Don’t Blame Your Accountant
Gene Marks says your tax return is your responsibility: “We accountants are very, very good at covering our butts. We have lots of disclaimers.”
Here are today’s highlights:
Do you have employees with kids in daycare? This is not going to be easy.
Vermont’s current labor shortage may be a glimpse into America’s future.
Looking for capital? There’s more money available through grants than you may realize.
Elon Musk may come to regret starting an EV price war.
Because I was at a conference last week, there will be no Dashboard published today. It will return next week.
Problem with your tax return? Gene Marks says it’s your responsibility, not your accountant’s (Gene’s an accountant, by the way): “Every year, millions of individuals and small business owners have their tax returns prepared by outside accountants. It makes sense. Taxes can be complicated so it’s a good idea to have someone who knows this stuff well — a professional — to do your year-end reporting, and do it right. But let’s say there’s a problem with your tax return. Maybe your tax professional made a mistake. Or was negligent. Or wasn’t up to date on the rules. And let’s say this problem resulted in you owing more money to the IRS. Or even — if serious enough — it results in the IRS taking you to court. Who’s ultimately responsible for this problem? Is it your accountant? Nope. It’s you.”
“I’ve been a licensed certified public accountant for over 30 years. I was a senior manager at one of the world’s largest accounting firms. We accountants are very, very good at covering our butts. We have lots of disclaimers.”
“And we’re adamant about one thing: the financial statements and tax returns of a client are their responsibility, not ours. It’s their books. It’s their taxes. It’s their signature. You can’t blame us for your problems.” READ MORE
THE DAYCARE CRISIS
Do you have employees who need day care to go to work? “Even before the pandemic, child-care provider Leah Zastoupil, who owned and ran Zasty’s Family Child Care out of her home, never exactly had an easy time of it. Pre-covid, she typically worked 70-hour weeks: 50 hours caring for the kids, plus 20 spent on cooking, cleaning, paperwork and the like. She loves working with kids, she said, ‘but it’s a huge burnout profession.’ ... Then along came the pandemic, which blew up that fragile business model. Throughout the country, parents pulled their kids out of care. Staff members fearing illness also quit, which required providers to further ratchet down enrollment. Nationwide, an estimated 16,000 child-care providers across 37 states closed their doors entirely between December 2019 and March 2021.”
“In Zastoupil’s area — the small town of Milton, Wis., about an hour outside Milwaukee — two day-care organizations closed. Zastoupil kept hers open but had to take on even more hours to cover additional cleaning, community coronavirus testing, and parental communications.”
“From 2020 to 2021, in response to these kinds of strains, Congress passed a series of temporary child-care subsidy programs that were administered by states. It was a lifesaver for organizations such as Zasty’s, which in December 2020 began receiving $1,000 monthly grants. The money helped defray rising costs, particularly for the groceries she bought for children’s meals. The main way she used the funds, though, was to raise the wages of the part-time staff she had recruited during the pandemic, from $14 to $20 per hour.”
“But the government subsidy program was temporary. ... Zastoupil knew she couldn’t maintain her employees, and therefore the business, without this subsidy. She could not endure the hours required to run the program entirely by herself. Raising tuition to compensate for lost grant money was not viable, either.”
“Even though she knew it made financial sense, for Zastoupil, the decision to walk away was hard. She had run this business for 18 years. She loved the kids and still kept in touch with many who had graduated from her program. She had strong bonds with the parents, too.” READ MORE
Vermont’s current labor shortage may offer a glimpse of America’s future: “At Lake Champlain Chocolates, the owners take shifts stacking boxes in the warehouse. At Burlington Bagel Bakery, a sign in the window advertises wages starting at $25 an hour. Central Vermont Medical Center is training administrative employees to become nurses. Cabot Creamery is bringing workers from out of state to package its signature blocks of Cheddar cheese. The root of the staffing challenge is simple: Vermont’s population is rapidly aging. More than a fifth of Vermonters are 65 or older, and more than 35 percent are over 54, the age at which Americans typically begin to exit the workforce. No state has a smaller share of its residents in their prime working years.”
“Employers are fighting over scarce workers, offering wage increases, signing bonuses and child care subsidies, alongside enticements such as free ski passes. When those tactics fail, many are limiting operating hours and scaling back product offerings.”
“Long-run labor scarcity will look different from the acute shortages of the pandemic era. Businesses will find ways to adapt, either by paying workers more or by adapting their operations to require fewer of them. Those that can’t adapt will lose ground to those that can.”
“Lake Champlain Chocolates, a high-end chocolate maker outside Burlington, has revamped its production schedule to reduce its reliance on seasonal help. It has also begun bringing former employees out of retirement, hiring them part-time during the holiday season.”
“‘We need to start looking at immigrants as a strategic resource, incredibly valuable parts of the economy,’ said Ron Hetrick, senior labor economist at Lightcast, a labor market data firm.” READ MORE
There’s more money available through grants than many business owners realize: “Brianna Arps is a grant go-getter. The founder and CEO of Moodeaux, a St. Louis-based fragrance company, has raised more than $200,000 in non-dilutive funding since her 2021 launch. ‘You've just got to keep applying,’ Arps says. ‘All it takes is one that can take you to the next level.’ Here's how she landed five of her key grants and what she did with the money.”
Arch Grants Startup Competition: “Moodeaux's largest award [$100,000] to date came from Arch Grants, a St. Louis nonprofit that provides funding to early-stage startups in the local business community. With this funding, Arps debuted on Scentbird, the fragrance subscription service, hired a part-time assistant and a social-media manager for TikTok, and launched the brand's sophomore perfume: PunkStar.”
Glossier Grant Program: “Moodeaux is the first fragrance house among more than 30 winners of this grant [$50,000] since the program launched in 2020. It gives Arps the chance to connect with other brands within the Glossier network and reach new customers. ‘Their fans are real die-hards,’ she says. Arps plans to use the grant to fund her new-product pipeline.” READ MORE
Michaels has introduced a seller platform, MakerPlace, to try to draw sellers from Etsy: “With Etsy continuing to face pushback for raising transaction fees last year, Michaels MakerPlace is positioned as a low-cost alternative for artisans. MakerPlace promises free product listings, low referral fees — 4 percent for Basic members and currently 0 percent on Professional account holders — with the Basic tier being free to join. Merchants also get perks like discounts on bulk purchases and 6 percent cash back on supplies at Michaels. Aside from handmade goods, MakerPlace has some unique features not found on platforms like Etsy. For example, the site also allows merchants to book virtual tutorial classes in exchange for 3 percent of bookings’ revenue.”
“Overall, the small-to-medium-sized Etsy store owners who spoke to Modern Retail welcomed having another marketplace to potentially sell through. Sellers have grown frustrated with Etsy over the past couple of years because of higher fees and the alleged influx of dropshippers selling mass-produced products.”
“Shane Earl, who runs two photography and design shops on Etsy, said that so far, there are a lot of unique features to like about the site. ‘I would definitely add my stores over there if they can be sustainable and I can keep the Etsy sites open,’ he said. ‘It is always good to have multiple options to reach people, and lower fees are always welcome.’” READ MORE
Detroit is at the forefront of a plan that would raise taxes on property and lower them on occupied structures: “The notion that land is an undertaxed resource — and that this distorts markets in destructive ways — unites libertarians and socialists, has brought business owners together with labor groups and is lauded by economists as a ‘perfect tax.’ And yet despite all that agreement, there are just a handful of examples of this policy in action, and none in America that match the Detroit proposal in scale.”
“When Mayor Mike Duggan talks about his accomplishments in Detroit, the list is both impressive and sad. He had the street lights turned back on, and reopened closed parks. In the decade since he took office, the city has demolished some 25,000 blighted homes whose rusty debris and incubation of crime drag down neighborhoods.”
“The progress would be even greater, the mayor argues, if the city hadn’t been smothered by speculation. In the years after the Great Recession, tens of thousands of Detroit properties were bought by absentee landlords and faceless LLCs. The owners are so negligent and hard to find that the city mows their lawns without asking.”
“The refrain is a windup for Mr. Duggan’s scheme to fix the blight: a new tax plan that would raise rates on land and lower them on occupied structures. Slap the empty parcels with higher taxes, the argument goes, and their owners will be forced to develop them into something useful. In the meantime, homeowners who actually live in the city will be rewarded with lower bills.” READ MORE
Is Elon Musk losing the price war he started? “Under increasing pressure from new competition, Tesla spent the past year slashing the average price of its models by roughly 25 percent. The Model 3 fell from $48,000 to $44,380. The luxury Model S, meanwhile, plunged from a high of $130,000 to $96,380. The cars, as they say, have been priced to move. It's an unusual business strategy, to put it mildly. ‘I can't think of another point in the history of automotive when a brand that wasn't going out of business cut prices 20 percent a year,’ Mark Schirmer, the director of communications at the research firm Cox Automotive, told me.”
“Lower prices are not translating into higher sales. The number of cars Tesla delivered to customers in the third quarter actually declined. Revenue is dropping, and the company's once fat profit margins are getting squeezed — down to 17.9 percent in the third quarter, compared with 25.1 percent a year ago.”
“Competitors aren't being driven out of business, either. Once totally dominant in the EV space, Tesla's share of the US market has fallen from 62 percent at the beginning of the year to only 50 percent today.”
“When companies play with price, [John Zhang, a professor of marketing at the Wharton School] said, they're playing with customer expectations. Once customers get used to paying $40,000 for a standard EV, they're not going to go back to $60,000. In a price war, you may prompt a few more people to buy from you today, but you'll be sacrificing millions of dollars in future sales.” READ MORE
Google has sued to block AI ads preying on small businesses: “The lawsuit, filed Monday, targets unnamed individuals in India and Vietnam. Google said the hackers have been tricking small-business owners into clicking on Facebook ads that offer to download Google’s Bard artificial-intelligence chatbot. When they do, the ads hit them with malware that steals their social-media credentials. The ads are false: Bard is a free web-based platform and isn’t available through download. Posting the official-looking ads is an organized group of hackers operating through accounts and pages with phony names such as Google AI, AIGoogle.Plus, AIGoogle Bard FB, and AIGoogleBard, according to Google.”
“Once users click on the offer to download Bard, their devices are hit with malware that sends their social-media credentials to the hackers. The hackers then use the information to take over their victims’ social-media accounts and spread more malware-linked ads, according to the lawsuit, which was filed in federal district court in northern California.”
“It wasn’t clear what was ultimately motivating the alleged scheme, and the lawsuit aims to obtain more information about how it operates. Google says that the intended victims include small businesses with Facebook business or advertiser accounts.” READ MORE
There’s a race under way to build the world’s largest insect farm: “A nascent drive to cut greenhouse emissions from animal feed has spawned a new industry, flush with venture capital, that promises to one day produce vast amounts of protein with fewer greenhouse emissions than traditional suppliers. Inside the cutting-edge farms, companies rear squirming masses of crickets, mealworms, and fly larvae within temperature-controlled plastic vats designed to help them grow quickly. They process the insects’ feces into fertilizer and their bodies into protein and nutrient-rich oil for pets, fish, and livestock.”
“The world’s largest insect farm — a high-tech facility that sprawls across 35,000 square meters and will produce 15,000 metric tons of protein from fly larvae each year — opened in April in Nesle, France. If all goes to plan, it will be upstaged in December by a 45,000-square-meter farm outside of Amiens capable of producing over 100,000 metric tons of mealworms per year. That record stands to be tied or broken by at least two more fly hatcheries slated to open in 2024 and 2025.”
“Insect start-ups have raised over $1 billion in venture capital since 2020, and they’re now vying for dominance in the small but growing market for bug protein.” READ MORE
THE 21 HATS PODCAST
The I-Hate-Marketing Approach to Marketing: This week, Shawn Busse tells Jay Goltz and Mel Gravely why he doesn’t want his firm, Kinesis, to be known as a marketing agency. Part of it is his sense that people just don’t trust marketers. But Shawn also believes that what Kinesis offers its clients is much more than just marketing. Hearing that prompts Mel to take us through his recent decision to spend a lot of money rebranding his construction business, which he says created alignment throughout the business and would have been worth twice what he paid. (Don’t tell his marketing consultant!)
Plus: Mel explains how he manages to generate new business without employing salespeople. Jay asks if it’s still possible in this tight labor market to enforce attendance policies. And, for the first time in the almost four-year history of this podcast, Jay goes extremely quiet for an extended period. What exactly was that about?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren