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Stories That Help You Decide If Dissolution Is Right

Updated: Jul 15, 2020

By Jigar Desai


The pandemic caused by the coronavirus has affected the country in an unprecedented manner. The unemployment rate peaked at 14.7% and over 100,000 businesses have foreclosed. Foreclosure of a business is always a difficult decision to make, as many owners have poured hours of work and dedication into a business they hoped to grow. While it is difficult, foreclosure can be an efficient way to avoid future debt and liability. When a business is drastically hemorrhaging finances, it is best to put an end to the business. We have put together personal stories of business owners across the nation to show their peers that sometimes dissolution of a business is out of their hands. We have also provided stories that demonstrate that there is still hope during these difficult times, by highlighting the unique ways businesses have changed their operations.

A 40 Year Run by EJ Cards and Gifts

The coronavirus pandemic has brought an end to many long-standing businesses that have served as an institution in their community. These closures may be out of the owner’s hands, despite the best efforts of the owner. This is highlighted by Valarie and Alan Wornian, owners of EJ Cards and Gifts of Flushing, New York. EJ Cards and Gifts has been serving their community in the same location for over 40 years. However, they have experienced that without a steady flow of income, a business’ financial commitments can add up to an insurmountable amount. These commitments include rent, insurance, employee pay, and others.

The Wornians explored different options through the Payroll Protection Payments, Small Business Administration and the Small Business Service Loans. The Payroll Protection Program is a loan designed by the Small Business Administration that provides an incentive for business owners to keep their employees on the payroll by offering a loan to pay salary costs. The payroll protection loan will be forgiven if the small business keeps the employees for eight weeks and the money goes towards payroll, rent, mortgage interest, or utilities. This is a helpful resource for some owners as these are a majority of their costs for their businesses. The SBA provides more information here, as well as various funding options here. Unfortunately, these options were not viable for the Worian’s business. They have also negotiated with their landlord to have rent deferral where they pay a partial payment and defer the rest for a future time. Harvard Business Review has provided a guide on how to negotiate a rent restructuring.

The business operated in a state with a shelter-in-place order, so they tried to pivot themselves into an essential business role. They made their case to remain open by offering the sale of hand sanitizer, masks and bandanas. Despite these efforts, they were denied the right to open. This is where the lack of future income and the collection of costs began to take their toll. The Wornians were heavily invested in their variable costs in the form of the products they were offering. They had Easter and St. Patrick’s Day merchandise collecting dust on the shelves, while also storing future products that they were planning on selling before the pandemic hit. The Wornians claimed that in the past, the spring season was their most profitable, so they usually order more products accordingly. Unfortunately, the debt created by these products still need be paid for, even if the Wornians had not sold any of them. This debt is what, like many businesses now, forced the Wornians out of business.

Bettina Stern of Chaia Taco

Bettina Stern is the owner of a restaurant in Washington, DC. Her vision was to provide high-quality food to customers with the ease and convenience of a casual restaurant. Bettina believed that her food should made from fresh-organic ingredients. This “farm-to-taco” concept proved to be one of the main reasons why customers order from her restaurant despite the pandemic.

Bettina was no different from everyone else in regard to the effects of COVID-19, as initially, she experienced an 80% decrease in sales during the shelter-in-place. She was facing possible foreclosure as her debts quickly added up without her regular income. She was in unchartered territory as she was forced to close her regular in-dining service. However, Bettina thought quickly on her feet and pivoted her offerings. Creating a reliable stream of income, while cutting costs, is an effective way to combat the financial effects of the pandemic. Most businesses can expect to experience a reduction in profits, similar to Bettina, but a steady flow of sales can allow a business to keep the lights on. Bettina started to focus on pick-up, delivery and take-out. She thought about the restrictions placed on her and thought of options she could offer around the restrictions. By offering these non-traditional options, Bettina was able to cut down the number of employees working during a shift, thus cutting down her costs. The restaurant was staffed with two employees at a time, far less than their normal dining service. One employee operating the front-of-house and one operating the kitchen. The easy function of preparing the delivery order and the lowered demand for food can be done by one employee each. To cut further costs, Bettina limited her operating hours and adopted a pared-down menu. This lowered Bettina’s variable costs as she only ordered food and ingredients she knew she would use. She was able to maximize the usage of raw ingredients she spent money on, not allowing anything go to waste.

Bettina was able to sustain her business through these times due to her leadership, risk-taking, and flexibility. She has been well-praised in her community due to her involvement of providing meals for those operating on the front lines of the virus. The commitment to fresh and high-quality food and her charity to the community have encouraged customers to return to her restaurant. She has also taken great care of her staff, who have responded accordingly. Bettina has managed to retain her entire trained staff by providing them the necessary shifts they need. From a business standpoint, this has benefitted her, as Bettina does not need to spend the time and money to hire and train new staff. Her current staff understands the changes she has made to the menu and new processes that the restaurant is undertaking. Forbes has interviewed Bettina and more small business owners.

Pivoting with Sprinkled with Pink

Kendra Eaton owns a business that produces handmade and personalized accessories for special occasions in Dallas, Texas. She operates the business by herself, two full-time employees and five part-time employees. Like most businesses, Eaton experienced financial difficulties due to the pandemic and the lack of sales caused by it. Eaton’s business suffered greatly, as the focus of her business are personalized accessories created for celebrations or big gatherings. Due to the pandemic and the effects of social distancing, many of her customers are not hosting such events and did not need her services. Eaton, like many others, operates a business that depends on customer demand, which is susceptible to massive swings in the economy. Her financial obligations began to increase as her income began to fall, so she filed for the aforementioned financial services. Eaton applied for the Paycheck Protection Program and the Economic Injury Disaster Loan.

She received a small advance that she was able to use to pay her small staff for the time being, but was unsure of the status of the loans. These loans are being filed by thousands of various sized businesses across the country and this demand has caused a backlog within the Small Business Administration. Eaton was forced to furlough her part-time staff due to the uncertainty of the loans. She hopes that she will be able to hire them back once she receives the loans. During these times, Eaton also experienced fallouts of deals she had with long term commercial clients. These contracts provided a guaranteed flow of income and returning business. While surrounded by adversity and facing dissolution, just having two full-time staff members and a decline in demand, Eaton was able to be versatile and pivot the business in a more profitable direction.

Eaton’s goal is not to pivot the entire operations of the business permanently, but simply to make short term changes that can help sustain the business until relief comes through. Eaton shifted her business to remote celebrations that are still paired with custom party accessories. Eaton is able to still provide her core business, but is able to deliver it in an alternate way that meets the current needs of her customers. Eaton states that she is working harder than ever and operating under a five-day turnaround time, a commendable goal in her industry pre-pandemic. Eaton says, “We will definitely continue [to grow and succeed]. We cut costs quickly and acted swiftly. We pivoted and brought revenue up.” This is the proper goal for a business to have to combat dissolution. You can read more about Kendra Eaton from her Business interview.

Closing Thoughts

We have shared personal stories above of a few business owners during the pandemic, some who have prevailed through this pandemic and some who were not so fortunate. The difference between being forced to dissolve the business and survival may or may not be in the owner’s hands. For example, the market in which the business operates in and the demand for the product or service is not in the owner’s hands. The amount of disposable income in the area in which the business operates also cannot be controlled by the business owner. In the case of the Wornians, they applied for the appropriate loans and sought out help from their local government but ultimately were forced to close.

However, from what we have learned from prevailing owners is that owners can adapt to the current conditions. Business owners should examine their business and try to cut excess costs that are not necessary during these lean times. Owners must also adapt their offerings to ensure that they are still able to generate a steady income. This income from their new method could be a more permanent operation, like Bettina Stern from Chaia Taco, or could be temporary, like Kendra Eaton from Sprinkled with Pink. Eaton made an adaption in offerings to keep her afloat until her loans came through.

The adaption of operations can be accomplished by offering a product or service that consumers will still want to purchase despite these times. Businesses can also consider giving back to the community to earn good will among the members of the community. Positive acts can serve as advertising for a business. With proper business management and creative thinking, a business has a better chance of survival. Along with changes internally, business owners should seek out relief provided by local and federal government.


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