Discover more from The 21 Hats Morning Report
Business Owners Are Feeling More Confident
About two-thirds expect their own business’s revenue to increase next year, but they’re a little worried about everyone else’s business.
Here are today’s highlights:
Selling freeze-dried candy online has become big business.
The SBA is considering lending money to ex-offenders.
For consumers, higher interest rates are finally starting to sting.
In the U.K., two pubs a day are going out of business.
Most business owners are feeling confident: “To compile the index, the researchers surveyed 751 U.S. business owners who run companies with fewer than 500 people. They asked questions about the state of their business, the local and national economy, and their future expectations: 66 percent of small business owners say their business is in good health — nearly a 10-point increase. Seventy-one percent say they expect revenue to increase next year — the highest number since the survey launched in 2017.”
“While small business owners are upbeat about their own company's health, they're less positive about the economy overall. Only 33 percent say the economy is in good health — a 9-point increase from last quarter, but still quite low.”
“A similar pattern is playing out among Americans as a whole, who say the economy's terrible but their personal finances are OK.” READ MORE
TikTok Shop is cracking down on businesses that sell homemade food: “TikTok added new language to its product policies earlier this month for its recently launched e-commerce platform TikTok Shop, boxing out merchants who sell homemade food items like candy. The company prohibits ‘all homemade food products, including but not limited to freeze dried candies, chamoy gummies, crystal candies, or home-baked foods, and more,’ as written in its policy post dated September 13. The company has been taking down products that violated the policy, per an enforcement notification one seller received on Thursday that was viewed by Insider.”
“The policy is having an immediate impact on small business owners who have come to rely on TikTok Shop as a tool to drive sales of products they make at home. ‘A lot of small businesses, they went from hundreds of sales a day to zero sales overnight,’ said Chrystian Linares, a Florida-based TikTok Shop merchant who sells freeze-dried Skittles on the app.”
“Linares, who previously worked as a truck driver logging around 500 miles a day between Orlando and Tallahassee, started selling candy on TikTok Shop about six weeks ago when he discovered he could make money by dehydrating and reselling Skittles purchased off of wholesale sites like BJ's.”
“Linares garnered over 1,400 sales through TikTok Shop in the last month, per documentation viewed by Insider. In the last few days, he began receiving takedown notifications from TikTok stating that his shop had violated its policies. The rule likely means game over for Linares' candy upstart, called Alinby.”
“Freeze-dried candies have become a massive category and a big business on TikTok Shop. Hashtags like #freezedried and #freezedriedtreats have been viewed more than a billion times across TikTok videos. Influencers regularly film videos of themselves chomping on freeze-dried products as they attempt to earn a commission on sales through the app's affiliate program.” READ MORE
The SBA is considering opening its loan programs to ex-offenders: “The proposed rule, published on Sept. 15, would remove various barriers within SBA’s 7(a) and other loan programs that have long kept those with criminal records out of those programs, whether it was questions on the applications themselves or through the screening process. The changes could end up allowing millions of Americans and small-business owners to apply to the program, as estimates say that more than 70 million Americans have some kind of criminal record.”
“The SBA has previously relied on self reporting of previous incarceration from the applicant, but under the new proposal would eliminate those questions. Applicants currently incarcerated or who have previously defrauded SBA or other government programs will still be ineligible for its loan programs.”
“The SBA stressed there is no evidence that people with prior convictions are at any greater risk of default and that asking questions about a criminal history can deter even eligible borrowers.”
“Meanwhile, those with previous convictions suffer from a much higher unemployment rate than the population at large, the SBA said, disproportionately impacting marginalized communities.” READ MORE
Ami Kassar takes a shot at Inc. magazine and alternative lenders: “I almost fell out of my chair when I read a recent article on Inc., all about the virtues and benefits of high-priced alternative lending for businesses, with no discussion about the risks and benefits of going to banks to get financing options that entrepreneurs can afford. If you are curious about the source of this article, it is authored by Oz Konar of Business Lending BluePrint. What is their business? Business Lending BluePrint charges individuals to teach them how to become alternative funding brokers! They are training an army of individuals to put business owners on predatory loans.”
“How does an article like this appear on Inc.? Mr. Konar is a member of the Inc. Masters Program for Inc. 5000 winners, which entitles him to ‘privileges’ to publish on the site.” READ MORE
A Philadelphia restaurant just named to The New York Times list of best American restaurants is closed on weekends: “During and after the pandemic, many restaurateurs felt obliged to tighten hours to manage labor and accommodate their staff’s wishes. But in the case of My Loup — a French-ish bar-restaurant that opened May 1 two blocks from Rittenhouse Square — the chef-owners are also considering their own quality of life. Amanda Shulman and Alex Kemp have made a bold decision: They are serving dinner and drinks from Monday to Friday. Five nights. But no Saturday night madness. No Sunday brunch.”
“‘We wanted time to see our family and friends who aren’t in restaurants,” said Shulman, whose nearby Her Place Supper Club is also closed weekends. ‘It gives us a little more life flexibility, and one day when we have our own family, it might make things a little easier with a traditional weekend-free schedule.’”
“Since My Loup is open Mondays, when many restaurants are closed, the couple expects to attract industry workers. Shulman is focusing on Her Place (‘baby number one’), while Kemp concentrates on My Loup, at 2005 Walnut St.”
“My Loup’s buzz began in December when it was announced, and grew louder in late March when Shulman was named a finalist in this year’s James Beard Awards’ emerging chef category. When the first month of reservations went online April 28, all tables and bar seats were claimed within hours.” READ MORE
The Biden administration will offer work permits to roughly 470,000 Venezuelan migrants: “In a significant concession to New York City Mayor Eric Adams and other blue-state officials, the Biden administration has agreed to make roughly 470,000 Venezuelan migrants eligible for work permits aimed at easing the financial strain on major migrant destinations. Venezuelans who arrived in the U.S. by July 31 will be eligible for the program, known as Temporary Protected Status. It offers them deportation protections and the ability to work legally for at least 18 months.”
“Until now, top officials with the White House and Department of Homeland Security had refused to consider that option, arguing behind closed doors that such a move would ultimately serve as a draw for even more migrants to head for the U.S. border, according to people familiar with their conversations.”
“Adams and officials in other cities who have received large migrant populations, including Washington, D.C., Chicago and Boston, argue that immediate access to a work permit would allow migrants to move out of city-run shelters and support themselves.”
“It isn’t likely that granting Venezuelans TPS will have the desired effect Adams and other city officials are hoping for, though. Processing times for work permits vary but are currently taking anywhere from 10 to 18 months, according to government data.” READ MORE
For many consumers, the higher rates are finally beginning to sting: “The economy has held up relatively well ever since the Federal Reserve started aggressively raising rates early last year. Many households have breathing room because they locked in low rates on their mortgage or car loan before the rate increases started. And in at least one significant way, the high rates can help consumers: Savers can get more bang for their otherwise idle cash. But these higher-for-longer rates are starting to exact a toll on households that need to borrow now, especially for major purchases such as homes and cars. Those who have to rely on credit-card debt, where rates rise along with the market interest rates, are also feeling the bite. In some ways, this tightening is what the Fed wants, because its rate hikes are meant to slow down the economy to curb inflation.”
“Inflation, for the first time in a long time, is stinging less. This summer, wage gains surpassed inflation for the first time since 2021. Price increases have slowed more than expected, while competition for workers has put pressure on employers to raise pay.”
“Consumers have continued to spend, including on travel, restaurants, clothes and other discretionary purchases. Households have drawn down the glut of extra cash they were able to save early in the pandemic. Still, account balances are elevated compared with 2019 levels.”
“The housing market is where the Fed’s high-rate policies have hit Americans the hardest, locking many out of homeownership. High rates can add hundreds of dollars or more to monthly mortgage payments, and prices are still up sharply since the pandemic began.” READ MORE
Two pubs a day are closing in England and Wales: “Wales lost the greatest number of pubs in the first half of the year, with 52 disappearing, while London and the North West lost 46 each. A total of 386 pubs disappeared throughout the whole of 2022. Chris Miles owns the Fleece in Richmond, North Yorkshire, and a few months ago decided to sell up: ‘I just thought, I can't solve this problem, he told BBC News. The 13-bedroom hotel, pub and restaurant business was popular with locals and tourists in the Dales market town.”
“‘It's a three-way squeeze,’ he said, citing staffing, running costs, and taxation as the causes. ‘VAT is the single biggest problem, a fifth of the money we generate we have to pay to HMRC. My last bill was £26,000, and that's for a business that's never made a profit,’ Mr Miles explained. ‘We don't want hand-outs or grants, we just want to keep more of the money we generate.’”
“Currently, firms that pay business rates—which is charged on most non-domestic properties, including pubs, offices, and holiday homes—will see an inflation-linked increase come next April unless there is government intervention.”
“This is expected to add more than 6 percent to bills next year. ‘With energy costs up 80 percent year-on-year in a low-growth, high-inflation, and high-interest rates environment, the last thing pubs need is an average business rates hike of £12,385 next year,’ Mr Probyn said.” READ MORE
THE 21 HATS PODCAST
I Would Have Been a Sub of a Sub of a Sub: This week, Shawn Busse, Paul Downs, and Liz Picarazzi talk about spotting the clients who are more trouble than they’re worth. Liz, for example, is tired of dealing with bureaucracy and being at the bottom of the food chain. In one instance, she was so turned off that she actually recommended a competitor for a job she no longer wanted. As you can see in his illustration below, Paul has a simple test: If it’s easy work for a bad client, okay, fine. But if it’s hard work for a bad client, “Just don’t do it.” Of course, there are times in the life cycle of most businesses when that’s easier said than done, when you have to accept almost any work offered. Those are the tough ones.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren