All Along, We’ve Been Waiting for September

Businesses that expected an economic surge are recalibrating.

Good morning!

Here are today’s highlights:

  • “We will travel for purpose rather than presence.”

  • Should ransomware be illegal?

  • This newsletter contains a Carey Smith quote that is the Carey Smithiest quote you will ever read: “If I had it to do over, I would've sought more advice—assuming I'd found anyone I believed worth listening to.”

MANAGEMENT

Carey Smith, who built and sold Big Ass Fans, tells other business owners to double-down on fast growth: “The outfit I founded and ran for nearly two decades, Big Ass Fans, appeared on the Inc. 5000 for 11 consecutive years. That's a feat matched by few companies. Behind that accomplishment was a deter­mination to increase revenue and put profits back into the business to expand product lines and markets; a firm belief that excessive profits at year-end meant missed opportunities; and a steadfast refusal to accept outside investment. And, honestly, after making the list the first time, I always wanted to climb higher in the rankings the next year. This focus on top-line growth accomplished a couple of important things:”

  • “First, it allowed us to operate the kind of business we wanted, one that delivered quality products and service and that took good care of its people.”

  • “And, second, when we decided to sell, we had plenty of suitors. Private equity firms find nothing more enticing than a company with lots of potential for cost cutting.”

  • “I got my asking price of $500 million, and because of a plan in place to share the wealth, more than $50 million of it went to colleagues. Twenty of them became instant millionaires.”

  • “If I had it to do over, I would've sought more advice—assuming I'd found anyone I believed worth listening to. Maybe they would have told us to acquire more companies, as I would tell my former self today.” READ MORE

PRICING

In the Bay Area, some home sellers are deliberately under-pricing their homes to spur bidding wars: “Nowhere else in America do homes sell for more over asking price than in Berkeley, Calif., where roughly 80 percent of homes sell above the listed price, according to Zillow. In neighboring Oakland, it’s just over 70 percent of homes. Berkeley also has the highest overbid situation in the country, according to Realtor.com, with listings selling for an average of 19 percent over asking. In Oakland, the typical house goes for 11.2 percent above asking.”

  • “Daniel Stea, of Stea Realty Group, which has offices in Oakland and Berkeley, recently listed a home in Rockridge, a neighborhood on the border of Oakland and Berkeley known for its charming Craftsman homes and quick BART commute into San Francisco.”

  • “The house, a 2,400-square-foot, four-bedroom brown-shingle Craftsman, has a large, renovated kitchen and a big backyard with a detached office studio. Mr. Stea listed it for $1.795 million. It sold in August for $3.075 million.”

  • “Homes often sell for so much more than their listed price in the Bay Area because brokers intentionally underprice listings to drum up as many offers as possible.”

  • “The strategy is to create something of a blind auction where buyers try to puzzle out a number that the sellers’ will actually accept and a number that’s higher than all the other offers.” READ MORE

CYBERSECURITY

Would there be fewer attacks if ransomware payments were illegal? “It’s a nightmare scenario. A company gets a notice telling them that hackers have broken into their network and encrypted their data. If the company wants the information back, they need to pay a ransom—or potentially face ruin. Should companies be allowed to pay up and resolve the situation? Or should they leave things in the hands of law enforcement right from the start? Ransomware attacks are increasing in frequency, and the losses from these attacks are skyrocketing.”

  • Yes: “If payments are prohibited, fewer companies will pay ransoms, shrinking the flow of money to the criminals. Reducing the tactic’s profitability will drive attackers away from it.”

  • No: “Making ransomware payments illegal would eliminate one of the few options that victims have to recover their data and get back to work quickly. Time is money. Sometimes paying a ransom is less expensive than withholding one—and being forced to laboriously rebuild an IT system and restore data from backups.” READ MORE

ECOMMERCE

Sellers are ditching Etsy for Shopify: “Insider spoke with six sellers who said they were either leaving Etsy behind for Shopify or using Shopify's suite of apps to bolster sales outside Etsy's marketplace. Sellers described not being able to create a strong brand identity on Etsy, facing competition in search results, and having to pay high fees as some of the top reasons they made the move. Etsy charges listing and transaction fees in addition to fees for optional services like advertising, shipping, and subscriptions. Shopify has its own subscription fees, though it has different cost tiers. Sellers must also pay to own their domain.”

  • “Shopify merchants with a TikTok for Business account can now add a shopping tab to their profiles, the companies announced on August 24. The integration could make Shopify even more appealing to business owners with large followings on TikTok.”

  • “Meanwhile, some Etsy users are feeling unsettled by its new Star Seller program. Starting in September, Etsy said, it will place a ‘Star Se badge on listings from sellers who meet specific criteria: They must respond to at least 95 percent of customer messages, ship at least 95 percent of their orders on time with tracking, and have at least 95 percent of their reviews be five stars.” READ MORE

HUMAN RESOURCES

Perhaps the Great Resignation should not have taken us by surprise: “Research has shown that people tend to quit their jobs after experiencing a ‘turnover shock’: a life event that precipitates self-reflection about one’s job satisfaction. Shocks can be positive, like grad school acceptance or a new baby, or negative, like a divorce or sick relative. Or they can be global catastrophes like Covid-19 that upend every aspect of daily life. The universal nature of the pandemic is a major reason so many are quitting at once.”

  • “‘Most people don’t evaluate their job satisfaction every one of 365 days in a year,’ said Brooks Holtom, a professor of management and senior associate dean at Georgetown University. ‘Those shocks usually happen idiosyncratically for people. But with the pandemic, it’s happened en masse.’”

  • “Historically, the availability of other jobs predicted how often people follow through, and right now the U.S. has a record number of job openings.”

  • “‘It’s a ‘perfect storm colluding against employers,’ said Holtom.” READ MORE

Editor’s Note: I’m going to record a one-on-one 21 Hats Podcast episode with William Vanderbloemen, who really did see the Great Resignation coming. We’ll talk about what he foresaw and how he thinks companies can cope. If you have questions for William about this or other topics, send them to me by replying to this email.

Research suggests that those chance encounters at the water cooler do encourage creativity—but only to a point: “The data shows that in-office work is helpful at one part of the creative process: forming initial relationships, particularly with people outside your normal sphere. In the past year and a half, that hasn’t been happening much, with large shares of American office workers still remote, and the Delta variant pushing some companies, including Google and Ford, to keep offices closed until 2022.”

  • “The research suggests that these missed encounters have an effect, but that the internet has fundamentally changed what scientists once thought about collaboration.”

  • “Bell Labs is the classic example; it gathered scientists across disciplines in a building designed for chance encounters. But now, it’s much easier for people to collaborate and to learn about work being done elsewhere.”

  • “For remote workers, there are apps to try to foster these connections. Donut Watercooler, on Slack, encourages small talk. Some companies have been hosting virtual book clubs or cooking classes. Spark Collaboration randomly matches employees for one-on-one conversations, and organizations have been doing the same thing with Zoom.”

  • “Online tools like Airmeet and Gather allow people to mill around and run into others — all virtually.” READ MORE

Gallup finds that 68 percent of Americans approve of labor unions, the highest reading since 1965: “Between 1936 and 1967, approval averaged 68 percent and included record-high 75 percent approval ratings in 1953 and 1957. Then, from 1972 through 2016, support eased, with few readings over 60 percent. This included the 48 percent all-time low recorded in 2009, the only time approval was below the majority level. Since 2016, approval has steadily increased and is now 20 percentage points above the historical low.” READ MORE

THE COVID ECONOMY

Businesses that expected the economic surge to continue are confronting a new reality: “Swing’s Coffee Roasters reopened one of its two downtown Washington, D.C., cafes in October of last year with just two employees. A second, a block from the White House, was set to reopen Tuesday. Now owner Mark Warmuth said he worries the commuters he was counting on won’t arrive. ‘All along we’ve been waiting for September,’ he said. ‘Now it seems everyone is standing down a little bit to see what will happen with Delta.’”

  • “Few federal agencies have opened their downtown Washington offices beyond essential workers, and many private employers are following suit.”

  • “Mr. Warmuth said he will reopen anyway. He has exhausted most of the federal and state aid he has received and needs to determine whether the downtown cafes can survive.” READ MORE

BUSINESS TRAVEL

Companies are trimming travel budgets for 2022: “To be sure, some road warriors have returned to airplanes, hotels and long lines for airport coffee, although most aren’t making trips as frequently as before and few are traveling internationally on business. Others are champing at the bit to visit clients, return to trade shows and conventions or just see colleagues in different offices. One big problem is that many aren’t in offices. As companies delay reopening offices, clients and colleagues are scattered working remotely.”

  • “HRS Group, a London-based business travel company that helps big companies negotiate discounts at hotels, says it believes business travel next year will be down 30 percent compared with 2019, for example.”

  • “Two-thirds of the travel managers surveyed said tighter budgets will limit who travels and how often.”

  • Food maker Mars, which has 130,000 employees in 80 countries, said it plans to cut its future business travel globally by at least half compared with 2019.”

  • “We will travel for purpose rather than presence,” the privately held company said in a statement. The move is intended to promote employee wellness and meet environmental goals.” READ MORE

THE 21 HATS PODCAST

 Episode 75: I Don’t Pay for Podcasts. Why Would I Pay for Yours? In our most recent episode, Karen Clark Cole, Paul Downs, and William Vanderbloemen start with a discussion of how 21 Hats might finally take the plunge into monetization. We also discuss Karen’s decision to forgo less-profitable revenue, William’s grand experiment of unplugging for seven weeks, and Paul’s attempt to balance personal and company responsibilities. Plus, we consider the impact of The Great Resignation, and we look for lessons to take from last week’s discussion about mental health.

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