analysts say, is listening to customers and anticipating their needs, both today and after the pandemic. | As Mr. Chow suggests, flexibility — both in product lines and operational structure — will help vulnerable businesses survive. The key, owners and analysts say, is listening to customers and anticipating their needs, both today and after the pandemic. |
Pam Weekes and Connie McDonald, the co-founders of Levain Bakery in New York, for instance, said they were able to manage costs in 2008 by keeping their product offerings to a minimum. That never changed, and their coveted cookies and fresh-baked breads remain the core of their business. “Our motto was always ‘do less and do it better’ — we never gave in to trends like cupcakes or Cronuts,” explained Andy Taylor, Levain’s chief executive. “So during this crisis we could easily react to our customers’ shifting behaviors.” | Pam Weekes and Connie McDonald, the co-founders of Levain Bakery in New York, for instance, said they were able to manage costs in 2008 by keeping their product offerings to a minimum. That never changed, and their coveted cookies and fresh-baked breads remain the core of their business. “Our motto was always ‘do less and do it better’ — we never gave in to trends like cupcakes or Cronuts,” explained Andy Taylor, Levain’s chief executive. “So during this crisis we could easily react to our customers’ shifting behaviors.” |
Mr. Taylor said that from March 30 to May 30, demand for Levain breads, for example, grew by 150 percent as customers avoided major supermarkets out of coronavirus fears. Having had so few products to manage, he added, the company was able to easily quadruple its bread production in just a matter of days. The giftable nature of Levain cookies also prompted the company to invest early in a robust e-commerce business, which has increased by 200 percent during the pandemic. | Mr. Taylor said that from March 30 to May 30, demand for Levain breads, for example, grew by 150 percent as customers avoided major supermarkets out of coronavirus fears. Having had so few products to manage, he added, the company was able to easily quadruple its bread production in just a matter of days. The giftable nature of Levain cookies also prompted the company to invest early in a robust e-commerce business, which has increased by 200 percent during the pandemic. |
Bronson van Wyck, a Manhattan-based event planner, was able to keep his business Van Wyck & Van Wyck afloat during the last recession by shifting away from mostly private parties to corporate events for clients like Target, Amazon and Samsung. “What we hadn’t considered back then, however, was the sentiment around what we do,” said Mr. van Wyck, who founded the company with his mother in 1999. “I thought our business would improve quickly once the markets stabilized, but it took two years for things to go back to normal.” | Bronson van Wyck, a Manhattan-based event planner, was able to keep his business Van Wyck & Van Wyck afloat during the last recession by shifting away from mostly private parties to corporate events for clients like Target, Amazon and Samsung. “What we hadn’t considered back then, however, was the sentiment around what we do,” said Mr. van Wyck, who founded the company with his mother in 1999. “I thought our business would improve quickly once the markets stabilized, but it took two years for things to go back to normal.” |
Mr. van Wyck has learned the sentiment lesson and is assuming that his business will suffer long after lockdowns end. | Mr. van Wyck has learned the sentiment lesson and is assuming that his business will suffer long after lockdowns end. |
“Unlike in 2008, we now understand that even when people are able to splash out on events again, there is no guarantee they will actually want to,” said Mr. van Wyck, whose company is staying busy by producing virtual events as well as a line of celebratory cocktail mixers. “We are structuring our business as if there will be no cash flow until December, while simultaneously preparing for the consequences of a second wave.” | “Unlike in 2008, we now understand that even when people are able to splash out on events again, there is no guarantee they will actually want to,” said Mr. van Wyck, whose company is staying busy by producing virtual events as well as a line of celebratory cocktail mixers. “We are structuring our business as if there will be no cash flow until December, while simultaneously preparing for the consequences of a second wave.” |
Along with flexibility, technology — as well as strong lines of credit — will also help determine which companies survive after the coronavirus. “Technology is essential for creating stopgap measures until companies gradually reopen,” said Augustine Faucher, chief economist at the PNC Financial Services Group. “Companies need to give their customers a reason to come back to them.” | Along with flexibility, technology — as well as strong lines of credit — will also help determine which companies survive after the coronavirus. “Technology is essential for creating stopgap measures until companies gradually reopen,” said Augustine Faucher, chief economist at the PNC Financial Services Group. “Companies need to give their customers a reason to come back to them.” |
Like Levain Bakery, and its early e-commerce focus, Singapore-based Aqua Expeditions’ initial bet on technology helped steady operations during both the Great Recession and today. Rather than build costly reservations and management platforms when it launched in 2008, “we outsourced most of these technology needs to cloud-based services,” said Francesco Galli Zugaro, founder and chief executive of Aqua, which operates small-scale luxury cruises in Peru, Cambodia and Indonesia. | Like Levain Bakery, and its early e-commerce focus, Singapore-based Aqua Expeditions’ initial bet on technology helped steady operations during both the Great Recession and today. Rather than build costly reservations and management platforms when it launched in 2008, “we outsourced most of these technology needs to cloud-based services,” said Francesco Galli Zugaro, founder and chief executive of Aqua, which operates small-scale luxury cruises in Peru, Cambodia and Indonesia. |
Opting for cloud services was an unusual move back then. “Smaller-sized companies typically created their own systems, but we realized we could benefit from all that technological R.&D. as it came online,” Mr. Galli Zugaro said. “Today, cloud services are allowing our entire business to run remotely with automated mechanisms in place to clearly measure company performance and employee productivity.” | Opting for cloud services was an unusual move back then. “Smaller-sized companies typically created their own systems, but we realized we could benefit from all that technological R.&D. as it came online,” Mr. Galli Zugaro said. “Today, cloud services are allowing our entire business to run remotely with automated mechanisms in place to clearly measure company performance and employee productivity.” |
Of course, for most small businesses, managing — and, particularly, cutting — costs ultimately proves to be the most effective recession survival strategies. Leon Avigad, founder and co-owner of the Israeli boutique hotel chain Brown Hotels Ltd., said that when his firm started in 2008, costly staffing setups like numerous assistants and unnecessary deputies were simply not an option. | Of course, for most small businesses, managing — and, particularly, cutting — costs ultimately proves to be the most effective recession survival strategies. Leon Avigad, founder and co-owner of the Israeli boutique hotel chain Brown Hotels Ltd., said that when his firm started in 2008, costly staffing setups like numerous assistants and unnecessary deputies were simply not an option. |
“We’ve never had ‘No. 2s’ or multiple managers at the company,” Mr. Avigad said. “Israel is the kind of place where every two years there’s a political crisis or mini-war, so beyond recessions or corona, businesses here must retain the ability to shrink or grow rapidly.” | “We’ve never had ‘No. 2s’ or multiple managers at the company,” Mr. Avigad said. “Israel is the kind of place where every two years there’s a political crisis or mini-war, so beyond recessions or corona, businesses here must retain the ability to shrink or grow rapidly.” |
Still, Mr. Avigad added that this did not necessarily mean simply hiring and firing at will. “Costs must be contained as cleverly as possible; for us this can mean combining jobs — perhaps having the front-desk manager also become a reservations manager.” | Still, Mr. Avigad added that this did not necessarily mean simply hiring and firing at will. “Costs must be contained as cleverly as possible; for us this can mean combining jobs — perhaps having the front-desk manager also become a reservations manager.” |
For Vivek Mathur, creative director and president of Indika Entertainment Advertising in Manhattan, cost management meant “replacing a culture of excess with a culture of thrift,” during the last downturn — a move which is helping to keep his company lean today. | For Vivek Mathur, creative director and president of Indika Entertainment Advertising in Manhattan, cost management meant “replacing a culture of excess with a culture of thrift,” during the last downturn — a move which is helping to keep his company lean today. |
Indika closed its Los Angeles office in late 2008, “because it involved not just the office itself, but also the cost of the travel, the cars, the digital connections between the offices in a pre-broadband world,” said Mr. Mathur, whose firm develops advertising and strategic marketing campaigns for movie studios, television channels and digital platforms. Indika’s New York office was also downsized, and unnecessary recurring expenses — multiple phone lines, special stationery, water delivery services — were eliminated. | Indika closed its Los Angeles office in late 2008, “because it involved not just the office itself, but also the cost of the travel, the cars, the digital connections between the offices in a pre-broadband world,” said Mr. Mathur, whose firm develops advertising and strategic marketing campaigns for movie studios, television channels and digital platforms. Indika’s New York office was also downsized, and unnecessary recurring expenses — multiple phone lines, special stationery, water delivery services — were eliminated. |
“As the economy recovered, some of our old habits did return, but we were better prepared for this crisis because we had already significantly lowered nonessential expenses,” during the last recession, Mr. Mathur said. | “As the economy recovered, some of our old habits did return, but we were better prepared for this crisis because we had already significantly lowered nonessential expenses,” during the last recession, Mr. Mathur said. |
Back in Harlem, 67 Orange Street is still open, with take-out and delivery menus, along with take-home cocktail kits for purchase. As for Mr. Williams, he is back where he started — behind his bar preparing drinks and keeping a close eye on operations. | Back in Harlem, 67 Orange Street is still open, with take-out and delivery menus, along with take-home cocktail kits for purchase. As for Mr. Williams, he is back where he started — behind his bar preparing drinks and keeping a close eye on operations. |
“I worked the bar half of the time during those early lean years,” said Mr. Williams. “Now I’m there two days a week; not only does it reduce overhead, but I’m extremely close to what is happening with the business so I can manage costs and immediately figure out the best ways to pivot.” | “I worked the bar half of the time during those early lean years,” said Mr. Williams. “Now I’m there two days a week; not only does it reduce overhead, but I’m extremely close to what is happening with the business so I can manage costs and immediately figure out the best ways to pivot.” |