THE VIRAL

OPPORTUNITY

As unemployment in Arizona went up, so did the number of new business applications

Here’s a look at the pandemic, through the eyes of 3 economics experts and 4 local entrepreneurs

Elaine Crippen of Sweetz Bakery Arizona greets customers as they browse her gluten-free treats in Gilbert, Ariz. Photo by: Michael McDaniel

A WAVE OF NEW BUSINESSES

By: Jimmy Cloutier, Mollie Jamison, Zoha Tunio and Michael McDaniel

Gluten-free peppermint sugar cookies. Snickerdoodles. Oatmeal cream pie. Cranberry orange bread. That’s just some of what Elaine Crippen, 50, of Sweetz Bakery Arizona is selling at the Made With Love Market in Gilbert, Arizona. 

The school-nurse-turned-entrepreneur says she wouldn’t have had the time to prepare so many baked goods if she were still working full time. But since leaving her job over concerns with her school’s response to the coronavirus, Crippen has put all of her energy into what was previously only a side hustle.

Most days, she starts baking at 6 a.m. and often won’t stop until the evening. Despite the long hours, she loves the work. Coming from a family of entrepreneurs, Crippen always wanted to be her own boss. Although she is earning less than she was as a school nurse, she is committed to making this business work. 

And she’s not alone. While the pandemic has forced hundreds of thousands of small businesses to close, Crippen and other budding entrepreneurs remain undeterred. 

In fact, Arizonans are launching new businesses at a record pace, according to the U.S. Census Bureau. Applications for employee identification numbers, which entrepreneurs need to start new businesses, surged over the summer.

As of Nov. 21, more than 82,000 applications have been filed, an increase of 16% over the same period in 2019 — and the biggest jump in more than a decade.

A handmade sign is on display outside Mark Quihuis’ The Commission Clothing located in a small shopping center near downtown Phoenix.

Photo by: Mollie Jamison

Breck Means crafts Christmas ornaments in his woodworking shop near downtown Phoenix. Photo by: Jimmy Cloutier

Some burgeoning entrepreneurs are seizing new business opportunities opened by the pandemic, while others are turning passion projects into full-time jobs. One man opened a vintage resale shop following a spike in online sales. Another pivoted to woodworking after he was laid off.  

A LEAP OF FAITH

The surge in new businesses follows a spike in the state unemployment rate, which shot up from 4.5% in February to 13.4% in April — when nearly half a million Arizonans were out of work — according to the U.S. Bureau of Labor Statistics. By comparison, the state unemployment rate peaked at 10.9% during the Great Recession.

It’s not uncommon for people out of work to turn to self-employment during an economic slump, says Steven Hamilton, an economist at George Washington University.

Eli Chmouni, a business owner who teaches entrepreneurship at Arizona State University, says people who are out of work also want to regain control of their situation. 

“When you lose your job, you try to take control of your own future,” he says.

ECONOMIC EXPLANATION

“COVID has made a lot of things impossible and a lot of other things much more attractive,” says Hamilton. “You’re going to see fewer personal services and more services that are better suited to the COVID economy.” 

As entrepreneurs adjust to these new consumer needs, new businesses will naturally emerge, he says.

In addition, unlike during the Great Recession, people have money now to launch new businesses, economists say. The Coronavirus Aid, Relief, and Economic Security Act, known as CARES, injected close to $40 billion into the Arizona economy during the second quarter of 2020, says George Hammond, an economist at the University of Arizona. He says that’s about 11-12% of Arizona’s total personal income.

 “That’s a big deal, and the biggest chunk of those funds actually came from what we call the recovery rebates, the $1,200 checks that were mailed out in April,” Hammond says. 

As a result, although many have been hit hard financially by pandemic, others are doing OK, Hamilton says. 

“You have to think about the psychology behind the business formation,” he says. Whether someone is willing to take the risk of starting a business, depends “significantly on their personal financial situation.” Someone who receives an unexpected windfall, or who can rely on a financial cushion in the form of unemployment insurance, may be willing to “ take the plunge.”

Given the scale of the current economic crisis, both in terms of unemployment and business closures, economists don’t want to overstate the significance of new business formation.

Hamilton estimates the U.S. has lost more than 700,000 small businesses this year — nearly twice as many as it normally does. Yet nowhere near as many replacements have emerged.

In addition, many new businesses will fail or remain small one or two-person operations, Chmouni says.

Even under normal circumstances, starting and growing a business is hard. One in five small businesses closes after a year, and more than half fail within five, data from the U.S. Bureau of Labor Statistics shows.

The odds that a surviving business will then expand and hire employees are even slimmer, Chmouni says.

As a result, Hammond doesn’t expect the unemployment rate to return to pre-pandemic levels until late next year. Hamilton’s forecast is even gloomier. Given how many businesses need to be replaced to absorb unemployed Americans, he expects the labor market to be “significantly impaired” for the next 5 to 10 years.“We’re still going to have a pretty big hole in the number of businesses, and therefore a big hole in the labor market.”

Mark Quihuis poses for a portrait inside his newest business, The Commission Clothing in Phoenix. Photo by: Mollie Jamison

ENTREPRENEURIAL STATE OF MIND

While many small businesses continued to close over the summer, Mark Quihuis, 29, went against the grain, and opened a vintage resale shop in downtown Phoenix called The Commission Clothing. 

By opening, Quihuis wanted to prove that people can get stuff done, even when times are tough. 

“You can still make good out of a bad situation and keep pressing on and doing what you’ve got to do.” he says. “Don’t stop just because something bad is going on.”

Surprisingly, Quihuis believes the pandemic has actually boosted sales. He says people have been inclined to support small businesses lately and that successful online sales were another reason he decided to open a store front. 

Quihuis calls himself an entrepreneur and says he used money saved from his auto body business to start The Commision Clothing. If it’s successful, he plans to continue launching new businesses, regardless of COVID-19 constraints.

PASSION PROJECT TURNED PROFESSIONAL ENDEAVOR

Breck Means, 33, says he likely wouldn’t have launched his business if it weren’t for the pandemic. He was laid off as customer service manager at Spear Education during cutbacks. Rather than look for another office job, Means decided to turn his passion for woodworking into a full-time job.

Breck says he couldn’t afford to think too long about his decision.

“If I’m going to do this, I’ve got to do it right now,” he says. 

Means put his $1,200 stimulus check toward upgrading his woodworking shop in his garage, then went to work making cutting boards, cheese boards, blanket ladders, and desks — things he had learned to craft by watching YouTube videos. He sells these online through his website, Honor In Craft. The name came to him while he was listening to an audiobook recording of Marcus Aurelius’ “Meditations.”

While making things is easy, finding sufficient buyers to sustain a business is a challenge, however. Although he hopes to be doing this for the foreseeable future, Means acknowledged that he will need a steady job if he cannot attract more buyers.

Elaine Crippen displays dozens of gluten-free baked goods she prepares at home for the Made With Love farmers market in Gilbert, Ariz. Photo by: Michael McDaniel

ALL OR NOTHING

Crippen knows all too well that the biggest hurdle in starting a business is cash. She launched a ceramics shop called Amazing Glaze in the ‘90s that closed after a year. Rent and the cost of operating the shop were too high. Crippen learned from the failure.

With Sweetz Bakery Arizona, she took her time, growing the business gradually while working full-time as a school nurse. As a licensed cottage baker, she’s been able to cut costs. 

“I think that my business is a little different than some people who have a huge investment.” she says. “I can do this out of my house.” 

“I think that my business is a little different than some people who have a huge investment.” she says. “I can do this out of my house.”

Crippen taught herself to bake when her first daughter was diagnosed with Phenylketonuria, a rare disorder that calls for a strict diet of limited protein and no artificial sweeteners. In 2019, she started Sweetz Bakery Arizona on the side to supplement her income. 

She expected to continue working both jobs for a couple more years, but the pandemic put her on the fast-track.

In April, online sales of her baked goods took off. At the time, many businesses were closed following Gov. Doug Ducey’s stay-at-home order, and consumers were increasingly shopping online. Somehow, word of her bake-it-yourself cookie kits spread on Facebook, and she was inundated with orders.

The popularity of Sweetz Bakery Arizona’s take-home kits convinced Crippen to put the business into “high gear.”

Then, the decision to leave her job at a private school in the East Valley became even easier after the school administration announced face masks would be optional. As a medical professional, she disagreed and felt it would put students, school staff and her own family at risk. 

Besides, she prefers to do this. Baking, meeting people at the market, crossing out items on her board for each baked good that sells out. “I love when people love what I do.”