I Used to Sell to Consumers
In our latest podcast episode, the business owners talk about the joys and challenges of selling products and services to other owners.
Good Morning!
Here are today’s highlights:
That pandemic boom in startups just keeps booming.
The new overtime rules have gone into effect. Sort of. Maybe. In some places.
If you’ve gone hybrid, there’s one big concern to keep an eye on.
If you want to be a Chick-fil-A franchisee there’s one big question you need to answer. It happens to be a good question to ask any job applicant.
THE 21 HATS PODCAST
I Used to Sell to Consumers: This week, Paul Downs, Jaci Russo, and Sarah Segal talk about how they wound up pitching their products and services not to consumers, but to other businesses. They all agree that selling to business is more profitable, and they all agree that it has other advantages, as well. “In general,” says Paul, “it's easier to sell to businesses because the person you're talking to, it's rarely their money.” But some aspects of selling B2B can be harder. For example, how do you break through and reach the right person at a business, especially if you’re trying to reach the owner directly? And of course, there’s always a learning curve: Selling to a big business requires a level of professionalism that can be challenging, especially early on.
Plus: Sarah explains why—even though she had to lay off people last year—she’s doubling her office space this year. Jaci is exploring what policies make hybrid offices most effective. And Paul, who says he’s having his best year ever, spells out the way he calculates when it’s time to add employees, as he had to do earlier this year.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
ENTREPRENEURSHIP
The startup boom continues: “Back in 2020, when the world was navigating the hellscape of the pandemic, economist John Haltiwanger discovered something really strange happening in the U.S. economy: Americans were creating new businesses at a record rate. Haltiwanger is one of the top experts on new business creation in the United States. He even helped the U.S. Census Bureau set up official statistics that track it. A surge in new businesses, Haltiwanger says, tends to be a great sign for job creation, innovation, and productivity growth in the economy. But, up until 2020, the data painted a sort of gloomy picture. Haltiwanger was writing research papers with titles like the ‘Top Ten Signs of Declining Business Dynamism and Entrepreneurship in the U.S.’”
“But we’re now well past the pandemic crisis and even the pandemic recovery. It’s been almost exactly four years since the startup boom began — and there’s still a bonanza of new business creation in America. It’s harder to be dismissive about it. ‘I’d say we’re on a new plateau that started in 2021,’ Haltiwanger says.”
“Comparing the three years before the onset of the pandemic to the three years after, the data suggests there are now, on average, almost 60 percent more new businesses being created each year.”
“The first set of new businesses are capitalizing on a huge post-pandemic population shift. Many office workers are now either fully remote or hybrid. ‘People are not spending five days a week at the office in major downtown areas,’ Haltiwanger says. Where people spend their time, they spend their money. Bad news for businesses in downtown areas. Good news for businesses where office workers live.”
“Haltiwanger is much more excited about the other big bucket of new businesses he’s identified in the data: tech startups. This boom is proving, he says, to be the most persistent. These tech startups come in many stripes, but there’s one sub-category that has really caught his and other economists’ attention: startups working in artificial intelligence.” READ MORE
REGULATION
The new overtime rule has gone into effect. Except in Texas. And until a court strikes it down: “Under the terms of a new rule, which was finalized by the Department of Labor on April 22, the annual salary threshold under which non-exempt workers would be eligible for overtime will go from $35,568 to $43,888 as of July 1, 2024 On January 1, that threshold will increase further, to $58,656 — a 64 percent increase from its current level. The salary threshold then would update every three years based on wage data, according to the Department of Labor. Over the first two updates, more than 3 million workers would be newly eligible for overtime, the agency said.”
“However, the changes don’t go into effect everywhere. A lawsuit in Texas successfully won an injunction against the new regulation and additional lawsuits continue to play out across the country that make a trip to the Supreme Court nearly inevitable. A judge for the United States District court in the Eastern District of Texas granted the injunction for the states of Texas only, indefinitely delaying all aspects of the new overtime regulations as the court challenge plays out.”
“But that challenge seems far more likely to be successful after the recent Supreme Court decision in Loper Bright Enters. v. Raimondo (the Department of Commerce) which overturned four decades of judicial deference to federal agency interpretation of legislation known by the previous case of ‘Chevron.’”
