Confidence Is Evaporating

Only 39 percent of business owners expect economic conditions to improve over the next 12 months.

Good morning!

Here are today’s highlights:

  • The owner of an Arkansas manufacturing company explains how he got 92 percent of his employees vaccinated.

  • In a hybrid office, human nature says, on-site workers will get the promotions and raises.

  • Young people are turning to farming.


Small business confidence has fallen to its lowest point since March: “Thirty-nine percent of small-business owners expect economic conditions in the U.S. to improve in the next 12 months, down from 50 percent in July and 67 percent in March, according to a survey of more than 560 small businesses for The Wall Street Journal by Vistage Worldwide Inc., a business coaching and peer advisory firm. The measure is one part of a broader confidence index that also tracks metrics such as small-business owners’ outlook for their companies and their investment and hiring plans. That overall figure remains positive, but fell to its lowest level since March.”

  • “The share of business owners who expect economic conditions to worsen also grew, but more slowly, to 20 percent from 15 percent a month earlier, the survey found. That is far better than in April 2020, when 57 percent of small-business owners believed the economy was worsening.”

  • “Twenty-two percent of small-business owners in the Vistage survey said their business has already been affected by the increase in Covid-19 cases tied to the Delta variant, while another 22 percent expect to be, according to the survey of firms with $1 million to $20 million in revenue.” READ MORE

The Delta variant is already undermining demand and raising costs: “In recent weeks, Kellogg Co. said Delta’s spread in Malaysia slowed production of Pringles there. Online travel company Booking Holdings said overall bookings declined as Delta took root in July. U.S. healthcare companies say elective medical procedures are slowing once again in some places. And, as more employers postpone their return to offices, the outlook is darkening for such disparate companies as a 25-person Houston cable installer and a company with a $1.3 billion market-capitalization that sells paper goods and cleaning supplies.”

  • “‘We were on a good trajectory, and then the Delta variant showed up and we’ve taken a step back as a result of that,’ Donnie King, chief executive of meat processor Tyson Foods, told investors last week. ‘Essentially, it takes us six days to get five days worth of work.’”

  • “Traffic at grocery stores, gas stations, gyms, restaurants and retail stores fell starting in late July, after surpassing 2019 levels earlier in the summer, according to mobility metrics from data firm SafeGraph.” READ MORE

A key measure of consumer sentiment fell dramatically in early August: “The consumer sentiment index tumbled to 70.2 in its preliminary August reading. That is down more than 13 percent from July’s result of 81.2 and below the April 2020 mark of 71.8 that was lowest of the pandemic era. It was the lowest reading for the measure since 2011. Economists surveyed by Dow Jones were expecting a reading of 81.3 for August.”

  • “And a sudden drop of that magnitude is extremely rare for the index.” READ MORE

Companies are hoarding cash: “Cash and short-term investments on corporate balance sheets globally are at an all-time high of $6.84 trillion, according to data from S&P Global, extrapolated from second-quarter earnings reports. That is 45 percent higher than the average in the five years preceding the pandemic and a 2.6 percent increase from the previous quarter. In April, analysts at Goldman Sachs had lifted their 2021 forecast for spending growth by S&P 500 companies to 19 percent from 10 percent, “as uncertainty continues to fall and global economies continue to reopen.”

  • “But global capital expenditures are expected to slow in the third quarter after a strong start to the year, according to an Aug. 6 report by JPMorgan Chase & Co.”

  • “Corporate spending growth is forecast to decline to 5.8 percent this quarter at a seasonally adjusted annual rate, down from 12.9 percent in the previous one.” READ MORE

The owner of an Arkansas manufacturing company explains how he took his workforce from 22 percent vaccinated to 92 percent:


Young people, believe it or not, are turning to farming: “More young Americans are joining the agriculture sector and changing what it means to work as a farmer. Only 8 percent of farm producers were under 35 in the 2017 USDA census, the most recent available, compared with 34 percent over 65. Though the workforce skews much older—their average age was 57.5 in 2017—youth representation is growing. From 2012 to 2017, the number of producers under age 35 grew 11 percent to about 285,000, while producers age 35-64 had shrunk by 2 percent.”

  • “The origin story of the Dream Harvest Farming Co. sounds straight out of Silicon Valley. College friends Zain Shauk and Harmeet Singh, while on a 2014 trip to Las Vegas, became absorbed in a discussion of hydroponic farming, which involves growing plants without soil.”

  • “Within six months, both had quit their jobs, moved to a house in the Houston suburbs and started sketching out lettuce-growing methods on the dining-room table. They built a prototype in a garage and raised money from friends and family to launch their startup.”

  • “By 2016, Mr. Shauk, a former journalist, and Mr. Singh, a chemical engineer, were selling their greens to local restaurants. They added grocery-store sales in 2017. Today they have closed $4 million in funding, run a team of 32 people and operate 7,500 square feet of warehouse space.” READ MORE

Artisan ice cream is growing fast—but not producing a lot of profit: “Fueled by pandemic trends of ‘at-home comfort’ and ‘anytime eating,’ the $7 billion industry grew 17 percent in 2020, after roughly 2.4 percent annual growth over the previous decade, said Jennifer Mapes-Christ of the market research firm Packaged Facts. Artisan ice cream — a ‘squishy’ term, she said, that usually refers to product with less air and more fat but ‘mostly just means fancy’ — is growing even faster than mainstream ice cream and is considered the industry’s future.”

  • “The spoils of success — tens of millions of dollars in incubation deals, plus the potential for hundreds of millions more if a label is bought by a giant like Unilever — have heightened competition in the $10-a-pint world.”

  • “‘Everyone’s like, I’m going to be the next Talenti. I’m going to be the next Halo Top. But it’s one in 1,000, right?’ said Crista Freeman, an industry veteran.”

  • “‘Nobody is profitable,’ Ms. Freeman said. ‘It’s just a game. You have to constantly raise money to compete.’” READ MORE


Yes, it’s true: with an ESOP, owners can sell their shares and continue to run the company indefinitely: Following our recent 21 Hats Conversation about ESOPs (What’s In It for the Owner? A Skeptical Conversation about ESOPs), we’ve received many requests for more information about the tax savings and other benefits that result from installing an ESOP.  If you have questions about how it works, please reach out to Applied Economics, LLC, one of our trusted partners and sponsors. Applied Economics works with established lower-middle market companies to assess the feasibility and appropriateness of an ESOP.  GET RESOURCES AND CONTACT INFO


In a hybrid office, on-site workers will get the bulk of the promotions and raises: “There are many reasons why this will be so, even if we believe it unfair. There is, for starters, human nature: If I’m the boss trying to sort out candidates for promotion, I’m looking for signals of who is more motivated and who is more committed to the organization. You put in the effort to be with us in the office, your friend doesn’t. It may be a biased and unfair signal of motivation and interest, yet it is one that most leaders will find hard to reject. Unless an organization is terrific at managing performance carefully and objectively—and few are—face time still matters.” READ MORE


Ami Kassar encourages entrepreneurs to think long-term with their debt: “I spoke with an entrepreneur yesterday who had received an Economic Injury Disaster Loan loan two months ago and was now considering paying the loan back. She felt that her business had mostly recovered, and she didn't like the idea of having the responsibility of paying back a loan. My advice for her? Not so fast. In a period of uncertainty, possession is 99 percent of the law. Her EIDL loan is due over 30 years, at a nominal interest rate. The monthly payments have no severe impact on her cash flow. In my opinion, she could consider the payments like an insurance premium, and hold on to the cash. That does not mean she should use the money frivolously, but there is little reason to not hold onto it.” READ MORE


Episode 72: It’s a Pile of Money: This week, Paul Downs makes two seemingly contradictory points: One is that his business is on track to have its best year ever. The other is that he expects to claim another huge government subsidy, courtesy of the recently enhanced Employee Retention Tax Credit. As Paul says, if you don’t know about the ERTC or if you don’t know that its requirements have been relaxed, you probably should check it out. Meanwhile, Jay Goltz tells us what happened when three employees found out what the others were being paid, and Dana White feels a little deflated after talking to an investment banker. Plus: Paul shares his new strategy for coping with the labor shortage.

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