A New Way to Sell a Business

Over the last three years, Teamshares has been buying up small businesses from retiring owners and giving their employees a stake in the outcome. In our latest podcast, we explain how it works.

Good Morning!

Here are today’s highlights:

• A convenience-store chain uses YouTube to deter shoplifters.

• Shawn Busse suggests turning the tables when it’s time to close the deal.

• Gene Marks says there’s an inconvenient truth about Salesforce.

• Last year was another big year for business starts.

THE 21 HATS PODCAST

In a bonus episode, Michael Brown, co-founder of an innovative company called Teamshares, discusses how he and his co-founders are bringing a fresh approach to a big challenge. Teamshares has been buying the businesses of Boomer owners who are ready to retire but, in many cases, struggling to sell. Once the business is bought, Teamshares is turning the employees of those businesses into employee-owners, which is intended to strengthen the businesses while also addressing income inequality. So far, starting in 2020 and flying largely under the radar, Teamshares has already bought more than 60 businesses in more than 40 industries, most ranging between $1 million and $5 million in revenue. Along the way they’re learning some intriguing lessons about what it takes to build a business.

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

SOCIAL MEDIA

A Kansas City convenience-store chain is using YouTube videos to deter shoplifters: “Four years ago, Babir Sultan uploaded a video to YouTube that featured two friends stealing Mountain Dew and other snacks from FavTrip, the Kansas City, Missouri-based c-store chain Sultan owns and operates. The three-minute video featuring clips of security footage shows how these individuals stole from FavTrip by pouring a can of Mountain Dew into a 32-ounce drink cup and swiping a snack as they left the store. The video includes humorous voiceover commentary from Sultan. ‘Little does she know, she could have gotten the Mountain Dew from the [soda] fountain,’ he says in the video. At the time the video was uploaded, FavTrip’s YouTube channel, which had about 300 subscribers, mainly included sketch comedy videos aimed at promoting the store and its items.”

• “Fast forward to 2023, and FavTrip’s YouTube channel has nearly 78,000 subscribers. The ‘Dew Shoplifter’ video now has about 4.2 million views. ‘We make it transparent that we’ll put you online if you steal from us,’ Babir said in an interview.”

• “‘A lot of the time, people post pictures of shoplifters, so we did that for a little while,’ he said. ‘It started as, Hopefully [the shoplifter] sees the post and doesn’t come back.’”

• “Everything changed when Sultan shared a video instead of a picture, which he posted on Facebook. The video got so much engagement that he decided to expand the concept, eventually creating videos with background music, quirky editing to point out what people have stolen, and his own comedic commentary.”

• “Shaming shoplifters and uploading their exploits for thousands of viewers to see has helped deter theft at FavTrip stores. ‘It has helped our business,’ Sultan said. ‘[Shoplifters] even come back and say, Take my video down and I’ll pay for what I stole.’” READ MORE

SALES

Shawn Busse on closing the deal: “This isn’t an original idea. But I tried it today. Results were…amazing. Here it is: As we approached the finish line for bringing on a new client, I asked a seemingly simple question: ‘Why Kinesis?’ Traditional salespeople focus on CONVINCING the customer why they should choose them. I’ve never liked this approach. In fact, most people I know can’t stand how persuasion can easily become ‘pushy.’ Great sales should be an exercise in mutualism; both parties should see compounding value. By asking a client why they decided to work with us, I’m looking to affirm they know what we offer, what they expect, and why they appreciate us. It moves the relationship from a transaction to a partnership. And, it helps immensely with client tenure.” READ MORE

SMALLBIZ TECH

Gene Marks says Salesforce’s recent financial troubles expose an inconvenient truth: “T\he cost of their software cannot be justified by most of their customers. Salesforce is not cheap. For sales capabilities alone pricing starts at $25 per month per user, but that’s for the bare-bones ‘Essentials’ package. Most businesses that want to take advantage of workflows, pipelines, and forecasts will want to use the Professional version, which is $75 per month per user. Many of my clients want advanced reporting and 24/7 support from the vendor which can only be accessed from the Enterprise version which costs $150 per month per user. That’s $36,000 a year for a sales team of just 20 people.”

• “It’s a pretty hefty fee. And that’s just for sales. If you want the ability to track service calls or to perform marketing campaigns you’d have to subscribe to additional modules which run anywhere from $150 per month to…well… you’ll just have to ‘call us for pricing’ where you can be guaranteed to get the hard sales pitch from an overly eager and slightly desperate sales rep fighting for their commission.”

