Small businesses reinvent themselves to make products needed for the coronavirus crisis

Last summer Jon Poteet fulfilled a dream when he opened Shine Distillery & Grill, a 260-seat restaurant and micro-distillery in Portland, Oregon’s historic Williams district. These days, however, rather than serving up regional cuisine and signature cocktails to a packed house, Poteet and his 25-person staff are doing a brisk business in private-label hand sanitizer.

Welcome to the coronavirus economy. Many small- and mid-sized businesses are hanging on by a thread as demand dries up and authorities in many parts of the country order nonessential establishments to close their doors temporarily. But some entrepreneurs and nonprofits are retooling in an effort to survive — and/or make a difference — by meeting the demand for hand sanitizer, face masks and other products in short supply.

Poteet saw his restaurant business begin to slow in early March, when the first reported cases of COVID-19 infection in the Seattle area stoked fears about dining out. In mid-March, Oregon Gov. Kate Brown ordered the state’s bars and restaurants to stop all on-site dining and limit sales to takeout and delivery. Fortunately for Poteet, Shine had already begun making, selling and donating hand sanitizer even before the order brought Portland’s booming restaurant scene to a near standstill.

Eighty percent alcohol by volume, Shine’s hand sanitizer sells for $1 per ounce and is made from alcohol typically used to produce vodka and other spirits, along with a commonly used food additive for thickening. The Centers for Disease Control and Prevention recommends using hand sanitizer with at least 60% alcohol, although vigorous handwashing is preferable. Shine’s hand sanitizer is produced on site. Shine’s distiller, Shannon Mosley, came up with the formula by tweaking a recipe found online.

“Our business doubled overnight. We had two lines out the door, one for seating in our restaurant and the other for hand sanitizer. I realized that this was a game changer,” says Poteet, reflecting on the changes that took place right after his hand sanitizer venture started to attract media attention.

In recent weeks, Poteet and his staff have been fielding hundreds of calls a day from anxious consumers wanting hand sanitizer, people seeking donations of it, media outlets, and other distilleries interested in making it. Poteet estimates that he’s given Shine’s recipe for hand sanitizer to some 300 distilleries across the country.

“I’m a believer in wanting a healthy community. Giving back to the community will always pay off,” says Poteet, who has also given away thousands of bottles of Shine’s hand sanitizer to individuals and community organizations.

“Anybody who walks in the door gets three ounces, whether they ask for it or not,” he notes.

Since early March, Shine has sold more than 4,000 bottles of its hand sanitizer, ranging in size from 6 oz to 16 oz. On any given day, the business generates almost as much revenue as it brought in prior to the temporary suspension of its sit-down restaurant business, according to Poteet. That’s about $6,000 a day.

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How can other firms shine (pun intended) in these difficult times? According to Andrew Sherman, a partner and corporate lawyer at Seyfarth Shaw, now is a good time for business owners to take inventory of their skills, distribution channels, supply channels, training protocols, trade secrets and other “intangible assets” to identify sources of revenue that they may not have previously considered.

“Ask yourself what you can do to create new revenue streams with very little new investment. There is no time right now to develop a six-month business plan and go out and raise capital,” says Sherman, author of the book “Harvesting Intangible Assets: Uncover Hidden Revenue in Your Company’s Intellectual Property.”

Speakers bureaus, for instance, might consider partnering with firms that specialize in online events, says Shaw. Owners and operators of conference centers and other public venues might consider repurposing their facilities for health care or related uses, he says, noting that the Jacob K Javits convention center in New York City temporarily has been transformed into a 1,000-bed medical station for non-COVID-19 cases. Companies that specialize in 3-D-printing technology might look to Italian start-up Isinnova, which recently began using its small 3-D printing machine to produce much needed valves for ventilator machines. Isinnova typically makes earthquake sensors, bicycles and other everyday items.

 ”It can take a crisis to uncover opportunity,” Shaw says.

That’s something Leo Friedman, founder and CEO of Chicago’s iPromo, knows full well. Friedman’s promotional products (aka swag) business, which earlier this year seemed poised for double-digit growth, came to a virtual halt in early March as cancellations of trade shows, conferences and other events mounted. With sales tanking, Friedman laid off seven employees, or about 15% of his 50-person staff, in a single day in mid-March and embarked on a frantic search for ways to avoid making further job cuts.

“It was truly heartbreaking. The day we laid them off, our revenue was nominal,” recalls Friedman, who founded his company in 1999. Last year the company had about $10 million in revenues.

Within five days of the layoffs, he managed to leverage his firm’s sourcing relationships in China to find suppliers of hand sanitizer, face masks, thermometers and other health-related goods and roll out an online sales platform called iHealth. Orders, sold in bulk and shipped directly from China, have been pouring in from hospitals, pharmacies, nursing-home chains, school districts, state and federal agencies and businesses. PepsiCo, says Friedman, bought $100,000 worth of hand sanitizer from iHealth in March.

“Two weeks ago [in early March] it would have been unfathomable to me that we’d be selling hazmat suits and medical gloves. We’ve done a 180-degree turn as a company. iHealth is literally what’s keeping us alive,” says Friedman.

His pivot into health-related goods has been eye-opening in more ways than one. With all types of fraud on the rise, some of Friedman’s customers have been careful to vet his firm, one of them going so far as to pay a surprise visit to his office to verify the company’s existence. Friedman, in turn, has worked to carefully vet suppliers and even his customers.

The firm only sells N95 respiratory masks to health-care groups, government agencies and other providers of critical services — a policy it put in place after learning that some customers had ordered large quantities of the masks to try to sell at big markups.

“We will not sell to resellers,” says Friedman. “We’ve been forced to cancel orders or say no to orders” to avoid doing so.

Small nonprofits are also stepping up to meet the needs of patients and health-care providers. Take Sew Loved, a nonprofit in South Bend, Indiana, that teaches sewing and vocational skills to underserved women and at-risk teens. Its facility is temporarily closed because of the pandemic, but the nonprofit is working to produce thousands of washable face masks through its network of home-based sewers, some of whom it has trained. It’s making the masks from high-thread-count, poly-cotton blend sheets donated by hospitals. Sew Loved plans to donate them to health-care providers and first responders to distribute to patients in hospitals and elsewhere.

The nonprofit is also trying to address the shortage of N95 masks for medical professionals by making large quantities of reusable mask covers and/or reusable custom masks. It hopes to make the products, designed to be sterilized after each use, from material that many hospitals already have on hand and may be willing to donate.

Sew Loved already donated an initial batch of 500 mask covers and custom masks to Beacon Health System of South Bend, a  network of four hospitals and a medical group. But Sew Loved also has ambitious plans to ramp up production by hiring workers to sew the items on industrial sewing machines housed in nearby RV factories, which have been hard hit by a drop in demand. The nonprofit plans to sell the finished products to cover its costs. But it must first raise enough money to get the venture off the ground.

“I’m trying to launch a multimillion-dollar business on my Amex card,” quips Vicki Miles, founder and executive director of Sew Loved, which last year landed a contract to embroider hats and beanies for Pete Buttigieg’s presidential campaign.

Of course, the demand for face masks, hand sanitizer and other health-related products will fade at some point — either because of increased supply or (one can only hope) significantly lower rates of COVID-19 infection. That means business owners that have retooled their operations must remain nimble.

The point isn’t lost on Friedman of iPromo, who also branched out recently into branded “work-from-home essentials,” such as headphones, self-heating coffee mugs and webcam covers. He believes there’s a big market for such goods now that working from home is the new normal, albeit temporarily.

“We believe the supply [of health-related goods] will catch up with demand and iHealth will slow down substantially, if not come to a halt,” as big companies like 3M ramp up production of N95 masks, says Friedman.

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.