COVID-19 And Montana's Entrepreneurs, Part Two: Keeping The Wheels On
Between March 15 and April 10, 2020, more than 64,000 Montanans lost their jobs and filed for unemployment benefits. In mid-April, Can Do host Arnie Sherman caught up with previous guests to learn how government stimulus programs and breathtaking shifts in the business environment are driving their decisions as employers and entrepreneurs. In Part Two of this two-part episode, you'll get an update from three Montana business owners in the fields of trucking, travel and dining.
Today on Can Do: Lessons From Savvy Montana Entrepreneurs, Arnie checks in with Walt Muralt, owner of several Missoula businesses, including Muralt’s Travel Plaza; Drake Doepke, owner of SakeTome Sushi in Missoula and Bigfork and the Michi Ramen Bar in Missoula; and Toby O'Rourke, president and CEO of KOA in Billings.
Walt Muralt owns Muralt's Travel Plaza, its associated businesses, and several Missoula hotels, restaurants and casinos. Given the long bear market, he's been prepared for an economic downturn, but "absolutely nothing like this. Who could predict anything like this?"
"A lot of my businesses are seasonal, cyclical, based on the nicer weather in Montana. Compared to last year, it's pretty drastic how much opportunity cost we're losing right now ... we've laid off maybe 30 to 35 people total."
Did Muralt apply for the Payroll Protection Program (PPP) and other stimulus programs offered by the Small Business Administration? "Absolutely, I mean, all our companies are strong, I'm strong going into this financially, but you never know what's coming down, how long it's going to last. So absolutely, every business, we applied for the PPP loan, have done all that process, and we'll be getting those funded here not too long, just as more of a cautionary thing than anything."
Muralt weathered the 2008 economic crash. What applicable lessons did he learn? "Never get yourself too leveraged up - and that was my major mistake back then ... I mean, this is a great lesson that'll probably live on for anybody that's 25 or older, and especially if you're in business and have risk out there, that this lesson will reverberate throughout our country and our history: to be more financially, uh, sound and stable, and not just always living paycheck to paycheck. Especially if you're in business, you've got to be able to sustain, you know, a good six months or a year downturn, and know what your cash reserves are: either have them or know that you have access to them."
Drake Doepke's three restaurants are operating with skeleton crews, for curbside-pickup takeout only. How's businesss? "There's really no barometer for that, because we've never just had that business. It is quite a bit less than, obviously, the dine-in customers, but it is something. It's worth doing, is the point."
Doepke's PPP loan application was processed and approved promptly by a local bank, but in the case of the Economic Injury Disaster Loan (EIDL) application he filed directly with the SBA: "I've heard absolutely nothing from that."
"What I would say to everyone who has a restaurant, regardless of it's big or small, is kind of: adapt or die. Whatever you can, do it - as long as you're staying, you know, in the health and safety guidelines of the country. But yeah, whatever it takes right now to keep some cash flow coming in, to keep as much staff as you possibly can employed so your turnover rate isn't high: that would be my advice to anyone that is in this situation at this point is, do what you can. And if it means doing something that you're not used to or not comfortable with, do it, give it a shot. What do you got to lose, at this point?"
Since March 17, Kampgrounds of America's (KOA) Billings staff has been managing the company's marketing, franchise services and corporate governance from their homes. They've had over 100,000 cancellations since early March.
The COVID-19 stay-at-home orders in the U.S. and Canada vary from state to state and province to province -- including what qualifies as an "essential" business. President and CEO Toby O'Rourke explains the effect on KOA's franchisees and customers. "There's a lot of full-time RVers out there that need a place to stay. With campgrounds closed, these people are displaced. And also, you know, we serve traveling nurses, traveling medical and utility workers, various things that are very essential at this time, and uh, we're just trying to make sure that people that need to be traveling at this time have a place to stay."
When it comes to forecasting the company's 2020 operating plan, O'Rourke finds herself in a very new normal. Here's how it usually works:
"We're building our budgets in October, with a goal to get those done by the end of December, and then we stick to that operating plan, you know, with our budgets around all of our business units for the full year. Sometimes we'll update that mid-year, you know: if we've had a really good year of business, we might re-forecast out what our operating income is going to look like. But we haven't had to do anything beyond that, at least in my time at KOA."
But as of April, she's reforecasting the plan and budget every two weeks.
"So moving to an every-two-week adjustment is a big change for us. But as an example, we updated our budgets a couple of weeks ago and it's showing an 85% reduction in our pre-tax profit for the year, from our original plan in January. It's quite dramatic. So we're using that now as a baseline for us to make decisions on what cuts we need to make to the budget, what programs we need to adjust, and do we need to dip into our line of credit, for example, with our bank. There's a lot of decisions that redoing that forecast is allowing us to make. We're now at the two-week mark and we're updating that again this week, and we'll have another picture of what we're going to work off of. Without having done that, we'd be running blind; we wouldn't know the impact of the decisions we're making."
KOA has weathered a lot of economic storms in its 58 years. What advice does O'Rourke offer other Montana business owners?
"It's easy to plan and attack the short-term, like what's happening right now, and adjust every day, and that's the mode, you know, we were in in mid-March. Every day there was a change and we were adjusting. But quickly we realized that we had to look longer-term. And so, for us, for example, it's looking at when these stay-at-home orders are going to lift, when travel restrictions are going to change. It's understanding our day-to-day finances, and how much our business is down, and then making some assumptions about how much is business going to be down in July, in April. I think the more any business can try to forecast the impact that this crisis is going to have, the better. And that keeps people prepared.
"And I think it's very short-sighted to think that there's just going to be a switch and we're going to say, 'OK, the country's reopened, Montana's reopened, we're back to business, you know, the tourists are going to come back immediately' or, 'People are gonna shop like they were before.' I don't think that that's the case, you know. I think that things are going to come in stages, and there's going to be different phases of this reopening, not only geographically across the country but even within our own state, there's just going to be different levels of how we return to some semblance of normalcy, and so business is going to be impacted ... I don't think things will be back to normal all year.
"Decisions you're making right now could mean, you know, cash-flow positive or cash-flow negative come December."
Production support for “Can Do: Lessons From Savvy Montana Entrepreneurs” comes from the Dennis and Phyllis Washington Foundation, dedicated to investing in people to improve the quality of their lives. And from the Greater Montana Foundation, encouraging communication on issues, trends and values of importance to Montanans. And from Blackfoot, providing communications solutions for Montana businesses. Plus opportunities like C2M Beta, an innovation lab aimed at helping startups thrive. C2Mbeta.com.