Get Rid of the Arsonists

Until he found a better approach, Jay Goltz says he used to spend much of his time putting out fires.

Good morning!

Here are today’s highlights:

• A consultant says that if you’re raising your prices now, you’re doing something wrong.

• Restaurant prices just had their biggest spike in 40 years.

• Are annual employee-performance reviews a thing of the past?

THE 21 HATS PODCAST

Episode 73: Get Rid of the Arsonists: This week, we have a very special episode. It’s the dog days of August, and the only regular available was Jay Goltz. So we reached out to a bunch of loyal listeners who we happen to know have listened to every episode of this podcast, and we asked them if there was more they wanted to know about Jay—or if they’d heard enough. It turned out, they had some great questions, including: What Jay thought of Dana’s “Jay” impression? What exactly Jay does all day? How he learned to delegate? How he knows it’s time to fire someone? And which of the other 21 Hats Podcast businesses he’d be inclined to invest in?

• You can subscribe to The 21 Hats Podcast wherever you get podcasts.

PRICING

A consultant argues this is not the time to raise prices: “If you have tied the price of your products and services to their cost, you have turned yourself into the supplier of a commodity and commodities always command razor thin margins. If your price is such that you can't absorb some inflation in your supply chain or cost structure, you've already screwed up. ... Pricing should always be based on the value of the product to the customer rather than the cost that you must expend to provide that product. Therefore, your price should only be responsive to the economy to the extent that the economy changes the value of your product to your customer.”

• “So, what if your costs do go up? Isn't it a good idea to raise your prices under those conditions? Answer: only if you've screwed up already. If you've been pricing correctly, there should be more than sufficient margin to absorb anything but hyperinflation.”

• “So, then, what do you do if you have screwed up and don't have plenty of margin to absorb inflation? Your first step should be to revisit your pricing strategy and figure out why it was so vulnerable in the first place. Then, if you indeed must raise your price to remain profitable, you do it in such a way that it doesn't get you involved in a counterproductive discussion of your costs.” READ MORE

Restaurant prices just had their biggest spike in 40 years: “Pricing for dining out increased 0.8 percent from June to July this year, according to new data from the Bureau of Labor Statistics. Menu prices haven't increased this sharply in years — the last time they reached this level was in February of 1981, Restaurant Business Online reported. Prices seem to be increasing faster lately. Between April and May, they went up 0.6 percent, and increased by 0.7 percent between May and June. Restaurant prices increased more than the full consumer price index, which went up by 0.5 percent in July. Prices are up on a yearly basis too, at 4.6 percent over July 2020, according to BLS.”

• “Chipotle raised prices across its menu by about 4 percent in June, a move the company said was prompted by increased wages for workers.”

• “Nearly every fast-food and fast-casual chain will likely follow, analysts at Gordon Haskett said.” READ MORE

THE COVID ECONOMY

Retail sales fell 1.1 percent from June to July: “Retailers and other U.S. businesses are also facing uncertainty caused by the Delta variant, as the highly transmissible strain causes setbacks for some companies and data suggest some pullback in spending on items such as air travel and cruises. A University of Michigan survey showed a sharp drop in consumer sentiment during early August. Richard Curtin, the survey’s chief economist, said the decline was due ‘mainly from dashed hopes that the pandemic would soon end.’”

• “Peter Elitzer, chief executive at discount retailer Label Shopper, said he had noticed more customers donning masks recently while shopping, even before the Centers for Disease Control and Prevention reversed earlier guidance and recommended that vaccinated Americans resume wearing masks indoors where Covid-19 rates of infection are high.”

• “Label Shopper has more than 60 stores located mostly in the Northeast and Midwest, and Mr. Elitzer said in the past two weeks he has noticed a bit of softening in sales at some locations, which he attributed to some customers being anxious about the Delta variant.” READ MORE

Europe is giving up on beating Covid: “The battle against Covid-19 is shifting into long-term, low-intensity mode in Europe, as countries including Germany, Italy and France go from seeking to end the pandemic to preparing to live with it. Governments are drawing up plans for campaigns of booster shots, mask wearing, frequent testing and limited social-distancing measures to keep the virus in check ahead of the region’s third pandemic winter. They are aided by a public that has proved relatively tolerant of social curbs. Unlike in the U.S., where some states were quick to drop restrictions amid optimism the virus was in retreat, there was never much expectation that the pandemic was over in Europe, where infections have spiked sporadically through spring and summer.” READ MORE

GROWTH

Inc. has released its list of fastest growing companies: READ MORE

HUMAN RESOURCES

A new study indicates that businesses are rethinking performance reviews: “Conducting annual reviews is quickly becoming a thing of the past. Employees — particularly younger employees — want feedback as often and as quickly as possible. That means ensuring that managers are communicating with their subordinates both formally and informally throughout the year. Many companies today have a formal sit-down employee review process, but these sessions are best when there are no surprises and really serve as a recap of the feedback an employee has already been receiving.” READ MORE

Nearly a third of workers under 40 have considered a career change since the pandemic started: “Nearly one in three U.S. workers under 40 have thought about changing their occupation or field of work since the pandemic began, according to a Washington Post-Schar School poll, conducted July 6 to 21. About one in five workers overall have considered a professional shift, a signal that the pandemic has been a turning point for many, even those who did not contract the coronavirus. Many people told The Post that the pandemic altered how they think about what is important in life and their careers. It has given them a heightened understanding that life is short and that now is the time to make the changes they have long dreamed of. The result is a great reassessment of work, as Americans fundamentally reimagine their relationships to their jobs.” READ MORE

LOGISTICS

As supply-chain issues linger, businesses try to make adjustments: “For direct-to-consumer furniture startup Dims, moving production closer to home helped offset escalating material and shipping costs. ‘A small minority of our products are now made in Taiwan, and one [shipping] container from there to [the U.S.] used to cost about $8,000. Our last container cost $19,000,’ says Eugene Kim, Dims.’s founder and CEO. Dims. began moving their wood furniture production to the U.S. before the pandemic, and completed the transition in 2020. They continue to produce metal furniture in Taiwan.”

• “Home goods designer and manufacturer Thomas Fuchs took a similar tack, recently rerouting production for some of their glassware to Mexico, though the company continues to produce overseas as well.”

• “A key solution for Rao was switching from air to sea cargo—a move she’d been wanting to make pre-COVID. ‘Normally, shipping via air freight took five to seven days, but now, it takes a month,’  she says. ‘Shipping by sea also takes about a month, but our carbon footprint is greatly reduced.’”

• “For companies like Seattle-based kitchen casework designer Space.Theory, doubling down on their initial commitment to local manufacturing has paid off. ‘Approximately 95 percent of Space.Theory manufacturing takes place at our Seattle production facility,’ with the remaining 5 percent handled by domestic and international partners, according to Michelle Kalsi, the company’s general manager. ‘To date, we have been able to maintain a minimal price increase of only 6 percent.’” READ MORE

THE 21 HATS CONVERSATION

A business owner dares to start a conversation about race: “White owners often ask Mel Gravely, CEO of TriVersity Construction, what they can do to help. He’s got an answer for them, which he offers in this interview and in his challenging new book, ‘Dear White Friend.’ The answer relates to his own journey to becoming a business owner and CEO, which happened only because a whole bunch of people made very deliberate decisions to reach out and offer him opportunities.”

• “There was no path from my Black neighborhood to the seat I sit in today.”

• “​​I said I wanted this division to be 20 percent Black. And so it became 20 percent Black, but they ignored performance. They ignored people adhering to our values, and they wouldn't step in and deal with people who needed to be dealt with from a managerial standpoint.”

• “I had people who own their business, some of them multigenerational business owners, who were the leaders of their organizations, and they hadn't thought about influencing their own sphere of influence. How are you looking at hiring? How are you looking at philanthropy? How are you looking at your supply chain?” 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