'Am I Buying Myself a Job?'
Michael Girdley analyzes a listing for a local-services business that makes a healthy profit on pest control, lawn care, and well-drilling.
Good Morning!
Here are today’s highlights:
Give that chabot a raise! At an apartment complex in Dallas, the new super is getting rave reviews.
A judge has rejected the $30 billion swipe-fee settlement.
It’s all happening again: Supply-chain issues and shipping costs are rising.
It could be a long time before car dealers get back to normal.
BUSINESS FOR SALE
Michael Girdley analyzes a listing for a local-services business in Florida with $2-plus million in EBITDA: “With this business, you get pest control, lawn care, and well-drilling services. Diversifying is great, because you’re never too dependent on any one market. Then there’s the track record. Any business that’s been running for 51 years probably has some runway left. And the fact that it looks like they’re based in a relatively small town means they likely have a niche market advantage. I like seeing steady financial growth, too. Of course, you’d want to look at the numbers more closely, but it looks like things are trending in the right direction.”
“The grab-bag of services is also a downside, for a couple of reasons: First, it complicates your focus. With all those revenue streams, you’ll constantly have competing priorities. Decisions like ‘Where should I deploy this capital?’ suddenly get a lot harder. Then there’s all the licensing. You need to have the paperwork for all these different verticals. Then there’s all the training and equipment.”
“I’d definitely want to know the breakdown of each service line. Is this 80 percent well-drilling, 10 percent pesticide, 10 percent lawn care? Or am I basically buying a landscaping company? I want to know what game I’m getting into.”
“And of course, there’s the question I always ask: Am I buying myself a job? How involved is the current owner in the day-to-day operations? Am I out there digging wells myself?”
“I think somebody's going to look at this and think it's pretty attractive. Because at first glance this seems like a mess, but it’s actually a pretty good countercyclical approach to a services business.” SUBSCRIBE HERE
ARTIFICIAL INTELLIGENCE
The building’s super is an AI bot: “The new maintenance coordinator at an apartment complex in Dallas has been getting kudos from tenants and colleagues for good work and late-night assistance. Previously, the eight people on the property’s staff, managing the buildings’ 814 apartments and townhomes, were overworked and putting in more hours than they wanted. Besides working overtime, the new staff member at the complex, the District at Cypress Waters, is available 24/7 to schedule repair requests and doesn’t take any time off. That’s because the maintenance coordinator is an artificial intelligence bot that the property manager, Jason Busboom, began using last year. The bot, which sends text messages using the name Matt, takes requests and manages appointments.”
“The team also has Lisa, the leasing bot that answers questions from prospective tenants, and Hunter, the bot that reminds people to pay rent. Mr. Busboom chose the personalities he wanted for each A.I. assistant: Lisa is professional and informative; Matt is friendly and helpful; and Hunter is stern, needing to sound authoritative when reminding tenants to pay rent.”
“The technology has freed up valuable time for Mr. Busboom’s human staff, he said, and everyone is now much happier in his or her job. Before, ‘when someone took vacation, it was very stressful,’ he added.”
“The technology is so good at carrying on a conversation and asking follow-up questions that tenants often mistake the A.I. assistant for a human. ‘People come to the leasing office and ask for Elise by name,’ Ms. Song said, adding that tenants have texted the chatbot to meet for coffee, told managers that Elise deserved a raise and even dropped off gift cards for the chatbot.” READ MORE
MARKETING
Gene Marks talks about how to work a trade show: “Companies that are committed to doing shows know that it’s not usually a one-off thing. Planning needs to be done as much as six months in advance before exhibiting, and it often takes years of participation before an acceptable return-on-investment can be achieved. ‘There’s nothing to compare with meeting people in person,’ said Ryan Butler, a managing partner at Grapevine Visual Concepts, a trade show booth design firm based in Southampton. ‘But you can’t expect to go into a trade show and walk away with a million dollars right away. It takes time to build relationships and letting people know you’re a player in your industry.’”
