Just Ignore Those New 1099 Rules
In our latest Dashboard episode, Gene Marks says the new rules governing the classification of workers as employees or contractors could have a big impact on his business—if they take effect.
Here are today’s highlights:
Michael Girdley says the amount of cash you keep on hand can depend on how many clients you have and how likely they are to stay.
Those wildly popular Stanley cups were a dud initially. Then marketing and luck happened.
A retailer built its business by explaining the business, including its pricing, on TikTok.
The employees of more small businesses are deciding to unionize.
THE 21 HATS PODCAST: DASHBOARD
You Can Just Ignore Those New 1099 Rules: That, at least, is what Gene Marks is planning to do. Gene says the new rules, scheduled to take effect in March, will have a profound impact on many businesses, including his—if they are actually enforced. But Gene’s not convinced that’s going to happen. Before you relax, though, he’s even more worked up about the new guidelines coming from the EEOC regarding harassment in the workplace. Very few businesses, he says, are prepared for what’s coming. One warning: when Gene talks about regulation, his language tends to get a little salty.
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Michael Girdley on how much cash you should keep on hand: “You don’t want your business to run out of money. That much is obvious. But what’s wrong with too much cash in the bank? Think of it this way: cash sitting in the bank could be better used in the business. Anything beyond your ideal balance is like leaving your foot on the brake pedal. So how do you find that ‘ideal balance?’ The popular rule of thumb is ‘three to six months.’ And this is a helpful starting point. But the real answer is: It depends on your business.”
“Is your business new? New businesses have fewer benchmarks and more uncertainty. If you’re two years old and closer to $500,000 annual revenue, you should aim for more reserves than a business that’s been doing $3 million a year for the past decade.”
“How large is your client base? This is about determining volatility. The more diversified your revenue sources, the less impact losing a client will have.”
“How confident are you that your clients will stay? Will your clients be here tomorrow, next year, or five years from now? With questions like this, it’s very easy to buy into your own story. Ask yourself: How do you know? Can you get a second opinion?”
“What are your growth plans? If you plan big purchases over the next 12 months, keep more in cash reserves. If sales are expected to grow, how much cash do you need to fuel the flywheel? Do you plan to hire soon?” READ MORE
Here’s a quick explanation of how those Stanley cups went viral: “In 2019, the brand’s now star product, the forty-ounce Quencher, was selling so poorly that the company had stopped restocking or marketing it. A partnership with the Buy Guide, an affiliate-marketing site based in Utah, where the Quenchers were popular among Mormon mothers, saved it. Coached by the Buy Guide, in 2020, Stanley launched a new Web site and an affiliate-marketing system through which fans could make money by driving sales. By May of 2022, a Times headline was observing the cup’s burgeoning popularity among women: ‘The Sisterhood of the Stanley Tumbler.’”
“In July of 2023, the brand launched its first celebrity collaboration, with the country musician Lainey Wilson, who produced a pink-and-green Watermelon Moonshine Quencher, named after one of her songs. It sold out in eleven minutes.”
“In November, a woman named Danielle posted a TikTok showing her car after a fire, and a Stanley cup that had survived in the cup holder amid the wreckage. She picked it up and shook it: the telltale tinkle of ice cubes, which had remained frozen despite the flames.”
“The video eventually garnered more than ninety-five million views, and [president Terence] Reilly recognized it as a perfect ad for the product’s durability. He posted his own video, pledging not only to send more Stanleys but to replace Danielle’s car.”
“On New Year’s Eve, Target released new, exclusive Valentine’s Day Stanley tumblers in shades of red and pink ($45). The vessels incited stampedes down store aisles and sold out in minutes. On the online secondary market, they’ve fetched prices in the thousands.” READ MORE
A marshmallow shop built its business by explaining both its product and its business on TikTok: “Videos that show the XO Marshmallow process have become a mainstay for the Chicago-based business. The company has 490,000 TikTok followers, 133,000 Instagram followers, and 213,000 Facebook followers. Those followers propelled the company past $1 million in revenue a couple years ago and have helped it grow now into a multimillion-dollar business, [Lindzi] Shanks said in an interview. Engagement soared during the pandemic as people took to the internet to watch TikTok. Online ordering surged.”
“‘The increase in video is something that has really transformed our business in the last few years,’ Shanks said. ‘It allowed people to see what's really happening. It’s allowed the customers to really connect with us in an authentic and genuine way that can be difficult to come across in photos.’”
“The company now employs 34 people and has a colorful storefront in Chicago's Lincoln Park neighborhood. But social media is where the company shines: It's the source of about 80 percent of XO Marshmallow's sales. Shanks does the video voice-overs herself, explaining aspects of the business and answering questions from customers.”
“Snark also does well, Shanks said, detailing one video in which she explained why their prices are what they are after one customer complained. Meanwhile, happy customers post their own videos unboxing and enjoying the colorful treats, leading to the best kind of unpaid endorsement a business owner can hope for, Shanks said.” READ MORE
More employees of small businesses have been attempting to unionize: “In the last few years, coffee shops have been a breeding ground for organizing, as hundreds of workers in the Bay Area, Brooklyn, and many locales in between have fought for their right to unionize. Yet once baristas, bakers, and other staffers sign union cards at coffee shops, they often find that the path to an actual union vote or to a contract with their employer can be loaded with land mines.”
“The owner of a small coffee chain in Pittsburgh called employees to a mandatory meeting on Jan. 10. It was supposed to be a gathering on team-building, designed in part to improve the performance of the chain’s four stores. Before the sessions began, however, employees stood in front of owner Sukanta Nag and asked him to recognize the union that they had agreed to form.”
“The following day, Nag closed all locations of Adda Coffee & Tea House. The abrupt closure sent more than 30 workers to the unemployment line, leaving them without a paycheck, without severance, and without access to personal belongings trapped inside the shops, including notebooks, cameras, and dozens of plants. Several workers said Nag changed the locks on the day he announced the closings.”
“Nag didn’t respond to multiple requests for comment, but in other stories and social media, the owner blamed the closure on a business that had been operating at a loss since its debut in 2016. He told the Pittsburgh City Paper that he decided to close the chain in December but wanted to make one last push at financial stability with the Jan. 10 meetings.”
“The workers didn’t buy the owner’s reasoning. Why, they wondered, had Nag hired a chief operating officer for the chain at a sizable salary? Why was he looking to hire a second general manager? Why was he even holding team-building meetings on the day before closure?” READ MORE
A new benefit lets employers reward young employees for paying off their student loans: “Student loan borrowers who are lucky enough to have access to a 401(k)-type plan, but are too stretched to save in it, may soon be helped by a new workplace benefit: Paying off their student loans can generate retirement savings contributions from their employer. Starting this year, workers with student loans can receive employer matching contributions in workplace plans, even if they’re not able to save anything on their own. The loan payments count instead.”
“The new feature was made possible by legislation known as Secure 2.0, which included a package of retirement-related provisions intended to boost savings.”
“Student loan matches are the latest addition to employers’ collection of education-related benefits, which have included tuition assistance and tuition reimbursement programs, debt counseling and even direct help to pay off student loans.”
“The latest twist, providing free money in 401(k) plans, is widely seen as a potentially effective recruitment and retention tool, particularly in industries that are trying to attract workers in health care, professional services and other fields in which young employees carry higher debt loads.” READ MORE
The FTC is warning funeral homes to provide accurate pricing information: “The Federal Trade Commission said its first ‘undercover phone sweep’ of funeral homes across the country had found that dozens didn’t accurately disclose costs for services to callers. Of the more than 250 funeral businesses F.T.C. employees called, 38 either didn’t answer questions about prices or supplied inconsistent prices for identical services, the commission said. Many homes, it said, provided ‘materially different’ prices for the same services during two separate phone calls. Another home promised to send an itemized price list, the agency said, but instead sent a list of package prices, which don’t meet disclosure requirements.”
“The typical cost of a funeral with a coffin and burial is $8,300, while the cost of a funeral with cremation, including a special coffin and an urn, is $6,280, according to 2023 data from the national association, which represents about 11,000 funeral homes.”
“‘It’s very important that consumers are able to comparison shop,’ said Melissa Dickey, an F.T.C. lawyer and a co-coordinator of the Funeral Rule. ‘Not everyone can go in person to pick up a price list.’” READ MORE
There are a slew of new social media startups on the way: “While many of the biggest social-media platforms have attempted to rekindle the rush of feeling connected — for instance, Meta's Instagram reprioritized its ‘Close Friends’ feature in 2023 — they have bigger priorities than helping people connect. From Meta to Snapchat to TikTok, shareholders, ad revenue, and overall user growth are all top of mind. This tension between the everyday consumer and Big Tech has helped create a new guard of social-media founders who largely see the media element of social media as part of the problem. Instead, many prefer the term social network or social utilities.”
“Diem, a social search engine, aspires to be an ‘older sister’ type of social-media platform, where women can get advice and camaraderie. Landing is somewhere where ‘likes’ are replaced with ‘throwing glitter’ at a collage. And PI.FYI, which launches this week on Apple's App Store, came to life out of a vibrant Substack newsletter community.”
“Atmosfy is a video-first dining app: “There are over 1 million businesses on the platform across over 150 countries and 10,000 cities, according to the company. Each city has its own feed of local customers. After noticing TikTok's growth in search and food-related videos, [Michael] Ebel set out to build a platform for short-form review videos left by local customers.”
“The app features in-the-moment content highlighting dining, nightlife, and travel experiences. Any user can create content for the app in their city and users get real-time updates on their friends and their recommendations.” READ MORE
Can a titan of tech turn West Virginia into The Startup State? “John Chambers grew up in West Virginia and went on to run what was once the world’s most valuable company, the computer networking firm Cisco Systems. Now he is trying to help economically lagging West Virginia by making it a ‘startup state’ akin to Israel, which has been called the start-up nation. I interviewed Chambers recently about his hopes and the magnitude of the challenge. Short version: It’s going to be very tough.”
“His main new gig is founder and chief executive of JC2 Ventures, a six-person venture capital operation that says it ‘focuses on helping disruptive start-ups from around the world build and scale.’ He has also been contributing to his alma mater, West Virginia University, whose John Chambers College of Business and Economics is named after him.”
“He’s focused on education, specifically training students for digital jobs. He has promises from business leaders to build in the state. He’s helped start a group called Vantage Ventures to assist West Virginians who want to ‘build high-impact, scalable businesses. According to Chambers, during Vantage’s last investor pitch day, almost $2.5 billion in investor capital was secured for the 62 start-ups the Vantage network supports.” READ MORE
THE 21 HATS PODCAST
Have We Been Too Generous With Employees? This week, Mel Gravely, Jaci Russo, and William Vanderbloemen talk about the possibility that, after several years of the Great Resignation and the labor shortage, some owners may have given away the store. We all know the risks of not offering employees enough. What are the risks of offering too much? How do you even know when you’ve crossed the line? The owners also discuss why this might be a good time to consider acquiring other businesses. “I think this is a time to double-down,” says Mel. And Jaci explains how she and her team are reviewing everything the company does to see if AI can be employed to improve each and every process.
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Thanks for reading, everyone. — Loren