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New businesses stopped in their tracks by COVID-19 struggling to ride out crisis

Author of the article:

Amanda Stephenson  •  Calgary Herald

Publishing date: May 24, 2020    on-line ;     May 25, 2020  printed 

31 minutes ago  •  6 minute read

Flux Fitness co-founders Ingo Ionesco and Tina Chin were photographed in their Calgary business on Thursday, May 21, 2020. The company had the unfortunate timing to launch just as the COVID-19 pandemic began to close down businesses in March. GAVIN YOUNG/POSTMEDIA

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Flux Fitness Studio had been open for a grand total of 13 days before COVID-19 shut it down.

For those 13 days, co-owner Tina Chin experienced what it was like to live her dream. Now, the first-time entrepreneur is caught in a nightmare, not knowing when she will be able to reopen, whether she’ll have any customers to reopen for, or whether her entire personal and financial investment will be crushed under the weight of the pandemic crisis.

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“I really hate thinking about it, honestly,” Chin said. “It’s really scary to think about what I’ve risked. It is a huge amount of my life savings that I’ve put into it, and I continue to use these funds to see this business through. It makes me sick to my stomach.”

Calgary’s small business community is reeling from the effects of COVID-19 and a series of strict public health orders that have been in place for more than two months. While Alberta leads the country in the percentage of small businesses (47 per cent) that have fully reopened as provincial economies relaunch, in Calgary — which has seen a higher number of COVID-19 cases — restaurants, pubs and hair salons are prohibited from reopening until Monday. Even then, they must abide by new restrictions on capacity.

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Many other businesses, including fitness studios, will not be allowed to open until Phase 3 of the provincial relaunch plan, for which a date has not yet been set. And with no inkling of when customer demand will return, most entrepreneurs are feeling stressed about the future. A recent survey by the Canadian Federation of Independent Business suggested half of the country’s small businesses will not be able to pay June rent, while 22 per cent fear eviction.

‘Particularly acute’ risks

But the near-universal stress and strain are perhaps being felt most by new businesses. According to the City of Calgary, there were 1,321 new business licences awarded between Jan. 1 and March 31, 2020. Many of these businesses, including Flux Fitness, barely had the chance to get off the ground before shutting down in the face of an unprecedented global pandemic and a series of strict public health orders.

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“It really sucked the wind out of our sails having to shut down,” Chin said. “We had an open house the Sunday before we opened and it was so busy and so much fun. So I was really optimistic and thought we were off to a good start. Shutting down was heartbreaking.”

Flux Fitness co-founders Ingo Ionesco and Tina Chin were photographed in their Calgary business on Thursday, May 21, 2020. /Gavin Young/Postmedia

For any business, the repercussions of an unanticipated shutdown can be severe. Studies across North America have shown businesses forced to temporarily close because of a natural disaster or other catastrophic event have a lower chance of succeeding in the long run, and up to 40 per cent of those that are affected never reopen at all.

In Calgary, following the 2013 flood that forced the closure of 4,000 businesses, only one to two per cent of those affected never reopened. Scott Crockatt, vice-president of the Business Council of Alberta, said the positive outcome was likely due in part to an aggressive “YYC is Open” marketing campaign that encouraged Calgarians to get out and support flood-affected neighbourhoods when the waters receded.

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This time, however, the continued threat of the virus makes a similar campaign impossible. It’s unclear when, or if, consumer confidence will return, and that means the risk of a temporary business closure turning into a permanent business failure is real.

“I think the risk is particularly acute for new businesses,” Crockatt said. “The days and weeks just count much more in the earlier days of a business. Probably one of the riskiest moments for any business is that moment when you’ve invested all of your capital in, and now you’re just turning around to try to make money on it. You’ve sent everything out the door that you can, and if nothing comes back in, you can be in really tough shape.”

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At Curious Boutique, a hair salon in West Springs that opened for the first time in December, owners Katerina Tsakalakis and Tony Allocca said shutting down in mid-March due to COVID-19 was like “getting the rug ripped out” from under them.

Tony Allocca and Katerina Tsakalakis, owners and operators at Curious Hair Boutique, on Thursday, May 21, 2020. AZIN GHAFFARI/Azin Ghaffari/Postmedia

“We were just starting to get more exposure . . . and then all of a sudden, boom, we had to close,” Tsakalakis said. “You know, it was extremely stressful just starting up. There were always delays, issues with contractors and stuff like that. We were actually supposed to open in September, and then we ended up opening in December, and then this happened in March. So you feel like you just can’t catch a break.”

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Tsakalakis, who is planning to reopen Monday, said she is fortunate that her landlord has been understanding and offered a rent deferral. Clients, too, have been sympathetic, offering to prepay for haircuts and ordering styling products for curbside pickup.

‘All we can do is make the best of it’

Laine Fedrau and her partner Darren Gustafson say they, too, have benefited from a kind-hearted landlord and a supportive clientele. The couple opened Vegan Street Kitchen & Lounge in a historic house on 7th Street S.W. in mid-February, and temporarily closed to the public due to COVID-19 on March 19.

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“It helps that we’re a niche business. Vegans don’t have a lot of options for takeout these days, so we’ve got a bit of a loyal following,” Fedrau said. “But it still would have been nice to build a solid foundation. We were still trying to figure out everything before things shut down. We were kind of stopped in our tracks when we were still smoothing out all of the kinks.”

Fedrau said she and her partner — who operated a vegan food truck before taking the plunge to open a dine-in restaurant — put all they had into the new venue and don’t have the financial cushion that older, more established businesses have.

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“It’s been scary,” she said. “We were on such a good trajectory with that first month, and now it’s going to take a long while before we get back up to 100 per cent capacity with reservations fully booked. But you can never predict these things, and we are living this situation along with everyone else, so all we can do is make the best of it.”

As dire as the situation might seem for some, Crockatt said small businesses have some advantages that more established businesses do not. Without a time-tested business model in place, new businesses can sometimes be nimbler than their larger competitors — pivoting quickly to online or offering new products and services in response to the pandemic.

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“There’s also been a bit of a democratization of marketing,” Crockatt said. “Almost all marketing has moved online, a lot of the selling has moved online, and that has actually decreased some of the barriers to newer companies compared to those who had really big established marketing programs.”

At Flux Fitness, Chin and her partner, Ingo Ionescu, are worried that even when fitness studios do get the green light to reopen, they may not be able to make it work if people still aren’t comfortable with working out in public places.

“We may only have one person coming in for our classes, but all the instructors will still need to be paid, rent will still be due,” Chin said. “So we’re in the difficult situation where it may be even more damaging financially to reopen.”

Still, Chin said there is enough in the business’ contingency fund to ride out a couple more months. And even though she has days where she is tempted to throw in the towel, she’s decided to hang onto her dream for as long as she can.

“I’m very grateful we’re not in a situation where we have to close just yet,” Chin said. “We still have a little fight in us.”

astephenson@postmedia.com

Twitter: @AmandaMsteph