Airbnb for Cars?
Entrepreneurs are using Turo and Getaround and even their own websites to compete with the big rental companies.
Good Morning!
Here are today’s highlights:
Don’t want to use your house as collateral? You won’t get any sympathy from Ami Kassar.
Your periodic reminder: Those ads you’re hearing about the ERC are probably scams.
There’s a slice of commercial real estate that’s actually doing well.
Southwest is revamping its schedules because of the new patterns in business travel.
OPPORTUNITIES
Here’s how some are competing with the rent-a-car giants: “Small-time entrepreneurs are amassing vehicles to rent out through car-sharing services such as Turo and Getaround, or their own websites. They aim to take on giants including Hertz and Avis Budget—assuming they can master the difficult logistics of the business. One owner said he had to retrieve a car that was stolen, driven all the way up the West Coast and abandoned at the Canadian border. Another rented out a car that was involved in a shooting. Still another said a customer totaled a Maserati by driving it into a wall.”
“‘It can be tough if you don’t know what you’re doing,’ said Jerome Mends-Cole, who rents out more than a dozen Teslas on Turo and his own website in Sacramento, Calif. ‘People look at it as a get rich quick thing, or a set it and forget it.’”
“It usually isn’t. The costs of parking, cleaning, insurance, and financing can quickly add up. Vehicles need to be picked up, dropped off, maintained, and repaired. The expenses can quickly outpace any revenue.”
Alex Zimmer got into the business when he started renting out a van that he wasn’t using for his other business of selling items on Amazon.com. Now he owns about two dozen vehicles in San Diego and Miami and manages roughly 70 for others. He tries to book much of his business privately, but also rents cars through Turo.”
“He has started selling a mentorship program to teach people the ins and outs of the business. He charges $2,000 for three months.” READ MORE
FINANCE
Ami Kassar has no sympathy for business owners who refuse to guarantee an SBA loan: “The rule is simple and appropriate. Anyone who owns 20 percent or more of a company must personally guarantee an SBA loan. If you think about it, if the U.S. taxpayer is guaranteeing the loan, the entrepreneur should also, or we would have a free-for-all on our hands.” READ MORE
TAXES
The IRS is warning businesses to be careful about claiming the employee retention credit: “The misstep involves a provision in the ERC for businesses that had a critical supplier shut down during 2020 or 2021. In specific cases, businesses that had a supplier shut down by a governmental order and could not get the part elsewhere would be eligible, but a new IRS memo stresses how rare that would be. That memo includes five separate possible scenarios in which businesses were impacted by Covid-19 because of a supplier but would not qualify, including supply-chain bottlenecks, shortages of needed supplies, or having to switch to another supplier to avoid delays. Only government-ordered shutdowns of a critical supplier counted, the memo said.”
“It seems the IRS continues to worry about small-business owners getting in over their heads with the ERC. It issued yet another notice on how to spot potential ‘scams’ and warning signs for ERC services providers — sometimes called ‘promoters’ — who are not trustworthy.”
“The IRS also warned of aggressive marketing, including ads appearing ‘almost anywhere’ such as radio, television, the internet, and phone calls or text messages. It's the latest in a series of increasingly specific notices to small-business owners to watch themselves when it comes time to decide to pursue the ERC.”
“Businesses actually have until April 15, 2024, to get their ERC applications in for any quarter in 2020. Businesses would have until April 15, 2025, for all quarters of 2021.” READ MORE
HUMAN RESOURCES
Some businesses are still paying signing bonuses: “American businesses continue to hand out signing bonuses far more than they used to before the pandemic, even as wage growth cools down, according to job listings service Indeed. While it’s fallen slightly, the share of jobs with a signing bonus remains three times higher than it was in early 2020, Indeed said in a research note. Roughly 5 percent of all posts offer some kind of incentive, and the number was sharply higher for jobs requiring more in-person work, like nurses and medical technicians.”
“The numbers show how companies still face tough competition for talent in a labor market where U.S. workers have plenty of options, even as the Federal Reserve seeks to cool things down. Signing bonuses allow employers to lure workers without being locked into paying higher salaries.” READ MORE
Yes, Covid cases are up: “If you are surprised to learn that your neighbor, co-worker, or kid’s best friend just tested positive for Covid-19, don’t be. Measures of Covid rates including virus levels in wastewater, ER visits, test positivity, and hospital admissions are increasing nationally, according to the most recent Centers for Disease Control and Prevention data. The good news is that we are starting from very low rates.”
“One possible factor: Heat waves are sending people fleeing for air-conditioned indoor spaces, where Covid transmits more easily compared with outside. Summer travel might also play a role, as people crowd into airports and bring their germs along with them crisscrossing the world.”
“In Houston, wastewater measures have tripled over the past three weeks, says Ostrosky at UTHealth Houston and Memorial Hermann. ‘That’s always a precursor to what we’re going to be seeing clinically,’ he notes.” READ MORE
RETAIL
Hybrid work has been good for strip malls: “With investor anxiety rising about types of commercial property from shiny office buildings to self-storage facilities, the low-slung structures are a rare bright spot. Retailers want to stay close to where customers are spending more time these days: their homes. The leased occupancy rate at strip center real-estate investment trusts stood at 95.3 percent as of the first quarter, a level last reached about eight years ago, according to real-estate advisory firm Green Street. Physical occupancy was 92.4 percent, right around where it was pre-pandemic.”
“One reason for strip malls’ strength is the widespread shift to a flexible working environment, which means consumers are spending more time at home rather than city centers where their offices are.”
“Strip malls are no bargain, but, given their strong balance sheets, it might take a plunge in retail spending, a mass migration back to the office, a sudden overbuild of strip malls or a sharp increase in interest rates to throw them off their foundations.” READ MORE
BUSINESS TRAVEL
The airlines are adjusting to the new patterns in business travel: “Appetite for travel has roared back in the past two years as pandemic-era restrictions began to fall away, and airline executives have reported soaring demand. But carriers are still navigating what they say might be long-term shifts in who is traveling, when and why. The big companies whose employees once filled weekday flights, often paying top dollar for last-minute tickets and premium seats, aren’t back in full force. Leisure travel, and an emerging type of trip combining pleasure and work, have taken on more importance.”
“Southwest will pivot from some short-haul routes aimed at business travelers to longer routes with more potential leisure traffic. And it said it would shift some flights from the early morning or late night hours, favored by road warriors jetting to and from meetings.” READ MORE
STARTUPS
From Burger King to a plant-based meat business: “The man who played a pivotal role in creating the plant-based Impossible Whopper at Burger King has launched a new plant-based meat alternative company in Phoenix with the financial backing of some major names in the state’s business community. Earlier this summer, Michael Salem, the former head of culinary innovation at Burger King and the kitchen leader of comedian Kevin Hart’s Hart House vegan concept, started Recreate Foods and decided to base it in Phoenix. The company describes its product as ‘culinary-forward chicken alternatives that deliver a better flavor experience than big-name competitors and the traditional animal protein.’ The product will be packaged in many of the typical forms that chicken is found in grocery stores – breaded and unbreaded filets, tenders, nuggets, and ground.”
“While there are several competitors in the plant-based meats category, Recreate said it differentiates itself by being committed to the culinary aspects of the food and not making the science the most important part. The company claims its plant-based chicken is made by chefs, for chefs.”
“Currently Recreate Foods is only available wholesale for restaurants and chefs, but the company said it is currently working on developing a distribution plan for grocery retailers and ecommerce.” READ MORE
A Bill Gates-backed startup is making batteries to help factories transition to green energy: “Giant factories that produce textiles, food, chemicals and cement require massive amounts of energy. They can use power from wind and solar, but because those sources of energy are intermittent and not always nearby, they require large and very expensive batteries. Now, companies such as Form Energy, AtmosZero and a Silicon Valley-based startup Antora Energy are tackling the challenge with more affordable battery technology. ‘We’ve developed a new class of battery, which is a thermal battery, which stores energy as heat instead of as electrochemistry or electrochemical bonds,’ said Justin Briggs, chief operating officer at Antora. ‘Because of that, we’re able to store energy at much lower costs.’” READ MORE
THE 21 HATS PODCAST
Escaping the Valley of Death: This week, Shawn Busse tells Jay Goltz and Jennifer Kerhin that he’s realized that his business, too—like Jennifer’s—is stuck in the valley of death that we first discussed a couple of episodes ago. Shawn’s realization prompts a discussion of what it takes to cross the desert and get out of the valley. We also have a surprisingly entertaining and enlightening conversation about insurance that makes clear why you should occasionally review what policies you have and why you have them. “I have something called directors insurance,” says Jennifer, “and I don't really even know what that is.” Shawn notes that he found a company that helped him reassess several of his insurance lines. “What I like about that,” he told us, “is that while insurance brokers are incentivized to oversell you, because they make commissions,” this company sells its expertise and not policies.”
“Plus: we start the episode with Jay explaining why binge-watching HBO’s Succession brought back all of his worst nightmares about owning a family business.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren