Is A Pandemic A Good Time To Start A Business? For Some, The Answer Is Yes
The phone rang at 4 a.m. on the West Coast, rousing Angela Muhwezi-Hall from a dead sleep. Normally, calls at such times are bad news.
But this was opportunity calling.
“Now is the time that we have to start working on QuickHire,” her sister, Deborah Gladney, announced from Wichita.
QuickHire was a concept the sisters had been chewing on for years: a way to make it easier for skilled trade and service industry workers to find and apply for jobs.
As the COVID-19 pandemic prompted the closings of restaurants and other service businesses around the country last March, millions of skilled workers found themselves without work. While there are many job-hunting apps available these days, many skilled trade and service industry jobs aren’t posted on online job boards.
“Our parents came to America over 30 years ago,” Muhwezi-Hall says. “And it was those skilled trade, service industry jobs that supported our family of seven. And both myself and Deborah have had experiences in these types of positions and, while times have changed, the process of getting a lot of these jobs has not changed at all.
"You may have to physically walk to their brick and mortar location just to know if they're even hiring. And they may hand you a paper application to complete.”
Their app launched publicly on Sept. 1 on the iOS App Store and Google Play store, billing itself as an online marketplace for skilled trade jobs. It has attracted 1,500 users to date, garnered national media attention and caught the eye of employers.
“A number of large enterprises have reached out to us wanting to be added to our platform, as well as other media outlets who would like to feature QuickHire,” Gladney says.
Bad times often good for new businesses
Historically, economic slumps involving significant numbers of layoffs have spawned surges in entrepreneurial activity as furloughed workers use their unexpected free time to develop and launch businesses that had only been percolating in their minds or their garages.
In places such as Sedgwick County, where 7.6% of workers were still unemployed as of November, slightly more than the national average, entrepreneurship represents a path for laid-off workers to take the initiative in launching new careers. It also provides a route for pandemic-stricken firms to innovate toward survival by quickly taking advantage of new market opportunities or to pivot away from offerings rendered unviable by changing circumstances.
Past downturns, the New York Times reported, have produced American companies that went on to develop high profiles: Airbnb, Disney, General Motors, Hewlett-Packard, Microsoft, Slack, Uber and Venmo, among others.
“Downturns or challenging times are seen as good times to start a business for two reasons,” Rashmi Menon, entrepreneur in residence at the University of Michigan’s Zell Lurie Institute for Entrepreneurial Studies, told the Times. “One is, there is less competition for resources. The second reason is that whatever changes we face, positive or negative, bring up new customer needs. And customer needs are at the core of any business.”
Workers might also have more free time to try new ideas when out of work, and a major event like a pandemic can free companies from constraints that have kept them from finding ways to create new products or tweak their offerings. It’s an example of how leadership opportunities can surface even during the most difficult times, providing a chance for anyone to lead at any time.
Government funding, including aid being distributed as part of pandemic relief efforts for such products as personal protective equipment (PPE), represents one opportunity for entrepreneurs, as do government programs to provide low-interest loans to help businesses get up and running. But neither are exactly foolproof, especially considering the assumption of risk that entrepreneurship entails even in normal times.
Christina Long, president and CEO of Create Campaign, a nonprofit organization that works to support minority entrepreneurs, says there are dangers to chasing some of the hottest new market opportunities being created by the pandemic, especially if it’s a new area for the business owner.
“PPE is a hot item that people are trying to score” funding to produce, Long says. “And while it's great to be in a position to service those immediate needs, reaching out into areas that you have no past performance, and you have no understanding of the business model, just because you see the opportunity,” is risky at best.
And just because something is a good idea during a pandemic doesn’t mean its success will last once the emergency is over. Simply surviving the pandemic will be a success story for many entrepreneurs, she says.
“Our state and local leaders are trying to identify different ways to get funding into business owners’ hands,” she says, “and from a leadership perspective, that is great.”
“It's that kind of innovative thinking with traditional products that I think needs to happen more,” she says.
But greater access to loans, which have historically been more challenging for people of color to obtain than white Americans, can come with its own dangers, she says.
“Loans are still loans,” Long says. “They have to be paid back. So even though the barrier to entry is lower, you still need to be very mindful about how much debt your company takes on because at some point, that debt is going to have to be repaid.”
Fortunately, she says, business development resources are available to help entrepreneurs flesh out their business plans and learn how to closely track their financials. The Create Campaign and the Wichita State University-Kansas Small Business Development Center are two such resources, and their services are free.
Mixed data on whether more entrepreneurship is happening
So are efforts by government, lenders and communities to help spur new business ideas during the pandemic having an impact? Economic analysts say that while 2020 has seen a surge in entrepreneurial activity in response to the pandemic, it’s not yet showing up in some traditional metrics.
