Like so many small business owners, the last month of my life has been a frantic flurry of loan and grant applications, setting up crowdsourcing campaigns, and hitting up anyone that I pay bills to for a reduction or deferral in the amount I owe. I have largely met with frustration: grant applications that crash as soon as they go live due to demand, people I reach out to for bill reductions or deferrals proving unsympathetic, and government loan programs that constantly change the rules and run out of funds.
When the store closed on March 21, 2020, I started out thinking I’d be able to keep enough sales going to cover basic expenses until we reopened. We immediately started offering local delivery and scrambled to put more products online. I also signed some affiliate agreements that allowed us to refer customers to other sellers and get commissions. It became quickly and painfully obvious that we weren’t going to earn the income we needed to survive - I was going to have to ask for donations. Since we are (hypothetically, although not practically) a for-profit business, this felt strange. It still does.
But since we are asking for donations as if we were a non-profit, I think it’s time I offer the transparency of a non-profit. I want you to see how we are using crowdsourced and government funds (more on that later), and I want you to have the confidence that you are investing in a business that is going to make it through this.
First, here is what a normal month looks like at Kona Bay Books:
So, yeah, we were barely for-profit before any of this. I had plans, of course. I’d just started expanding our selection of new books (99% of our inventory is used) and was in the process of setting up an online store. I’d reduced the amount we pay for used books to cut down on our Cost of Goods. But this is definitely a passion project for me. Simply put: I love Kona Bay Books!
Now, before I dive into current financials, I want to give some context to the expenses above. First, employee-related expenses: I pay competitive wages, offer a 401(k) plan with an employer match, and pay 100% of health insurance premiums. I also don’t draw a salary for myself. That $50 at the bottom is my cut. That brings me to Travel, which is not a normal monthly expense for a used book store. Although I would love to move home to Kona, $50 a month doesn’t quite cut it for me, so I still live on the mainland and have a day job. Finally, Rent, Janitorial, and Utilities are reflective of our size. I rent a 6000 square foot warehouse space in a tropical climate.
Here is what things look like from 3/23/20 - 4/24/20:
My actual cash flow was different because of the timing - I actually had to cough up two rent payments and two health insurance premiums during that time. And the amounts allocated to Marketing, Janitorial, Legal Fees, Commercial Insurance, and Travel are monthly estimates for large periodic expenses - I didn’t have any cash outflows for those categories during this time period. My actual cash flow for this period was -$30,327.24.
I couple other things to point out: Software and Shipping fees, and Credit Card Processing fees and Cost of Goods as a percentage of sales spiked during this period. That’s because we basically had to change how our business operates. Free shipping is the new norm because retail businesses are desperate for sales. Half my sales used to be from cash and the other were from in-person card transactions (generally the cheapest to process). Software expenses were up because I bought inventory software so we could eventually sell our used books online.
Now the good news: on Friday I received my PPP loan funds. I could wax poetic about the complexities of the PPP program, but the succinct version is that, in order for the majority of funds to be forgiven (a grant instead of a loan), 75% of the funds have to be used for payroll and the remainder have to be used for rent and utilities. In practical terms, that means I’ve been able to restore most of my employees who had been on reduced hours or furloughed to pre-COVID-19 pay for the next 8 weeks and will have about $7,000 leftover for June rent. I’ve also been approved to fundraise for a $10,000 loan at 0% interest on Kiva. If I’m able to get enough lenders, that loan will effectively allow me to defer my July rent (paid in June) until the store reopens. If we are able to raise those funds, here is what an “average” month looks like right now:
I feel so grateful when I see that bottom number, because it gives me a couple month’s space to work on how I will keep things going from mid-June onward. Having two months to plan feels like such a luxury! Of course, this is contingent on use meeting our goal for the Kiva loan. The minimum loan amount is $25. Please consider lending to us and sharing this link with friends: https://www.kiva.org/lend/1959555
Since we are nearly back to pre-COVID-19 staffing for the next couple of months, we are taking advantage of this time to tackle an enormous project: moving the approximately 158,000 used books in our store onto Basil software so we can sell all of our books online and quickly answer questions from customers about what books we have in stock.
We also hope to restart our delivery program after Hawaii’s Stay-at-Home order expires or is amended on 4/30/20. We had developed a completely contactless delivery process that was popular with our customers but which had to be discontinued due to the following email from Governor Ige’s office:
Bookshops are non-essential businesses under the Governor’s Third Supplementary Proclamation. On page 6 of the proclamation, travel to non-essential businesses is allowed but is limited to "minimum basic operations", which may include maintaining inventory, ensuring security, processing payroll, etc. Delivery services are limited to groceries, food, alcoholic and non-alcoholic beverages, and goods or services that are essential or supply essential businesses. The Governor's stay-at-home order does not allow for curbside delivery.
As I mentioned in the beginning, most sources of help for small businesses are absolutely unhelpful right now. There have been a few exceptions that I want to call out, because I would not be in a position of hope and optimism right now (and I am) if it wasn't for their support: I submitted my PPP application through Divvy. Their guidance along the way was so helpful, and they managed to get my application in during the first wave. The ABA and ABAA, two bookstore industry associations, have been amazingly supportive, as has Bookshop.org. As much as I cringe when I see my credit card processing fees, I also appreciate the resources Square has made available, including waived fees for some subscription services. And last but not least, everyone who has donated or lent us money, bought books from us, or made sweet comments on social media. You will always have a special place in my heart.
So, what does it take to run the largest bookstore in Hawai'i during a pandemic? Community, grit, and adaptability. And maybe more. This thing isn't over yet.