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Do You Really Want That Shiny Object?
In this week’s 21 Hats Podcast episode, Laura Zander talks about spending 8 months chasing an acquisition and asking herself, “Is it worth it?”
Here are today’s highlights:
There’s another reason women have trouble raising capital.
A fast-growing craft brewery heads for receivership and a sale.
Those job-switchers you hired may not be done switching.
Do business owners need more government support?
THE 21 HATS PODCAST
Do You Really Want That Shiny Object? This week, Laura Zander tells Shawn Busse and Jay Goltz about her eight-month roller coaster ride
, pursuing an acquisition. The deal would bring a new brand and profitable revenue at a reasonable price. To Laura, the creative challenge and opportunity are exciting—“really, really exciting”—but the financials are a concern. “Do I do this?” she asks. “Is it worth it?” And then there’s the broker, whose numbers don’t add up and who wants to collect his fee—including his piece of the earnout—immediately. Plus: Shawn explains how the rise of inexpensive design contractors forced his company to become a better business.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Etsy sellers go on strike as the marketplace raises its fees: “More than 20,000 sellers on the digital marketplace have signed a petition against Etsy’s move to raise the commission it charges on each transaction to 6.5 percent from 5 percent, according to Kristi Cassidy, an Etsy shop owner and one of the petition organizers. Some, including Ms. Cassidy, are also going as far as temporarily closing their shops in protest. Etsy executives say the fee increase effective Monday—the first such increase since 2018—is critical to increasing investments in marketing and expanding seller-support services.”
“The tension between Etsy and parts of its seller base, which totals roughly 5.3 million businesses, comes as the company tries to evolve from a niche online marketplace to a major e-commerce player.”
“The company became a go-to destination for shoppers looking to purchase masks, before the evolving spending habits of homebound consumers pushed the company to booming sales. ... Sellers generated about $12.2 billion in merchandise sales on Etsy last year, compared with $5 billion in 2019.”
“Ms. Cassidy said Etsy’s strategy is incompatible with how many of the artisans who built the brand do business. Sellers who make everything by hand have to limit their orders to what they can produce, she said, so more advertising doesn’t necessarily mean more revenue for those sellers.”
“‘It’s like they’re trying to be Amazon, and there’s a reason why I don’t sell my products on Amazon,’ she said.” READ MORE
Gene Marks says small businesses don’t need more government support: “My firm serves more than 600 small and mid-sized businesses around the country, and I talk to these business owners (and many others in my community) frequently. In the past few months, I’ve traveled to Florida, California, North Dakota, Wisconsin and other fine places where I’ve spoken to and with more than a dozen industry organizations representing businesses that sell corrugated containers, construction materials, financial services, foam, insulation, tires, auto parts and equipment and, here’s what I found: they’re fine. Small businesses in America in 2022 are generally doing just fine.”
“Because I write a lot about small businesses, I read a lot of reports. Like the recent one from Oculus, a document automation platform, which says that across its customer base of multiple industries small businesses are sitting on average daily cash balances that are almost 80 percent greater than 2019 levels.”
“Or the report from the Bureau of Economic Analysis, which found that corporate profits — big and small companies — ‘surged’ 25 percent year over last year, the largest annual increase since 1976.” READ MORE
Philadelphia is the first major city to reinstate its mask requirement: “The mandate announced today won’t go into effect until April 18, city health commissioner Cheryl Bettigole said, to give businesses time to adjust. The move came amid rising COVID-19 cases in Philadelphia in recent weeks. The Philadelphia Department of Public Health established a benchmark system in February that uses case counts, hospitalizations, and the increase in case rates to determine which safety strategies are needed. The seven-day daily average of cases, 142 as of April 8, and a 60 percent increase in case counts over the past 10 days met the standards to reintroduce the indoor mask mandate.” READ MORE
Opinion: Our immigration problem isn’t that we have too many immigrants: “Worker shortages are pervasive, with vacancies hovering around record highs. The resulting disruptions to supply chains and normal business operations have raised costs for companies and consumers. Some of these ‘missing’ workers retired; some dropped out of the labor force because of care issues or illness. But a huge chunk were foreign-born workers who either never arrived in the United States in recent years or who were already here but have been forced out of their jobs because of government incompetence.”
“There are about 1.8 million fewer working-age immigrants in the United States today than would be the case if pre-2020 immigration trends had continued unchanged, economic researchers Giovanni Peri and Reem Zaiour estimate.”
“Unsurprisingly, they also find that industries that had a higher percentage of foreign workers in 2019 — such as hospitality and food services — tend to have higher rates of unfilled jobs now.” READ MORE
Those job-switchers are still looking: “Two of every five workers who switched jobs over the past year are looking for work again, according to a new survey published by Grant Thornton, a consulting firm. These workers will likely account for a good deal of churn in the labor market as the so-called Great Resignation continues, and this suggests employers may need to reconsider pay, benefits and other workplace issues. ‘The power is going to the employee right now,’ said Tim Glowa, who leads Grant Thornton’s employee listening and human capital services team. ‘They are in the driver’s seat.’” READ MORE
Abortion is becoming a workplace issue: “Yelp is expected to announce Tuesday that it will cover expenses for its employees and their spouses who must travel out of state for abortion care, becoming the latest company to respond to a Texas law that bans the procedure after about six weeks of pregnancy. The online search and review platform, which is based in San Francisco and has more than 4,000 workers, employs just over 200 in Texas, but the benefit extends to employees in other states who might be affected by ‘current or future action that restricts access to covered reproductive health care,’ a company representative said.”
“Last month, Citigroup became the first major bank to disclose that it will pay travel costs for employees affected by the law in Texas, where it has over 8,000 workers.”
“Other companies that have announced policies aimed at mitigating the impact of the law include Uber and Lyft, which offered to pay legal fees for Texas drivers who could be sued for taking someone to an abortion clinic.” READ MORE
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Here’s another reason women have a harder time raising capital: “The plight of women founders was on the minds of participants at the Female Founders Forum, held recently by the NYU Entrepreneurial Institute. Bringing together more than a dozen seasoned entrepreneurs and investors in the startup ecosystem, the event touched on some of the special challenges women face and how they might be able to overcome them. ‘The men are just better at bullshitting,’ observed Melody Koh, a partner at seed stage investment firm NextView Ventures. Speaking on a panel during the virtual event, which included about 130 participants, she said if male founders are achieving 80 percent of a target, they’ll talk like they’re hitting 120 percent.”
“‘At the same time, stories like the recent implosion of one-time Silicon Valley darling Fast, a one-click checkout company led by Domm Holland, spotlight the readiness VCs seem to have to throw money at white men, even when business fundamentals are questionable.”
“‘The saddest thing for me about @fast is that I know plenty of incredible women with healthy revenue unable to raise VC, building solutions for half the planet,’ British Jamaican entrepreneur Sharmadean Reid tweeted Wednesday. ‘Every time I would come on Twitter and see Domm I would think maybe I’m doing something wrong.’” READ MORE
Inflation accelerated to 8.5 percent in March: “High inflation is the downside of booming growth as the economy bounces back from the Covid-19 pandemic, creating a tough balancing act for the Fed as it tightens monetary policy to douse price gains without damping growth. ‘We’re seeing strong inflation momentum across the board, both for goods and services,’ Blerina Uruci, U.S. economist at T. Rowe Price Group, said ahead of the report. Ms. Uruci said supply-chain constraints continue to push prices up, except for an easing of the costs for used cars.”
“‘To me, this is a red flag,’ said Ms. Uruci. ‘The other red flag is Russia’s invasion of Ukraine and the rise of Covid in China. Those pose risks that the so-called normalization of supply chains takes longer to materialize.’”
“Persistently higher prices come as the overall economy is strong and the labor market is tight. Employers added 431,000 jobs in March, the 11th consecutive month with gains above 400,000—the longest such stretch since records began in 1939.” READ MORE
Mark Zandi blames Russia:
FOOD & BEVERAGE
A fast-growing brewery with employee-owners and a lot of debt is headed for receivership and a sale: “Modern Times started in 2013 as a small brewery and tasting room in San Diego's Point Loma neighborhood. It quickly grew with locations across the West Coast that focused on enhancing ‘good vibes’ and offering its guests unique spaces for people to enjoy their craft brew and coffee. [Recently hired CEO Jennifer] Briggs said the company's debt problem is a pretty straightforward situation — combine rapid expansion with a pandemic that shut down businesses and you get debt — approximately $16 million of it.”
“‘This company’s strategy had been investing in on-premise, which took a lot of work as far as investment,’ Briggs said. ‘They were doing all that growth, and who's to say if it was the wrong strategy?’”
“Take their Anaheim location, for example. The massive 33,000-square-foot property called Leisuretown opened in July 2020 with a cafe inside a three-story historic home, and an outdoor area that includes a beer garden and swimming pool — yes, a pool.”
“Briggs started in December  after Modern Times' founder and former CEO, Jacob McKean, stepped down amid allegations of harassment that stemmed from a #MeToo movement for those in the brewing industry.” READ MORE
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