Jermale Eddie co-founded Grand Rapids-based Malamiah Juice Bar a decade ago, but he still feels like he’s running a “10-year-old startup.”
That’s primarily because of the COVID-19 pandemic, which he says set him and other small business owners back to the proverbial drawing board, determining how to run more efficiently and re-evaluating growth plans.
Eddie was among a panel of small business owners and advocates who joined a recent MiBiz roundtable to discuss their ongoing challenges and opportunities in 2023. With the pandemic disruption fresh in their minds, the panel also discussed the difficulty and systemic disadvantages of accessing capital, inflation, and challenges with finding workers.
The executive roundtable featured:
- Hannah Berry, founder and executive director of Lions and Rabbits, an arts nonprofit and former event space in Grand Rapids;
- Eddie, CEO of Malamiah Juice Bar, which has two locations in Grand Rapids;
- John Hendershot, business development director of Rende Progress Capital, a community development financial institution (CDFI) focusing on entrepreneurs of color;
- Brandon Voorhees, co-founder of Eastern Kille Distillery, which is in the process of building a new production facility, restaurant and tasting room in Plainfield Township; and
- Carrie Wilson, founder and CEO of Freedom Construction and Consulting Inc., a two-year-old construction firm based in Byron Center.
Here are some highlights from the conversation:
What’s your outlook for 2023?
BERRY: We closed our (Lions and Rabbits) event venue because of the amount of public art that we were able to do last year. Because everyone who’s been working in the arts is more passionate about the arts than doing the events, we understand that the people who are supporting us through events will support the arts in some capacity. That’s part of our job is to figure out how that works. I’m really thankful for that continued community support. I think the community supporting our smaller initiatives has been able to make us a little bit more stable in our growth path and really be able to open the doors for what public art looks like as we venture outside of just Grand Rapids.
EDDIE: We’re an almost 10-year-old business coming up in September, which is crazy to say that, but yet we feel like an almost 10-year-old startup. COVID has made a lot of entrepreneurs feel like they’re back at year two. … When it comes to 2023, our outlook is that it just has to be better than 2022 and has to be better than 2021. It is difficult to recover from that thing that zapped you of your energy, your creativity and your spunk. I put it like this: It feels like we’re in a fancy boat taking pictures and waving to the press, and saying how great things are in this big ocean of entrepreneurship. Yet our feet are covering the holes that are in the boat that happened because of that traumatic experience, the crash of the pandemic. We’re just hoping that our boat doesn’t spring a leak in the public eye for the world to see.
HENDERSHOT: Equipping entrepreneurs with resources. Right now, we’re running an incubator that’s five weeks long. I think entrepreneurs are hungry and they want to learn the fundamentals. We’re not about some of the fancy stuff. We’re more about the financials and the stuff that typically not too many business owners get excited about. They don’t get into business because they like bookkeeping or accounting or anything like that. But we all learn, whether the hard way or just through stepping through the business, that we end up spending more time on those operational pieces, those foundational pieces in building our business. That is the big focus that we’re on. I’m planning five incubators (that Rende Progress Capital will run) this year. Hopefully, we’ll have 30-plus entrepreneurs going through each of these sessions. That’s what we’re doing is building strong foundations. No pitch competition, no marketing, no fluff, just basics.
VOORHEES: We’re in a unique situation right now (after) we were pursued to sell our current location (in Grand Rapids’ Monroe North neighborhood). That opened up an opportunity to build the distillery that we needed for our growth path. We just broke ground a few weeks ago on a new distillery out in the Rockford area just north of Grand Rapids, which will allow us to build.
When we first started, we fabbed out an old building for our distillery needs, and we could not execute all of the needs. Quite honestly, building a distillery for the first time seven years ago, we didn’t know everything that we should have or would want in that space. This is giving us an opportunity to build a state-of-the-art facility for the growth that we need right now, plus will allow us to grow hopefully for the next decade or so in that space. We’re really excited about that. That’s set to open up in hopefully September, October of 2023.
As we exit our current location on Ottawa (Avenue), we are very hopeful to find a location in that neighborhood or very close to that neighborhood for a future satellite tasting room as well, when we move headquarters a little bit further north. Our company right now is in growth mode. We’re just trying to figure out the best ways to execute that growth and what it looks like.
