Family Business of the Year
A 100-year-old manufacturer increases its capacity more than 30-fold in one crisis-filled year.
Good morning. In today’s newsletter, we highlight stories on how WhatsApp could change ecommerce, whether the PPP loan program actually helped the businesses it was supposed to save, and how some Japanese companies last a thousand years.
HUMAN RESOURCES
As the vaccines get closer, more businesses consider requiring employees to get them: “For employers, many of which have kept workers home for months, it has opened a complex set of legal and practical issues: Can they require employees to take a vaccine? Should they offer incentives instead to encourage compliance? And what should they do if employees resist?”
“Once a coronavirus vaccine receives formal government approval, employment lawyers say it’s more likely to be treated like the flu shot, which can be mandated, even if it’s currently rare outside the healthcare field.”
“Employers must abide by any state or local laws, as well as provide ‘reasonable accommodations’ to people with qualified disabilities and to those who have religious objections, as required by the ADA and Title VII, respectively.” READ MORE
ECOMMERCE
What Facebook does with WhatsApp could change the way we shop: “Perhaps never before has an online property been so popular and made such little money. More than two billion people worldwide use WhatsApp regularly to text or make phone calls, but it scarcely generates any money for Facebook, which has owned WhatsApp since 2014. That’s because WhatsApp is mostly a personal communications app, and Facebook doesn’t make money from that group chat with your cousins. This looks set to change. Haltingly, including by agreeing to buy a customer service start-up on Monday, Facebook is trying to use its trademark playbook to remake WhatsApp into an inescapable way for businesses to interact with us.”
“If Facebook figures it out, WhatsApp could change how we shop and use the internet forever — as the company’s main social network and Instagram did.”
“If not, Facebook will own a spectacularly popular failure. The outcome will set trends for our digital lives and determine which businesses thrive or don’t.” READ MORE
STARTUPS
Amazon is in talks to buy venture-backed podcast startup Wondery for more than $300 million: “The company is on track to increase revenue to more than $40 million this year, according one person familiar with the matter, with about 75 percent of that coming from advertising and the rest from licensing to TV, to subscription services like Audible and Stitcher Premium and to Wondery’s own premium subscription service, which launched this summer. The deal talks are continuing and negotiations could still fall apart, the people said. Closely held Wondery is the last large, independent podcaster on the market—and could present the final opportunity for a major tech or media giant to buy its way into the exploding field.”
“Podcasting as a whole is attracting over 100 million monthly active listeners, according to Edison Research.”
“U.S. ad revenue from podcasts, meanwhile, rose an estimated 48 percent to $708.1 million last year, according to the Interactive Advertising Bureau, and is projected to exceed $1 billion by 2021.” READ MORE
MANAGEMENT
Here’s how a 100-year old family business in Maine met a historic manufacturing challenge: “Only two companies in the world made the type of nasopharyngeal swabs required for Covid testing, producing an estimated two million units per month combined--just 5 percent of the 40 million per month officials said were needed in the U.S. alone (a laughably low miscalculation since revised to 150 million per month). One firm, Copan Diagnostics, was based in Lombardy, Italy, which was being decimated by the West's first major Covid outbreak and was in lockdown. The other was Puritan Medical, the pride of tiny Guilford, Maine (population: 743). So in one of the stranger turns in this most shocking year well into the 21st century, the most highly sought-after piece of tech on earth was a plastic stick with a tuft of polyester on one end--and the most important manufacturer in the world was a century-old family company founded as a toothpick maker.”
“Puritan, with reported annual revenue of $45 million, received government contracts totaling more than $126 million through the Defense Production Act and the Cares Act.”
“Puritan leased, gutted, and outfitted a 100,000-square-foot factory, increasing its production of various Covid-test swabs to 90 million per month by the end of November.”
“Before the end of March 2021, the company will bring yet another new plant online that will increase its capacity by an additional 50 million swabs per month. All told, Puritan will have increased its production capacity more than 30-fold within a year.” READ MORE
In Japan, there are 33,000 businesses that have been operating for 100 years or more and at least 19 that have been operating for 1,000 years: “The businesses, known as ‘shinise,’ are a source of both pride and fascination. Regional governments promote their products. Business management books explain the secrets of their success. And entire travel guides are devoted to them. Most of these old businesses are, like Ichiwa, small, family-run enterprises that deal in traditional goods and services. But some are among Japan’s most famous companies, including Nintendo, which got its start making playing cards 131 years ago, and the soy sauce brand Kikkoman, which has been around since 1917.”
“Naomi Hasegawa’s family sells toasted mochi [rice cakes] out of a small, cedar-timbered shop next to a rambling old shrine in Kyoto. The family started [Ichiwa] to provide refreshments to weary travelers coming from across Japan to pray for pandemic relief — in the year 1000.”