Data provided by the Kansas Secretary of State’s office showed there were 8,467 articles of incorporation filed between March 1 and July 7. That’s down slightly from the 8,594 filings through the same period the year before and slightly more than the 8,456 in 2018. It was more than 500 above the 7,962 filings in 2017.
The numbers aren’t higher, economic analysts say, because a lot of the entrepreneurial activity is happening in the form of pivots by existing companies and not necessarily through new-business startups. In addition, the state doesn’t require sole proprietors to file articles of incorporation.
On a national level, the third quarter of the year saw the number of applications for employer identification numbers explode compared with the second quarter, according to the U.S. Census Bureau. Nationwide, entrepreneurs filed 1.5 million applications, a 77.4% increase over the second quarter.
The figure for the Midwest region, which includes Kansas, was even higher: 88%. The number of applications for high-propensity applications – or those companies considered most likely to transform into businesses with a payroll – grew by 92%.
As the Poynter Institute pointed out, filing for a new employer ID number does not equal actual new businesses. It just means that somebody is thinking seriously enough about starting a business that they started the paperwork. They may be doing it because interest rates are low or because there is a large pool of great employees potentially available.
But it’s easy to see from such figures that entrepreneurship isn’t a path out of unemployment for most Americans. The ranks of jobless Americans, while on the decline from earlier in the year, still hit nearly 11 million nationally in October and more than 80,000 in Kansas.
While a select few will carve their own path out of the pandemic, most workers will need to weather the storm through some combination of savings and unemployment benefits until the labor market recovers further.
That’s not to say that there aren’t promising developments in the landscape for entrepreneurship. QuickHire is an example of a recent trend that has continued to strengthen, Long says.
A study by the Federal Reserve Bank of Kansas City showed that between 2002 and 2012, the number of businesses owned by Black women around the country increased 179%, compared with 52% for all women-owned businesses and 20% for all businesses.
The rates are similar in the Wichita area, Long says. They haven’t received much attention because they’re typically small businesses, she says, not tech startups with one eye on scalability into the Next Big Thing.
“When we look at the backbone of economic development in our country, small businesses are that backbone,” Long says.
Around Wichita, she says, those entrepreneurial ventures are much more likely to be in service industries than in tech.
“For that reason, we tend to get overlooked because they're small and micro businesses,” Long says. “However, those micro businesses are a great contribution in that they do help people extend their household income in ways that they are then able to produce and to impact the economic bottom line in a community.”
That growth will only continue when the pandemic eases, Long says, as more and more entrepreneurs learn and use the tools to set up and run their own businesses.
“For so long, people overlooked our businesses, because we were undercapitalized and underutilized,” Long says. “I am seeing such hustle and grit and heart to put out the best of the best because you are overlooked.”
The sisters behind QuickHire didn’t let their lack of knowledge stop them from launching their dream.
“We don’t have tech backgrounds, we’re not based in Silicon Valley, we didn’t speak the tech/venture capital language, we didn’t know how to get people to use our product,” Gladney says. “We just didn’t know.”
They also didn’t know where to find financing. They scraped together $50,000 of their own money to start QuickHire.
“As children of immigrants and wives to first-generation college graduates, this is a lot of money and risk for us,” Gladney says. “When you invest that type of money, you have no option but to push onward. Also, we've been very in tune with our customers. Businesses wanted this so bad and people were having a tough time finding jobs. We know the capital and investors will come as long as we stay focused on creating value for society.”
That focus has served Gladney and Muhwezi-Hall well, Long says. Entrepreneurs around the country have made the mistake of trying to tap into federal dollars made available in the fight against the coronavirus by “completely abandoning their business in search of something trending.”
An idea made for the moment
Ad Astra Medical Devices, on the other hand, is the result of a product developed upon request that officials soon recognized has a market far beyond the initial target. In response to the pressing need for medical equipment in the treatment of COVID-19 patients, the National Institute for Aviation Research and Wichita State University teamed up to engineer a disposable stethoscope. They manufactured more than 3,000 of the new stethoscopes.
“We started getting feedback from the nurses and front-liners who were using them telling us, ‘Hey, this is better than what we were able to get our hands on before the pandemic,’” says Rob Gerlach, executive director of Tech Transfer and Commercialization at Wichita State. “That's when we started scratching our heads a little bit: ‘Wait a minute. That's kind of interesting.’”
In response to that feedback, Wichita State partnered with Airbus and created a new design with fewer parts but with acoustics that are at least as good, if not better, than the original. Ad Astra Medical Devices was established, and Ben Wolff was brought on board to ramp up production for wider use. The stethoscopes are being produced at a factory in McPherson.
As effective as the stethoscopes produced with a 3D printer were, they could not be mass produced with that process. It takes 10 hours to produce a single stethoscope on a 3D printer, Wolff says. Using an injection molding process speeds up production a thousand-fold, he says.