“The courts will now have more power to determine a final interpretation for legislation that agencies would be locked into following — removing the ability for new administrations to offer up new regulations on existing law and severely curtailing much federal agency action. Attorneys say the overturning of Chevron will likely lead to less aggressive rule-making.” READ MORE
In California, restaurant surcharges will remain legal so long as they are clearly displayed: “Gov. Gavin Newsom’s office confirmed Saturday that he signed SB 1524, legislation that allows restaurants to continue adding surcharges to diners’ checks — fees that the industry says are crucial to the survival of these businesses. These fees range from additional tips intended to maintain pay parity between the wait staff and the kitchen staff, to city health mandate fees, to corkage fees for diners who bring their own bottles of wine for dinner. Without the industry carve-out, an emergency measure introduced by Sen. Bill Dodd in early June, restaurants, bars, and other food-service businesses would have been subject to the SB 478 prohibition starting July 1 on so-called ‘hidden fees.’”
“The Golden Gate Restaurant Association hailed the approval, noting that surcharges ‘will make it possible for restaurants to continue to support pay equity and contribute to worker health care.’ Transparency is critical, the GGRA said in its statement Saturday. ‘Customers should never be surprised by their bill,’ the group said.”
“Restaurateur Helen Nguyen, who owns Pho Ha Noi restaurants in San Jose, Palo Alto, Fremont, and Milpitas, was pleased to hear of Saturday’s resolution of the issue. ‘I am happy to know that the political figures finally understand the importance of taking action to support the restaurant business,’ she said. ‘The service charge will help business owners maintain a balance in payments between front-of-house workers and back-of-house workers. It will also save money for customers ordering takeout.’” READ MORE
HUMAN RESOURCES
One of the biggest concerns about hybrid work is proving worthy of concern: “Now that employers are in the midst of their hybrid models — and some are even moving past them — new data suggests fears about proximity bias, or the tendency to gravitate toward employees who are physically present more often, were justified. That's according to a survey of 626 managers by Resume Builder, which found managers are more invested in the growth of in-person workers rather than their mostly remote counterparts.”
“The survey found 56 percent of managers said they care more about the growth of in-person workers. The survey also found one in four managers are more likely to fire remote employees than in-person workers, citing the need for more supervision among the top reasons for the increased likelihood of dismissing remote workers.”
“For employers, the consequences of proximity bias can be steep, including potential for higher turnover and negative impacts on morale, but there are some best practices for organizations to avoid proximity bias.” READ MORE
FRANCHISING
When Chick-fil-A interviews potential franchisees, there’s one question its reps ask over and over: “You should know that getting a Chick-fil-A franchise is one of those things in life that is much harder to do statistically than many people would realize. With thousands of applicants for a chain that opens a few dozen restaurants each year, we're looking at a 1 percent success rate, at best. Why so many applicants? Maybe because Chick-fil-A requires only a $10,000 franchise fee, compared to as much as millions for other brands. Plus, some reports suggest that Chick-fil-A owner-operators can make as much as $300,000 per year.”
“The question they ask over and over in franchisee interviews is simply: ‘Why do you want to own and operate a Chick-fil-A franchise restaurant?’ The reason they ask it so often is to track the candidates' answers over time and ensure that people have thought it through deeply. In short, I think they want to know if applicants know what they're getting into.”
“I asked Chick-fil-A for a few more details. One data point is that fully 76 percent of successful franchise candidates over the past two years previously worked at a Chick-fil-A restaurant. So that's apparently one way to up your odds.” READ MORE
INSURANCE
In California, a request for a massive rate hike: “Mere months after its last rate increases went into effect, California’s largest insurance provider is asking for another huge hike. Earlier this week, State Farm’s California subsidiary submitted a request to the Department of Insurance to raise its rates by an average of 30 percent for homeowners, 52 percent for renters, and 36 percent for condo owners. This marks the latest escalation of California’s home insurance crisis, which has seen a slew of insurance providers issuing dramatic rate increases, halting new policies or leaving the state entirely.”
“Insurance industry experts have described the state of California’s insurance industry as a ‘ticking time bomb,’ with a mass exodus of carriers severely straining the state’s ‘insurer of last resort,’ which only provides bare-bones coverage.”
“State Farm had a loss ratio of nearly 90 percent in California last year (meaning it paid out about $90 of every $100 it collected in premiums). The overall market in California had a loss ratio of 68 percent.”
“The requested rate hike is ‘crazy high,’ according to Karl Susman, president of the Susman Insurance Agency in Los Angeles and an industry pundit. But the Department will likely ‘have no choice but to approve it’ if State Farm proves it needs this money to survive, he said.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
SCOTUS Unleashes a Regulatory Revolution: This week, Gene Marks and I discuss the Supreme Court’s decision, released on Friday, that takes authority to interpret laws passed by Congress away from federal agencies and gives it to judges. Whatever you think of the merits of the ruling, Gene points out, it creates tremendous uncertainty for businesses trying to comply with the law. For example, a new overtime rule is supposed to go into effect today. Should businesses start following it, Gene asks. Or should they wait to see what happens with pending litigation?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren