Have You Considered Not Taking Investors?

In our latest 21 Hats Podcast episode, we talk about the pluses and minuses of selling equity. Do you like having a boss?

Good morning!

Here are today’s highlights:

• A survey finds entrepreneurs struggling with mental health and not getting the support they need.

• Real estate agents are trying a daring new sales strategy.

• Startups that help businesses manage their supply chains are raising record amounts.

• Two years into the pandemic, shoppers are still hoarding.

THE 21 HATS PODCAST

Have You Considered Not Taking Investors? This week, Jay Goltz, Liz Picarazzi, and Dana White talk about the advantages and disadvantages of bringing in outside capital and expertise—something both Liz and Dana have considered. “I have a background in Russian literature and credit card marketing,” says Liz. “I'm now a manufacturer, so if I could have an outside investor who either brought that to the table or could help me with it, that would be really valuable.” But of course, there are trade-offs. We also talk about Dana’s looming franchise sales, why it’s so hard to hire lawyers and accountants, and whether there’s an opportunity for Jay in framing NFT art.

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

SALES

Real estate agents are trying a new strategy—being honest: “The Covid-19 pandemic sparked a surge of Americans moving to new regions, sometimes sight unseen, lured by lower costs or the ability to work remotely. But house hunters or those who uproot can be surprised by what they find, from pea-soup fog on coasts to relentless snowstorms in the mountains. In response, a new genre of videos is populating YouTube, in which real-estate agents get brutally upfront about the potential downsides of moving to their area. They say the blunt talk helps them stand out, sets realistic expectations and reduces buyer’s remorse. The agents say it also prevents them from having to assist needy homeowners who may be out of their depth when they move to a new locale.”

• “Real-estate agents ‘get a bad rap, usually well deserved, for sugarcoating everything,’ said Realtor Jamie Eklund, who sells properties in Northern Colorado. ‘If a house is old and rundown and small, we say, It’s cozy and has lots of character. But everything has its bad side, and I want to be as honest with people as I can.’”

• “His online pitch for relocation opportunities to Greeley, Colo., is heavy on B-roll of cloudless skies meeting the jagged horizon of snow-capped Rocky Mountains. Clad in a homey checked shirt, Mr. Eklund also launches into ‘reasons why you might regret moving to Greeley.’”

• “‘It smells like a farm town,’ Mr. Eklund says into the camera as the video pans to cattle ranches. ‘If this is something that might bother you, you might want to reconsider.’” READ MORE

ECOMMERCE

Shopify is offering businesses the opportunity to pitch their products in 3-D and augmented reality:  “Merchants can convert their entire product offerings into 3-D and A.R. models on their websites. Shopify is partnering with the U.K.-based A.R. platform Poplar Studio to offer the service through an app that costs businesses $49 per month. Shopify already offered some 3-D and A.R. features, but the experience was fragmented and required multiple apps. The new platform allows retailers to access all the features in a single app.”

• “3-D and A.R. can help online retailers offer experiences generally only provided by brick-and-mortar stores, allowing customers to better visualize their potential purchases.”

• “Shopify merchants that have added 3-D images to their websites have experienced 94 percent higher conversion rates.” READ MORE

THE COVID ECONOMY

Two years in, shoppers are still hoarding: “Retailers and analysts predicted that the bulk buying in the early days of the pandemic, when supplies of many goods were constrained, would subside once people returned to work, stores were able to restock and vaccinations became widespread. Instead, Americans continue to stockpile food and household goods. Many are spending more time at home and remain uncertain about product availability. Some have moved from tight-spaced apartments in cities to more spacious suburban homes, and inflation is spurring a search for savings by buying in bulk.”

• “Consumers are also buying larger package sizes: average volume per unit was up 2.1 percent last year compared with average sizes in 2019, IRI figures show.”

• “Consumption is likely to decline this year from last year, IRI forecasts, but it says levels of food and household goods consumption will still be double pre-pandemic levels.”

• “‘Even if somebody waves a magic wand and makes Covid go away completely, we still expect elevated consumption in the home because people are accustomed to working from home, and hybrid work is here to stay,’ says Krishnakumar Davey, president of client engagement at IRI.” READ MORE

HUMAN RESOURCES

Amazon is more than doubling what it pays tech and corporate workforces: “Amazon will boost its maximum base pay to $350,000 for corporate and tech employees, from $160,000 previously, as part of an overall increase in total compensation intended to help recruit top talent and retain existing employees. The move promises to bring Amazon’s base pay more in line with other big tech companies, including Google, Facebook, Apple and Microsoft. Historically, Amazon has kept its base pay lower than many of its peers have, making up the difference with restricted stock units and cash compensation such as a sign-on bonus, paid over two years.”

• “Those additional components of compensation will remain in place. Amazon says it’s ‘increasing overall compensation ranges for most jobs globally, and the increases are much more considerable than we’ve done in the past.’”

• “Amazon announced the plan to employees Monday morning in a post on its internal corporate site. GeekWire viewed the post and confirmed its accuracy with Amazon.” READ MORE

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LOGISTICS

Startups that help businesses manage their supply chains are raising record amounts: “Julian Alvarez, CEO and founder of Seattle-based Logixboard—a customer engagement platform designed to help companies manage freight operations—said even how people in the space view it has changed in three years. While the supply chain used to be looked at as something that was just a cost, companies are now seeing how having the right materials and delivering on time can help an organization.”

• “‘Software is turning [the supply chain] from a cost center to a profit center,’ said Alvarez, whose company raised a $32 million Series B last month.”

• “‘No one cared about this space just a few years ago,’ said Teddie Wardi, managing director at Insight Partners. ‘Not just investors, but I mean, everyone. Now, we have seen about 10 years of transformation in two.’” READ MORE

TAXES

Expecting a refund this year? File your taxes ASAP because the IRS is already warning of delays: : “It’s important to start your tax filing process as early as possible. Meet with your accountant, understand what’s needed, and gather the necessary documents. That way, your accountant can get a head start on your returns before things really get busy in March and April. (If you have a calendar year end S-corporation and partnership, then tax returns are due by March 15, 2022, C-corporation and individual returns are due by April 18 this year.)

• “‘As the season goes on, the IRS becomes overwhelmed with an increasing number of returns being filed as we get closer to the deadline,’ said Frank Pileggi, a tax partner in the Philadelphia office of Eisner Advisory Group.”

• “‘In addition, if the taxpayer is using an accounting firm to prepare its taxes, they can expect faster turnaround times earlier in the season and avoid the need to go on extension.’” READ MORE

PROFILE

In November, New York’s Metropolitan Transit Authority closed the Clark Street subway station in Brooklyn for repairs — leaving a handful of business owners to fend for themselves:

• “Salahuddin Aziz, 60, owns the Sun News newsstand: ‘Before all of this, we’d make $1,500 to $2,000 on a good day. Now, I just make $100 some days. It’s nothing. My rent is $4,500, and I haven’t been able to pay since the station closed, and the pandemic has been hard with less people on the subway overall. I owe a lot to the landlord: $40,000. I’ve used my savings. I’ve borrowed money from my family. I have a lot of sleepless nights. I’m doubtful that I’ll be here when the station reopens.’”

• “Tommy LaMarca, 75, owns the Cutting Den hair salon: ‘My grandfather opened this business in 1926. I’m the third generation, and I’ll be the final act. There’s a lot of history here. Arthur Miller, Norman Mailer, James Dean — my father cut all their hair here. Truman Capote used to come in three times a week; he’d come in for a shave, facial, and mudpack. He gave one of my workers an autographed, first-edition copy of In Cold Blood. ... Now with the station closed, our business is down about 70 percent. I cut five or six people’s hair a day when I used to cut 22 or 23. I’ve been paying 20, 25, 30 percent of the rent, which is up to $5,100 — paying what I can.’”

• “Cheung Han, 59, owns Han’s Market, a small grocery store: ‘Most of my customers come from the subway, and usually about 700 people would come in a day. Now it’s more like 250. But my rent is $15,000. I have to pay five workers. My electric bill is $3,000. Garbage is $750. There’s the phone bill, too. All these expenses. I got a PPP loan that I’ve been using, but there’s not much left. Just look at the place now: It’s lunchtime and it’s dead. ... We’re talking to the landlord because I owe a lot. I owe about $350,000.” READ MORE

THE ENTREPRENEURIAL LIFE

A survey found entrepreneurs struggling with mental health and not getting the support they need: “Starting a venture from scratch can be risky, exhilarating, exhausting — sometimes all at the same time. The Hustle surveyed more than 300 entrepreneurs on the state of their mental health, and a whopping 63 percent reported dealing with burnout, with 59 percent saying they’ve dealt with anxiety. While the numbers are high, the findings aren’t shocking given how perilous founding a new business can be. Readers reported the top stressors are financial concerns (21 percent) followed by day-to-day stress (16 percent), work-life balance (15 percent), and uncertainty about the future (12 percent), among many others.”

• “Dr. Michael Freeman, a psychiatrist and researcher at UC San Francisco, conducted a study in 2015 that illustrates how different founders are from the rest of the population. He found that 72 percent of entrepreneurs reported having a mental health history, in contrast to only 48 percent of comparison participants.”

• “Freeman, who was once a co-founder and CEO himself, identified the need for this type of research through that experience. ‘Everybody can hold a job, some can lead a team or club, but very few people can start and grow a business,’ he says.”

• “Stigma could be to blame for the lack of mental health support for founders: 30 percent of respondents said they do not think there are mental health resources available to entrepreneurs, and another 40 percent said there are some, but not enough.” 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