PPP Recipients Are Failing

Doctors Are Giving Up. Despite Losing Billions, Southwest Is Expanding. And Do You Hire to Fill a Need or to Bring on a Good Person?

THE 21 HATS PODCAST

Episode 40: We’ll Find Something for Them to Do: Starting with a conversation about crucial hires Dana White and Laura Zander have made recently—an operations manager for Dana, a salesperson for Laura—we found ourselves exploring some of the great unresolved debates of entrepreneurship this week. For example, which comes first when hiring: filling specific needs or finding places for good people? With sales people, do you motivate by paying commission or build a team by paying salary? And in finance, do you bootstrap to maintain control or raise capital to grow faster? Dana and Laura tell us what’s been working for them.

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GOVERNMENT SUPPORT

Hundreds of companies that got PPP loans have failed: “Many of the companies, which employ a total of about 23,400 workers, say the funds from the Paycheck Protection Program weren’t enough to keep them going as the coronavirus and lack of additional stimulus payments weighed on their businesses. The total number of companies that failed despite getting PPP loans is likely far higher. The Journal only analyzed the big borrowers from the program, which accounted for about half of the overall loans though only about 13.5 percent of the total participants. And many small businesses simply liquidate when they run out of cash rather than file for bankruptcy.”

  • “Keith Clark ran Waterford Receptions, a popular wedding and events venue operator with two locations in Northern Virginia, for 20 years. He is closing for good, losing his business as well as his house because of the pandemic.”

  • “Revenue this year fell to $567,000, down 90% from $6 million in 2019, according to court documents. Mr. Clark considered filing for chapter 11 bankruptcy under the Small Business Reorganization Act, which makes it more advantageous for firms to quickly restructure operations and shed debt, but as Covid-19 cases continued to climb over the summer, it became harder to envision a reopening.”

  • “Instead, Mr. Clark put Waterford into chapter 7 bankruptcy to repay creditors by selling the company’s assets. Because he personally guaranteed a $1.5 million loan from the Small Business Administration last year, Mr. Clark, 68, expects to file for personal bankruptcy and auction off his home to pay creditors.” READ MORE 

Struggling businesses can apply for additional EIDL support: “If your business is still struggling from Covid-19 and you have used or are close to using up your PPP and EIDL funds, you can apply for and request an increase to your EIDL loan. You can apply for up to six months of working capital. If you would like to request an increase to your EIDL amount, you need to send an email that states your need to pdcrecons@sba.gov with the word ‘INCREASE’ in the subject line.” READ MORE

OPPORTUNITIES

Despite losing more than $2 billion this year, Southwest Airlines is expandinginto new markets: “The airline is adding four more cities to its network this year and announced plans for another six in 2021. And it’s looking for more. It hasn’t added airports this quickly since integrating with AirTran Holdings, which it bought in 2011. ‘It sounds risky to go open a bunch of new cities, but the alternative is worse,’ says Andrew Watterson, Southwest’s chief commercial officer. ‘You could wait til Covid is over. But that’s far too long.’ Through its history, Southwest has leapt at opportunities to encroach on rivals’ territory when they were struggling. If successful this time, it would be a prime example how some U.S. companies, taking advantage of the carnage around them, can come out of crises stronger.”

  • “Capt. Jon Weaks, head of the union representing Southwest’s pilots, which is fighting pay cuts, described the expansion strategy as ‘predatory and opportunistic—which we like.’” READ MORE

The surge in online deliveries has recharged the market for recycled paper: “Junk mail and discarded delivery boxes have turned into a hot commodity as the paper industry uses them as a substitute for recycled office paper, which became scarce as people work from home. That is a sharp turnaround from two years ago, when the market for recycled catalogs, boxes and newspapers collapsed after China toughened its standards for waste paper imports. Now, U.S. paper and cardboard mills are figuring out how to turn that trash into new toilet paper, coffee cups, paper towels and cardboard boxes. And they have more material to work with as people order more food and packages to their homes during the coronavirus.”

  • “Dallas-based Texas Recycling, which collects paper from commercial and industrial users and sells it to paper mills, is looking for more cardboard to cover the 40 percent drop this year in its shredding business for office paper.”

  • “‘The demand for corrugated is going to pick up,’ said co-owner Joel Litman. ‘More mills are coming on line.’” READ MORE

Real Estate transactions are going virtual: “Digital products designed to streamline the home-buying process are not new, but coronavirus restrictions have enabled some of them to finally gain a foothold. Eight months into the pandemic, many of New York’s real estate professionals believe that some of these tech solutions may be here to stay as buyers and sellers have become more comfortable with virtual transactions. While some clients continue to prefer in-person closings, others are giving their lawyers power of attorney to sign the final documents for them or they’re executing closings on virtual platforms like DocuSign. “

  • “Between the second and third quarters of this year, the number of sales listings with 3-D tours increased by 110 percent.”

  • “To streamline workflow, Freedom Mortgage uses a digital verification service called AccountChek to review the borrower’s income and employment information.”

  • “A platform like DocuWalk, which uses blockchain technology to record transactions through a decentralized network, makes it a quicker, more auditable and secure process.” READ MORE

THE COVID ECONOMY

With cases exploding, companies are turning to tracking devices: “The powerful new surveillance systems, wearable devices that continuously monitor users, are the latest high-tech gadgets to emerge in the battle to hinder the coronavirus. Some sports leagues, factories and nursing homes have already deployed them. Resorts are rushing to adopt them. A few schools are preparing to try them. And the conference industry is eyeing them as a potential tool to help reopen convention centers.”

  • “In Rochester, Mich., Oakland University is preparing to hand out wearable devices to students that log skin temperature once a minute — or more than 1,400 times per day — in the hopes of pinpointing early signs of the coronavirus.”

  • “In Plano, Texas, employees at the headquarters of Rent-A-Center recently started wearing proximity detectors that log their close contacts with one another and can be used to alert them to possible virus exposure.” READ MORE

Companies are hesitating to reopen offices because of the potential legal exposure: “As Covid-19 cases surge in nearly every state, offices around the country have stayed largely closed or only partially reopened, and not just because of health concerns. For white-collar workplaces, the pandemic has required compliance with the kind of complex workplace-safety regulations that, until recently, applied more to industrial settings than to offices. Office spaces that fail to comply with the requirements face a liability threat few had to think about before the pandemic, employment lawyers say.”

  • “Such regulations range from the general—including the need to wear masks and ensure social distancing—to the more granular. New York state’s guidance for office reopenings, for example, spans more than 100 bullet points and covers everything from the kinds of amenities that should be installed, such as touch-free water fountains, to the kinds of health records that can be maintained.”

  • “‘Now, everywhere is a potentially hazardous environment,’ said Harris Mufson, an employment lawyer at Proskauer Rose.” READ MORE

MEDICAL PRACTICES

Doctors are giving up: “Thousands of medical practices have closed during the pandemic, according to a July survey of 3,500 doctors by the Physicians Foundation, a nonprofit group. About 8 percent of the doctors reported closing their offices in recent months, which the foundation estimated could equal some 16,000 practices. Another 4 percent said they planned to shutter within the next year. Other doctors and nurses are retiring early or leaving their jobs. Some worry about their own health because of age or a medical condition that puts them at high risk. Others stopped practicing during the worst of the outbreaks and don’t have the energy to start again.”

  • “The clinicians also painted a grim picture of their lives, as the pandemic enters a newly robust phase with record case counts in the United States.” READ MORE

SPONSORED

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CONSUMER GOODS

P&G tried to get entrepreneurial with Microban 24: “It is no surprise that the Covid-19 pandemic set off a surge in cleaning. What is surprising is that P&G had launched the niche product at all. The consumer-products giant, famous for its meticulous market research and layers of managers, set out to launch Microban 24 with a team of five employees and released it without relying on an army of test subjects to chart every major decision. P&G’s factories don’t even produce Microban 24. It is made by outside contractors. The blue spray bottle is a sign of how much the 183-year-old company revamped the way it runs its business and develops products. Gone is a complex management structure that sometimes put brand managers and country managers at odds. Gone too is the strictly centralized product development that unilaterally controlled which ideas got approved and how they were marketed.” READ MORE

APPAREL

The tradition-bound tailors of Savile Row are struggling: “They typically spend nearly as much time flying around the world, fitting clients, as they do cutting and sewing. For many houses, 70 percent of revenue comes from these overseas trunk shows. With tailors stuck in their shops, and London tourism in free-fall, the most famous men’s clothing street in the world is gasping for life. ‘Our company lived through the Boer War, World War I, the Depression, World War II, recessions,’ said Simon Cundey, the managing director of Henry Poole & Co., which traces its roots to 1819. ‘But through all of these crises, we could visit our customers and they could visit us. This is a tragedy on a different scale.’”

  • “Covid has turned the Row’s challenges into a brush with the abyss. Even dandies are now trundling around their homes in Lululemon.”

  • “One morning in early November, a tailor on Savile Row took the measurements of a client 5,500 miles away with the help of a robot.” READ MORE

-- Loren Feldman (lfeldman@21hats.com)