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How Are Small Businesses Fairing At This Stage Of The COVID-19 Pandemic?

Necessity is the mother of invention, and never was that truer than for small businesses weathering the COVID-19 pandemic. Hear from one who turned disruption into opportunity.

Transcript

Tim Maurer
Hello, I’m Tim Maurer, welcoming you to another episode of Ask Buckingham, a new video-podcast series designed to bring clarity in the midst of confusion by connecting your great personal-finance questions with straightforward answers from industry thought leaders. Today’s segment is a small-business spotlight, and we’ll be talking to Mike Kenneally, the vice-president and co-founder of East Coast Dyes Lacrosse, a lacrosse-equipment company created by two brothers in Baltimore, who’ve retooled their operation to create face shields to meet the needs of the community during COVID-19. Mike, thank you so much for joining me. Before we get into how you respond to the COVID-19 crisis, I think we’d need to give folks a little bit of background. What’s the short version of the East Coast Dye story, how and more importantly, why it became to be?

Mike Kenneally
Yeah, absolutely. Thanks for having me, Tim. Long and short is we both have played lacrosse. I was five. I have a twin brother. His name is Greg, and he was always the team stick doctor, strung people’s sticks in college, started a little bit of business dying, stringing sticks, and selling them on eBay or lacrosse forums, and eventually, invented his own wax-based lacrosse mesh. We started selling that on our website, and eventually got into retailers like Dick’s Sporting Goods, Lacrosse Unlimited, Universal Lacrosse, some of the biggest lacrosse retailers. Really boosted our knowledge of the sport and understanding the retail position and continue to make more innovative lacrosse products.
So fast forward to today, we have some of the best-selling heads, mesh, and sticks in the game. We just got into women’s lacrosse last year. Our differentiating factor is focusing on making high-end lacrosse sticks with a lot of technology built into them and only focusing on the sticks. So a lot of our competitors will make helmets, gloves, protective gear. We decided to focus on the lacrosse stick, which is really the most important piece of gear a lacrosse player uses.

Tim Maurer
Love it. And Mike, there’s a rumor out there that your dad, who’s a fantastic CPA, I know back from my days in Baltimore, he supported you guys in this whole endeavor, but he required you to go get a business education first. Is there any truth to this story?

Mike Kenneally
Yes. So our whole family is CPAs. My mom and dad actually met studying for their CPA exam, and my dad started his own accounting firm when he was younger. Greg and I actually majored in accounting. While we were getting our master’s in accounting at Towson University, we were working part time at his firm preparing taxes or miscellaneous things and also starting this business. So we kind of were able to start the business. Didn’t take any money out because we were getting some income preparing tax returns, and eventually ended up graduated from Towson with our masters in accounting, and both Greg and I have passed the CPA exam and are CPAs, so that has been invaluable to us.

Tim Maurer
Well, is it now that you’ve finally realized the true benefits of that in the middle of all of this, and you had to put your CPA hats back on? I mean, how are you guys holding up in the midst of the crisis?

Mike Kenneally
Yeah, it’s certainly been tough. So lacrosse, a season essentially has been canceled. Generally, we’re a very seasonal business. Generally, March, April, May are three of our best months of the year and we’re just booming. So that’s been a struggle for us. We’ve lost a very significant portion of revenue just based on the fact that people aren’t buying new sticks. They’re not out there playing. So it’s been a little bit hard, but we’re trying to transition and play a little bit of offense here instead of defense.

Tim Maurer
Yeah. So did you guys qualify as a small business to receive any assistance from the CARES Act or the Paycheck Protection Program or any of that stuff? Did you look into that? Did you take advantage of it?

Mike Kenneally
Mm-hmm (affirmative), yup. So we applied for the PPP loan. We did receive it first round, which was great, and so we were able to bring a lot of the employees that we had laid off back on. And actually now, we’re hiring as many employees we can find to build face shields and cut medical gowns.

Tim Maurer
Unbelievable. Well, let’s talk about that. You guys did choose to pivot at a certain point to retool your operation and make face shields. Tell me about the moment when you guys decided to do that.

Mike Kenneally
So I think, us being a small business, and one of our core values of our company is really caring for our employees, it was a really hard day when we had to let employees go, which obviously, no lacrosse teams playing, we had no choice. And so we played a little bit of defense in the beginning, and said, “Okay, we’ve got to cut our expenses as much as humanly possible.” And then I think we sat there and said, “Okay, now that we’ve done that, what can we do to make sure we don’t have to lay off more employees, and what could we do to hire more employees?” One of our competitors, actually Cascade Helmets, they started making face shields really early. Their engineer sent us drawings, said “Hey, there’s more demand for these than we can ever fulfill.”

Tim Maurer
Wow.

Mike Kenneally
And so from there we said, “Okay, we’ll do it as well.” And so what we’re really good at, and we do a lot of made in the USA, is we do all of our assembly work in-house. So all of our sticks, we package them in-house, which is very unique from our competitors. So we were in a good advantage position to take that warehouse space and take that labor and roll that right into assembling face shields.

Tim Maurer
Well, fantastic. Well this has changed your market quite substantially though. It’s not parents and teens who were playing lacrosse. Who is it that have become your customers for these face shields?

Mike Kenneally
Well right now, Tim, we’ve relied on that lacrosse market and being whether it is people that we know. So we launched the shields on our website and a lot of the purchases have been, “Hey, I play lacrosse, but I’m also a dentist,” or “I play lacrosse, but I work at a nursing home, and I’m going to tell the purchaser that we need to buy these face shields from this company.” So that’s been one avenue of being able to sell them. The other is we listed it on Amazon. We sell lacrosse products on Amazon. We fulfill them through our warehouse, so we’re very familiar with that process. So we listed our shields on Amazon. We’ve also applied to the state to get a grant for making PPE. We were awarded that grant, and they set us up through the state of Maryland with a place where we can put bids in on contracts for PPE, which we’ve done a few of those as well.

Tim Maurer
Great. Well, what’s the supply-and-demand story here. Are you finding sufficient demand out there? It sounds like you’re rehiring some employees back to do more of this work.

Mike Kenneally
Mm-hmm (affirmative). Yeah, so we’ve gotten pretty good demand on the shields, and I think we’ll only increase over time as dentists’ and doctors’ office start to reopen for normal things. I think we’ve even sold some to restaurants and retail operations that want their employees to have that for a curbside pickup. So I think that will continue to increase. The biggest struggle for us has been getting the word out there that we are doing this as most of those people are set up to fulfill through their current buying networks. So we’re also cutting medical gowns for University of Maryland Medical System, and that’s been really good for us, too. And that, we require a lot of labor to do that.

Tim Maurer
Fantastic. Well, we’re happy to help get that word out. What are your plans going forward as a company as it relates to this new business line that you’ve effectively created and then also serving the lacrosse community going forward?

Mike Kenneally
Yeah, so a couple different strategies we’ve taken. We’re trying to be really offensive and say, “Okay, how do we continue to get revenue in, get sales when lacrosse isn’t being played?” The first move that we made is obviously our retail partners have been phenomenally great over the past six or seven years. They’ve really grown with us, but we had to make the decision to list all of our products on our website. So we only sold mesh on our website up until now. We said, “Okay, it’s time to go direct.” So we’ll continue to service that lacrosse community directly through our website, and that’s been really good so far and helped us bring in more revenue than we would have.
The second would be going after the PPE market, whether it’s face shields, cutting gowns, whatever, we can get our hands on maybe there. And the third would be looking for new business avenues. So like I mentioned, we are really familiar with the Amazon platform. If there’s other products in other industries that we can get ahold of and ship and fulfill them out of our Warehouse Prime, we’ll continue to look at those opportunities as well.

Tim Maurer
All right, Mike. Last question, and this is the toughest one of all. You know I’ve got two boys who are high schoolers playing lacrosse who had their seasons cut short. This is a small sacrifice compared to what most people have endured throughout this time, but a sacrifice nonetheless. And now, we’re looking at the club season for this summer. Here’s the question, man. When are we going to get back on the field?

Mike Kenneally
That’s a really good question, and I wish I knew the answer to it. I think it’s going to be different for every location. So I think if you take a market like New York, they’re going to have to be slower as they’ve had more virus contagion. And if you take a look at a market like you’re in, it might be a little bit sooner. You know, people are more spread out. I would like to think that we’re going to get some form of lacrosse this summer, whether it is just social distancing practices or keep the stick in our hands.
But my heart goes out to all those players. I can’t imagine my high school season being canceled or my college season being canceled. You know, those are memories that you kind of hold on to for a lifetime, and it’s a shame that a lot of people have to miss them. But if you look at what can we do this summer? You know, hey, getting the kids out in the field for a practice, where they’re playing catch far apart from each other, I think would be a phenomenal thing for the kids. I mean, just to have some social interaction to do and being safe, of course.

Tim Maurer
Yeah. Well, we’re already on it. We started social distancing practices this week.

Mike Kenneally
Oh, good.

Tim Maurer
Indeed, we’re hoping to get back out there. Now, if you guys want to bring like an ECD big tournament down to Charleston, South Carolina, you just let me know, because things are maybe opening up a little bit faster down here.

Mike Kenneally
Well, I don’t know if you saw this last year. We bought an RV to go to all the PLL events, and they have moved into just a one-championship closed location, so we won’t be able to use that this summer. I hate for it to sit idle. We might have to take a trip down to Charleston. I hear it’s phenomenal.

Tim Maurer
Hey man, hop on the bus. It is phenomenal. Thank you, Mike. And as a fellow Baltimoreon and lacrosse fan, I’m proud of what you guys are doing and love to see the innovation right now. And thank you for tuning into this special episode of Ask Buckingham. If you have a personal finance question or a small business question that you’d like to see us address, you can do so by navigating to the website, askbuckingham.com or by emailing your question to question@ask buckingham.com or just click in the upper right-hand corner of your screen, and you’ll be taken directly to the website.

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Mike Kenneally
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