I Can’t Have a Handle on Everything
Once a business gets past a certain size, no owner can do everything or even be aware of everything. But where do you draw the line?
Good Morning!
Here are today’s highlights:
People are selling BMWs and Cadillacs on TikTok, which is no longer just for kids.
Janet Yellen says the U.S. will protect the small banks that serve small businesses.
Steve Case says we need something to take the place of Silicon Valley Bank.
Here’s a list of things you should do right away if you’re thinking of selling your business.
THE 21 HATS PODCAST
This week, Jay Goltz and Laura Zander talk about the limits of their own management: Does the owner need to be conversant with most aspects of management, marketing, and finance to oversee the business? This came up, in part, because Jay told us recently that his framing shops routinely ask customers how they learned of the business and that a recent review indicated that his social media efforts were not having an impact. But when asked about those efforts, Jay wasn’t entirely sure what they consisted of or if they even existed. Perhaps surprisingly, it also became clear that Jay wasn’t all that interested in learning more. It was working well enough, he’d concluded, and that was all he needed to know. Along the way, we also address such questions as: Where’s the line between being a manager and being a therapist? Do owners need to be passionate about their businesses? What does the phrase “people over profits” really mean? And while “the customer is always right” has become a cliche, is it really a good policy?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
MARKETING
As TikTok becomes more of a search engine, it’s also becoming more of a channel for big-ticket retailers: “Increasingly, local car dealerships and other brands selling big-ticket items say they’re finding success on TikTok given the app’s low barrier to entry, preference for authentic, organic content, and new search functionality. The latter of which has become a bigger focus recently, with advertisers and the platform itself shifting to keep up with young people’s changing online search habits. ‘[Consumers], in the past, may have gone to Consumer Reports [to research big purchases],’ said Yunilda Esquivel, director of strategy at Laundry Service agency. ‘Not unsurprisingly, TikTok is a search engine for Gen Z consumers–how to do things, where to find things, especially when it comes to things like travel and discovering new brands.’”
“Matt Eldridge, product expert or BMW Genius at BMW Tuscaloosa, Ala., started TikTok-ing last year with an organic approach. Because of TikTok’s reach, he’s been able to get the dealership in front of a broader audience and sold at least four high-end, specialty cars because of it, he said.”
“It’s a similar story at Lockhart Cadillac, where Jason Fox serves as brand manager, spending a few hours per day managing @lockhartcadillac’s 141,2000 TikTok followers. Per Fox, TikTok presents more opportunities to go viral and reach a broader audience than platforms like Instagram or Facebook, mostly because of its algorithm. ‘We’re always out here trying to crack that code and get our video pushed even further,’ Fox said.”
“Insider Intelligence reports U.S. adult users will spend nearly an hour a day on TikTok this year, exceeding its previous forecast of 47 minutes by 18.7 percent. ... What’s more is TikTok is no longer the Gen Z app. Per Business of Apps, 34.9 percent of TikTok users range between 18 to 24 years old. Meanwhile, 28.2 percent of users range from 25 to 34 years old.” READ MORE
BANKING
Treasury secretary says U.S. will protect small banks if necessary: “The comments come as government officials contemplate additional options to stem the flows of deposits out of small and medium-size banks, and as concerns grow that more will need to be done. Ms. Yellen said recent federal actions after the failure of Silicon Valley Bank and Signature Bank were intended to show that the Biden administration was dedicated to protecting the integrity of the system and ensuring that deposits were secure.”
“Despite those efforts, the Fed’s campaign to raise interest rates to tame inflation has exposed weaknesses in the balance sheets of regional banks, rattling investors, and raising fears that deposits are not safe.”
“The recent volatility has led to calls for a review of the nation’s financial regulations and raised doubts about whether the existing methods of supervising banks are sufficient.”
“‘Large banks play an important role in our economy, but so do small and mid-sized banks,’ Ms. Yellen plans to say. ‘These banks are heavily engaged in traditional banking services that provide vital credit and financial support to families and small businesses.’” READ MORE
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CORRECTION
Yesterday’s newsletter included a photo of Ami Kassar that said he was addressing an EO event. It was actually an Inc. magazine event.
SELLING THE BUSINESS
Gene Marks has a list of things you should do right now if you’re thinking about selling—all things you should be doing anyway: “There are many reasons I’m expecting to see continued growth in the number of small business owners looking to exit their companies over the next few years. Our population is aging and much of the ‘boomer’ generation is at retirement age. Capital gains and estate tax rates — for now, at least — remain at historic lows. ... If some or all of these factors are making you think it could be time to sell your business, then know that this won’t occur overnight. You will need to plan and take these six actions before dipping your toes into the market.”
“If you have other equity partners, I’m hoping you have some type of partnership or buy-sell agreement which indicates the process that will need to be followed if one or more partners exit a business — be it voluntary or not.”
“Getting an appraisal done earlier will be a reality check and allow you to zero in on the areas of your business that need to be fixed in order to increase your company’s value. That way you can go into the market with a price for which you have confidence.”
“You’ll need to bring in an outside technology firm to evaluate your network, hardware, security, software, and databases and give you an honest report on just how out-of-date you are and what investment is required to bring your system into (at least) the 19th century.” READ MORE
STARTUPS
Steve Case says something has to take the place of Silicon Valley Bank: “There is real danger that we let the focus on SVB’s collapse obscure the critical role it played for startups and entrepreneurs. Those who have an interest in nurturing U.S. innovation — including venture capitalists and regulators — must quickly figure out how to continue supporting our startup community. SVB wasn’t exclusive to Silicon Valley — it had branches in Georgia, Illinois, Pennsylvania, Arizona and nearly a dozen other states — and it banked not just tech companies, but nearly half of the nation’s start-ups. In its core banking business, SVB’s loan book had losses estimated at less than 1 percent of a $74 billion portfolio. And despite making poor investment decisions with its excess liquidity, it was, for many start-ups, essential to growth.”
“Some may argue that tomorrow’s founders should just do what other small businesses do when they need a loan — apply to a traditional bank. But national and midsize banks often don’t understand the unique business model of a start-up and tend to require collateral ahead of approving a borrower.”
“SVB’s commitment to the entrepreneurial ecosystem compelled its employees to take meetings with founders, learn about their plans and develop relationships that other banks would likely not take the time to nurture. ... As a result, SVB became an important gateway for female founders, minority founders, and entrepreneurs from corners of the country that don’t see a lot of venture capital.”
“Start-ups are responsible for nearly all net new job creation in the United States. The country’s continued prosperity depends largely on the community SVB served better than anyone to date.” READ MORE
Venture funding is expected to fall to its lowest level in six years: “With just two weeks left in the first quarter, CB Insights projects venture outfits worldwide will invest about $56.3 billion in the period across 5,792 deals. That would mark the lowest quarterly funding amount in nearly six years and the fewest number of deals in a quarter since the end of 2016, according to the research firm's prior reports. Venture investments peaked at $180.7 billion worldwide in the fourth quarter of 2021, according to CB's past reports. The number of deals globally topped out at 10,922 in the first quarter last year, according to a post from the firm on Thursday. Both have fallen steadily since.”
“In a sign of the times, Y Combinator under new CEO Gary Tan this week announced it won't raise another late-stage investment fund, preferring to focus instead on early-stage startups, where the investments are smaller and the valuations generally lower.”
“Over the last year, as startup valuations came under pressure amid the plunging stock market and the decrease in venture investments, SVB helped to prop them up by providing companies with financing that didn't require them to reevaluate their worth, as CB noted in a separate post.”
“Without SVB actively providing such financing, more companies could see steep valuation cuts and some could go under or lay off staff, CB said.” READ MORE
OFFICE SPACE
A lot of commercial buildings aren’t suitable for residential conversion: “A local principal for a global architecture firm suggested a potential limit for ambitions to turn some of downtown Pittsburgh's largely empty and outmoded office buildings into residential. Gensler principal Carolyn Sponza, based in Pittsburgh, was asked about the subject of converting office buildings to residential as part of a panel discussion of NAIOP Pittsburgh on the subject of the local multifamily market. ‘This is a topic that I think is probably on the top of a lot of our clients’ minds and it has driven a lot of traffic to our website,’ said Sponza. More than that, it's a subject that involves a strategy proposal for which there's plenty of hopes for downtown Pittsburgh and its collection of mature office buildings struggling with high vacancy in the wake of the Covid-19 pandemic.”
“Sponza said Gensler developed an online assessment tool to compile the qualities a building needs to be successfully converted to residential use, pointing out five key characteristics such buildings have: location, building form, envelope, floor plate, and servicing. ‘It's interesting,’ she said. ‘Only 30 percent of the buildings we surveyed were really suitable for conversion.’"
“The administration of Mayor Ed Gainey working in tandem with the Pittsburgh Downtown Partnership, recently established a new conversion fund administered by the Urban Redevelopment Authority to help downtown building owners convert old office buildings to residential. “
“In its inventory of the buildings stock in the Central Business District, the PDP has indicated there are 144 buildings in the Class B and C category largely past their useful life as office buildings out of 188 buildings overall.” READ MORE
RETAIL
Fairway, a New York City grocery chain is gathering facial recognition and other biometric information, including voice prints, on shoppers: “‘We have found that this technology — used thoughtfully and in combination with other measures we take to reduce theft — is helping prevent more crime in store,’ Fairway told the [New York] Post. Fairway did not immediately respond to Insider's request for comment. Fairway is collecting the biometric data at one of its locations on Manhattan's Upper West Side.”
“Fairway told the Post that its system will only be accessed by ‘trained asset protection associates.’ The chain added that it is trying to find repeat shoplifters.”
“Nearly one-third of the arrests made for shoplifting in New York City last year involved the same 327 people, the Post reported in January.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
Bank As I Say, Not As I Do: This week, in the aftermath of the Silicon Valley Bank collapse, Gene Marks says he banks at Wells Fargo — but that’s not what he recommends. His suggestion: Find a good community bank, spread your money around to play it safe, and then relax. He also says you should consider going to a four-day work week. And not because it’s good for your employees, but because it’s good for you.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren