Instagram Is Working on Its TikTok Impression

Just in case the Chinese-owned social media platform is banned, Instagram wants to be your Plan B.

Good Morning!

Here are today’s highlights:            

• For many businesses, disaster loans have been disastrous.

• Ami Kassar offers some reminders on what to consider when choosing a bank.

• Reclassification will allow cannabis businesses to operate more like a business.

MARKETING

Instagram is changing its algorithm to make it even more like TikTok: “​​In a blog post, Instagram explains that ‘historically’ its systems worked so that creators with ‘large followings and aggregators of reposted content have gotten more reach in recommendations than smaller, original content creators.’ That principle shapes many companies' Instagram marketing strategies, and it's why creators and influencers are so keen to drive up their follower counts: More followers means more eyeballs on a Reel advertising a particular product or service. Instagram now says it's reconsidering this selection preference, saying it's ‘important to correct this to give all creators a more equal chance of breaking through to new audiences.’”

• “The biggest change is that the ‘ranking’ algorithm that Instagram uses to put content in front of users has been adjusted. Now, when an eligible video is uploaded (that is a video that doesn't violate any of the usual terms and conditions), it will be ‘shown to a small audience that we think will enjoy it, regardless of whether they follow the account that posted it or not.’ As that small group interacts with the content, via likes and comments, then the ‘top performing set of Reels are shown to a slightly wider audience.’”

• “Instagram is also emphasizing original content over reshared or re-uploaded content. That's because, as the post explains, ‘it takes a lot of time and effort to create original content,’ so users who upload innovative material ‘should get credit and distribution even when it is reposted by other accounts.’”

• “This is hardly surprising, given the impact that TikTok has had on the social media world. TikTok is centered on short, pithy, catchy video content and really pushed the format into the mainstream--Reels was Meta's unashamed copy of TikTok. Now that TikTok is facing down a ban, many creators and small companies that use that platform are looking for alternatives. Instagram is presenting itself as an excellent plan B.” READ MORE

FINANCE

Disaster loans offered businesses a lifeline. Now many of those businesses say they didn’t know about the 30-percent late fee: “The Small Business Administration provided $390 billion in Covid disaster loans to nearly four million small businesses and nonprofits during the pandemic. The loans provided a lifeline for many small businesses. For some borrowers who have defaulted on their loan payments, the bill is now coming due—and it is larger than they expected. The SBA has referred 860,000 delinquent Covid disaster loans totaling more than $59 billion to the Treasury Department for collection. Some borrowers say their businesses are still struggling or have closed their doors, while others say they inadvertently missed loan payments, or never intended to repay their debts.”

• “Ampac USA borrowed $500,000 to stay afloat during the pandemic. The skincare-products company defaulted on its loan last year. It has made $425,000 in loan payments and was told it still owes roughly $262,000.”

• “The reason: After Ampac defaulted, the loan was sent to collections where the company was assessed a 30-percent fee. That percentage is on the high end of what private lenders typically charge customers who fail to make loan payments; Ampac’s loan was issued by a federal agency.”

• “David Bade, Ampac’s chief operating officer, said he was stunned to learn that the Santa Rosa, Calif.-based company owed a 30-percent collection fee, a cost that he said isn’t spelled out in the documents borrowers signed when they took out the loan. ‘I can’t charge that as a business,’ Bade said. ‘You would go to jail for usury.’” READ MORE

More businesses hit the SBA’s $5 million lending cap in 2023: “When it comes to Small Business Administration loans, the $5 million club is getting more crowded. That's according to an analysis of SBA 7(a) lending data by The Business Journals, which found 404 businesses hit the $5 million lending cap in fiscal 2023. That's a huge jump from the 97 businesses that hit the cap in fiscal 2012 and also up from 361 in fiscal 2022. The increase — along with inflation resulting in $5 million not going as far as it once did — are among the reasons why some have pressed for the SBA to raise the cap on its flagship program.”

• “The increase in companies hitting the cap comes as the SBA is in the midst of several tweaks to 7(a) lending and other loan programs with a goal of expanding access to businesses. In fiscal 2023, the SBA approved more than 57,000 7(a) loans totaling more than $27 billion and an average loan size of nearly $480,000, according to SBA lending data.”

• “Another factor fueling the increases is the surge in entrepreneurship that followed the pandemic. In 2023 alone, U.S. Census Bureau figures show 5.5 million new businesses were created. The SBA has attempted to keep pace, revamping programs and services, adding a Lender Match tool, rebranding the agency’s management assistant program (now called Empower to Grow) and expanding the number of lenders for the first time in more than 40 years.” READ MORE

In the aftermath of the shutting down of Philadelphia’s Republic First Bank, Ami Kassar offers a reminder on choosing the right bank for your business: “​​Choosing a bank that’s the right fit for you is an undeniably significant decision to make as an entrepreneur. Accessibility, lines of credit, available loans, customer service, and associated fees are all considered at the genesis of this decision, but how do you proceed with confidence as time goes on? Much like all healthy relationships, occasional checkups to make sure everything is in good standing can place you in the best position possible as a business owner.”

• “Bauer Financial analyzes banks and credit unions for your peace of mind, ranking banks according to a 1–5 star rating system. A variety of reports are available for purchase, such as Due Diligence Performance Reports, LLAMAS, Historical Reports, etc.” READ MORE

HUMAN RESOURCES

Despite the still strong job market, job candidates say it’s getting harder to find a job: “The monthly jobs report out Friday will probably look great, if recent months are any indication. Yet plenty of workers have rarely, if ever, felt more stuck. I hear from a lot of white-collar workers on the job hunt who say it’s much harder to get hired than the unemployment numbers make it sound. They complain about hiring managers who ghost them and draw out the interview process. They say job listings linger on companies’ career pages and never get filled. Or get reposted repeatedly. It’s enough to make people who are between jobs question whether businesses are serious about hiring.”

• “Recruiters acknowledge the uncertain outlook is a factor and even say some jobs advertised are fake, designed to give the impression of company growth or build a reservoir of résumés to tap at a later date. It is one thing not to get a job—it’s another to feel like you’re being gamed. And it’s wreaking havoc on people’s self-worth and belief in their career paths.”

• “After vying for talent with generous pay and work-from-home flexibility, companies have reasserted control over the employer-employee relationship. Bosses who preached self-care now squeeze maximum efficiency out of their teams and hold out for ‘perfect’ hires when they reluctantly agree reinforcements are needed.”

• “One in 50 American workers jumped from one company to another in March, according to the Federal Reserve Bank of Philadelphia, among the lowest rates in three decades.” READ MORE

CANNABUSINESS

The reclassification of marijuana could help a lot of struggling dispensary businesses: “Industry insiders say the move, if approved, could become a lifeline to California’s struggling cannabis industry. ‘We’ve been anticipating this,’ said Meital Manzuri, an attorney whose firm specializes in the cannabis industry. ‘This is big for the industry.’ Lawful in California but illegal under federal law, the state’s cannabis industry has operated in a difficult legal limbo. Stores and farms operate in the open, but they’re cut off from benefits that other businesses enjoy, such as access to out-of-state markets. Their murky legal standing has also meant that banking, credit card processing, insurance and other vital business services are out of reach for many marijuana businesses.”

• “The tax burden, though, has been particularly onerous. Section 280E of the federal tax code bars businesses involved in ‘trafficking’ of Schedule I or II substances from deducting the expenses they incur. As a result, they are taxed on every dollar they collect, not just their profits.”

• “But if marijuana is reclassified as a Schedule III drug, ‘players in that industry for the first time will be able to take standard tax deductions that other businesses take,’ said Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws, also known as NORML, which advocates for cannabis consumers. ‘The biggest change is going to be how the industry does business.’”

• “For years, licensed businesses have struggled to compete with a burgeoning black market that, while avoiding licensing, fees, and taxes, can sell its wares at a fraction of the price charged by legal outfits.” READ MORE

THE 21 HATS PODCAST

How Do You Make Innovation Happen? The wrong way to make innovation happen, Ty Hagler says in this week’s special bonus episode, is to have a great idea and then go all-in trying to create it. That, he says, is a really expensive way to find out if your idea works. The right way to pursue innovation, he says, is to take your idea to customers so you can assess the pain points and opportunity spaces before proceeding. Hagler, who is founder and CEO of Trig, an innovation and design firm in North Carolina, also says he’s learned that the problem with focus groups is that the more people you have in the room, the less valuable the conversation tends to be. In fact, he says, one-on-one is best.

• He also says that brainstorming remotely can actually work better than brainstorming in-person. Oh, and by the way, if your Mom tells you she loves your idea and will definitely buy your product as soon as it’s available, she’s probably lying.

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

Thanks for reading, everyone. — Loren