“The company has declined many opportunities to expand, including, most recently, a request from Uber Eats to start online delivery.” READ MORE
GOVERNMENT SUPPORT
Did the PPP loans end up helping businesses? “The rules initially required businesses to keep nearly all of their employees if they wished to have their loan forgiven, but Congress later softened the requirements to allow many businesses to have their loans eliminated even if they reduced their employee headcount. While economists believe the program contributed to job retention in the pandemic’s early months, its effects faded as the money dried up. An analysis by Gusto, a payroll provider for small companies, found that the chances that workers would lose their job at a company that took a PPP loan increased by 25 percent during the week that the loan’s restrictions on job reductions ended. Gusto estimated that 232,000 jobs may have been eliminated as the restrictions expired.”
“‘Once that requirement ends, the head count falls off a cliff,’ said Luke Pardue, an economist at Gusto. ‘It was designed to be temporary relief, but what we find is that companies really emerged in no better shape. A lot of that is due to the fact that the economy is in no better shape.’”
“Discussions in Congress about further economic stimulus measures have included calls for a second round of PPP loans, this time more narrowly targeted to the hardest-hit businesses.” READ MORE
More than half of the PPP small-business loans went to large companies: “Officials from the Treasury Department and the Small Business Administration have argued the program primarily benefited smaller businesses because a vast majority of the loans ― more than 87 percent ― were for less than $150,000, as of August. But the new data shows more than half of the $522 billion in the same time frame went to bigger businesses, and only 28 percent of the money was distributed in amounts less than $150,000.” READ MORE
THE COVID ECONOMY
UPS is imposing shipping limits on large retailers: “The move comes during a holiday season when retailers are increasingly dependent on delivery companies to move online orders, as store traffic has plummeted during the coronavirus pandemic—a dynamic that has shifted power significantly. UPS and rival FedEx have raised prices and promised to hold merchants to volume agreements. The temporary limits, which some drivers say they haven’t seen during previous holiday seasons, are a sign that UPS is metering the flow of packages into its network to preserve its performance during one of the busiest shipping weeks of the year. The National Retail Federation estimated that online shopping jumped 44 percent over a recent five-day stretch that included Black Friday and Cyber Monday.”
“On Wednesday, FedEx said it had agreed to buy online-shopping platform ShopRunner. to bolster its e-commerce capabilities. ShopRunner charges a yearly membership fee of $79 for two-day shipping from more than 100 retailers. Terms weren’t disclosed.” READ MORE
Optimism among small-business owners has hit a four-year low: “That’s one finding from a Bank of America Corp. survey of more than 1,000 entrepreneurs between July and September. Only 39 percent of respondents expect their local economy to improve in the next 12 months, down from 51 percent at the start of the year, the survey found. Hiring plans and revenue expectations are at the lowest levels since 2012 and 2013, respectively. Still, seven in 10 small-business owners say they plan to keep staffing levels steady in 2021.” READ MORE
Nobody is going to conventions but convention centers are growing anyway: “The financial wounds caused by the pandemic have been grievous. In Irving, Texas, the public finance authority behind a year-old convention-center hotel has already defaulted on $37 million of municipal bonds. In Seattle, one plan to finance an expansion failed to meet a legal requirement because hotel-tax revenues have dried up. And in Milwaukee, the pandemic threatened to throw the downtown Wisconsin Center into insolvency. But none of that has slowed a building spree meant to attract hordes of middle managers, car aficionados and coin collectors.”
“Georgia budgeted $70 million in July to help Savannah double its convention center’s exhibition hall.”
“In Cleveland, officials are seeking $30 million to upgrade an underused health technology center and add it onto the Huntington Convention Center.”
“‘This is a perverse world, where market realities do not affect city decision-making,’ said Heywood T. Sanders, a professor at the University of Texas at San Antonio who studies the use of convention centers as urban-renewal tools.” READ MORE
THE 21 HATS PODCAST
Episode 41: She Was a Hiring Goddess: Back in 1996, Jay Goltz had no real hiring process -- and the results to prove it. “My hiring success rate,” Jay tells us, “was probably, I don't know, 30 or 40 percent, which isn't much better than whoever walks in you hire.” And then he asked Ivy Garfield to take over his hiring. As Jay explains, Ivy brought an instinct, an understanding of how to assess people. “She profoundly changed my business,” he tells us. “She was here six years. Most of my key people she hired. They’re with me 25 years later.” Jay talks about the secret to Ivy’s success and why entrepreneurs like him tend to be terrible at hiring.
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--Loren Feldman
