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October 14, 2020

5 Tips for Small Business During Uncertain Times

When my wife Candace Nelson and I founded Sprinkles Cupcakes in 2005, the world was sunshine and rainbows for small businesses.

When my wife Candace Nelson and I founded Sprinkles Cupcakes in 2005, the world was sunshine and rainbows for small businesses. The day we opened, there was a line out the front door, and we sold out of every flavor within a few hours. We created a new vertical, the cupcake bakery, that became a global phenomenon when we landed on “Oprah” only 8 months after opening. We went on to create the world’s first cupcake ATM, another overnight success.

After selling the Sprinkles brand to a private equity firm in 2012, Candace and I set our sights on new horizons: Pizzana, a Neo-Neapolitan pizzeria concept we debuted in Los Angeles in 2017; Play 2 Progress, a kids playspace that launched the same year; and Willy California. Buoyed by our experience with the rapid expansion of Sprinkles, as we entered 2020, we were on the path to scale all three concepts under CN2 Ventures, our new venture capital fund focused on early stage consumer-based businesses.

When we scaled Sprinkles to 20 retail locations, we faced the manageable realities of a growing start-up: construction delays, unexpected expenses, and bringing in generators to bake cupcakes through sudden power outages.

We learned to anticipate, and be ready to act and adjust.

But no one could have anticipated the immediate devastation and our current reality after COVID-19 hit in March. Like everyone, we found ourselves stunned into a strange torpor. How would our three very different fledgling businesses survive?

I launched Willy California because I couldn’t find any reasonable-looking, comfortable clothes that would transition from home to lunch meetings to coaching kids’ sports teams.

Enter polos, hoodies, and, for the surfer-preneurs out there, board shorts and rash guards.

Candace and I opened Play 2 Progress because our toddler son was referred to an occupational therapist, and we realized the value of developmental play for all kids with a focus on motor skills and messy play.

That same year saw the arrival of Pizzana after we fortuitously met Naples-born master pizzaiolo Daniele Uditi and fell in love with his pizza. A glowing Los Angeles Times review and Michelin Bib Gourmand recognition made Pizzana an instant hit within the LA food scene, and brought a slew of star-studded investors including Jay-Z, James Corden and Russell Westbrook.

They all saw the potential of Pizzana’s Neo-Neapolitan pies from Uditi and his signature “slow dough.”

And slow dough was exactly what we tasted in March. In February, we had record sales for all three businesses and had just announced CN2 Ventures.

We had all the momentum in the world and then everything shut down, The stock market plunged and our interested VCs disappeared to do damage control on their own portfolios

Sprinkles was a hit the day it opened, but we’d been plugging along with these three concepts for a couple of years before finding them on an accelerated trajectory. The businesses had customer and critical acclaim and were just stepping into profitability and awareness.

This was going to be our year—and then it wasn’t.

As an entrepreneur, your whole life is built on a dream. To see the lights go out indefinitely is soul-crushing.

There was and is no playbook for this. So, we’ve found ourselves going back to business basics, assessing the cash position, the employee needs, and the sales potential of each company. While we are still weathering the storm and financial crisis, here are the moves we’ve made to stay afloat:

1. Examine marketing strategy:

Online advertising is the lifeblood of any nascent direct to consumer clothing brand, but with our first profitable quarter looking much more distant on the horizon, we moved quickly to preserve cash reserves and reduced our online advertising budget for Willy California by 50%. Digital advertising remains an invaluable part of the equation, but during times of economic strain, consumer brands can also focus on internal strategies for lead generation, creating compelling content and product giveaways to increase the subscriber database to market to directly.

2. Pivot messaging:

As consumer spending dried up with so much economic uncertainty, we leaned into the fact that leisure clothing was still one of the few viable markets. Sweatsuits quickly became the new black and Willy California recalibrated its messaging to market its work and work out from home appeal, while also being sensitive of tone given the climate.

3. Consider virtual models

COVID-19 completely shut down Play 2 Progress gyms. As a business rooted in sensory development, physical touch was a cornerstone of our program and philosophy, but COVID forced us to go virtual. With moms at home eager to keep their kids developing in the absence of school and sports, we were able to capture 50% of our former weekly revenue within two weeks. Originally, entirely brick and mortar, Play 2 Progress has now shifted to an online and membership model which ultimately opens up our service to a national audience and may be the key to our future growth.

4. Give back to the community, and allow your customers to help:

We had to furlough our entire front-of-house staff because dine-in at Pizzana (60% of our revenue) was not allowed for the foreseeable future. And when permitted in June, the six-foot social distancing of tables was not an economically feasible option for our small restaurants. So, we reconsidered Pizzana’s model, starting a GoFundMe account early in the crisis so we could feed front-line workers at hospitals across L.A. County. This not only helps the community, but also keeps the business viable, as the restaurant makes and delivers nourishing pizzas and salads to nurses, doctors, and emergency medical staff. Plus, many of our loyal customers felt called to help out during the crisis, and this provided them with an avenue to give back while strengthening their trust in us as a business.

5. Be Nimble

Finally, we’ve learned to accept the fact that even when we plan for everything, anything could happen. The key is staying nimble and being open to new ways of operating that can open up new opportunities and connections.