The Equivalent of $11,000 in Annual Salary
That’s the value job candidates place on the ability to work remotely, according to one survey. The rise of remote work has also made it easier to start a business.
Good Morning!
Here are today’s highlights:
Even smaller employers are trying to recruit and keep employees by offering on-site child care.
Yes, your chances of being audited are extremely low, but Gene Marks has a warning for those cheating on their taxes.
Michael Girdley has some common sense advice for managing Gen Z.
Businesses are finding ways to offer personalized pricing.
PROGRAMMING NOTE
We will not be publishing a Dashboard podcast today: It will return, as usual, next week.
THE ECONOMY
The eclipse could create the most profitable 22 minutes in Texas history: “Studies have pegged the potential economic impact of the eclipse at $1.4 billion statewide, roughly $200 million of which could be felt in the Austin area alone. That would provide a welcome tailwind for tourism and hospitality industries that have been hammered in recent years by the pandemic and various unfavorable macroeconomic trends. Still, the potential impact is just a small blip relative to the annual $2.3 trillion output of the state's economy — a figure that equates to roughly $6.5 billion a day. But Ray Perryman, CEO of economic research firm the Perryman Group, which published an eclipse impact study, said the phenomenon will provide a big bang for smaller communities that don't typically cash in on major events such as Super Bowls because they're concentrated in large cities.”
“‘A major sporting event, for example, may bring throngs of people to one area, but the eclipse impacts communities of all sizes across a substantial area,’ Perryman said. ‘It is especially impactful on smaller communities which don't often have the opportunity to host large events,’ and the benefits are likely to trickle down to lodging and home rentals, local restaurants, retailers, and other businesses.”
“So much so that Bulent Temel, an assistant economics professor at the University of Texas at San Antonio, has described the upcoming eclipse as the ‘most profitable 22 minutes in Texas history,’ referring to how long it will last throughout the entire state.”
“Temel has pegged the impact at between $151 million and $603 million, based on economic activity related to previous eclipses. He said Texas stands to benefit more than other states because of its big metros, good weather and status as a high consumption state — meaning every dollar spent in Texas ends up creating $2.29, much higher than the national average of $1.64.” READ MORE
HUMAN RESOURCES
Newer businesses continue to embrace remote work as a recruiting advantage: “More than one-third of new businesses (35 percent) hired remote workers in 2023, according to a survey of 1,345 new-business owners from payroll and benefits platform Gusto. That's up from 22 percent in 2022 and 16 percent in 2021. Meanwhile, the number of new businesses hiring in-person workers has dropped — from 65 percent in 2021 to 43 percent last year. That shift means less money spent on office space and equipment. It also means businesses can recruit workers beyond their respective local footprints — and beyond what they otherwise might be able to pay, said Gusto economist Liz Wilke. ‘They don’t carry the baggage of in-person work,’ Wilke said. ‘If you are starting a new business and have experience with remote or hybrid work, then you as an entrepreneur are a lot more familiar with how to make remote work, work.’”
“The flexibility of remote work doesn't just save on costs. It also can entice workers who might otherwise opt to work at a big company. That means an edge on recruiting for new businesses that embrace remote work. ‘Workers really monetarily value remote work,’ Wilke said, adding that a Gusto calculation found that employees tag remote work at an $11,000 value in annual salary. ‘I think it can be turning into a talent advantage by these smaller businesses that workers really value.’”
“In addition to enabling the rise of remote work, technology has changed the face of entrepreneurship in the United States, according to Gusto's research. Nineteen percent of new-business owners last year reported some form of disability, and 12 percent of those respondents said technology had lowered the barriers to starting a business — double the rate of entrepreneurs without a disability who said the same thing.” READ MORE
Looking to keep employees in high-turnover jobs, even small employers are opening child-care facilities: “Zach Wiley left his job at a coffee roastery in rural Virginia in 2021 because he found the 45-minute commute from Roanoke too onerous. Less than a year later he returned to his former employer, this time moving his family into a house they bought in the neighborhood. What helped? The employer, Red Rooster Coffee, offered subsidized on-site child care. ‘The child care is just huge. I don’t know what we would do without it,’ said the 31-year-old, who pays $2 an hour each for his toddler son and infant daughter’s daycare. ‘Our son loves it, and I never worry about him. He’s right through the next door.’”
“Red Rooster Coffee is among a growing number of businesses in high-turnover industries that are turning to child care as a solution for staffing problems. Restaurants, warehouse operators, and manufacturers are stepping up subsidies for employees, contracting with backup-care providers and finding ways to bring care close to employees. Executives see it as a way to reduce churn because the cost of searching for and retraining replacements has skyrocketed.”
“Red Rooster Coffee began offering subsidized child care in 2018, when the company moved to an 11,000-square-foot facility in Floyd, Va. Haden Polseno-Hensley, with his wife and Red Rooster co-owner Rose McCutchan, had to decide how to use the new space. ‘More of our employees started getting pregnant or having spouses about to have a baby,’ said Polseno-Hensley, at the time the father of a young child. As a result, he set up an on-site child-care facility.”
“Red Rooster hired a former teacher to run the day-care center and fulfill the licensing and inspection requirements. Still, Red Rooster subsidizes 70 percent of the cost of running the facility. ‘It’s basically an investment in our staff by the coffee-roasting company,’ said Polseno-Hensley. Most employees have used the facility at one time or another, he said.” READ MORE
TAXES
Gene Marks has a warning: “I’m not going to name names, but over the past 25 years of practicing accounting, I’ve run across a fair number of business owners who are tax cheats. These are the people that are playing what I call ‘audit roulette.’ They are knowingly underpaying the taxes they owe and hoping they don’t get selected for an audit. Considering that the IRS only audits less than 3 percent of corporate tax returns (it’s .1 percent for S-Corporations) — and most of them are larger companies with bigger pocketbooks — it’s not a bad gamble. Are you cheating on your business taxes — or thinking about it? I don’t recommend it. Here are the five most popular ways I’ve seen people do this and — most importantly — how they get caught.”
“Under-reporting their revenues: This is generally done by cash-based businesses (generally a corporation or partnership if its average annual gross receipts for the three prior tax years were $26 million or less ) like restaurants. These establishments don’t accept credit cards and only accept cash. The methodology is simple: For every $100 received, they pocket a percentage and keep the rest on their books.”
“How does an auditor figure this out? In the restaurant example, one easy way is to spend a few Saturday nights on the premises, figuring out an average check, counting the customers, and making some estimates. Or comparing the restaurant’s revenues, expenses, and margins with industry norms.”
“Many small businesses — lacking resources and accounting knowledge — combine their expenses with their business expenses, and this always creates headaches for their accountants. Others blatantly run personal expenses — vacations, gifts, dinners — through their business. Some have the foresight to come up with a rationale for the expenses. Others I know don’t seem to care. They should.”
“A competent auditor will perform a review of a company’s general ledger to reveal expenses that aren’t business-related. The same goes for a review of credit card statements, which can provide a very detailed picture of spending in a number of different ways.” READ MORE
MANAGEMENT
Michael Girdley offers some advice for managing Gen Zers: “When I mention Gen Z (born 1995-2012), lots of people start chirping: ‘They’re too sensitive!’ ‘They have no respect!’ or ‘They don’t want to work!’ But I think they’re one of the most interesting generations in history. And if you figure out how to work with them, they’re amazing. They’re just totally different than other generations.”
“Never tell Gen Z that’s how it’s always been done: These kids grew up with Gen X parents like me. We treated them the way we always wanted to be treated: like a peer. I ask my kids’ opinions and see what they think. So when they show up for work, they have a lot of freaking ideas. Their entire lives, there’s been instantly available magic internet information about everything at their fingertips.”
“Show Gen Z a path forward for their future: This entire generation has grown up with the most negative-facing set of inputs ever. They’re constantly seeing perfection on Instagram. They’re cyberbullying each other. They have more polarized, negative news. Politics are super negative. And it feels that way more than ever before. It’s created an entire generation of kids who have defeatist, pessimistic attitudes. You’ll hear them say things are hopeless, that there’s no point, they’ll never buy a house, they’ll never own anything. ... Be proactive. Be a partner to them and help them shape the future they want to have.”
“Compensate Gen Z for their results and provide them autonomy: Gen Z hates the Baby Boomer belief in rewarding seniority and experience. If Gen Z, the most practical generation of all, feels like the pie is growing because of their work, they feel they deserve a slice of it. If you can figure out ways to give them skin in the game, then give them the autonomy to get the job done, they will love you for it.” READ MORE
PRICING
More companies are finding ways to offer personalized pricing: “Jean-Pierre Dubé is a professor of marketing at the University of Chicago’s Booth School of Business who has studied personalized pricing. In one experiment, two movie theaters offered mobile discounts to people who were located closer to their competitor, effectively creating a two-tier price structure. In the end, both moviegoers and theaters came out ahead. ‘When both firms do it, the prices go down a ton,’ Dr. Dubé said. ‘The only reason the firms aren’t harmed profit-wise is that you can generate enough new customers who wouldn’t have otherwise gone to a movie to make up for it.’”
“Zohar Gilad runs Fast Simon, a company that helps retailers optimize their websites. Instead of offering different prices, they might display higher-end items for customers with a free-spending buying history, and clearance items for bargain hunters. Targeted coupons for hesitant browsers also create a personalized price by another name, creating a sale that might not have happened.”
“‘Say if you search for something and you didn’t buy it, you may get an email saying: Hey, you have great taste. We saw you looking for black boots. Here’s a 20 percent coupon, Mr. Gilad said. ‘I think that personalization, done correctly, can be good and serve both shoppers and the merchants well.’” READ MORE
BUSINESS TRAVEL
The combining of leisure and business travel is a growing phenomenon, and it can get complicated: “As post-pandemic work life has changed, and arrangements now include full-time office attendance as well as hybrid and remote work, so, too, has business travel. The phenomenon known as bleisure, or blended business and leisure travel, was initially embraced largely by digital nomads. But such combined travel is now also popular with people outside that group. Allied Market Research, a subsidiary of Allied Analytics, based in Portland, Ore., estimated that the bleisure travel market was $315.3 billion in 2022 and would reach $731.4 billion by 2032.”
“As employees increasingly add leisure time to their business trips, companies are struggling to determine where their legal obligation to protect employees from harm — their so-called duty of care — begins and ends. And workers may think that because their trip started with business, they will get all the help they need if something goes wrong on the leisure end.”
“Employees may be on their own without realizing it and may be surprised by out-of-pocket expenses if they require hospital care abroad or evacuation, said Suzanne Morrow, chief executive of InsureMyTrip, an online insurance travel comparison site in Warwick, R.I.”
“The chief executive of RevShoppe, Patricia McLaren, based in Austin, Texas, said the company provided flexible travel options and allowed employees to work anywhere they choose. Even so, there are constraints. The company requires all employees, including executives, to sign liability and insurance waivers when they are on a voluntary company-sponsored trip, such as an off-site meeting. Such waivers typically place responsibility on employees for their own well-being. And if they bring someone, they are responsible for that person’s expenses.” READ MORE
FAMILY BUSINESS
Even in the diner capital of the world, diners are struggling: “Peter Sedereas has owned Town Square Diner in Wharton, New Jersey since 1987. He also leads that unofficial coalition of New Jersey diners that was established during the pandemic. It's made up of over 25 of his cousins, who all own diners. Altogether, they own around 50 diners in New Jersey. Sedereas says his business is doing better than 20 years ago and that people are still going to diners. He lists a few reasons why so many diners in New Jersey are closing. ‘My grandfather's generation... three generations ago. They started the diners, they opened up the diners. And then their sons took over. My father's generation took over the family businesses. And now my generation, we're taking over the family businesses,’ said Sedereas. ‘My kids aren't interested in the diner business. They're all in the medical field.’”
“The vast majority of diners in New Jersey have always been a family business, according to Sedereas. And while he isn't close to retirement, a lot of owners sell their diner when they do retire and make a lot of money: “Property values are very high, and diners are always at the best locations. In the city centers, on the busy highways, or on corners. And I think as the generations have gone on, the younger generations may not want to enter into the diner business.”
“Sedereas says that the diners that were already struggling financially closed during the pandemic. The ones that stuck around have needed to change how they operate to survive. When you think of diners, you often think of these big, book-like menus where you can order almost anything you want. Most diners don't have that anymore.”
"Our menus used to be 18 pages long. Now it's one page, front and back. We've become more efficient on our menu, which has helped us save on labor costs because not as much prep time. Labor costs increased so much. Minimum wage has doubled in the past five years. We've become more efficient in our staffing... it's harder to staff nowadays,’ said Sedereas.” READ MORE
PROFILE
Muhammad Abdul-Hadi of Down North Pizza in Philadelphia has been honored with a James Beard leadership award: “Abdul-Hadi, who opened Down North in 2000, said he hopes to ‘continue to shine the light on the issues we’re trying to tackle, as far as giving voice to individuals in the culinary space.’ Among Down North’s causes is employing previously incarcerated employees. ‘Not having a culinary background but making an impact means a lot to be recognized by an organization that’s as prestigious as James Beard.’ Abdul-Hadi said the group is working to develop other restaurants, not just pizzerias, to spread its mission.” READ MORE
You can listen to this 21 Hats Podcast with Muhammad Abdul-Hadi: “The Unlikely Plan that Launched Down North Pizza.”
THE 21 HATS PODCAST
I Took My Eye Off the Numbers: This week, in episode 190, Jay Goltz tells Shawn Busse and Jaci Russo that, while he’s always been good with numbers, he’s never really enjoyed tracking his finances. It’s not what drove him to start a business, and over time, he stopped paying close attention. But now, after seeing his inventory levels and some big expenses get out of control, he’s diving back into the numbers and pretty much serving as his own chief financial officer, something he says he should have been doing all along.
Plus: Shawn explains how one book and a specialized accounting firm and a monthly routine have gotten him comfortable with his numbers. And Jaci says it took years for her to learn to ignore the accountants who always gave her the same advice: Cut expenses. Instead, she tells us, “We've spent the past probably eight years really right-sizing what we charge. And now I feel like I can breathe.”
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren