The year 2020 was arguably the worst ever for Israeli business. Yet in spite of the lockdowns and soaring unemployment, the uncertainties and the fears, many new businesses survived. Here are two stories of businesses that made it through, and of a third that even grew and prospered.
Raad Fadul and his sister Najah Heir from the Druze town of Peki’in in the Galilee had a dream: to manufacture gluten-free products. COVID nearly killed the dream.
Heir’s daughter, Yara, now 25, was diagnosed with celiac disease when she was a baby, and her mother had difficulty finding food that she would happily eat. She ended up preparing the food herself. “When Najah started, there wasn’t much awareness of celiac,” recalls Fadul. “Yara didn’t like what we brought for her. The food ended up in the trash. The pitas, for example, would crumble in her hand.”
Heir runs a small, two-unit bed & breakfast and in 2005 she started to sell her homemade gluten-free products. “People started coming from all over the country,” recalls Fadul. “The news traveled by the grapevine and the number of customers increased. My sister suggested in 2017 that we start a business together. I had just retired, and I had free time. The idea was that I would run the financial side and she would provide the knowhow and the recipes.”
It took three years to draw up a business plan, get all the approvals and equip space in the nearby Tefen industrial area from scratch. “The process was much more complicated than I had thought,” says Fadul. They called their new business “Mama Yara” and they were ready to go.
But just two months after they had begun operations, COVID-19 struck and completely disrupted their plans. “We felt like the owners of a vineyard who’d waited three years before the harvest, and then, the moment the grapes are ripe, can’t enjoy them. We couldn’t ship products because restaurants and stores were closed, and because the distributor we wanted to work with got into difficulties,” says Fadul.
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“We couldn’t do deliveries ourselves because you have to freeze our products at minus 18 degrees centigrade, and that makes things unfeasible. Without the virus we would now have better nationwide distribution. I estimate that because of the pandemic we spent 300,000 shekels ($90,000) more. We were forced to reduce our living costs and I had to break a pension savings account.”
The business managed to get through the first lockdown, but the second brought it to its knees. “October 2020 was the first time I thought of closing the business,” Fadul says. What finally saved it was a chance conversation with some acquaintances. “Thanks to that conversation, I found a new distributor. He started working with us in December, and helped us to reach 30 to 40 sales points. That helped us to reach a total of over 100 sales points today.”
Mama Yara’s problems were not unusual for the coronavirus year. According to the business-research firm Dun & Bradstreet, in the three years prior to 2020, Israel created a net 12,000 to 13,000 new businesses every year. In 2020, however, for the first time in more than a decade, the economy lost 35,000 businesses, as 70,000 closed and only 40,000 started up.
As it turned out, Mama Yara didn’t succumb, but it is still struggling, even as the economy reopens. “We still have problems. We knew in advance that this was a tough market with high production costs. Still, we’re beginning to see the light at the end of the tunnel,” he says. “I discovered strengths in myself that I didn’t know existed. What’s guiding me now is the sense of mission in providing food products to celiac patients, and for my sister to be happy with what she’s doing. I believe that I’ll get the business on its feet and that everything will be fine.”
Playing for time
Avi Mogylnitzki, 38, of Rishon Letzion, started thinking about opening a toy store three years ago.
“My wife Ronit and I were looking for quality toys for our children and we had difficulty finding them,” he says. “I found things on the internet, I traveled to fairs in Europe and I saw unique items that weren’t available in Israel. What delayed the idea was money and manpower. I had to deal with getting permits for the business, learning how to work with customs, how to import and how to take loans.”
About two years ago Mogylnitzki started to accumulate inventory for the store. Ronit found a location in Rehovot by chance. “While I was driving the car, I saw that a store I know on a street that we liked was about to close,” she says. “I stopped and went in, and a day later we had a contract. For me, it was like starting an adventure whose end you don’t know. We really believed in the product.”
The lease took effect on January 1, 2020, and Mogylnitzki hoped to begin immediately with renovations and open for business a month later. They called the store “We Toys.”
“When the coronavirus arrived, everything started to get delayed. The contractor’s work was suspended because he had difficulties getting to the place, and he had no workers. Even the sign for the store arrived late,” says Mogylnitzki.
But he soldiered on. “There was no option of closing the business because of all the money we had already invested in it. It’s like making a plan to escape from prison, starting to dig your way out with a teaspoon and in the end giving up.”
We Toys did open, but only in June 2020, and it was rough. “Other shops, older ones, could take telephone orders. But we were just building our customer base,” he says. “We closed temporarily, but we still had to pay the rent and municipal taxes. Our bank account went deeper into overdraft and so did the interest costs. Without help from my parents, I wouldn’t have survived. They took a loan and mortgaged their house.”
Mogylnitzki learned the value of the internet during the second lockdown last fall. “I left that issue on the side when we started, but I finally realized that this was something that could really help us,” he says. “In addition, I distributed fliers and looked for other ways to sell my products, I ran from one bank to another to get loans. I didn’t want my dream to die.”
To help repay the loan by increasing his turnover, Mogylnitzki plans to open a second store in Tel Aviv. He has already amassed enough inventory to do that. “I have a place at an attractive rent and good terms, because of the coronavirus. We agreed that if there’s another lockdown, I won’t have to pay rent. That felt like an offer I couldn’t refuse. The banks are chasing after me to repay loans. ... From my point of view, it’s also a way to ensure the future of my kids.”
They have been trying times, but Ronit said she and her husband’s relationship didn’t suffer. “Working together is never easy, but the partnership we had between us was a problem,” she says. “When Avi traveled overseas to source inventory, I was pregnant and later had a little baby, but we managed. The response we got [from customers] strengthened us. In addition, over time we each assumed responsibility for different areas. The wisdom is not to tread on each other’s territory. That way there was less friction and more order. It’s something you learn over time.”
COVID spurs career change
For over 15 years Stav Raz worked in film and television. The coronavirus put the 33-year-old wife and mother of two from Herzliya on a new path.
“While I was working in film and television, I was in seventh heaven. But, shortly before the coronavirus began, I wanted to earn more money on the side. A girlfriend suggested that because I’m always helping others with design, maybe I should go into that. I designed several rooms for people close to me, based on the knowledge I’d accumulated throughout my career.”
In March 2020, Raz was furloughed from her regular job. “That put me under pressure, because I’m used to working long hours,” she recalls. “I had doubts about continuing on my career-change path, but after talking about it with my father I concluded that I could actually take advantage of the situation to really grow the business. I took design courses, found clients over Facebook and by June I was already working at it full time. Without COVID, I might never have developed my business as I did. Then, who knows what would have happened?”
She used her furlough money for living expenses and did the advertising and marketing by herself over social networks.
“I realized that I needed more jobs to get experience and have something to show prospective clients. I decided to conduct a lottery – I asked people on Facebook to introduce themselves in a few words and promised that three of them would receive free advice. A few were enthusiastic, and I designed rooms for them. It helped me reach other clients.
“People like to have someone take care of everything for them, and that’s what I do. I’m responsible for matching colors, furniture delivery, plans. I’m the one who pays the professionals. My fee includes all those services, but not the items, which have to be purchased separately.”
Raz admits that pricing was one of her biggest challenges. “It took me time to reach a situation where I have the right team members and price things correctly,” she says. “I had a client whom I charged 3,500 shekels while the renovator I was working with cost me 2,800 shekels. I had almost no profit left. I didn’t know it would be like that, but I learned my lesson and after consulting with a small business adviser I arrived at a basic price list.”
Her professional revolution was also an acculturation process. She had spent 22 of her first 30 years in the United States, but only when she started to get her business going did she “officially land” in Israel. “In the U.S., I didn’t feel completely American and in Israel I didn’t feel completely Israeli,” she says. “I didn’t imagine the extent to which I would have to deal with the differences in mentality, but also to take advantage of what I learned in each country, for example, to provide customer service according to American standards but to work with Israeli spontaneity.
“Arguments with suppliers and the obligation ‘to clean up the mess you leave behind’ wasn’t something that I was used to dealing with in the U.S., and I didn’t experience it when I was working in film and television. I learned how to take things in stride and the positive aspect of the Israeli mentality.
“Everything is dwarfed when you hear that people are satisfied with your product. I had a client who immigrated with her family from New York and it was hard for them to acclimate. I designed their daughter’s room. When they went on vacation, they told me that the child missed her room in Tel Aviv. Such things make me happy. In design, as in production, you have to think outside the box. There are screw-ups like an item you ordered and suddenly discover that it isn’t suitable. Those are the kind of things that I enjoy.”