• “If your company desires service (as most do) then that’s another ballgame. CRM software providers love saying how ‘user-friendly’ their products are. But the reality is that the customers who subscribe aren’t CRM experts and need outside consulting help for setup, implementation, integration, customization, and training. ... There are many other great Salesforce consultants. But these too aren’t cheap.”

• “I understand that you get what you pay for and Salesforce is truly the Lamborghini of CRMs. But, other than a minority of companies that have these needs, the reality is that most small and mid-sized companies — who make up the lion’s share of American businesses — require an intermediate level of CRM features to help them grow.” READ MORE

RETAIL

Macy’s is going small: “In place of large department stores, Macy’s is rolling out a concept aimed at being more scalable. Gennette is focused on ‘off-mall, small-format’ stores that can be placed in open-air shopping malls or strip centers. Last summer, the company announced two versions, Market by Macy’s and Macy’s Backstage (an off-price concept), would open in a handful of markets. If those concepts prove successful, the company can rapidly scale across the country, Gennette said. The brand currently has ‘a slew’ in the pipeline, waiting to be announced, he said. Ideal locations would be shopping centers with 2 million to 3 million visitors a year with stores measuring about 30,000 square feet. Initial markets include Dallas, Texas, and St. Louis.”

• “Since 2016, the company has shuttered 107 stores, with four more closures announced just last week, [CEO Jeff] Gennette said during the National Retail Federation’s annual conference held this week in New York City. By the end of 2023, the company will have closed about one-fifth of its total stores in a three-year time span.” READ MORE

THE ECONOMY

Over the past six months, inflation has returned to pre-pandemic levels: “The inflation benchmark, measuring price growth over a year, hit a 40-year high in June after months of sustained price increases. Since then, monthly gains have slowed. While December 2022 prices were up 6.5 percent from a year earlier, a Wall Street Journal analysis of Labor Department data indicates that annual growth has eased to levels that existed before the pandemic. Inflation observed during the past six months would extend to prices rising 1.9 percent over the course of a year, close to the average annual rate of 1.7 percent between 2010 and 2020.”

• “Generally inflation has slowed, but food-price inflation has been persistently elevated. Egg prices, for instance, grew at a 21 percent a year rate since January 2020, but have seen inflation jump to a 68 percent annual rate since June.”

• “Meanwhile, ground beef had average inflation of about 6 percent from 2020 through 2022, but prices have fallen recently and would be 4.4 percent cheaper a year at the rates recorded in the past six months.” READ MORE

And, yes, we have hit the debt limit: “At stake is the fate of the U.S. economy, which could face a financial crisis and fall into a deep recession if lawmakers cannot reach an agreement. Among the looming questions is when the United States will hit the so-called X-date — the point at which the government can no longer find creative ways to stay beneath the $31.4 trillion debt limit and will need to borrow more money or fail to pay its bills. The other big question: Will Congress agree to raise the borrowing cap? So far, House Republicans have vowed to oppose any increase in the debt limit without spending cuts. President Biden has said the debt limit needs to be raised without conditions. That has set up what could be a protracted fight to ensure that the United States does not default on its debt.” READ MORE

STARTUPS

Last year was another big year for business starts: “Americans submitted five million new small business applications in 2022, a notch behind the 5.4 million applications filed in 2021, the most popular year on record, according to data released by the U.S. Census. The Census publishes monthly data on business formation applications, with July 2004 being the earliest month this data became available.”

• “The rate of entrepreneurship over the past two years was likely goosed by a number of factors including historically low interest rates, pandemic-fueled layoffs, increased personal savings rates and the Great Resignation.”

• “And while more Americans are entertaining entrepreneurship, their success itself isn't guaranteed: a long cited statistic suggests around 90 percent of startups fail within a decade of launching, according to research from the Startup Genome, a San Francisco-based policy advisory and research organization.” READ MORE

THE 21 HATS PODCAST

I’ve Always Been Afraid to Raise Prices: This week, in episode 139, Jay Goltz, Dana White, and Laura Zander have a wide-ranging conversation that starts with pricing. Do you set prices based on what you think the market will bear? Or do you set prices based on your own rising costs and what you need to charge to make a profit? And how much profit should a business expect to make? Along the way, the owners also discuss why Laura wants to keep buying businesses (don’t tell her husband, Doug), what Dana needs to do to get her new salon open at Fort Bragg, and why both Dana and Laura are going all-in on influencer marketing. Jay, on the other hand, isn’t entirely convinced that social media marketing works for his picture-framing business.

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

Thanks for reading, everyone. — Loren