Making Tough Businesses Choices During COVID-19

While the city and state are entering in Phase 5 of its reopening, it’s not a secret one of the unfortunate side-effects of COVID-19 is the negative impact on the economy – especially small businesses.

According to published reports, 100,000 small business permanently closed in the eight weeks beginning in mid-March. Many businesses have been forced to shut down or adapt to this unprecedented time. Almost every business will have to pivot or change their business model to acclimate to the changing marketplace that presents itself amongst this pandemic.
This reality is hitting Detroit, with many businesses grappling with a tough decision, do we close it close or keep it stay open?
Some of these businesses won’t have a choice and for others, they will make painfully strategic moves to cut losses and recalibrate to get to their next opportunity.  It’s a challenge and these times are particularly difficult for entrepreneurs.  To wit, Detroit Dough started in 2017, grew into a successful business and opened its first “brick and mortar” at Novi’s Twelve Oaks mall in mid-December, 2020.  Since COVID-19 in mid-March, its future is uncertain.
I talked to co-founder, Autumn Kyles, regarding COVID-10’s impact on its business and its uncertain future.
Lee:  Do you plan on reopening?
Kyles:  We’re unsure and are taking into consideration the impact of the stay-at-home orders on overall business.  It also depends on the industry because we rely on sports, entertainment, et. al.
Lee:  How has the changed business landscape impacted your business?
Kyles:  The landscape of consumer behavior has drastically changed over the two months of self-quarantine. Due to Governor Whitmer’s stay-at-home orders, Michiganders are shopping less in-person, opting for do-it-yourself fixes and choosing e-commerce solutions. Although consumers know that the pandemic is a temporary situation, shopping and spending habits of  consumers have already permanently changed.
In short – life will not go back to pre-coronavirus once the lastest stay-at-home order is lifted beginning June 15th.
The anticipated traffic promised by “the outside opening up” won’t actually be there. Businesses that are heavily dependent on foot traffic like brick-and-mortars will suffer significantly, even after business returns to normal.
Lee:  Talk about pivoting your business during COVID-19.
Kyles:  If a business has not found a way to pivot and generate income during the shutdown, it is safe to say their value proposition has already drastically decreased.  Pivoting takes money, time and resources that some small businesses don’t have.
Prior to coronavirus, Detroit was known for its plentiful resources to help start-ups grow into thriving, sustainable businesses. Now those funds have gone to keep businesses afloat. And while those funds are going to the bleeding arteries of our economy, they are no longer available to drive innovation in creating or sustaining  the very businesses that need it right now.
Receiving a grant today from the Detroit Economic Growth Corporation or Oakland County has to go paying rent, payroll or managing cash flow – not investing in the tools needed to pivot. Entrepreneurs are forced to make a choice – stay operable even though they are barely breaking even or shut down to maintain what they already have. Unfortunately, this is leaving  companies behind in the race to adapt to the new normal.
Lee:  How have the increased costs impacted your business model?
Kyles:  The cost of pivoting has skyrocketed to an unmanageable level. E-commerce and contact-free services are now at a premium and eat a sizable chunk of a small business’ bottom line. Restaurants are struggling to make ends meet as the majority of their business is now in the hands of DoorDash or Uber Eats, food delivery platforms that take on average 25 to 30 percent of revenue from their pockets.
Raw goods are slowly starting to increase in price, reducing the already razor thin profit margins businesses have to operate on. International trade is expected to fall 13% – 32% according to the World Trade Organization so we can expect sharp increases in cost of goods sold for small companies who are primarily near the end of the supply chain.
All of these elements make an extraordinarily tough decision even more complex for small businesses.
Lee:  As the state continues its “slow opening”, the country has been experiencing a deep economic slowdown.  How are you forecasting business?
Kyles:  We’ve seen the statistics – The United States is seeing the highest level of unemployment in its history; the stock market is volatile at best and international trade will hit historic lows as aforementioned. Although some experts at Forbes don’t anticipate a 21 st century Great Depression, we can assume that some economic downturn is inevitable.
As a small business owner, this is considerably scary to forecast, especially when you haven’t been lucrative for almost a quarter of the year. Even if you aren’t a small business owner, chances are that you are currently taking precautions to shield your savings and investments to ride out this wave.
Imagine your life savings and your retirement plan was wrapped up into a business that might not have space in our economy post COVID-19. Would you take the gamble and press on?
Lee:  And from a business perspective, what have you assessed in your determination to remain open?
Kyles:  Entrepreneurs thrive on high-risk high-reward but in these unprecedented times, this type of risk can be too much of a gamble.  As the co-founder and CEO of Detroit Dough, my team and I are consistently assessing the economic landscape to make a decision to stay in business or close up shop. Detroit Dough primarily sells to entertainment venues like movie theaters, amusement parks and stadiums.
For example, when the NBA made a bold move to end it’s season due to COVID-19, our sales went down with it. 80% of our sales are dependent on high-traffic venues that, more than likely, will not resume normal business until 2021. We, like many other small businesses, are looking at our short list of options and realizing that our once strong trajectory is just about non-existent now.
Lee:  So what does this mean for our local economy? What does this mean for the businesses and shops that we depend upon to keep our communities thriving?
Kyles;  We may not know the full impact of COVID-19 on our economy for a while, but we can assume that our small business community will be forever changed.  All I can hope for is that our startup ecosystem can regenerate businesses that contribute to our new normal and create a new renaissance for small business in Detroit.
Mark S. Lee is Founder, President & CEO, The LEE Group, and can be heard “In the Conference Room”, Sundays, 11 am, on 910am, and you can listen to “Small Talk with Mark S. Lee” podcasts at