“Butler said that trade show booths can cost anywhere from a ‘few thousand to hundreds of thousands of dollars’ to build, deliver, set up, maintain, troubleshoot, and store for the future. One way to mitigate these costs is renting a booth, instead of building one. ‘Renting has become more popular as costs have risen,’ said Butler. ‘Instead of spending $80,000 to build a booth, you can rent one as little as one third of the price and then return it when you’re done.’”
“Robert Aibel, who owns Moderne Gallery in North Philadelphia, has exhibited in countless arts and trade shows over his more than three decades in the business. He’s learned that it’s important to stand out. ‘I tend to lean on eye candy,’ he said. ‘Your display needs to have things that immediately catch people’s attention so that they can be drawn in to look at other products.’”
“Aibel used to encourage visitors to sign up on mailing lists, but then found that, although they were interested, many were not actual buyers of his art. He also offers business cards to people that visit his booth, but only follows up if he senses that they’re serious. ‘If they’re serious, they’ll get back to us. If they don’t then it’s not worth our efforts,’ he said. ‘In the end, trade shows are a gamble.’” READ MORE
PAYMENTS
A judge has rejected the $30 billion swipe-fee settlement: “The decision jeopardizes an agreement reached in March that was meant to end two decades of litigation related to swipe fees, which card companies charge retailers on each purchase a customer makes. U.S. District Judge Margo Brodie of the U.S. District Court of the Eastern District of New York said in a memo that she was ‘not likely’ to grant approval to the final settlement and rejected a request for preliminary settlement approval. Brodie ordered the plaintiffs to confer and respond to the ruling by Friday. Visa and Mastercard will have to either renegotiate the settlement with merchants or go to trial.”
“Retailers typically pay between 1.5 and 3 percent in swipe fees on every customer transaction to credit card companies. The settlement would have required the average swipe fee to fall by at least 0.04 percentage points for three years and remain at least 0.07 percentage points below the current average for five years. The settlement also would have prevented credit card companies from increasing swipe fees until 2030.”
“The settlement opened the door for credit-card companies to either increase other fees for merchants to make up for lost revenue or wait until the settlement’s timeline expired to hike them again, said Stephanie Martz, the chief administrative officer and general counsel for the National Retail Federation, a trade group for retailers.”
“‘We didn’t think [the settlement] accomplished anything,’ Martz said. ‘It’s up to Visa and Mastercard now. If they want to come back and really address the problems that we have identified for the last 20 years, we are absolutely open to it. But if not, we’ll see them at trial.” READ MORE
LOGISTICS
Is the supply-chain thing happening again? “The intensifying upheaval in shipping is prompting carriers to lift rates while raising the specter of waterborne gridlock that could again threaten retailers with product shortages during the make-or-break holiday shopping season. The disruption could also exacerbate inflation, a source of economic anxiety animating the American presidential election. If the supply chain disturbances of the pandemic proved anything, it was this: Trouble in any one place tends to ripple out widely.”
“‘I’m lovingly calling the market now Covid junior, because in a lot of ways we’re right back to where we were during the pandemic,’ said [Stephanie Loomis, head of ocean freight for the Americas at Rhenus Logistics]. ‘It’s all happening again.’”
Since October, the cost of moving a 40-foot shipping container from China to Europe has increased to about $7,000, from an average of roughly $1,200, according to data compiled by Xeneta, a cargo analytics company based in Norway.”
“It now costs over $6,700 to transport a 40-foot container from Shanghai to Los Angeles, and nearly $8,000 for Shanghai to New York. As recently as December, those costs were near $2,000. ‘We haven’t seen the peak yet,’ said Peter Sand, Xeneta’s chief analyst.” READ MORE
TRADE
Could India be the new China? “In a global marketplace reshaped by volatile forces — not least the animosity between the United States and China — India shows signs of emerging as a potentially significant place to manufacture products. Multinational brands that have for decades relied on Chinese factories are expanding to India as they seek to limit the vulnerabilities of concentrating production in any single country.”
“India’s manufacturing growth remains nascent and tenuous. In its nearly 80 years as an independent nation, the country has typically been ruled by stultifying bureaucracy, ardor for self-sufficiency and disdain for international trade. Prime Minister Narendra Modi has altered that perception, winning plaudits from business leaders for streamlining regulations and championing industry.”
“‘If Trump gets in again, he’s going to finish off what he started,’ said Dov Shiffrin, a representative for Yukon Glory, a barbecue accessories company that manufactures in China. ‘India is the wave of the future,’ he said. ‘They’re going to be the next China.’” READ MORE
CYBER SECURITY
Car dealers are still struggling after the cyber attack: “Car buyers and dealers are grappling with the shutdown of the retail software provider, which has left nearly 15,000 car dealerships across North America struggling to provide services to customers and scrambling to find temporary analog solutions to operate. CDK says it’s working on restoring its systems and expects them to be back online in several days, but in the interim, customers and dealership employees remain beset by long wait times, delays – and missed chances to make or save money.”
“A CDK Global system outage has affected nearly every aspect of the Mazda dealership in Seekonk, Massachusetts, where Ryan Callahan is general sales manager. He says it won’t be a simple fix. ‘The financial impact it will directly have on us will take months to correct, if not years,’ Callahan said.”
“Midway Automotive uses a CDK product to register cars with the Massachusetts Registry of Motor Vehicles. Owner Michael Deveney says that after the shutdown on Wednesday, the dealership started sending customers to their local RMV office in order to register their cars in person after purchase.”
“‘That was up until Thursday. Then customers started being told that (the RMV) wasn’t taking any walk-ins,’ he said. ‘They were probably getting flooded with customers and started turning people away.’” READ MORE
HUMAN RESOURCES
Down North Pizza continues to thrive hiring formerly incarcerated workers: “At Down North Pizza, which debuted in 2022 and is located in north Philadelphia, [Muhammad] Abdul-Hadi goes out of his way to hire formerly incarcerated people. Why? ‘Because recidivism plagues this part of North Philly and I wanted the business to be a benefit to the neighborhood,’ he responds. He himself was previously incarcerated. Abdul-Hadi tapped his own money to open Down North Pizza; he has no investors or partners. His pizza shop covers 1,200-square feet and accommodates 8 to 10 people.”
“Everyone of his eight employees is formerly incarcerated. And each does a variety of tasks from making pizza to serving customers. What special skills from an employee does he require to hire a former prisoner? ‘As long as they are willing to learn, we are willing to give them a shot,’ he replies. Once a staff member is hired, they go through training that involves learning culinary skills and life skills training as well.”
“People who spend time in prison are exposed to so many setbacks that they learn to be ‘resilient,’ he explains. They learn to restore their mental fortitude. And once they are released from prison, they become in Abdul-Hadi’s view, ‘the most dedicated and responsible people.’”
“How does he balance his mission of doing good, with the capitalistic needs to make a profit at a pizza shop? Abdul-Hadi replies that ‘You don’t have to be one or the other. You can make money and do good. All I’m doing is investing in people,’ he says.” READ MORE
THE 21 HATS PODCAST
This Is Not How This Ends: This week, we bring you what we’re calling an Entrepreneurial Fish Bowl with Chris Hutchinson. As you may remember, we recorded one of these at our 21 Hats Live event in Fort Worth, where I shared some of my challenges trying to build 21 Hats and got feedback from the group. We recorded that conversation and turned it into a podcast episode. This time, we’re doing the same thing except it is Jaime Echt, founder and CEO of The Crafters Workshop, who explains her challenges to a virtual group of 21 Hats entrepreneurs. As you’ll hear, Jaime’s challenges are real: Her sales are down. Her customers are aging. Her lease is up. And she’s not sure what she should do next. We’re going to see if a group of 21 Hats Founding Members can offer some support and advice.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren