The Christmas Tree Gamble

Over the 10 years it takes to grow a tree, expenses go up, and much can go wrong.

Good Morning!

Here are today’s highlights:            

• Gene Marks lists the nine habits he believes produced his successful business. (Your results may vary!)

• If child care is so expensive, why are the margins so slim?

• This holiday season, prices for some holiday goods are actually falling.

• An online marketplace for brick-and-mortar boutiques is struggling to survive.

AGRICULTURE

This is a good year, but Christmas trees are a gamble: “Unlike commodities like corn and soybeans, which [John] Wyckoff grows on another 90 acres he owns, there is no good way to insure Christmas trees against the harm caused by extreme weather, or the effects of an overseas war or a pandemic that freezes supply chains, he added. ‘Farmers are the biggest gamblers there are,’ Mr. Wyckoff, 57, said. His family has been growing Christmas trees in Belvidere, N.J., about a 90-minute drive from Midtown Manhattan, since his grandfather started the business in the 1950s.”

• “Christmas trees grow slowly, about 12 to 14 inches a year, and can take 10 years to go from seed to harvest. Most trees he plants are 3 to 5 years old by the time he buys them from nurseries. To keep up with costs, Mr. Wyckoff raised the price of his trees this year to $15 a foot, or $105 for a seven-foot tree, up from $14 a foot last year. A decade ago, similar trees sold for $10 a foot, he said.”

• “The biggest expense is labor, with about 30 percent of a tree’s cost tied to year-round care — from shearing and shaping it by hand, to the frenetic cutting season after Thanksgiving, when up to 40 people work.”

• “Climate change adds to the risk that he could lose huge swaths of trees. Of the 10,000 he planted this year, 5,500 were lost to drought and flooding. That cost him at least $27,500. In a typical year, he might lose 5 to 10 percent of his new trees.”

• “Despite the risks, the trees remain Mr. Wyckoff’s most profitable crop. He expects to sell 7,000 this year, up from 5,000 last year. ‘We’re currently in a boom period,’ said Tim O’Connor, the executive director of the National Christmas Tree Association.” READ MORE

THE 21 HATS PODCAST: DASHBOARD

Do the Math. Lean into A.I. Play Squash: In our last Dashboard of 2023, Gene Marks talks about the nine habits that he believes have helped him build a business. Those habits include meeting regularly with his accountant, meeting regularly with his clients, and over-paying his employees. Gene saves what he considers the most important suggestion for last: “Make time to enjoy your family.”

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

BUSINESS MODELS

If child care is so expensive, why is it such a tough business? “Melissa Colagrosso and her husband have struggled to make a profit during the nearly three decades they’ve owned A Place To Grow Children’s Center in West Virginia. ‘We borrowed a lot of money. We found resources over the years to kind of dig ourselves out of holes, and then just keep making payments,’ Colagrosso said.She said the math doesn’t add up for her and the math doesn’t add up for families. There’s a paradox that lies at the heart of the child care industry: parents dole out high fees, while child care centers make very little and workers don’t get paid much. The annual cost of child care in 2022 stood at $10,853, according to Child Care Aware of America. Meanwhile, the median pay for child care workers in 2022 was just $13.71 per hour or $28,520 a year, according to Labor Department data.”

• “This paradox raises the question: Where is that money going? ‘The main reason that child care is so expensive has to do with just how many people you need in a classroom to make sure that little, little children are healthy, safe and learning every day,’ said Susan Gale Perry, the CEO of Child Care Aware of America.”

• “Because of these limits, that means more staffing, which means higher payroll costs. Colagrosso said you also have to pay for supplies, insurance, utilities, equipment and advertising, among other expenses. Colagrosso is blunt in her assessment about the state of child care: ‘It’s a failing business model,’ she said.”

• “Colagrosso  opened her center in 1995 because it was tough to find high-quality child care for her two kids. She’s been close to giving up. She said if you want to open a child care business, any accountant or loan officer will tell you, ‘You want to do what?’ But her community needs child care.” READ MORE

HUMAN RESOURCES

The minimum wage will rise in 22 states on January 1: “For Americans making minimum wage, it's an automatic raise — but it also ripples out. Typically, increasing the wage floor for the lowest earners pushes up pay for those who make a bit more than the minimum, as employers have to adjust pay scales upwards. More states are requiring a $15 an hour minimum wage — including New York, Maryland, and New Mexico — a dozen years after Fight for $15 kicked off its campaign. Thanks to inflation, the dollar amount doesn't quite mean what it used to.”

• “In 13 states wages are going up because they're indexed to inflation, including California, Ohio and South Dakota. Three more states and Washington, D.C., are set to raise the wage later in the year.” READ MORE

Here’s where you can expect benefits to trend in 2024: “With healthcare costs increasing by 5.4 percent in 2024, it seems employers will need to rethink if their health plans are keeping employees as healthy as possible. This may mean eliminating any financial barriers to primary care, as well as ensuring immunizations, cancer screenings, blood pressure, diabetes and cholesterol tests are free and encouraged. For some employers, they may go as far as to remove deductibles and copays altogether, in hopes of reducing long-term healthcare spend with a healthier workforce.”

• “According to ResumeBuilder, 90 percent of employers plan to ask their employees to return to the office in some capacity by 2024. But it's clear employees don't want to be in the office full-time: In a Flexjobs survey of over 8,000 workers, 63 percent voted remote work as the most important thing they look for in a job, beating out salary.”

• “While companies are still debating the benefits of unlimited versus accrued PTO policies, employers on either side of the debate can usually agree: Taking vacation time is stressful when the rest of the company is still working. Giampietro highlights that EY now has a week-long winter and summer break for the entire firm, ensuring that everyone can truly unplug for a few weeks a year.” READ MORE

Fewer companies are giving year-end bonuses: “A survey of more than 200 small, midsize and large companies found that 34 percent wouldn’t give year-end bonuses this year, up from 27 percent last year, according to the poll conducted by Challenger, Gray & Christmas and provided exclusively to The Wall Street Journal. That was the highest number of companies not giving bonuses since 2019. Lower bonus payments could be particularly felt on Wall Street. Payouts are projected to fall as much as 25 percent this year from last year for investment bankers who advise on mergers and acquisitions, according to Johnson Associates, a compensation-consulting firm for the financial-services industry.” READ MORE

THE ECONOMY

This holiday season, prices for some goods are actually falling: “Toys are almost 3 percent cheaper this Christmas than last, government data shows. Sports equipment is down nearly 2 percent. Bigger-ticket items are also showing price declines: Washing machines cost 12 percent less than a year ago, for example. And eggs, whose meteoric rise in prices last winter became a prime example of the country’s inflation problem, are down 22 percent over the past year.”

• “Most groceries still cost more than they did a year ago. So do most services, such as restaurant meals, haircuts, and trips to the dentist. And housing costs, the biggest monthly expense for most Americans, are still rising for both renters and home buyers.”

• “Overall, the price of physical goods is flat over the past year, while the price of services is up a bit more than 5 percent. Still, economists view the moderation in goods prices as an important step toward putting the high inflation of the past two and a half years more firmly in the rearview mirror.” READ MORE

FINANCE

The SBA is creating a small-business lending advisory committee: “The forthcoming committee is expected to allow the SBA to engage directly with lending experts to keep up with changes in the sector and fine-tune existing programs, according to SBA administrator Isabel Casillas Guzman. The cadence of how often the committee might meet has yet to be determined. While the committee makeup is not yet formalized, Guzman tells Inc. that the SBA is looking for a variety of perspectives, including those from small-business owners. ‘We will be seeking all types of membership to ensure that we get a diverse perspective of what the capital marketplace is,’ Guzman says. ‘Now, more than ever, it's increasingly important that the small-business voice is heard.’”

• “Part of the focus that the SBA and the committee will take is working to reverse the decline in small-dollar lending. Those types of loans, which tend to clock in anywhere under $150,000, have historically been less desirable to lenders, as they can oftentimes be as taxing to issue but not yield as much in the way of fees.”

• “Guzman nodded to the case of Jeni's Splendid Ice Creams, which took out an SBA-backed loan worth $35,000 to help get the Columbia, Ohio-based ice cream shop up and running.” READ MORE

ECOMMERCE

Farfetch, an online marketplace that has been called the “Amazon of fashion,” is teetering: “Farfetch came to life in 2007 as an e-commerce marketplace for brick-and-mortar fashion boutiques. This meant that a shopper in London could buy boots from an independent shop in Paris, or a customer in Beijing could source a bag that wasn’t available locally from a store almost 5,000 miles away in Venice. Today, it works with more than 550 fashion boutiques in 190 countries. As consumer appetite for buying luxury goods online began to grow, the company also started working directly with fashion brands to build their websites and back-end operations. Through Farfetch Platform Solutions, the company now offers a host of e-commerce services to brands, like Burberry and Ferragamo, and department stores, like Harrods and Bergdorf Goodman.”

• “Farfetch charges a cut of more than 30 percent of sales for making a retailer’s stock available to almost a million active customers. The company reached profitability for the first time in 2021 but has had a rocky time maintaining it since then.”

• “Overhead costs soared as the company continued to scale up. This year, in Farfetch’s second-quarter results, the New Guards division posted a 40 percent drop in sales, despite a much celebrated partnership with Reebok that was unveiled earlier in the year.”

• “Last month, investor confidence was shattered after Farfetch said it was postponing the release of its latest quarterly results, saying it would ‘not be providing any forecasts or guidance at this time, and any prior forecasts or guidance should no longer be relied upon.’” READ MORE

THE 21 HATS PODCAST 

What Are Your Goals for 2024? This week, Shawn Busse, Liz Picarazzi, and Jaci Russo discuss what they learned in 2023 and what they expect from 2024. After a tough year, Shawn is optimistic that his clients, having survived the turbulence of the past few years, are ready to spend money and try something different. Liz explains why she’s been willing to discount her products as much as 40 percent on Cyber Mondays and tells us about some new products she has in the works. Early in the year, Jaci, thinking she was going to have to staff up to handle two big new clients, dove into remodeling her offices — but those big clients have yet to sign on. “I might have jumped the gun a little bit,” says Jaci.

• Plus: Liz talks about her Midwestern mom, who can’t understand how Liz can charge so much for her trash enclosures. And Shawn raises the issue of how much money business owners should spend on marketing.

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

Thanks for reading, everyone. — Loren