The last 3 months have been a test of my personal and business philosophy like no other. A near constant reevaluation of the situation globally and in Colombia brings with it a constant reevaluation of wisdom of the decisions we’ve taken regarding our small business – an all day cafe in Bogota.
We initially felt so confident about our decision to retain all of our staff. It was and remains a core value of Mesa Salvaje that the well being of our staff is of vital importance to us if we are to build a truly sustainable business, and this seemed like the perfect test: we were going to pay our staff to remain at home, taking care of themselves and their loved ones for the month-long duration of the quarantine. The business had been growing like crazy in the prior 4 months, with each month breaking the previous monthly sales record by more than 10%; we shut the restaurant 3 days before the mandatory shutdown after our single best sales week in our 14 month history. A month-long paid break seemed like a generous way to say thank you for all the hard work so far this year – take care of yourselves and socially isolate, you don’t need to worry about your next paycheck or heading out of the house to work in a high risk situation. We even thought that this could be the time to hire someone new and get them up to speed during the shutdown so they could hit the ground running when we reopened.
In hindsight it was an easy decision for us to make: thanks to a combination of the successful prior few months and our external sources of cash independent of the restaurant we were in a position of relative strength with a healthy bank balance. I calculated that we had cash on hand to cover ~2 months of fixed costs without any incoming revenue. KC and I heard with disdain about other restaurants letting staff go or reducing hours/salaries in the first few days of the Colombian national quarantine. We recognized our position of privilege, but we were disappointed to see peers at successful restaurants either choose or be forced to let go of staff very early on. How could they have let themselves get into a position where they couldn’t pay their fixed costs for 1 month?
Testing my life philosophy
Obviously, as we sit here 3 months later, the reality has played out differently to our expectations. We probably won’t be able to have a partial reopen until September, and there is a growing probability that the relaxing of restrictions won’t allow us to return to full capacity until December or later. That healthy bank balance has been depleted and our current situation, in which we are more or less covering our fixed costs through our delivery operations and support from our landlady/government programs, feels precarious at best.
Doubts creep into my mind. Where previously I was certain that we were making the right decision, I’m beginning to wonder if I was naive about our ability to pay our way through a crisis of unknown duration and severity. The phrase “amputate the part to save the whole” has come to mind more than once, and I am in personal turmoil about whether this is the moment to double down and invest in improving our operation or starting a second enterprise, ruthlessly cutback and preserve resources, or try and maintain the status quo with the idea that we will weather the storm as a team and emerge stronger together. The status quo bias is real, and the thought of either investing more capital when we’re in cash burn mode, or laying off members of the team into an unemployed status in a country with little to no safety net are both to extreme to contemplate at the moment.
I have previously written that “In a world of abundance, to be rich is to be moderate… we don’t take the inefficient route because we have to, but rather we are making a conscious choice to take the route to be cognizant of others.” This philosophy is this reason we had our own personal safety net as well as a business bank account that was sufficiently big to act as an emergency fund on a moment’s notice. I believe it is a moral duty for any small business that achieves a sustained level of positive cash flow to have an emergency fund to take care of 1-2 months of expenses if needed. But I am being tested on that theory right now, 3 months into the crisis. The efficient way to run my business would be to scale back staff costs to a level appropriate with demand and withstand the storm by reducing cash burn. For the moment my personal philosophy holds firm, but the threat of being unable to operate my business as originally designed until December gives me pause. I can afford to run a money-losing operation, but is that ultimately in everyone’s best interest?
The risks to our strategy are both tangible and intangible
It isn’t a sound or particularly innovative strategy to hope that my restaurant can outlast other restaurants that are currently closing at an accelerating rate, but right now that’s the bet we’ve made. We’re willing to withstand the cash burn for another few months and even up to a year in order to do what is right by our eight employees and hopefully emerge into a less competitive environment and reap the rewards. It is a bet that could backfire – there is a real possibility that the assumptions made about the sustainability of the business model when we first opened have altered fundamentally and indefinitely – but I consider this to be a risk I’m currently willing to take. Perhaps I’m succumbing to suck cost fallacy and I’d be better to cut the whole thing loose before I’m down by a much more material amount, but I’m betting that the lure of a place to spend time that isn’t one’s home remains very appealing to our inner-social nature.
The downside of maintaining the entire business operation isn’t just the cash burn, either. 3 months after seeing many talented chefs and service members let go at neighboring restaurants, we are starting too see the green shoots of independent creative side hustles- homemade greek yogurt sales, a sauce company, and a new neighborhood burger delivery service. None of these are putting the owners full talents to use, and perhaps I’m romanticizing what is really an awful situation to be in, but it feels like a real world example of “necessity is the mother of invention”, and I know that the same cannot be said of my staff right now. They are in an envious position compared to many of their peers – full salary, breakfast and lunch everyday, a relatively relaxed working environment – but they are still obliged to do what tasks we find for them to do and they don’t have the independence to create something new. Maybe I should be trying to encourage them and help bankroll the startup of an independent project, but faced with the unknown against the backdrop of their current job security, I doubt any of them would be interested.
Furthermore, there is an inherent disconnect which creates tensions between the boss, who has made the decision to keep the employee despite knowing how much the business itself is suffering, and the employee, who has been told they can feel safe about their job. My business partner and I have had to have various tough conversations with the team to stress that we are operating in a “war time” environment, that errors are less tolerable than under normal conditions, that wasting food and resources is unacceptable, and that every single employee needs to do everything in their power to help right the ship. I now know that the incentives are misaligned, and the friction caused by that misalignment creates tensions that can damage relationships. It’s not an ideal working environment.
It’s not black and white
The conclusion of the story is that I’m personally very lucky to be in a situation whereby our external savings give me enough of a buffer that I can make the decision to be the benevolent boss without putting myself in personal financial jeopardy. But the longer this situation extends, the more I am forced to reckon with the wisdom of decisions made, and to recognize biases that may have played a role in those decisions. I remain a strong believer that a small business owner has an outsized moral obligation to take care of the employees, all of whom are as vital to the success of the business as the owner themselves, but as this situation has evolved I am recognizing that there is more grey area than I had previously imagined. I am no longer as mad at the other restaurant owners for letting most of their staff go, although I wish they had at least been able to explain the situation and give them a month’s notice. I am also a bit mad at myself for not seeing the downsides associated with playing the capitalist martyr and maintaining staff even when they will cause the business to lose money.
All business is ultimately a human story, full of emotion. Spreadsheets and other abstractions cannot begin to express the full range of emotions and human interactions that ultimately comprise a business, especially a small business. The moral obligations of a small business owner need to reflect the humanity of themselves and their employees, not just the bottom line. And the extent of those obligations remains murky, even to those of us who have spent weeks ruminating on this exact topic.