A Business Community Sells for $1.8 Million

The co-founders charge a $99-per-month subscription for access to a private Slack community. They publish a new piece of educational content every week. They host a monthly live Q&A on Zoom. Hmmm.

Good Morning!

Here are today’s highlights:            

• Thumbtack is a growing marketplace for home services.

• Business schools are building AI into all of their offerings (but you cannot eliminate human judgment).

• A new bill in California would give employees the “right to disconnect.”

• A listener to our latest podcast agrees that ultimately, it’s the owner/operator who has to take responsibility for understanding what drives the business.

SELLING THE BUSINESS

This community, with 750 paying members, sold for $1.8 million: “When three co-founders launched an online community for SEO professionals called Traffic Think Tank in 2017, they had their doubts that members would pay $99 per month. But they knew charging for the community – rather than offering it as a free resource – would increase the quality of the members and their interactions. They went for it, and it worked. Years later, Matthew Howells-Barby, Ian Howells and Nick Eubanks were approached by bigger companies interested in buying their community business. But none seemed like the right home for what they’d built.”

• “In 2017, [Howells-Barby] and his two co-founders, who were all members of the Facebook group, launched Traffic Think Tank. They organized it like this: Charge a $99-per-month subscription for access to a private Slack community. Publish a new piece of educational content every week. Allow members to ask them questions directly. Host a monthly live Q&A on Zoom.”

• “They debated whether to initially offer access to the community for free. Free access would bring more people in faster, but charging for access would eliminate spam. ‘I’ll be the first to admit that I was extremely skeptical of the idea that people would pay $99 per month to be part of a Slack community,’ Howells-Barby wrote.”

• “It worked out, though. They limited their community to 100 members at first, and they quickly maxed that out. While they focused on educational content, it became apparent that Traffic Think Tank was really in the business of personal connections. The more connections it facilitated, the more valuable it became.”

• “Eventually they were approached by SEO giant Semrush – which Howells-Barby had advised and which they all respected. Semrush had previously acquired companies such as Backlinko, an SEO training website and newsletter. This time, the partners felt comfortable selling their prized creation. Semrush purchased it in 2023 for $1.8 million in cash, of which $360,000 was to be paid in 12 months and another $360,000 was to be paid in 18 months.” READ MORE

MARKETING

Thumbtack is a marketplace for home services: “It's like the Yellow Pages and Uber mixed into one app built for homeowners, where you can find and hire a professional in your area for nearly anything you need to do in your home. There are vendor reviews from other customers with photos of the completed work, plus you can chat with and book these experts through the app. Thumbtack as a company has been around for more than 15 years, so its database is enormous—there are 300,000 local professionals across the US. Best of all, the app is free; the company charges professionals a matchmaking fee, and it doesn't place any pressure on you to pay them through its app.”

• “Today, Thumbtack is unveiling a new version that evolves the app from a way to find home professionals into a project manager for your home. I've been playing around with the new update over the past week—it's only rolling out for iPhone right now, with Android to come in a few months—but it's already giving me a little more peace of mind.”

• “The best part of the new Thumbtack update, however, is the effort the company put in to make the app more proactive than reactive. You can set a date to receive a reminder to clean the gutters or get recommendations on how often to maintain your appliances—like when you need to flush the water heater.”

• “The new update adds pricing estimates for various projects (even seasonal pricing), so you have a clearer picture before even messaging a professional about a ballpark cost.” READ MORE

Increasingly, influencers are the primary way restaurants find customers: “‘This is a major factor of how consumers and travelers and people that are looking for restaurants to go out to on a Friday night,’ Joleen Zanuzoski, senior director for public relations and marketing at Green Rubino, told the Business Journal. ‘If you look at Gen Z, for instance, or even millennials, those people are getting their recommendations and really sourcing what they’re doing, what they’re buying, where they’re spending money on TikTok and Instagram and YouTube. If your business isn’t showing up on one of those, then there’s a disconnect in your marketing strategy.’”

• “For Seattle influencers, most paid partnerships are with larger brands. Pricing depends largely on how many followers an account has, and the relationship creators develop with firms and restaurant groups. In the Seattle area, influencers can charge up to $2,000 per deal. Still, only about a dozen or so influencers in the area have large enough audiences to receive those calls.”

• “In some states, it can be as high as $20,000, says Crystal Southcote, owner of digital marketing firm Southcote Digital, which works with restaurant groups like Ethan Stowell Restaurants. Those arrangements can come with an array of deliverables, from posts and stories on their social media channels to more traditional marketing assets like high-res photos and videos that restaurants can purchase.” READ MORE

ARTIFICIAL INTELLIGENCE

Business schools are going all-in on AI: “American University’s Kogod School of Business is putting an unusually high emphasis on AI, threading teaching on the technology through 20 new or adapted classes, from forensic accounting to marketing, which will roll out next school year. Professors this week started training on how to use and teach AI tools. Understanding and using AI is now a foundational concept, much like learning to write or reason, said David Marchick, dean of Kogod. ‘Every young person needs to know how to use AI in whatever they do,’ he said of the decision to embed AI instruction into every part of the business school’s undergraduate core curriculum.”

• “American’s new AI classwork will include text mining, predictive analytics, and using ChatGPT to prepare for negotiations, whether navigating workplace conflict or advocating for a promotion. New courses include one on AI in human-resource management and a new business and entertainment class focused on AI, a core issue of last year’s Hollywood writers strike.”

• “M.B.A.s should be using AI to generate ideas quickly and comprehensively, according to Sheena Iyengar, a Columbia Business School professor who wrote ‘Think Bigger,’ a book on innovation. But it’s still up to people to make good decisions and ask the technology the right questions. ‘You still have to direct it, otherwise it will give you crap,’ she said. ‘You cannot eliminate human judgment.’” READ MORE

RETAIL

Amazon grocery stores are ditching Just Walk Out: “Amazon Fresh stores will instead use Dash Carts, which allows customers to use their carts to scan items while shopping, according to a company spokesperson. The Dash Cart technology, which is already used in some Fresh stores, doesn’t require shoppers to interact with a cashier. Major retailers have been weighing how to best handle checkout at their stores. Some have adopted various forms of self-checkout—which can be unpopular among shoppers—only to ditch them years later. Last month, the discount retailer Five Below said it would limit self-checkouts to curb theft.”

• “The Just Walk Out system, which relies on cameras and shelf sensors, was a major innovation in checkout technology when it made its debut years ago. The technology charges shoppers via a smartphone app once they leave the store, a method that was parodied in a 2022 ‘Saturday Night Live’ sketch.”

• “There are currently 44 Amazon Fresh stores in the U.S., 27 of which use the Just Walk Out technology, the company said. The decision to remove the technology was earlier reported by The Information. It will still be used at the convenience-store style Amazon Go locations, as well as at smaller Amazon Fresh stores in the U.K. and some third-party retailers.” READ MORE

REGULATION

A new bill would give California employees the right to ignore off-hour messages: “Assemblymember Matt Haney of San Francisco recently introduced Assembly Bill 2751, which would give employees the right to ignore communications from their employers outside of working hours, barring an emergency or scheduling exception. As of Monday, the bill was re-referred to the Assembly's Committee on Labor and Employment. If passed, the bill would apply to both private and public employers and their employees--except for those covered by a ‘valid collective bargaining agreement.’ It would require employers in the state to create a policy protecting employees' ‘right to disconnect’ and establish ‘non-working hours’ via a written agreement with employees.”

• “The bill is already facing some pushback: Ashley Hoffman, a senior policy advocate at the California Chamber of Commerce, argued in an opposition letter that the bill's definition of an emergency is ‘narrowly defined’ and that there are ‘some positions where compensation is higher because people in those professions are expected to be available more often or be responsive during atypical times.’”

• “Haney told The New York Times that the bill isn't meant to completely restrict longer hours, but rather provide clarity: ‘The problem we have now is the gray area, where an employee is expected to respond all the time when on paper they work a 9-to-5 job.’” READ MORE

HUMAN RESOURCES

Even Gene Marks seems accepting of California’s raising of the minimum wage for fast-food workers from $16 to $20: “One thing is for sure: It’s generally not catastrophic. Even when a business is in New York City or Tukwila, Washington (which has the highest minimum wage in the United States, at $20.29 per hour for large employers and $18.29 for mid-sized ones), they adapt. To these business owners, it’s just another increase in costs, and they respond in kind. How do they respond? Many raise prices. Others cut overhead or limit hours. Those with the means invest in technology to do some of the work that employees once did.”

• “If California raised its minimum wage to $100 per hour, then many businesses would obviously suffer and even shut their doors. But if the state raised its minimum wage by $1, it would have less effect and would likely be absorbed by most. Is $20 per hour too high? Probably not.”

• “I expect fast-food store owners and franchisees in that state to grumble. Still, they’ll figure out how to pay the wage without cutting back too much on hiring or raising their prices too much (already a number of franchise food operators in California have announced that very thing). They won’t be happy, but they’ll stay in business.” READ MORE

INSURANCE

Home insurance rates continue to surge: “U.S. home insurance rates are approaching record highs this year, and Florida is leading the pack by a wide margin. The average cost of coverage in Florida is nearly five times the national average at $10,996, and that figure is expected to rise an additional 7 percent to $11,759 in 2024, according to a report by insurance research firm Insurify. Florida far outranks the top 10 most expensive states. Louisiana ranks second at $6,354, Oklahoma third at $5,444 and Texas fourth at $4,456. The average national rate was $2,377 in 2023, an increase from $1,984 in 2021, and an additional 6 percent increase to $2,377 is forecasted in 2024, according to the report.”

• “Florida had the second largest amount of insured damages last year, or $390 billion, behind Texas at $400 billion. Of the 10 most expensive cities for homeowners' coverage, six are located on the coast of South Florida, with the remaining four on the coast of Louisiana and Mississippi.” READ MORE

LISTENER FEEDBACK

Here’s one response we got to our latest podcast: “It's really easy for people to just see the title ‘CPA’ and assume that they're all seeing numbers wizards. The reality is that they're all specialized in different areas. In the same way you wouldn't see a dermatologist for a heart problem, I wouldn't go to a tax firm for financial consulting. A tax specialist, or an auditor, or a forensic accountant, has their own deep body of knowledge over a specific area. Even most fractional CFO services frequently aren't going to have industry specific knowledge (especially with a niche business like Jay's) to provide true consulting type advice. The purpose of accounting is to provide information to allow management to make decisions.”

• “The key word in there is ‘management.’ There's no substitute for an owner understanding how their business works. Whoever can take that data and turn it into actionable decisions is ultimately the person that's in charge. For a closely held business, there's really no substitute for that being the primary owner.

THE 21 HATS PODCAST

I Took My Eye Off the Numbers: This week, in episode 190, Jay Goltz tells Shawn Busse and Jaci Russo that, while he’s always been good with numbers, he’s never really enjoyed tracking his finances. It’s not what drove him to start a business, and over time, he stopped paying close attention. But now, after seeing his inventory levels and some big expenses get out of control, he’s diving back into the numbers and pretty much serving as his own chief financial officer, something he says he should have been doing all along.

• Plus: Shawn explains how one book and a specialized accounting firm and a monthly routine have gotten him comfortable with his numbers. And Jaci says it took years for her to learn to ignore the accountants who always gave her the same advice: Cut expenses. Instead, she tells us, “We've spent the past probably eight years really right-sizing what we charge. And now I feel like I can breathe.”

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

Thanks for reading, everyone. — Loren