“Something that we've picked up so far is that there's a lot of first responders and paramedics that maybe this is a really good product for them," Wolff says. "Because it's so light and it's disposable, if something happens to it, it's not that big of a deal.”
Ad Astra used federal COVID-19 response money distributed via a Department of Commerce PPE grant to pay the substantial costs of starting up production, Wolff says. Without it, the venture wouldn’t have gotten off the ground.
“There's a lot of work yet to be done,” Wolff says. “But we just feel very fortunate that we can play a part in trying to help the community with these stethoscopes, which we believe are superior to what's currently available.”
The pandemic hasn’t just forced people to think outside the box, says Jeremy Hill, director of the Center for Economic Development and Business Research at Wichita State. In many ways, he says, it has destroyed the box.
“The Great Recession was cyclical,” Hill says. “This one is going to be structural. We’ve destroyed several industries, destroyed certain practices that will never come back” because of how things had to be done during the pandemic.
“The only way to be successful is to be dynamic going forward,” Hill says.
That requires leaders willing to embrace entirely new ways of doing things, Hill and others say. QuickHire is an example of innovation helping create a structural change in an industry.
Josh Oeding is president and chief executive officer of NXTUS, a nexus for entrepreneurs, investors, corporate partners and the community in Wichita. The traditional path for entrepreneurs, he says, used to be to develop a product, open a physical storefront, hire employees and work to make the venture successful.
“With the way e-technology has changed, there’s very different ways people are entrepreneurs,” Oeding says. “They’re starting and growing ventures that don’t have those traditional metrics.”
They’re using platforms such as Shopify or Etsy and producing on demand, using social media to promote their products.
A good product for a bad economy
One local example that has blossomed during the pandemic is Greatness Vodka, a corn-based flavored vodka developed by Troy Brooks of Wichita. Brooks was celebrating his birthday in San Diego a couple of years ago, sipping a French vanilla vodka he’d been eager to try, and he found himself thinking, “This would be really cool if I had my own brand.”
He came home and dove into research, where he quickly discovered how much he didn’t know. “I didn't really know what I was doing,” Brooks says. “I didn't know what I was looking for. I (had) never done any of this before. It just became something I would research at night and work really hard at throughout the day.”
At the time, he was selling cars for a living and saving every dollar he could toward his dream venture. His research led him down a path driven by what he didn’t like in vodka. So many flavored vodkas he had tried “tasted like medicine,” he says. He also wanted a vodka with a smooth finish.
“Most people don’t like vodka because of the bite afterwards that it has,” Brooks says. “I knew if we want to be successful, we need to create something that tastes good as well as it needs to be smooth.”
He tinkered with recipes for the vodka until he found a combination of peach and cherry that left him saying “This is it.” A buddy who owns a distillery in Florida agreed to produce it for him.
And then the pandemic hit, just as production was about to begin. Brooks wrestled with whether to move forward, because he was an unknown pitching a brand-new product to distributors. Without distributors, you can’t get the product to bars, restaurants and liquor stores.
“Bars are closing down,” Brooks says. “Clubs are closing down. Restaurants aren't the same. They have to really take a chance on you.”
Brooks decided to push ahead anyway. His research showed that companies that stayed aggressive during the Great Depression emerged stronger. It showed him something else that was even more important.
“In a great economy, the wine and spirits industry does great,” he says. “But in a bad economy, it flourishes.” (Alcohol sales have surged by more than 20% during the pandemic, according to Nielsen market data.)
It’s a persistent pattern: Hard liquor sales soared in the recessions of 2001 and 2008, even as beer sales stayed flat or fell off, the trade publication Craft Brewing Business reported.
Brooks found a distributor, began an intense promotional campaign on social media, and sold 1,000 bottles in the first week. The second shipment was sold out before it arrived and most of the third shipment was sold out prior to arrival as well – in Wichita alone. Demand continues to be strong and Brooks is looking to expand into other markets.
“It's been growing really, really, really fast,” Brooks says.
For now, the goal is to continue to grow demand and develop additional flavors. But the response tells Brooks he was right to listen to his instincts and take the risk despite the upheaval created by the pandemic.
While entrepreneurship isn’t a path for everyone during a pandemic-disrupted economy, it’s certainly a great chance for some to meet a need and position themselves to prosper financially.
When she reflects on entrepreneurs that are doing well despite launching during the pandemic, Long says, a common theme emerges.
“People do business with people,” she says. “That's where I think companies are also standing out and being highlighted during this pandemic time, because you have founders who are resilient, and they're just not going to let the downturn crash them.”
This story was originally published by The (KLC) Journal and is published here as part of the Wichita Journalism Collaborative, a partnership of seven media companies, including KMUW.