Nobody Can Sell Your Product Like You Can
The founder of Big Ass Fans makes the case for avoiding distributors and selling direct.
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Here are today’s highlights:
Tyson’s vaccine mandate worked.
The talk about Miami isn’t just talk.
The man who brought down the taxi industry.
A lawsuit reveals that Google charges a lot more than its rivals for advertising.
THE 21 HATS PODCAST
I Track Everything You Could Possibly Measure: Several weeks ago, we had a great conversation about how Jay Goltz, Diana Lee, and Dana White track their financials. This week, in episode 82, we decided to put similar questions to Paul Downs and Laura Zander. “It's funny, I was listening to that episode,” Laura says, “and Diana said she's a freak about the numbers. I'm like, ‘God, does that make me a superfreak?’” Laura walks us through how her labor costs can affect what types of yarn she carries, Paul suggests a quick-and-easy ratio that can signal when a business is in trouble, and Jay explains how an hourly performance indicator that he began tracking 30 years ago transformed his business. Plus: Laura tells us how she got a bank loan that’s almost three times the size of the one she couldn’t get last year.
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When the pandemic hit, Carey Smith, founder of Big Ass Fans, tried to buy a multi-station home gym through a distributor. It did not go well: “This pandemic business lesson only further confirmed what I've always believed: Nobody can sell your product like you can, because nobody knows or cares about your product like you do. Years ago, when Big Ass Fans had just started to spin, the idea of bypassing distributors was viewed as sacrilegious. Distributorships were deeply entrenched in business, especially in manufacturing. And while most manufacturers still rely on them, the internet has given people alternatives. Many startups and even some established companies have adopted a direct sales model. Selling direct may seem like more work, but it's actually less.”
“There are so many advantages, the most important being that you really get to know your customers. At the fan company, we talked to them all day, every day. Real voices, not words in a chatbox.”
“Dealers, distributors, and gargantuan online retailers only interfere with the connection. As our experience shows, middlemen are often muddlemen.” READ MORE
FOOD & BEVERAGE
Because the restaurant industry was hit so hard by the pandemic, “Congress singled it out in March’s American Rescue Plan, earmarking $28.6 billion for restaurant relief. The pot of money was pitched as a lifeline for businesses large and small, from swanky steakhouses to halal carts and holes in the wall. For many, the Restaurant Revitalization Fund was just that, helping 101,000 businesses recover their financial losses. But the federal program left many more eateries unfunded, frustrating bar and restaurant owners trying to stay afloat. With barely enough money to meet the needs of the struggling industry, the fund was besieged by litigation and drained within weeks.”
“Lawmakers in Washington initially proposed spending $120 billion to aid eateries but ultimately set aside $28.6 billion for the program. That was hardly enough to meet the demand of hundreds of thousands of businesses that collectively asked for $72 billion in financial help.”
“Philadelphia’s RRF distribution reflects a national trend: Half of the total funds sent to the region went to just under 10 percent of recipients, according to an Inquirer analysis of Small Business Administration data.”
“‘I’m sure their buffalo-wing hot bar really struggled over there,’ Todd joked in frustration. ‘When you see a strip club get $2 million to revitalize restaurants. … You just want some clarity on how they chose it, you know?’” READ MORE
Google charges more than twice what its rivals charge for advertising: “Google takes a cut of 22 percent to 42 percent of U.S. ad spending that goes through its systems, according to a newly unredacted lawsuit by state attorneys general, shedding new light on how the search giant profits from its commanding position in the internet economy. The share the Alphabet Inc. subsidiary takes of each advertising transaction on its exchange—a marketplace for ad buyers and sellers—is typically two to four times as much as the fees charged by rival digital advertising exchanges, according to the suit, which is being led by Texas.”
“‘[T]he analogy would be if Goldman or Citibank owned the NYSE,’ said one senior Google employee quoted in the suit, referring to the New York Stock Exchange.”
“Smaller advertisers pay even larger fees. Transacting on a separate system called Google Display Network, they pay fees ranging from 32 percent to 40 percent to Google. The rates are in line with Google’s public statements that publishers receive 68 percent of revenue from AdSense, a tool to serve ads to smaller websites.” READ MORE
Tyson’s vaccine mandate worked: “Nearly three months after Tyson mandated coronavirus vaccines for all its 120,000 U.S. workers, more than 96 percent of them are vaccinated, the company’s chief executive, Donnie King, said in an employee memo on Tuesday. Less than half of Tyson’s work force was inoculated when it announced on Aug. 3 that it would require vaccines. Nearly 60,000 more Tyson employees got the shot following the announcement, Mr. King said. Tyson has said workers must be fully vaccinated by Nov. 1 as a condition of employment.”
“Tyson was one of the first major companies to mandate vaccines after incentives like paid time off to be inoculated started to lose traction.”
“Its stance was notable because it included frontline workers even as labor shortage concerns prevented many companies from expanding vaccine mandates beyond the office.
“‘This is an incredible result,’ Mr. King wrote, ‘not only for our company, but for your families and our communities across the country.’” READ MORE
The talk about Miami isn’t just talk: “So far this year, Florida companies have raised just over $1 billion in early-stage funding, per Crunchbase data. That’s nearly quadruple the sum raised in all of 2020, and comes as other investment stages are also posting gains. What’s driving the momentum? There is certainly a buzz factor. Among tech influencers on Twitter, posts singing the praises of Miami became a thing last winter. Miami Mayor Francis Suarez capitalized on the moment with a social media campaign to attract startup talent to the city. But just as you can’t start a fire without a spark, you can’t build a startup hotspot without some elements already in place.”
“Although the spotlight cast on South Florida intensified in recent months, founders, investors and universities in the region have actually been engaged in a years-long process to build up startup momentum, said Kevin Burgoyne, president and CEO of the Florida Venture Forum.”
“‘It’s a perfect storm of positive indicators that bode really well for the future,’ he said, noting that years ago prominent venture firms might have an occasional portfolio company in the state. These days, there’s a sense among the most active startup investors that ‘now you have to cover Florida.’” READ MORE
THE COVID ECONOMY
In New York City, Covid may be evolving from pandemic to chronic: “Life in the New York City area might be transitioning into a phase in which the virus is a present but diminished danger for most people, some epidemiologists and doctors say. Vaccination rates are higher than U.S. averages, and some people in the region likely have some immunity from infections during past surges. Masks are required in settings including public transit and schools, and officials mandated vaccinations for healthcare workers as well as employees and patrons at bars and restaurants.”
“‘New York and New Jersey are going to be in the U.S. where I would look first for the transition to endemicity,’ or the point when the virus is still circulating in the background but the disease is more manageable, said Andrew Noymer, an infectious-disease epidemiologist and demographer at the University of California, Irvine.”
“‘It’s also, quite frankly, the canary in the coal mine, conversely, if there is a significant winter wave.’” READ MORE
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Chuck Bundrant built Trident, America’s largest seafood company: “Mr. Bundrant was just 19 when he joined three friends on a summer road trip to Seattle, where they worked in a seafood cannery to make money for school. The others returned home; he saved enough to move to Alaska and buy a crab boat, then used the proceeds from that venture to found Trident, with two partners, in 1973. Its fleet consisted of a single vessel. Sixty years after his arrival, his empire sprawled across the Pacific Northwest — from the Bering Sea, where his 40 trawlers, crabbers and catcher-processor ships plied the freezing waters in search of fish, to 11 processing plants along the Alaska coast, to a test kitchen in Seattle, where a team of chefs develops recipes for the dozens of seafood brands that Trident sells to restaurants and big-box stores like Costco.”
“In 1998, he used those connections to push legislation that drove foreign fishing companies out of American waters and imposed quotas on commercial fishing, bringing order, and immense profit, to the industry.”
“Perhaps his greatest coup came in the late 1980s, when he persuaded many of America’s leading fast-food chains, including Long John Silver’s and McDonald’s, to switch their fish sandwiches from cod to pollock, a then-unattractive species derided by chefs as a ‘trash fish.’”
“Thanks in large part to that switch, Trident’s sales today are estimated at $4 billion (the company is privately held and does not report financial results), and Mr. Bundrant’s personal fortune was estimated at $1.3 billion.” READ MORE
Gene Friedman, a cab driver’s son who “brought down the taxi industry”: “Mr. Freidman, who emigrated from the Soviet Union with his parents in 1976, was widely known as the swashbuckling ‘Taxi King’ and just as widely regarded as a piratical entrepreneur who did for the cab industry early in the 21st century what greedy lenders did for the nation’s savings and loan associations at the end of the 20th. ‘He hurt so many people in so many different ways,’ David Pollack, the former head of the Committee for Taxi Safety, an association of fleet owners that once included Mr. Freidman, told The New York Times in 2019. ‘Your headline could be The man who brought down the taxi industry.’”
“Mr. Freidman, a lawyer by training, was once flush with $525 million in assets, personally owning 250 taxi medallions worth $1.3 million each, a 4,000-square-foot townhouse off Park Avenue in Manhattan, an estate in Bridgehampton, N.Y., two villas on the French Riviera and a $400,000 Ferrari.”
“But within the past five years or so he wound up being disbarred in New York, evicted from the headquarters of his cab empire for owing $170,000 in back rent in 2017 — the same year that the city’s taxi commission refused to renew hundreds of his licenses — and legally bankrupt.”
“Mr. Freidman and his confederates artificially inflated the price of the medallions required for yellow cabs and steered drivers to buy them.”
“The drivers, most of them immigrants, took out loans, which they could not afford to repay when the value of the medallions dropped by half because of, among other things, competition from ride services like Uber and Lyft.” READ MORE
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