WILSON: We are just celebrating our second year in business. The 2023 outlook overall, I would say, is very optimistic for us. We’re expecting revenues to increase by close to 300 percent over last year. That’s a huge number, but we’re a small company. There are some challenges in that revenue growth in the construction industry, specifically. Inflation — nobody’s immune to that. Some of those implications are customers or clients in our range might be postponing due to rising costs of materials. A project that they were estimating to be between $500,000 and $1.5 million is now somewhere close to $3 million and on up. Furthermore, we are definitely hexed like the rest of the industry with staffing issues. Over the next 10 years, they’re expecting 50 percent of the industry to retire. With that, diversity statistics in the construction industry are absolutely dismal. For us as a company, we’re really, really focused on finding those pipelines for non-traditional hires.
Labor concerns appear to be a common theme here. How are you managing through those?
VOORHEES: Fortunately, we’ve escaped that for now. We currently operate two cocktail lounges, which four to five people at each location can run it. We’ve had a very consistent team over the last five, six years. We don’t experience a whole lot of turnover, which is awesome.
We are bracing and getting ready for that, as we hit a larger restaurant space that requires different skill sets throughout the space. We are getting ready for it.
EDDIE: When we opened, we set out to be that good company. Part of our mission statement is being a force for good or a vehicle for good in the community, as well as youth employment. We started off wanting to say: ‘Hey, how do we become the employers, the supervisors, the bosses that we wish we would’ve had?’ That was what we did for a while. Then the pandemic hit and it just shook us to the core, because we were spending time retraining people, retraining people. I would say the culture of our business suffered from that. The customer service that we have been known for suffered for that. It’s something that I’m not proud about, but I do know that many were understanding of it. But that still didn’t feel good to be like, ‘Man, we used to really hit these marks.’ But it’s like you have to create new marks, new goals, new benchmarks. Now today, we have a pretty good team that’s helping us reshape who we are.
What kind of capital needs do you have or are seeing among other small businesses?
HENDERSHOT: By far, within the last three years, it’s been the hospitality industry, mostly restaurants and individuals in the retail space. That’s the biggest concentration of our portfolio right now. We actually capped out because of the demand being so high for businesses within that industry. I think that is the biggest need, and I think it’s going to continue to be the biggest need.
WILSON: We struggled with getting a line of credit. We, like so many other small businesses, used our home as collateral to get an SBA-backed loan. Now we’re there, that’s great. We’ve got working capital, but then we’ve got bonding. That’s great. But then the bonding company wants us to get a line of credit. Now as we go down that road, lending institutions are saying, ‘Well, you have nothing for collateral to use on your loan.’ Then all future contracts and accounts receivable really are under that lane. That’s definitely a hang-up point for small businesses.
EDDIE: This year I think is the first year that we have not had a line of credit. Fortunately, we did receive some of the pandemic dollars, and so during the pandemic we felt like we got bumped a little bit. It was rough, but that didn’t hurt us. We feel more pain post-pandemic than we did during the pandemic. It wasn’t the hurricane or the monsoon that got us, it’s the aftershock that’s getting us.
What I believe our city does a great job in is attracting businesses, but no one’s doing anything to retain businesses. Is getting more debt more detrimental to your business in terms of retention? Are you getting more debt with the hopes that you can pay it off? It may or may not make sense. Sometimes in this work, it feels like you’re digging a hole at the beach. You keep digging, more water’s coming in. I feel like many of us are in that situation. There’s not that many folks who are interested in putting more debt on top of debt, with the hopes that debt turns into good debt and that they can pay it off. The question is: Do we go after more debt to help retain us? Meanwhile, there’s money out there to attract new businesses. But what about those of us who are here now for one, two years, five, 10, 20 years?
VOORHEES: Like many people starting a business, it was me and a good friend, and we pushed most of our chips in to get off the ground seven years ago. As many people know that run and operate small businesses, it’s not right away that you start getting to pay yourself back.
There were a few really tight years there. We started hitting our stride maybe year three or four and we’re a sustainable business. Then the Spectrum deal (to buy Eastern Kille’s original location for $3.75 million in 2021) definitely catapulted us, and now we have a little bit more financial leverage to be able to make that happen. That’s the fortunate part. The unfortunate part is that happened mostly in 2021, 2022, where getting a new project off the ground was not easy.
HENDERSHOT: I think there are things that entrepreneurs can do to leverage or pivot in that space to understand their business better. What I mean by that is banks will use forecasts, they will use your accounts payable to let you borrow against. Not a lot of individuals know that. Those are ways that you could acquire cash. Some CDFIs will help with startups. The line of credit is another thing, too. You look at the SBA statistics and over 45 percent of businesses close within the first five years, and I think 10 percent only make it out past the 10th year. Those aren’t good statistics. I could see what the bankers are looking at and I understand what it is for the entrepreneur. But how do entrepreneurs and bankers come together to be able to help one another? I think there is a gap there. I don’t know what the complete answer is. There has to be a marriage of some sort, whether that’s equity, a bank having equity in a business, or with offering mentorship. I’m just saying there’s so much for both parties on the line that I think something has to change in the way that we’re financing businesses.
What role do you see for CDFIs in that?
HENDERSHOT: I think that CDFIs are trying to do that. We have talked about in the future: Do we become venture capitalists as a nonprofit? But I think the technical assistance side of that is understanding that something needs to change in the fundamentals of businesses and the way that we do business. The reason being is most of us don’t get in business because we love business. We get in business because we’re trying to monetize some skill or talent.
EDDIE: A lot of this has to deal with systems. From my perspective and where I sit, it’s thinking about communities and people groups that have been historically pushed out, who historically had a disadvantage. There’s so much history here and so much to overcome that it does make it difficult, especially as a business owner of color, to actually do the business, when you always have to worry about are you not getting this or not getting that because of where you’re from or because of what you look like.
HENDERSHOT: Jermale is absolutely right. Over my history of doing this at (Rende Progress Capital), I have seen predatory lending like no other. Just terms that are fee-based and mostly on contracts with minority business owners.
What’s it going to take to meaningfully move the needle on achieving equity in financing and access to capital?
HENDERSHOT: Cash is king, and where we do business matters. Pull (your business) if we don’t like the practices. There are businesses that I will not conduct business at because I know things that went on at those businesses. I think that we have to look at the deeper issues instead of the superficial service, whether it’s interest rates or whatnot. What are the practices of this financial institution? When we start hurting industry in their pocketbooks, that could be a brand, that could be anything out there. When we start affecting their pocketbook, that’s when real change is going to start taking place.
How has the COVID-19 pandemic changed you as a business owner?
WILSON: Probably the largest impact for us is still staffing. The first thing that comes to mind is the Great Resignation. I think potential employees’ expectations of employers have changed, in my opinion, in a good way. I think they’re more mission and purpose-focused. People want to work for companies that have a strong mission with strong ties to the community. They want to know why they’re working there, and pay has slipped down the priority list of why someone will work somewhere.
HENDERSHOT: I think that in many ways, it’s caused most of us to become more creative to think of other solutions, maybe to seek advice. One of the things that I’ve done most of my life was seek mentorships, seek counsel from individuals who are within the space that I am. I could tell you I stepped away from that for a few years. It caused me to go back and start doing that because our individual perspectives can sometimes be skewed.
EDDIE: I think I am still experiencing what I would call a traumatic response to COVID. I really believe COVID affected solopreneurs a whole lot more than others. Folks would say that small businesses are the backbone of America. In some ways, I’m skeptical of that statement right now because if we’re the backbone, we’ve slipped a disc. We’re trying to still stand. We need an entrepreneurial chiropractor to come along. I believe (the pandemic) exposed the fact that it’s hard out here. Entrepreneurship is a lonely place to be, depending on the level of where you are at in the company. Wellness was not a priority for me and others and we’re feeling that.
BERRY: When we’re talking about small businesses being the backbone of Grand Rapids, I don’t think that small businesses are the backbone of Grand Rapids or greater Grand Rapids in general. I think that we are a portion of what the economy is, but we’re not valued the same way. USA Today just named Grand Rapids in the top 10 cities to view public art. Is it the tourism economy? Is it the small business economy? Is it the entrepreneurs? I don’t think that there’s enough people sitting at the table that aren’t from those higher wealth brackets, with people who are from those more grassroots organizations sitting and talking about what community is, what it means, your community, my community, our community. What did (the pandemic) do for us? It helped artists be recognized as small businesses.