Startup mentality is saving small businesses

Small players are using startups' 'fail fast' approach to survive the Covid-19 fallout.

IN early February, things were looking good for Practice San Francisco, a centre offering individual psychotherapy and classes for children and adults that promote physical and mental wellbeing. Business was so good that owner Nina Kaiser, a psychologist, had just renovated and moved into a bigger space with the goal of doubling revenue.

Then the coronavirus pandemic hit. In early March, she moved all her classes and counselling services online. Fairly quickly, however, video fatigue set in.

"After a few weeks, we saw a big downturn in attendance across all our programmes, even psychotherapy," she said. Thus began a period of "endless pivoting and troubleshooting".

Like many other small businesses, Practice San Francisco, which has been around for three years, has essentially become a startup again, employing a strategy similar to the "fail fast" approach well known in startup culture: A change is made to some aspect of the business and if it works, it sticks, but if it fails, data is collected and something else is tried.

"There has been a lot of flying by the seat of your pants," said Dr Kaiser. "We see what doesn't work, where we run into trouble, and we course-correct. It's this constant, iterative process."

That process is crucial right now for small businesses, whose numbers dropped by 22 per cent, or 3.3 million, between February and April, the National Bureau of Economic Research showed.

Dr Kaiser changed her class model from drop-in to series-based, keeping a cohort of students together for an entire series. Attendance went from one or two people per class to between eight and 15.

Once it became clear the pandemic would not be short, demand for remote psychotherapy began increasing. Dr Kaiser projects that 2020 revenue will be up 50 per cent.

The Greater Knead, a gluten- and allergen-free bagel company in Bensalem, Pennsylvania, had also been poised for a good year this year. The eight-year-old company, whose bagels are sold in bagel shops and supermarkets, had finally turned a profit, with just under US$1 million in revenue. In February, sales were up 20 per cent, and the business was on track to have its best year yet, said the owner, Michelle Carfagno.

But in early March, sales dropped steeply as stores closed and customers stayed home. Supermarkets began running out of Greater Knead bagels and did not reorder, focusing instead on stocking items like toilet paper and cleaning supplies.

By May, revenue was down 60 per cent. A small bright spot, however, was its online sales, which were slowly increasing.

Ms Carfagno capitalised on that and invested in social media advertising - something she had not done before - to drive traffic to her website.

Soon after, she worked with a West Coast fulfilment centre, enabling her to ship nationwide, something she had not considered before because of the high cost of shipping frozen bagels. It turned out to be a smart move. By September, online sales were up 250 per cent.

"We are so much more efficient now," she said. "And because we have consumers buying directly from us, it costs much less to launch a new product."

Anthony Casalena, founder and chief executive of Squarespace, a Web site building and hosting company with more than 2.5 million customers, the majority of which are small businesses, sees an increasing willingness among these businesses to try new strategies, including fostering a more direct online relationship with their customers.

"Companies creating new Web sites on our platform, and e-mail marketing campaigns, are at an all-time high," he said. "And e-commerce sales on our platform have doubled."

Before the pandemic, Seattle-based Snapbar, which created custom selfie stations and photo booths for events, was the kind of company that did business over the phone and in person. Its staff members in five cities would set up "luxe photo booths" at events like weddings and charitable galas.

Snapbar also shipped "selfie stands" - easy-to-set-up photo booths that use an LED light and an iPad - for use at sporting and corporate events. At the start of 2020, the eight-year-old company was on track to more than double its 2019 revenue, which was US$3.2 million.

But by mid-March, Snapbar had lost all its business, and operating remotely was not an option. During a night of panicked insomnia, Sam Eitzen, co-founder and chief executive, came up with 50 ideas for "pivots, changes, adaptations and reinventions".

Eventually he and his brother and co-founder, Joe Eitzen, settled on Keep Your City Smiling, a direct-to-consumer site that would sell gift boxes filled with items from local small businesses in a particular city.

In its first three months, Keep Your City Smiling earned US$500,000 in revenue, with 50 to 60 per cent going back to the small businesses whose products were included in each box. But as the pandemic wore on, orders plummeted. Mr Eitzen shifted focus again - to corporate gift giving. That enabled Keep Your City Smiling to stay afloat, but did not generate enough revenue to sustain Snapbar.

During this period, however, Snapbar's director of engineering had been intensely working on developing a product he believed could save the company: a virtual photo booth.

"We create a custom-designed and branded photo booth that lives in a link on the event's site," Sam Eitzen said. "So an attendee is still consuming information, but they can also engage in another way, taking a selfie at the event and posting it on Instagram."

This pivot transformed Snapbar into a tech company. The virtual photo booth is now the fastest-growing product it has ever had. And revenue - after the company nearly went under - is projected to be US$2 million this year. NYTIMES