I’ve had a lot of people ask me how we’re doing as The Detroit Bus Company or how we plan to survive through this crisis. The truth is that going a month or more without any bookings or tour tickets sold will cripple or kill our business if we don’t take immediate evasive action. We’re in a very low profit margin, very high overhead cost industry that has giant monthly auto insurance payments, office staff, software costs, facility rent and others. The refunds alone are bleeding us out. Not to mention paying drivers and tour guides while we’re not operating.
We’d need about $65,000 per month just to hold at a breakeven. We automatically save money each week since our founding to deal with rainy days and insurance down payments – but we’ll run out of that well before this crisis resolves. Plus, even when the restrictions are lifted, we’ll be in a very poor economic situation with consumer spending at all-time lows. I don’t expect some kind of corporate funder to step forward because they’re probably inundated with pleas right now. I also don’t think it’s reasonable to ask all of you to donate because you’ve got your own economic perils either coming or already landed in your professional and personal lives.
This crisis will kill most of the small businesses you love. A couple gift card or t-shirt purchases online won’t provide the revenue needed to buoy them through the next 1-3 months of rightfully government mandated zero operation. The numbers just don’t check out.
I’m working on answers to this right now for both us and other businesses in our community. I don’t know what yet, but I’m working on it. Open to your ideas to my email at email@example.com
Q: Why not just take out one of those SBA disaster loans being offered?
A: Loans are not the answer for the majority of small businesses. The problem with a loan is that you need to start paying at back at some point and that time will probably be during a poor economy. We already make very little profit as a socially-driven L3C (low-profit limited liability social benefit company) and won’t be able to afford debt payments on a loan after this all resolves.
Plus, applying for an SBA loan is an extremely arduous process requiring a ton of paperwork to apply including lots of historical records. Small businesses just don’t have this stuff at hand; we’re scrambling just to keep our heads above water.
Also, you need to put up any collateral you have against the loan: buildings, vehicles, inventory, equipment. And if you default on the loan? They come and seize all of those assets. A loan isn’t a solution; it’s kicking the bankruptcy can down the road.
Q: Won’t people buy gift cards?
A: I love this concept and I love the spirit of it, but I’m not confident about enough people buying enough gift cards to replace our daily operations or those of other businesses. We’re a medium-sized businesses that relies on daily bookings through charters, school rentals, private tours and public ticketed tours. That’s all gone to zero.
Q: Surely this won’t last until June. Won’t people put deposits on bus rentals for summer and fall?
A: People aren’t booking. Schools, a major source of our income through field trips and athletics, are closed indefinitely. I’m of the opinion that this crisis will last much longer than we’ve been told right now. This will hopefully take a long time to propagate and then resolve through the entire US/world — slowing the spread is the purpose of social distancing. But that also means we’re looking well into the later parts of 2020 to achieve anything resembling normalcy.
I’ll add to this Q&A as questions and ideas come in.