'Inflation Has Been a Benefit to Us'
Some smaller businesses are learning that it has never been easier to raise prices than it is now.
Good morning!
Here are today’s highlights:
Social media marketing is growing more expensive and less effective.
You know supply-chain issues are real when they affect Amish furniture makers.
The labor shortage is leading more business owners to try virtual assistants.
You can probably guess why 50-50 partnerships are more likely to fail.
MARKETING
It might be time to find alternatives to social media marketing: “The cost to acquire new customers on social media has risen dramatically: In the second quarter of 2021, the cost per thousand impressions on social platforms was up 41 percent compared with the same period the prior year. At the same time, new privacy laws and the launch of iOS14 in early 2021 (which clamped down on Facebook ad targeting) mean that it's more challenging than ever to zero in on specific consumers. Not to mention these platforms may have reached a brand saturation point. It's enough to make you wonder if you shouldn't just skip social media marketing altogether.”
“Lean in to email and direct mail: These methods of communication are cost-effective and can result in easy loyalty if done right. With emails, the key is to both draw customers in and to give them something that will bring them back.”
“Direct mail is an effective strategy to invite back a customer who hasn't purchased in a while. ... In a world that is increasingly digital, a piece of mail can feel more thoughtful and personal.” READ MORE
MANAGEMENT
Tim Ludwig, a business owner and investor, surveyed other owners about their challenges: “What did I ask in my survey? Four simple questions to collect anecdotes and discover patterns from across a representative sample of small business constituents – operators, lenders, brokers, investors, and service providers. The results themselves may not surprise, but the details provide insightful color about an evolving market landscape.” A few responses:
“‘Our biggest challenge is dealing with the existential threat of Google’s search algorithm changing in a way that materially impacts our business, given that around 50 percent of our revenue comes from SEO.’—Owner, online information services company.”
“‘Demand for our services is steady and requires next to no effort on our part. I have basically no advertising running, and we haven’t attempted to email our prior customers in over a year. Leads just keep rolling in and closing.’—Owner, residential services company.”
“‘We actually think inflation has been a benefit to us. There's never been a better time to raise prices than now, and you never have an easier built-in excuse than now to go and do it. Across the board. We have been raising prices and been fairly aggressive with it and have gotten limited pushback.’—Investor.” READ MORE
LOGISTICS
The supply chain chaos is even affecting Amish furniture makers: “With its furniture made by a couple of dozen rural American workshops and in-house craftsmen, Arcola, Ill., manufacturer Simply Amish would seem to be far removed from the global supply-chain strains that have hobbled most businesses. But the seller of handmade tables, chairs, and beds famous for clean, simple lines and old-fashioned sturdiness has seen its costs skyrocket as volatility in lumber markets has raised prices for the wood used to make its products.”
“Lead times for Simply Amish’s deliveries to dealers have also increased dramatically even though the company sources the maple, cherry and other woods from within 500 miles of its plant in central Illinois.”
“The problems in such a seemingly pared-down domestic supply chain, one that harks back to an era before offshoring and other pillars of globalization, suggests how deeply embedded global sourcing has become in manufacturing.”
“The issues at Amish furniture shops and sellers of their goods also highlight the challenges companies face in trying to get more resilient to global disruptions by bringing production closer to home.” READ MORE
HUMAN RESOURCES
With the labor shortage continuing, more business owners are trying virtual assistants: “The virtual-assistant industry has existed for decades, but it has boomed since the start of the pandemic, Jill Salzman, the founder of networking and education company The Founding Moms, said. She started her business in 2010 and hired her first virtual assistant nearly three years ago. Salzman has since increased sales across her company thanks in part to virtual workers, she told Insider. ‘I took years to learn the horrible lesson that you can't do everything by yourself,’ Salzman told Insider. ‘But once I hired a virtual assistant and began working with one, I was like, ‘This is ridiculously efficient, convenient, and affordable.’”
“Salzman ... said hiring contract workers is a cost-effective strategy for her business since she doesn't have to provide those employees with full-time benefits.”
"’I hope to never have to hire an employee,’ Salzman said.” READ MORE
About 10 percent of Russia’s tech workers are believed to have left the country: “The Russian Association for Electronic Communications told the lower house of Russia’s parliament last month that 50,000 to 70,000 tech workers have fled the country, with 100,000 more expected to leave over the next month — for a total of about 10 percent of the sector’s workforce. Ok Russians, a new nonprofit group helping emigres, used a sampling of data from neighboring nations and social media surveys to estimate that nearly 300,000 Russians overall had left since the war began.”
“The Russian government is ‘really scared and shocked,’ Aleshkovskiy said. ‘The prime minister of Russia has been begging these guys to stay. He’s telling them, Don’t worry that Apple leaves, we will build our own Apple Store.’”
“‘I would say that the best people are leaving right now. … The highly skilled, highly educated, highly paid specialists.’” READ MORE
STARTUPS
Starting a business with a 50/50 partner may not be the best choice: “New research finds that early-stage companies formed with an equal ownership split—such as 50 percent each for two partners or 25 percent each for four—were less likely to have measurable revenue or employees one year later, says Dave Noack, an assistant professor of entrepreneurship in the Goddard School of Business and Economics at Weber State University in Ogden, Utah. How much of a difference did it make? Companies with an unequal split were 21.7 percent more likely than other firms to be up and running a year later.”
“Today, roughly three out of four startups decide to divide the business equally when getting started, he says.”
“The problem, though, is that when shares are split evenly, no one founder feels they have ownership of the company and the responsibility for running it. And that often means that nobody takes charge, and the startup stalls.”
“‘The key takeaway is that there needs to be someone on the team who ultimately takes charge,’ says Dr. Noack, whose research was published in the Journal of Small Business and Enterprise Development last year.” READ MORE
Record fertilizer prices are driving farmers and investors to alternatives: “Startups marketing alternative crop fertilizers said they are gaining traction among U.S. farmers and investors, pitching themselves as a potentially cheaper option as prices for traditional fertilizers surge. Companies such as Pivot Bio, Kula Bio and Anuvia are pushing development of farm fertilizers by harnessing microbes or plant-based products to deliver nutrients that corn and other crops need.”
“[Dan] Hansen, who has been applying [Pivot’s] products to his roughly 700 acres for several years, said he has cut his nitrogen fertilizer use by about 25 percent over that period and that his corn yields have been bigger, too.”
“Nitrogen fertilizer costs him about 90 cents a pound, while Pivot’s product amounts to about 60 cents a pound, he said. ‘When fertilizers are cheap, guys are more willing to do what they do,’ Mr. Hansen said.”
“‘It’s in these situations when there’s supply issues that we’re pushed to step out of our comfort zone a bit.’” READ MORE
SUSTAINABILITY
A restaurant says it serves gourmet meals from scraps: “[Douglas] McMaster is waging war against waste at Silo, which he opened as head chef in 2019 in East London’s hip Hackney Wick neighborhood. It continues the zero-waste concept of his first restaurant, in Brighton, England—also called Silo—which he opened in 2014 and closed to move to the capital. Silo London’s interior is designed with recycled or recyclable materials—the lampshades are made of seaweed, the bar of reused plastic, the cutlery holders of crushed wine bottles. Local farmers supply the ingredients and collect what diners don’t eat to make compost. McMaster uses every scrap he can in his dishes, which also feature invasive species such as crayfish.”
“Food waste produces methane when it breaks down in landfills, and is responsible for as much as 10 percent of global greenhouse gas emissions, according to the United Nations Environment Programme.”
“A tasting of the entire menu—including smaller portions of the three starters, six mains, and two desserts—costs £59 ($74), plus the 12.5 percent discretionary service charge that’s customary in British restaurants.” READ MORE
CLOSINGS
Many independent bookstores have thrived during the pandemic, but it’s been tough on those serving a niche: “The Children’s Book Shop, a neighborhood treasure that has delighted young bibliophiles for decades, shuttered its doors Saturday with an emphatic final hurrah as it became yet another casualty of the pandemic’s barrage on local businesses. The 900-square-foot shop has occupied the same picturesque storefront in Brookline Village since 1977, making it the oldest independent children’s bookstore in Greater Boston. But social distancing wrought unique havoc here: Not only did the shop endure the reduced foot traffic that hit other storefronts in 2020, but its customer base, made up largely of parents and grandparents, was even more reluctant to return until their children could be vaccinated.”
“By and large, independent bookstores have thrived during the pandemic, pivoting to supplement storefront sales with e-commerce and capitalizing on a renewed interest in reading, said Beth Ineson, executive director of the New England Independent Book Sellers Association. Shops that cater to a niche, though, have struggled, she said.”
“‘We had a really incredible run,’ said Terri Schmitz, who has owned the store since 1985. ‘I’ve spent 37 years being around the books that I love, getting to know a wonderful community. It’s sad to have to go, but I’m proud of the work we’ve done.” READ MORE
THE 21 HATS PODCAST
Setting an Anchor Price: This week, Shawn Busse, Paul Downs, and Liz Picarazzi talk pricing, specifically how they use an anchor price—the first number they offer prospective customers. Do they anchor low to avoid scaring anyone away? Or do they anchor high to disqualify unlikely buyers and to make the actual sale price feel more comfortable?
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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