Clients and Taxes and Bears, Oh My!
In our latest podcast episode, the owners bring us up to date on some unusual challenges—or, just another routine week in entrepreneurland.
Good Morning!
Here are today’s highlights:
Dan Kahn writes movingly about helping his father sell his business and what he’s learned from the long line of entrepreneurs in his family.
Even the smallest of businesses are using “stay-or-pay clauses” to keep employees.
Or maybe offering pet insurance is a better way to retain employees?
Amazon will train your employees in artificial intelligence. For free.
PROGRAMMING NOTE
The Morning Report will return on Monday. In the meantime, have a wonderful Thanksgiving. We are extremely grateful that you choose to spend time with us.
The Grizzlies were up to the Citibin challenge, but was it a fair test?
THE 21 HATS PODCAST
Clients and Taxes and Bears, Oh My! This week, Jaci Russo explains how she put an end to her eight-month, new client drought. Jennifer Kerhin takes us through the bureaucratic nightmare of managing remote workers based out of state (“That is a headache that I don't wish on my worst enemy,” says Jaci, who has found a way to sidestep the problem). And Liz Picarazzi brings us up to date on her ongoing struggle to get her trash enclosures certified as bear-resistant. The common thread to these challenges may lie in these two questions: When is continuing to fight the good fight the definition of entrepreneurship? And when is it the definition of insanity? Plus: Why does it cost so much to exhibit at a trade show?
And did you know that as recently as 35 years ago, there were still laws on the books requiring women to have a male relative cosign on a business loan? Those laws are now gone, but Jaci, Jennifer, and Liz can all attest that that kind of paternalism is very much alive and well.
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SUCCESSION
Dan Kahn writes about how the many entrepreneurs in his family have watched their fathers and learned what not to do: “My grandfather saw what happened with HIS father and vowed to walk a different path. He was thrifty and stayed in the same small house with my grandmother for over 50 years, but retired in his early 60s… bought an RV, a fishing boat, etc. But his health wasn’t great, and he didn’t really have a hobby to keep his mind busy. So, he started fading not long after retirement. He stayed with us for many years after that but was never quite the same. He spent huge amounts of time sitting in a La-Z-Boy just watching TV.”
“My dad went to work in the family business in the mid-1960s. For a time, they were one of the biggest residential HVAC dealers in Southern California and their billboards and trucks were everywhere. Top of the world. Because of what he witnessed with HIS father, my dad vowed he wouldn’t retire. He didn’t want to be the guy in the La-Z-Boy.”
“But I think he held on a little too long, and doing business through the pandemic really put him through his paces. He’s now 76, the business is still stable, but he doesn’t have the energy he once had. After a few health scares, he asked me to help him sell the business. After nearly six months of work, stress, planning, pitching, financial analysis, late night and early morning conversations and, honestly, a few tears … we closed the deal this week.”
“I suppose this post is less about succession, and more about fathers and sons and that unique relationship. My forebears were all entrepreneurs, and each of them made critical decisions about retirement and succession based on what they’ve learned not to do from what they observed in their own father’s experience. I am 44 and my business is not only healthy but we are at the top of our game right now.”
“My plan includes multiple life insurance policies to protect my family and cover any business debt in the off chance that I get hit by the proverbial bus. We have been in a growth phase and are building a second agency over the last two years, both of which have vacuumed up most of our net profit. My plan starting next year is to refocus on profitability and stability, not growth. Be able to spend more time with my family while I’m here and the kids are young enough to want to spend time with me.” READ THE WHOLE THING
ARTIFICIAL INTELLIGENCE
Gene Marks says help is coming for companies trying to access their own data on multiple platforms: “I have a manufacturing client that collects data in their order entry and inventory systems as well from sensors on some of their equipment on the shop floor and video cameras on their forklifts. I know many businesses in the service industry that are storing information in separate systems tracking time, materials, expenses, job progress, client communications and contracts. I have distribution clients that are managing their warehouses through various software to track inventory, security, temperatures, safety and product movements. And I personally know a dozen construction companies that are using multiple systems used for project management, accounting and job costing as well as estimating and design.”
“Regardless of the industry, all of these companies have files and information in their payroll and customer relationship systems. All of them use either Office 365 or Google Workplace. There’s data everywhere. How do you chat with it all in one place? That’s the challenge being addressed by Constructable and other startups like it.”
“Constructable’s cloud-based modeling is first pulling together information from the documents, spreadsheets, and emails stored in Office 365, Workplace, and Procore — a popular construction industry management application — into one place for its customers to converse, query, and get the information they need to estimate, run jobs, communicate with customers, and manage their business.”
“‘We’re really focused on commercial general contractors, and especially project managers,’ says Emma Nazim, one of the company’s three co-founders. ‘We’ve talked to a number of people who are just spending hours a week trying to answer questions that they need to keep the project moving forward and also to make sure that they’re preventing mistakes.” READ MORE
Can A.I. make banks better at lending? “A.I.-powered models can incorporate far more data points than traditional credit scoring, from utility payments and rental histories to social media posts. And the same fraud-detection systems that protect customers can be turned on applicants to look for anomalies in their data. Once an application is processed — and A.I. helps process many, many more applications — tools can create personalized terms and rates that match the customer’s behaviors, and then they can monitor the entire portfolio for exposure by the second.”
“Last year, JPMorgan Chase — whose chief executive, Jamie Dimon, is as rapturous about artificial intelligence as he is dubious of cryptocurrency — invested hundreds of millions of dollars in A.I. and claimed a profit of about $1.5 billion. It’s reportedly at work on an AI tool to help investors pick stocks.”
“‘A.I. is penetrating every nook and cranny of these banks,’ says Alexandra Mousavizadeh, chief executive of Evident, a research company that measures A.I. adoption in financial services. ‘They’re using it for credit decisions, fraud detection, personalization, operational efficiency, trading, you name it.’”
“‘If I’m 28 and female or a minority, I don’t want a middle-aged white dude determining whether I’m gonna get my mortgage or credit line,’ says Mousavizadeh. ‘The data shows people, particularly young people, trust algorithmic decisions to be less biased than human ones.’” READ MORE
Amazon is offering free A.I. classes: “Amazon.com is launching a program to train millions of workers in artificial-intelligence skills as the tech giant seeks to gain an edge in a pitched battle for talent with Microsoft, Google, and other companies. Named ‘AI Ready,’ Amazon’s new program plans to train at least two million people by 2025 on basic to advanced A.I. skills, including how to make use of the generative A.I. technology that has powered language-based models such as ChatGPT. Amazon aims to fill a gap in A.I. talent as it has sought to generate interest in its generative A.I. efforts after falling behind rivals. In launching its program, Amazon is adding to a broader effort by the corporate world to get workers in various fields trained in A.I.”
“The training is centered on eight online courses that focus on generative A.I. and target people with both tech and tech-adjacent roles. The classes are catered to both beginners and those with more experience, and the company said it can form the foundation for professionals to prepare for the jobs and skills now needed in the industry.”
“The courses are free to access online through an Amazon learning website and are available for non-Amazon employees.” READ MORE
HUMAN RESOURCES
Even the smallest of businesses are requiring employees to pay thousands if they quit: “This type of contract provision is known as a ‘stay or pay’ clause, and it used to be common only for certain high-paying roles or in certain specialized industries. For airline pilots and software engineers, for example, it has been a longstanding practice at some companies to require employees to stay at their jobs for a defined period of time in order to recoup costs related to hiring and training. But the line between recouping costs and penalizing workers for leaving can be blurry, and companies have increasingly taken advantage of that ambiguity. Workers’ rights advocates say that, in many cases, stay-or-pay clauses no longer accurately reflect the company’s costs but instead appear to be inflated financial penalties designed to discourage quitting.”
“They’re cropping up in many places you might not expect, like your locally owned salon. Simran Bal, a 26-year-old woman from Washington State, graduated from aesthetician school in 2021 knowing that it could be hard to break into the field. That’s why she invested in a couple of extra certifications in sugaring and waxing.”
“One of her first job offers was at a salon in Kirkland, where she was asked to sign a contract agreeing to a two-year commitment in exchange for $5,000 in training. She was new to the industry, she told me, and she ‘didn’t think they would hold the contract over my head.’”
“Bal says the training provided no transferable credential. It involved a list of services that needed to be completed under supervision, like sugaring eyebrows or waxing the bikini line — all things Bal felt she was already trained in.”
“Karina Villalta, the salon owner, disputed Bal’s characterization of her training. ... Employees who bounce from job to job, she told me, are ‘why small businesses have to have reimbursement agreements.’ Many small-business owners say these agreements help them stay afloat and manage their labor costs — the largest expense for most businesses — by making sure their investment of time and money doesn’t walk out the door.’” READ MORE
New York will give a clean slate to formerly incarcerated people: “Under the so-called Clean Slate Act, people who complete their sentences and remain out of trouble for a set period — three years for misdemeanors, eight for eligible felonies — will have their convictions sealed. The most serious crimes, including sex crimes, murder and most other Class A felonies, will not be eligible for automatic sealing. New York is now one of a dozen states that have enacted such laws, which are aimed at interrupting the cycle of recidivism by enabling formerly incarcerated people access to jobs and housing. The law will go into effect a year from now, though it will take three more years to clear the records of those currently waiting.”
“Ms. Hochul said that she was proud to sign the legislation, which she said would provide economic opportunities while protecting public safety. ‘The best crime-fighting tool is a good-paying job,’ she said.”
“The governor was able to extract concessions from its sponsors before its passage, including an extended waiting period and liability protections for businesses that hire people who have criminal records. Records will remain visible to law enforcement and court personnel, as well as certain sensitive employers.” READ MORE
Pet insurance is becoming an increasingly popular employee benefit: “One of the primary reasons employers should consider including pet insurance in their benefits package is its power to attract and retain employees. Studies show that 63 percent of pet owners believe pet-friendly benefits increase their likelihood of staying with a company. This statistic is particularly relevant in today’s competitive job market, where talent acquisition and retention are critical for business success. By offering pet insurance, employers signal their commitment to employees’ holistic well-being, recognizing the emotional importance of pets in their lives. This gesture fosters a deeper connection between the employer and the workforce, ultimately leading to increased job satisfaction and loyalty. As employees increasingly value work/life balance and wellness, pet insurance can be a key differentiator that sets an employer apart from the competition.”
“Forty-five percent of pet owners will spend the same amount or even more on their animal’s health care than on their own, and a substantial 50 percent of dog owners express concerns about their ability to cover unforeseen veterinary expenses.”
“By offering pet insurance, employers can demonstrate their commitment to the well-being of their employees and their pets, fostering a workplace environment where financial stress is lessened and employees can focus on their work with peace of mind.” READ MORE
THE PET INDUSTRY
ButcherBox, the fast-growing, meat-delivery startup that eschewed venture capital and turns a profit, is moving into dog food: “Founded in 2015, ButcherBox is one of the most successful businesses to launch from the funding site Kickstarter, which it used to attract early customers for a $129 box of frozen, grass-fed beef. (It has since expanded into humanely raised chicken and pork, as well as wild-caught seafood.) It has also achieved distinction among startups by making it without venture capital and earning profits consistently.”
“Looking to continue a blistering run of growth — from zero to $540 million in just eight years — the company began selling dog treats earlier this year under the brand ButcherBox for Pets. Founder Mike Salguero says they’re planning to launch dog kibble in early 2024.”
“Moving into pet products is a way to sell more to the roughly 40 percent of ButcherBox customers who own dogs, said Salguero — and a way to use parts of the cows and chickens it buys that people don’t eat.”
“‘It’s so much easier to sell an existing customer additional merchandise that they may need, as opposed to going out to get a new customer,’ said entrepreneur Paal Gisholt, who ran an animal-oriented e-commerce business, SmartPak.” READ MORE
FEATURE
Some restaurants in Boston feel they have no choice but to become part of the Israel-Palestine conversation: “Local restaurants have often been quick to express support in moments of crisis, tragedy, and social reckoning, speaking up en masse for movements such as Black Lives Matter, Stop Asian Hate, #metoo, and LGBTQ+ rights. With this conflict — fraught, historically divisive — the social media landscape looks a little different. Those who take a public stance are more likely to have a personal connection to the situation. ‘Knowing we should say something, we wanted to stay true to ourselves and show compassion to everyone affected by this,’ said Mahmood Abu-Rubieh, the middle sibling at Brookline Lunch, who also works in public relations. ‘You don’t need to be Israeli or Palestinian to feel this. It’s grown into something much larger at this moment. It touches everyone some way or another. There is such a difficult conversation happening around whether you should post as a business or how you should post. Many people want you to make pancakes and leave it at that.”
“At Mamaleh’s Delicatessen, which serves bagels and lox, pastrami on rye, and other Jewish deli staples, the owners felt similarly compelled to address the current moment. Half of the management team is Jewish, and the restaurant capitalizes on and celebrates Jewish culture. ‘This issue is so deeply challenging and also, in a way that nothing else before has been for us, so personal,’ said co-owner Rachel Miller Munzer.”
“‘What are we trying to say here? We’re Jewish, and we’re a Jewish restaurant, and that’s OK. We’re not going to hide. We don’t have to take sides in this war. But we also don’t have to cower,’ Munzer said. They also feel the responsibility of tikkun olam, the Jewish concept that calls upon people to work to repair the broken world.”
“At Yafa Bakery & Cafe, every customer gets a small cup of chai. ‘You’ve walked into our house. My house is your house,’ [Abdulla] Awad said. ‘We are open to everyone. We offer love and kindness through what we have. Our food, our recipes, our culture, our service, our generosity: That is who we are. We try our best to carry on with peace and kindness, and hopefully we pray for peace in this world. This world is insane, but there is some goodness. I believe in that.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
It’s the Data, Stupid: This week, Black Friday and Small Business Saturday will represent hugely important shopping days for many retailers. But Gene Marks says the sales those days generate aren’t necessarily as important as the data they generate -- so long as the retailers are smart enough to capture it. Gene also talks about why business owners need to understand that when they sign their tax returns, they—and not their accountants—are responsible for what the returns show. Plus: why Gene loves shrinkflation as a pricing strategy and why it’s not just for those who sell food or products. It can even work for consultants like Gene.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren