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A $10 Billion Gusher for Small Businesses
The SSBCI program will send $10 billion of federal money toward small businesses. Gene Marks explains which businesses might qualify. (Almost all of them!)
Here are today’s highlights:
How “Two Buck Chuck” became a phenomenon.
Tim Hortons used its app to spy on its customers.
The shift in the economy caught big retailers by surprise.
And what’s wrong with this picture of a Forbes ad?
You can see why the one-year plan might be more popular than the two-year plan.
Forbes is trying out an intriguing pricing strategy: How many people do you think will opt for the two-year plan? And what might Forbes charge for a three-year subscription? SEE THE FORBES AD
Meanwhile, it’s always fun to relive the story behind “Two Buck Chuck”:
Tim Hortons wanted to know when its customers chose to patronize competitors: “Tim Hortons used its mobile app to collect ‘vast amounts of location data’ from users, including tracking when they visited competing coffee shops, says Canada’s privacy watchdog. Yesterday, the Office of the Privacy Commissioner of Canada released the results of a 2020 investigation into the coffee and donut chain, demanding it delete any remaining location data and limit future collection. Tim Hortons, the commission says, has agreed to implement the regulations.”
“The full report outlines a sweeping, invasive attempt to deduce Tim Hortons customers’ behavior in order to target advertising at them — although the company apparently never actually used the data for that purpose.”
“According to records reviewed by the commission, Tim Hortons sought the data to support trend reports saying customers were switching to its competitors.” READ MORE
An unexpected surge of income tax revenue is flowing into the federal government: “Individual income tax collections are poised to reach $2.6 trillion, or 10.6 percent of the economy in the fiscal year that ends Sept. 30, according to the Congressional Budget Office. That is up from 9.1 percent in 2021 and would mark a record in the 109-year history of the tax, topping the war-tax receipts of 1944 and the dot-com boom of 2000.”
“It is individual income taxes—more so than corporate or payroll taxes—that are most notably above forecasts. Individual income taxes include those levied on wages, capital gains from investments, and business profits reported on owners’ personal tax returns.”
“‘To the extent that the economy is even stronger than we thought, then perhaps the size of the tax revenues that are coming in is less anomalous,’ Mr. Mehrotra said.” READ MORE
Big retailers are stuck with the wrong stuff: “Joggers are piled up at Gap, Macy’s has too much activewear and Kohl’s is full of fleece. Shoppers have shifted their spending from the casual clothes and home items that had been in demand during the height of the pandemic, catching some retailers off guard and leaving them with excess goods that need to be marked down. The scenario playing out this year at Gap, Macy’s, and other chains is a reversal from the past two years, when soaring consumer demand and supply-chain delays created a scarcity of goods that allowed retailers to scale back discounts and push through price increases.”
“Walmart’s inventories rose about 33 percent in the first quarter as the biggest U.S. retailer misjudged that shift in consumer spending, contributing to markdowns and weaker profits.”
“‘There was a lot of misforecasting in terms of how fast that shift would go back the other way,’ said Citi analyst Paul Lejuez.” READ MORE
FOOD & BEVERAGE
The future of farming continues to evolve: “The Boston company Freight Farms builds farms into shipping containers for clients who want to feed a small community or run a business. In 10 years it has gone from a Kickstarter campaign to growing food for Google’s office lunches. Freight’s newest offering, the Greenery S, is a system that packs rows of vertical growing shelves into an 8-foot by 40-foot shipping container. It’s controlled by a companion app called Farmhand that allows growers to monitor data collected by sensors inside the container. With it, growers can remotely tweak a garden’s temperature, humidity, lighting, and CO2 levels from their desktop or phone.”
“‘I could be sitting in the farm, I could be sitting in my office away from my farm, I could be sitting on the beach 500 miles away from my farm, and I can just see what's going on,’ says Erich Ludwig, a product leader at Freight Farms.”
“That ease of access doesn’t come cheap. The Greenery S container costs $149,000, and a subscription to the Farmhand app is $2,400 per year.”
“Still, Freight Farms wants to appeal to a broad range of customers, from aspiring business owners to educators and hobbyists. Freight Farms CEO Rick Vanzura estimates that 80 percent of the company’s customers have no previous agricultural experience.” READ MORE
Would forgiving student debt help business creation? “A student-loan forgiveness plan is a step in the right direction to saving American entrepreneurship, according to NextGen's executive director, Eddie Monroy. Loan forgiveness, he says, doesn't just ease the burden of starting or expanding a new business, ‘but ultimately would provide greater access to wealth building for many Americans who have been saddled with debt—especially women and minorities—helping to create a more inclusive economy.’ Student-loan payments divert capital that could be used for other purposes, such as reinvesting in a growing business.”
“Take the case of Lonny Ruben, who graduated from college with three small businesses already under his belt ... and student loans totaling $156,000. While working at a food distributor, inspiration struck Ruben: Buy up vending machines and customize them for special diets.”
“He launched a company called Bunny James, but to meet rent and his student-loan payments, Ruben had to work two jobs. ‘The business needed me full time, but I couldn't jump because of the loans.’” READ MORE
THE RUSSIAN INVASION
In a besieged corner of Ukraine, a farmer tries to hold on: “Mr. Chaplik owns about 75 acres of land near the city of Sievierodonetsk, where Russian and Ukrainian troops have been battling for control in heavy street fighting in recent days. The countryside around his farm is under almost constant bombardment by Russian forces trying to encircle the easternmost Ukrainian forces and lay siege to Sievierodonetsk and Lysychansk. The roar of multiple rocket launcher systems being fired south of the farm rattled the windows and doors of his home. ‘Don’t worry, those are Ukrainian,’ he said as he gave a tour of his farm.”
“‘They want to be eating grass,’ he said as he walked down the stalls of his 35 dairy cows. ‘But I cannot let the cows loose on this grass because of these bombs, and I am scared they will fall in the bomb craters.’”
“He has had to shrink his business while trying to keep the farm producing and workers fed and paid. With utilities cut off, he runs the milk machines on generators, but can only operate his refrigerators for 12 hours a day.”
“‘But people need to eat,’ he said. ‘I am a businessman. So I am doing my job.’” READ MORE
THE 21 HATS PODCAST
Dashboard: A Gusher of Money: This week, Gene Marks talks us through the State Small Business Credit Initiative, or SSBCI, which is complicated but well worth figuring out. While the actual offerings vary by state, as the name suggests, there is $10 billion on the table in the form of grants, loans, and venture capital that could conceivably help almost any business. Plus: we discuss the dangers of hitting customers with fine-print fees and surcharges, an assessment of New York City’s efforts to eliminate onerous regulations, and Gene makes the case for employee ownership—while explaining why he would never, ever consider an ESOP for his own business.
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If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren