Debt or Equity?
Ami Kassar reminds that taking on debt can be less expensive than giving out equity. Neither is also an acceptable answer.
Good morning!
Here are today’s highlights:
A lobbying group funded by Big Tech pretends to speak for small businesses.
It’s not just you: Employees are quitting without telling anyone.
Last year was the most profitable one for big corporations in more than 70 years.
Some companies are seeing if heaping praise on employees helps with retention.
FRANCHISING
Salty Paws, an ice cream shop for dogs, opens this weekend on Philadelphia’s Rittenhouse Square: “Lactose-free and goat milk ice cream, with flavors ranging from cookie crumble to liver crunch, complete with a full toppings bar. Dogs can dine in the store, or pet owners can grab a cup to go. The shop will also sell bones, treats, baked goods, collars, leashes and toys, Karla Shanesy, the Philadelphia store's owner, tells Axios. The ice cream is safe for cats too, Shanesy says. They'll have a full line of cat products for sale as well.”
“Franchise owner Suzanne Tretowicz first opened Salty Paws in Rehoboth Beach, Delaware, back in 2018. The business has since launched seven other locations, including Pittsburgh and Annapolis, Maryland.”
“The Philadelphia location will be its ninth store.” READ MORE
SMALL BUSINESS ADVOCACY
A lobbying group funded by Amazon and Google lists thousands of small businesses as members but many have never heard of it: “The four-year-old group listed about 5,000 small businesses in its membership directory before it removed that document from its website late last month. When Politico contacted 70 of those businesses, 61 said they were not members of the group and many added that they were not familiar with the organization. ‘We aren’t associated with them,’ said Kris Naidu, CEO of Zeacon, a Seattle-based software company listed in the directory.”
“‘We are neither a member nor have I heard of them until just now,’ said Jack Gannon, co-owner of YBR Publishing in Ridgeland, S.C., which was also listed.”
“‘I have an issue with anybody using my name without my permission,’ said Susan Kadar, owner of Your Computer Friends in Wilmington, N.C. (also on the list). ‘They can’t speak for me.’”
“When asked about 3C’s representation of their membership, Colorado Rep. Ken Buck, the top Republican on the House Judiciary antitrust subcommittee, said, ‘The fact that Big Tech’s so-called grassroots support is fraudulent doesn’t surprise me.’” READ MORE
FINANCE
Lending expert Ami Kassar reminds that debt can fund growth less expensively than equity: “I often find myself challenging many business owners' pre-conceived notions of ‘debt always being evil.’ Debt can be evil if you misuse it, but it can be a great tool to grow if used correctly. Most entrepreneurs are pleasantly surprised when I tell them that they can get money to grow without bringing on an equity partner and without significantly restricting their cash flow. Having a set monthly payment is a predictable way to manage the remainder of your cash flow each month in case of emergencies and preserve future profits. You don't have to wait for your cash flow to skyrocket to grow, and you don't have to sell equity to grow and try to become a unicorn. But, in the media, you always see the entrepreneurs highlighted who were able to grow their company at an incredible speed, and sometimes you may wonder, Why not me? Why can't I do that?”
“I understand why equity can be much more appealing than debt, but it is almost always more expensive.”
“I want to assure you that just because you are a business owner doesn't mean you have to be able to stomach that level of risk and speed. Many of us don't have that kind of tolerance.”
“By educating yourself about debt, you will gain perspective and clarity on what other options are available for you to grow your business in a way that feels authentic and ‘safe.’”
“Of course, even after that education, you may still only feel comfortable enough to grow slowly through cash flow, and that's okay.” READ MORE
HUMAN RESOURCES
Employees are quitting without telling anyone: “In a survey of more than 5,000 employees, one in 50 confessed to giving no word to their employer when quitting a job. Some managers called it inexcusable and unprofessional, and they worried workers were burning bridges by not telling their employers before quitting. But others told Insider they were more empathetic toward employees who left unannounced and tried to use those instances as teachable moments to make their other staffers feel heard and seen.”
“Tyler Garns, the founder and CEO at Box Out Marketing, a company that offers coaching and campaign-implementation services, is unsympathetic when it comes to employees ducking out without notice.”
“‘Ghosting, in my opinion, is not acceptable at all,’ Garns said. ‘The company accepted you to be their employee professionally. If you are no longer happy with the company, a piece of paper called a resignation letter is the most professional thing to do.’”
“Nunzio Ross, the CEO and founder at Majesty Coffee, which provides espresso-machine deals to local coffee-shop businesses, said an employee who had been with his company for almost six months left without notice in August.”
“Ross — who has a team of fewer than 20 people — added that he never found out what happened. But afterward, he decided to increase the frequency of his team's casual-feedback sessions.” READ MORE
Employees are returning to offices, but not everyone is okay: “For the subset of Americans who had the luxury of working from home, their professional lives mirrored their personal ones: upended. They answered emails from their couches, spoke to teammates on Zoom and refashioned daily schedules to accommodate this new remote-work era. Now, some have gotten the message that their employers are trying to restore an old status quo. Dozens of companies are calling workers back to the office: Microsoft, Goldman Sachs, Chevron, The Washington Post. And some worry that their teams aren’t prepared for the emotional transition awaiting a work force already on edge.”
“In a McKinsey study of more than 2,900 people last year, one-third of those who had just returned to the office said going back had negatively affected their mental health.”
“Supervisors are finding that they are called on to help people navigate personal challenges, whether or not they have the training to do so.”
“April Koh, founder of Spring Health, a mental health start-up that offers employees access to therapy and other services, recently realized she hadn’t fully dealt with her own pain after being targeted with a racial slur on a street in New York.”
“When her team planned a healing circle to discuss anti-Asian violence, which has increased during the pandemic, Ms. Koh surprised herself as she wrestled publicly with questions about her personal history. ‘I hadn’t expected to be so emotional,’ she said.” READ MORE
Will showering employees with praise keep them from leaving? “In a time of high turnover and remote work, companies have tried ukulele classes, staff talent shows and other ways to keep workers connected. Now many are trying to get their employees to praise each other—well, praise each other more. Some companies offer a monthly allotment of points that colleagues can give each other to show their appreciation, redeemable for Amazon and Target gift cards and other perks, such as lunch with the CEO. Others have public channels in Slack, where people can share thanks and heap compliments on their co-workers.”
“Jacob Coite sent more than 2,700 compliments to coworkers last year, and he’s just getting started. Mr. Coite works in Northborough, Mass., as a scheduler for Esler Cos., a window and door installation company, and prides himself on coming up with creative ways to virtually backslap his colleagues.”
“‘If this company was a California roll, you’d be the seaweed that holds the whole thing together,’ he recently wrote to a customer service representative.”
“For Mr. Coite’s efforts, his company recently awarded him a trophy emblazoned with his name and the number of praises he sent (2,745, to be exact) for being the firm’s top cheerleader.”
“He keeps it displayed on his desk. The sight, he says, ‘keeps me motivated.’ The runner-up had praised peers a mere 900 times.” READ MORE
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THE RUSSIAN INVASION
From a Ukrainian entrepreneur:
THE ECONOMY
In 2021, big corporations had their most profitable year since 1950: “Profits surged 35 percent last year, according to data published on Wednesday by the Commerce Department, driven by strong household demand, which was underwritten by government cash transfers during the pandemic. In all four quarters of the year, the overall profit margin stayed above 13 percent, a level reached in just one other three-month period during the past 70 years. It was a solid year for workers, too—just not in comparison to shareholders. Employee compensation rose 11 percent, but the so-called labor share of national income—essentially, the portion that’s paid out as wages and salaries—fell back to pre-pandemic levels.”
“That tends to undermine the argument that soaring labor costs are what’s driving the current surge in inflation, a case the Federal Reserve is starting to make as it accelerates interest-rate increases.”
“The elevated numbers have triggered a debate about whether opportunistic price hikes by U.S. businesses are partly to blame for high inflation, an argument pushed strongly by the Biden administration last year, though less so more recently.” READ MORE
PRICING
Jack Stack, CEO of SRC Holdings, says that with so many stresses hitting the economy right now, it’s essential to protect margins: “That's especially true for us as a manufacturer of vehicle components. We've always said that our business tracks in line with how the nation's gross domestic product rises or falls. We are the GDP. Based on our forecasts, we believe 2022 will be a much tamer year than the record growth we saw in 2021. Our order board looks solid, at least through 2024, but as we've said before, we get nervous playing with a lead. There's always another shoe to drop. So, we need to be smarter than ever about looking ahead and doing everything we can to protect our profit margins—including raising our prices.”
“We need to do this for the simple reason that we're trying to sustain the standard of living of our associates. If we want to pay our people more to protect them from inflation, we need to ensure we can support that financially.” READ MORE
THE 21 HATS PODCAST
What If I Get the Contract? This week, Liz Picarazzi tells Jay Goltz that she’s pursuing multiple sales opportunities—and ponders what would happen if those opportunities actually came to fruition. Would her company, Citibin, be able to handle the additional volume? “In my fantasy world, where I am a lot,” Liz says, “I look at where this could go. And just like you, Jay, I go to, ‘How in the world would I produce all of these?’” Liz and Jay also talk about the pros and cons of pricing transparency: Do you volunteer your premium price up front? On your website even? Or do you wait until you’ve made your sales pitch and gotten your customer excited?
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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