“My business is virtually dead.”

In just five words, a small distributor in California expressed the fear and despair many similar firms are facing right now. As the pandemic lingers and sales stall, promo companies are in survival mode and doing what they can to keep their doors open. They’re laying off workers, cutting business hours, dipping into dwindling savings and applying for another round of government assistance in the hopes they qualify.

The coronavirus pandemic and prolonged shutdowns have been hard on everyone. Yet small businesses – and certainly small distributors – have borne the brunt of it. ASI research shows that while distributors collectively saw a 19.8% drop in sales in 2020, small distributors (with less than $250,000 in revenue) were down 33%. Meanwhile, large ($1 million and over) and medium distributors (between $250,000 and $1 million) fared much better, declining 15% and 24%, respectively.

In a survey from the U.S. Chamber of Commerce and MetLife, 74% of small-business owners said in October and November that they’d need more government assistance to survive another year. And in the Small Business Pulse Survey in February by the U.S. Census Bureau, 53% of small-business owners said they don’t expect to return to pre-pandemic operations for at least another six months.

“We know in general that small businesses are very fragile,” said Antoinette Schoar, a professor of finance and entrepreneurship at the Sloan School of Management at MIT who co-authored a January study on how small businesses dealt with the first weeks of the pandemic. “They have very little slack cash. Even say a couple of weeks or a month of significant slowdown seems to be enough to … kill the weakest of the small businesses.”

There’s hope that business will get better – an economic shot in the arm later in the year as vaccines are distributed, in-person events start to return and clamped marketing budgets are finally unlocked. In the meantime, the promo industry is staring at sluggish sales, without the PPE boon that propelled the industry through much of 2020. Many small promo companies are nearing – or have arrived at – their breaking point.

“I’ve been in promo for over 45 years,” says Sandi Weber, a partner at Sole Images, a distributor in Scottsdale, AZ, “and this is the worst I’ve ever seen it.”

The usual customers still aren’t buying the amount of promo they did pre-pandemic and it’s hitting distributors hard – particularly those that serve just a few key markets. In Houston, Cynthia Cormier, president of C&E Specialties (asi/154889), says her main clientele has been universities; since the beginning of the pandemic, C&E has lost 75% of its business because of school closures and lack of recruiting, athletics and fundraisers. If her company does get an order, it has a hard time filling it because of inventory and supply chain challenges. “Fortunately, we do have a rainy-day fund,” she says. “That’s helped me keep all four of our employees.” It remains to be seen if Texas lifting its state’s mask mandate on March 2, and the resumption of businesses to open at 100% capacity, will help promo companies in the Lone Star State.

Elementary and high school business has slowed considerably or stopped altogether as students continue learning from home, and that’s significantly impacted distributors like Hurst Office Suppliers (asi/224890) in Lexington, KY. President & COO Steve Snowden says school systems are normally his largest client base.

“Shutdowns have devastated our economy state-wide,” he says. “Larger companies have access to capital resources and aren’t dying on the vine like small businesses. We’re stuck in a political/social/economic quagmire filled with abject bureaucracy and disregard for economic sustainability. Small business is at risk, and this pandemic is only part of the cause.”

“We’ve been in business 27 years now under my ownership, and last year was the first time we haven’t grown. We’re back to where we were financially in 2007. Life is not good here.” Linda Lindeman, Naag Tag

Business at Branding Innovations Inc. on Fox Island, WA, fell 50% in 2020; President Vanessa Lindsay, who applied for and received a second round of PPP funding, expects a bigger revenue drop in 2021.

“Clients who ordered last year for 2021 events are just hanging on to those items and waiting for things to open back up,” she says. “They won’t order again until 2022 at the earliest, depending on this year. The only thing keeping me afloat is operating other businesses that are still bringing in income. Otherwise, I’m not sure where I would be.”

Linda Lindeman, owner of Naag Tag in West Jordan, UT, has had to cut business hours and lay off staff; the distributor is now down to eight part-timers. She’s currently working the customer service desk herself because she can’t afford to bring anyone else on. “It’s hard to manage the company and take care of customers at the same time,” she says. “I really want to be able to hire again.”

While Naag Tag is still operational, it’s “not looking good,” says Lindeman, who saw some modest sales recovery at the end of 2020 but was back down to almost nothing at the end of February. “We’ve been in business 27 years now under my ownership, and last year was the first time we haven’t grown,” she says. “We’re back to where we were financially in 2007. Life is not good here.”

Compounding all the stress is the ongoing uncertainty about government aid. Snowden applied for the second round of PPP, though he’s still waiting for the Small Business Association (SBA) to approve forgiveness for the first loan. Recently, the SBA reached out to the lender for more supporting payroll documentation from Hurst. “We’re now requesting a loan not to exceed $150,000 for approximately three months of payroll,” Snowden said in February. “It won’t shore up our entire business, and it’s a risk based on the experience we’re having with obtaining forgiveness for the first loan. We’re sweating bullets waiting to hear.”

Snowden said it was a confusing mess from the beginning; with a lack of clear information from the government, companies like his made educated guesses on what they would need in a bid to survive. But it’s led to more anxiety months later.

“We needed the funds to stay open, so we applied and were approved within a week for the first loan,” says Snowden. “We subsequently applied for forgiveness last August with no resolution to date.”

Naag Tag received the first round of PPP, which Lindeman said helped significantly. With another drop in sales in January, she quickly applied for a grant in the second round. “I did receive it last week,” she said in late February. “Hopefully we’re good for another couple of months and then maybe the growth will begin again.”

In the first weeks of shutdowns, MSL Line (asi/68314) in Mission Viejo, CA, had to close and laid off half its workforce. Because of high demand, many employees didn’t receive unemployment funds for a while, so President Steve Latham and the management team sold off old equipment to raise proceeds. “Morale was very low,” he says.

Fortunately, the company received PPP funding in June and was able to bring back the laid-off workers, but only part-time. Now, as states start to open, Latham and the team are contending with a bottleneck of POs; at one point, MSL Line had three months’ worth of orders on the docket in one week. “We’re still trying to catch up,” says Latham. “About 85% of what we do is geared toward the automotive industry and they’re selling cars. I believe housing and automotive will bring us out of this recession.”

Meanwhile, those able to hire can’t compete with the unemployment benefits currently on offer from the government. BMS Direct (asi/142184) in Lynchburg, VA, was deemed an “essential employer,” but director of marketing Doreen Flint says applicant pools are shrinking because of the COVID-19 stimulus on top of normal unemployment payouts, making it difficult for smaller companies to compete. The distributor also doesn’t qualify for the second round of PPP because it didn’t experience a 25% decrease in receipts when compared to a year prior. “We’re looking ahead to brighter days with the purchase of more efficient equipment and the release of the vaccine,” she says.

In addition to finding it difficult to compete with government compensation, Snowden says he’s found that his company doesn’t operate as well with remote work, making it even more difficult to compete for talent with larger firms that have more flexibility and resources.

“My primary goal is to survive in 2021,” he says. “Corporations can develop new protocols and strategies, reengineer mission statements and communicate their positions on diversity and inclusion. Small business is simply trying to survive.”

In addition to overwhelming financial concerns, there’s mounting pressure on physical and mental health as the pandemic lingers a year after initial shutdowns. Nonnie Luther, director of sales & marketing at Cadillac Sign Co. (asi/155452) in Norwood, NC, says her team hasn’t seen clients and prospects in-person in months – a combination of safety concerns and a feeling of futility in the face of canceled events – and it’s weighing on them.

“Larger companies have access to capital resources and aren’t dying on the vine like small businesses.” Steve Snowden, Hurst Office Suppliers

“It’s really gotten out of hand here with the fear factor,” says Luther, whose company will be applying for a second round of PPP to help with expenses and payroll. “My normally happy and energetic co-workers are depressed, and we all look and feel like [Pantone’s] Cool Gray 10.”

To ease the pressure, the team has participated in webinars and virtual trade shows. “It was OK, but nothing beats face-to-face contact and hands-on demos for new products,” says Luther. “I know of several small businesses that had to close and I really hate to see that, for the owners and the employees who kept them busy.”

Cormier in Houston has also attended virtual shows; she says her team shipped out the self-promo items and free samples they received from suppliers to customers, which did lead to some sales. She’d like to see more of that from suppliers who can afford it. “Help the smaller distributors promote themselves,” she says, “which is a win-win for all of us.”

In the meantime, distributors need to keep leaning on their value-added services, namely creativity and marketing expertise, along with their established relationships with suppliers. “That’s how we’ve weathered this storm so far,” says Weber. “But this is a very sad situation for the industry.”