How’s Your Compensation Plan Holding Up?
In our latest 21 Hats Podcast episode, the owners talk about what the past three years have meant for employee compensation and how they are trying to adjust.
Good Morning!
Here are today’s highlights:
Almost all PPP loans have been forgiven, which is not necessarily a good thing.
Brian Canlis, a friend of 21 Hats, says it’s possible to run a fine dining restaurant without abusing your staff.
Venture capital firms have started celebrating their misses in “anti-portfolios.”
Here’s how Debbie and Lisa Ganz turned being twins into a business model.
THE 21 HATS PODCAST
This week, Shawn Busse, Liz Picarazzi, and William Vanderbloemen discuss trying to make sense of employee compensation in a time of COVID, the Great Resignation, inflation, and a looming recession. Shawn’s business model is evolving, and he’s trying to adjust his mix of employees to fit the new model with as little disruption as possible. Liz is expecting a year of growth and is assessing how that will affect her staffing needs—especially as she introduces new benefits, including health care. And William is trying to create a more sustainable compensation structure while also breaking his employees’ expectation that they will always get a year-end bonus. Plus a listener asks: What tasks are the owners still doing even though they know it’s not worthy of their time? (Aside from participating in this podcast, of course.)
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
FINANCE
Almost all Paycheck Protection Program loans are being forgiven: “Called PPP for short, the program offered simple-to-get, potentially forgivable government loans to small businesses. Yet billions of dollars went to companies owned by wealthy celebrities, including Tom Brady and Khloe Kardashian, and companies that thrived during Covid, like many manufacturing and construction firms. Government officials acknowledge that the program was rife with fraud and did not weed out undeserving applicants. But there was a way to remedy those early errors: Deny forgiveness. That could have thwarted scam artists and forced businesses that prospered to repay the money. Yet nearly three years after the rollout of PPP, the vast majority of loans have been forgiven.”
“An NPR analysis of data released on Jan. 8 by the Small Business Administration found that 92 percent of the loans issued have been granted full or partial forgiveness. That includes loans to companies with mega-rich owners.”
“That infuriates Beba Touloupis, who with her husband co-owns Ted's Restaurant in Birmingham, Ala., which serves cafeteria-style Southern cooking. When Covid shutdowns left them able to sell only takeout orders, they watched their business plummet from more than 200 people a day to as few as 10. A $45,000 PPP loan kept some of their workers on the payroll, but so far the loan remains unforgiven.”
“So Touloupis was shocked when a longtime customer told her he received a PPP loan that he said wasn't necessary for his company's survival, yet was forgiven. ‘He had the nerve to tell me that he got money and he didn't need it,’ Touloupis said. ‘And that was, like, three times the amount of money I got — maybe four.'" READ MORE
FOOD & BEVERAGE
In Chicago, restaurants are showing signs of life but only under certain circumstances: “Activity perked up in the past few months, throwing a lifeline to remaining restaurants, according to Scott Weiner, co-owner of Fifty/50 Restaurant Group, which operates more than a dozen establishments across Chicago, including West Town Bakery and 90th Meridian, both in the financial district. But ‘restaurants are typically most at risk of closing from November through March, because it’s the slowest time of the year,’ Weiner said. ‘Anyone who is not well-capitalized is in a risky position, and I have to imagine that’s most restaurants right now. I think we’re going to see plenty of places go under, although probably not at the scale we’ve seen over the last few years.”
“Weiner’s restaurant group had to close Steadfast at The Gray, a Central Loop restaurant next to the Kimpton Gray Hotel, after business travel dried up and hotel occupancy plunged. It’s also kept 90th Meridian closed on Fridays. But it’s ready to launch new ventures, at least in some locations.”
“In January, Fifty/50 will open Kindling, a two-story restaurant in Willis Tower that will serve live-fire cuisine. It’s a bit nerve racking to open a new restaurant anywhere downtown, Weiner said, but Willis Tower just underwent a $500 million makeover and is the state’s top tourist draw, so it’s one of the few locations where it makes sense to take a risk. ‘I would be terrified if I was opening this restaurant in a lot of other downtown buildings,’ he said.”
“The Fulton Market neighborhood just west of the Loop is also attracting new tenants and commuters, said Bauer. In November, the neighborhood’s foot traffic reached 90 percent of the level recorded just before the pandemic, while the Central Loop stood at 76 percent, according to Cushman & Wakefield data.”
“‘The Loop has definitely improved compared to where it was six months ago,’ said Russell Cora, executive vice president of developer Sterling Bay. ‘It’s been a steady build since Labor Day, but Fulton Market is definitely the hottest market in the country.’” READ MORE
Brian Canlis, who runs one of America’s renowned restaurants and who we met in an early 21 Hats Podcast, believes it’s possible to be great and also take care of employees:
SMALLBIZ TECH
For some reason, Gene Marks, who consults with small businesses about their technology use, is getting wistful about paper checks: “For most businesses, paper checks are still a thing. As many as one in three business-to-business transactions are paid this way and 81 percent of firms in the U.S. are still using paper checks to settle at least some of their bills. Stop the eye-rolling because yeah, we know. Electronic payments make more sense for a business. They’re quicker to initiate, authorize, and complete, and they’re easier to track, audit, and report. They save paper and are good for the environment. They’re more secure, efficient, and cost less. They can be initiated and approved from anywhere. And a growing number of businesses not only prefer payment electronically, but are requiring customers to do this.” And yet:
“Paper checks are not only a written form of contract embraced by firms throughout history but also a form of marketing where companies can proudly display their logos. They are tangible evidence of stability and reliability.”
“Most importantly, the biweekly check run is a time of reflection, a ceremony of sorts where those vendors deemed worthy of payment are singled out, approved, and honored with a place in the stack on our desk for the final sign-off.”
“Yes, it’s inefficient and costlier. But please be patient. Allow us this one little enjoyment while it lasts.” READ MORE
PROFILE
In 1994, Debbie and Lisa Ganz opened a restaurant in Manhattan—and discovered an unexpected opportunity: “Within weeks, hundreds of newspapers and TV shows were asking for interviews or to film inside the restaurant. That’s because the world had never seen anything like the Ganz sisters’ restaurant. Lisa and Debbie are identical twins, and they had staffed their eatery, Twins Restaurant, with 30+ pairs of identical twins who wore matching outfits and sported name tags that read something like ‘I’m not Lisa’ or ‘I’m not Debbie.’ If one twin got sick, the other had to stay home, too. Buoyed by the restaurant’s viral reception, Lisa and Debbie planned to open locations across the country. But as they worked long restaurant hours, emptying grease traps at 2 a.m., they discovered a more intriguing opportunity.”
“For any business project or media opportunity that involved twins, triplets, or ‘multiples,’ the Ganz twins would be the consultants, the authors, or the ones to find the twins. They excelled at it. They monopolized it. And they’ve been doing it for decades now.”
“Lisa and Debbie Ganz have chased a world record by putting 150+ identical twins on tandem bikes. They have found identical twins to play roles in ‘Law & Order’ and ‘The Marvelous Mrs. Maisel.’ They have published a twin-related book.”
“‘We basically [turned] how we were born into our business model,’ Lisa tells me.” READ MORE
SILICON VALLEY
Venture capital firms have started tracking the ones that got away: “Unable to forget their biggest mistakes, some venture investors—who by definition are mostly investing in companies before they become successful—are embracing them, talking about them, even writing them down. Bessemer Venture Partners, a large San Francisco-based investment firm, popularized the trend with a page on its website dedicated to the ‘anti-portfolio.’ The company’s ‘long and storied history has afforded our firm an unparalleled number of opportunities to completely screw up,’ declares the Bessemer page.”
“Bessemer’s long list of misses includes Google in 1999, Tesla in 2006, Apple at a $60 million valuation, and Airbnb at $40 million. And then there was Facebook, shunned by Bessemer partner Jeremy Levine.”
“‘Jeremy Levine spent a weekend at a corporate retreat in the summer of 2004 dodging persistent Harvard undergrad [and Facebook co-founder] Eduardo Saverin’s rabid pitch,’ Bessemer’s anti-portfolio says. ‘Finally, cornered in a lunch line, Jeremy delivered some sage advice, Kid, haven’t you heard of Friendster? Move on. It’s over!’”
“By touting their warts, firms in a field not known for its modesty can show a degree of humility and that they are learning from their mistakes, potentially making them appear more trustworthy to investors.”
“There are skeptics. Hunter Walk, a partner at venture firm Homebrew who himself has publicly admitted some of his misses, called anti-portfolios ‘performative BS.’” READ MORE
OBITUARY
Joe Hardy, founder of 84 Lumber — “the largest privately owned home improvement retailer in the United States and third overall behind Home Depot and Lowe’s. He’s credited with rethinking the lumber business in the late 1950s with a cash-and-carry approach focused on professional contractors and builders, then proceeded to dictate over company growth that at one point included more than 500 stores in 38 states, placing him and eventually his daughter Maggie Hardy on the Forbes 400 list of the world’s richest people.”
“By 2002, Ms. Hardy was included on that list, with an estimated wealth approaching $1 billion, at a time when 84 Lumber revenues had reached $2 billion a year. Mr. Hardy’s wealth has been reported as high as $1.2 billion. Neither is currently on the list. Mr. Hardy turned 100 on Saturday and died on his birthday.”
“His late-life transformation into a bon vivant, elderly playboy and avant garde promoter of unapologetic extravagances — that’s to say, parties, young women, marriages and divorces, and song — drew media and public attention. ‘I get a kick out of life,” he once said. ‘I really, really do.’” READ MORE
THE 21 HATS PODCAST: DASHBOARD
Check out the new retirement plan rules: This week, Gene Marks says that the politicians behind Secure 2.0 are smarter than you think. The omnibus spending bill that recently became law includes a slew of generous changes to the rules that govern retirement benefits. The changes are designed to encourage both employees and owners to sock away more money, and they include a $1,000 tax credit per employee for owners who match employee savings. Plus: are non-compete clauses of any value to small businesses? And the IRS blinks on its requirement that third-party payment platforms issue 1099-K forms.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren