Entrepreneurs defy historic crisis with mighty resolve

Colleen O'Connor was surrounded by a mess of her own making, just the way she liked it.

Across the tables of her St. Paul art studio were small frames, cups of paintbrushes and mini plastic pots filled with acrylic paint she mixed herself. She moved into the space in October 2019, thinking it would be a good place to host classes and expand a business she'd been running from her attic.

"The intention of the studio was to up my game a little bit and to prove to myself and others that I was an artist," O'Connor said.

Six months later, her hopes and ideas changed. The worst public health crisis for the United States in a century began to unfold as the coronavirus spread in early 2020.

By mid-March, government authorities ordered businesses and schools to close. The health crisis instantly became an economic one, and the hardest-hit businesses were small — stores, restaurants, bars, dry cleaners, health clubs, hair and beauty salons, contractors, consultants.

"We just took a giant step backward," said Michael Sedlacek, owner of Worker B, a Minneapolis-based business that sells skincare items, candles, honey and other products from bees.

But when the enormity of the pandemic hit, many small business owners changed plans and direction. They found ways to make money. They seized new incentives and help and worked around the pandemic's constraints.

"They've really been remarkably resilient," said Brian McDonald, director of the Minnesota district office for the U.S. Small Business Administration.

It was a time of extreme pain. In March and April 2020, Minnesota lost about 10,500 businesses, according to the state Department of Employment and Economic Development. More than 70% of those closings were of businesses employing less than 10 people, a group that accounts for 9% of the state's employment base. The difficulties were compounded by trauma and strife from the police killing of George Floyd in May 2020.

Today, federal and state data show that new business starts are rising in Minnesota and elsewhere, shaped in part by people who were pushed out of jobs since the pandemic began. Minnesota's 3 million person workforce lost 410,000 jobs in March and April 2020. It has since recovered about 70% of those jobs.

Changing directions

Just getting her studio business going when the pandemic hit, O'Connor, who is best known by her artist alias Colleen Elizabeth, saw an opportunity to sell more tactile products that customers could enjoy at home.

She started to sell puzzles of her artwork and broadened her selection of paint-by-number kits. She does all of the production and shipping of her products herself from her light-filled studio on University Avenue that she shares with a growing menagerie of plants and her miniature labradoodle, Wilson.

"I pretty much live here," O'Connor said. "I love being able to just truly use the space the way that I want."

In the days after his Gym Mpls. shut down in March 2020, personal trainer Joel Eshelman searched online for fitness gear to help his clients exercise at home. What he saw struck him: skyrocketing prices.

On a lark, he listed two used 25-pound dumbbells on Facebook Marketplace. They sold for $150 in 10 minutes and he received 40 messages about them.

He was stunned at the potential opportunity as people were willing to pay top dollar to create home gyms in the early days of pandemic. "I took that money, bought something else and sold it. I had nothing else to do," Eshelman said. "After four days, I had $1,000."

With a newborn at home, Eshelman discovered a way to survive the pandemic financially.

"It started as a joke that's turned into a pastime that created an income for my family to survive, to a business — that's part of what we do," he said.

He now works with a business partner to source equipment from China, manage a warehouse and sell a higher volume of product. He oversees the retail sales while his partner manages sales to gyms. The retail business now averages $15,000 a month, and peaked around $60,000 some months.

Lingering side effects

As 2021 nears an end, most Minnesotans are vaccinated and less concerned about the health risks of COVID-19 as they go about their routines. But businesses continue to endure new effects, including the worst inflation in 30 years and shortages of products and labor.

Nikki Hollerich and her sister Anna Hagen started their custom woodworking business, called Hagen and Oats, six years ago, and they had several stores around the Twin Cities when the pandemic struck. They considered themselves lucky that their Mall of America store was near the end of its lease.

"That lease was up in May in 2020, which was a blessing because we would never have made it at the mall without it being at full capacity," Hollerich said.

All of their locations have reopened, including at the Mall of America store just this month. Now the problem is finding workers. Bigger retailers are offering huge signing bonuses.

Meanwhile, their landlords have put the business — which makes custom wooden signs like pet portraits and lake cutouts — on shorter leases. "We can get into these malls and into these stores, but we are at their mercy," Hollerich said.

When Melissa Taylor's hair salon, the Beauty Lounge, closed during the first statewide shutdown last year, she was still settling into a new location in the Uptown area of Minneapolis. "We were really hitting our stride when we had to close," she said.

Taylor discovered new interest in her business as she reopened soon after Floyd was killed by a Minneapolis police officer. Her salon, specializing in the hair needs of people with multicultural backgrounds and curly hair, was added to lists of Black-owned businesses and calls came in from new customers.

Some new customers treated their visits as a public service. "Some people would say that explicitly," Taylor said. "I had to get over myself and take it as it came."

Today, the salon has been busier than ever. Taylor is now facing staffing and hiring challenges. She routinely seeks out freelance stylists to help customers prepare for weddings. "People just didn't respond," she said.

At the Blue Plate Restaurant Company's seven restaurants around the Twin Cities, co-owner Stephanie Shimp said they've been dealing with the workforce shortage by emphasizing health and 401(k) benefits, as well as hiring staff with no industry experience and doing more training. "In most cases, it's paid off really well," she said.

But the restaurants open later and close earlier now. The Freehouse in the North Loop of Minneapolis stopped serving breakfast Monday to Friday, opening for lunch instead. "I think condensing our hours has created a better work environment for our hourly staff and managers, both for mental health and safety," Shimp said.

Regaining confidence

Even with such challenges, people are still forming businesses. According to data from the U.S. Census, there were more than 5,500 Minnesota business applications this October, 13% more than the same time last year and about 45% more than in September 2019.

The local SBA office has also seen an increase in interest on how to start small businesses, McDonald said.

Seeing the strength of pickup and takeout during the pandemic, Sabahat "Saba" Imran decided to launch a Pakistani restaurant this summer. She called it Saba Dhaba Do, a playful combination of her nickname, South Asian "dhabas," or street vendors, and her childhood love of the Flintstones.

"I wanted to give myself a chance to work for myself," said Imran, who'd worked in pharmaceuticals before staying home with her daughters for several years.

Imran decided a ghost kitchen would be a good test run and opened in a North Minneapolis building operated by CloudKitchens called Currie Food Hall, investing $10,000 so far. She's able to stay in her kitchen while runners transport her food to delivery drivers or takeout customers.

Her regulars have turned out to be vegetarians, vegans and others who crave South Asian food. She's also tested other menus, such as a vegan burger, with some success.

With the holiday shopping season at hand, many small businesses are optimistic that the economic recovery will continue.

Nearly 30% of Twin Cities residents surveyed by professional services firm Deloitte plan to shop on Small Business Saturday, which falls on Nov. 27 this year. That's up from 21% last year. "Holiday sales can represent a breaking point [for small businesses]," said the SBA's McDonald.

O'Connor, the St. Paul artist, plans to launch adult coloring packets, virtual color theory classes and a line of paint brushes to boost her sales during the holiday season.

"I didn't realize how passionately I felt about other people being creative," she said. "I love being the provider of these moments."

Over the next few weeks, Sedlacek, of Worker B, will alternate work between its store at the Mall of America and a series of pop-up retail events around the metro.

"I think Minnesota has some of the biggest opportunities for people who make stuff," he said.