The Journeys of Three Women Entrepreneurs
Lucy Yu rebuilds her bookstore after a devastating fire. Liz Picarazzi goes looking for manufacturing options. And Merrilee Kick, a former school teacher, scores with ready-to-drink cocktails.
Good Morning!
Here are today’s highlights:
A crowdfunding site that backed Main Street businesses shuts down.
How one family manages the challenges of running a New Jersey diner.
A Morning Report reader takes issue with Lou Mosca’s comments on golf.
If you know a Boomer business owner, please share this podcast.
PROFILE
After a fire, it took Lucy Yu seven grueling months to reclaim her bookstore dream: “She opened her store with about $45,000 in December 2021 as [Manhattan’s Chinatown] was rebounding from the pandemic shutdowns and reeling from a spate of anti-Asian attacks. It quickly became a literary hub that hosted first-time authors and held weekend bar nights, when bibliophiles sipped hard seltzers and wine. The store was profitable within four months.”
“In the days after the fire, Ms. Yu had totaled her losses and expenses: She was out about $60,000 worth of inventory. The ceiling’s collapse destroyed the heating, cooling and ventilation system, so that needed replacing, too. Initially she estimated she’d need $80,000 to rebuild, which didn’t include paying her nine employees, which she had resolved to do.”
“Ms. Yu thought about the crowdfunding site GoFundMe, but was hesitant. A few years earlier, she had used the platform to raise about $16,000 to start Yu & Me. What would people think when she said she needed their help again? Her friend and colleague Kazumi Fish reminded her that Yu & Me had come to mean something to others as well. Within a day, more than 2,400 people donated a total of $231,152 to Ms. Yu’s new GoFundMe campaign. (The campaign eventually raised $369,555.)”
“On the last Sunday in January, Ms. Yu, now 29, opened the door to Yu & Me. It was dark and rainy, but patrons immediately and consistently flowed in. ... She had set low expectations for sales. But a month after the opening, her revenue was 50 percent more than it was before the fire. The bar nights are back, too.” READ MORE
Good Morning, Vietnam!
MANUFACTURING
Liz Picarazzi reports on her trip to Vietnam, where she went hoping to find answers to questions raised by looming tariff hikes: “Should I just raise prices? How much and when? If I raise prices, will I become too expensive? What if my July shipment is late and arrives on August 1, when the tariff goes from 11 percent to 28 percent? For that large order, if the ship arrives one day late, the incremental tariff will be $68,000, a month before my daughter starts college. I can’t just charge more and recover the $68,000 because some of that order was sold at the pre-tariff-hike price. What will happen if every other manufacturer trying to avoid the August 1 tariff rushes their containers to U.S. ports and there is a long line? Should I move manufacturing to Vietnam? What are the risks if everyone else tries to shift to Vietnam at the same time? Should I split production between China and Vietnam?”
“My COO Frank (also my husband) and I took a trip to Vietnam in May to meet with a factory that made samples of 2 products. The trip was a fact-finding mission, and the Vietnam option looks very promising, with a few watch-outs that are being addressed.”
“What’s next? We’re placing a small order with the factory in Vietnam and if that goes well, we’ll figure out which products will be manufactured where. Frank and I knew that we needed a ‘China plus One’ strategy and this may be it. I haven’t entirely ruled out Mexico, or the USA, and will share when I get to that part of my journey.” READ MORE
SELLING THE BUSINESS
A former public school teacher turned a side hustle in ready-to-drink cocktails into more than half a billion dollars: “Brightly colored, plastic spheres filled with pre-mixed drinks with names like ‘Cran Blaster’ and ‘Forbidden Apple’ are packed onto thousands of shelves across America, from supermarkets to gas stations. BuzzBallz, as these ready-to-drink cocktails are known, started as a side hustle and has transformed into one of the biggest brands in the $2 billion industry. ‘I’ve been living in the American Dream,’ says BuzzBallz founder and CEO Merrilee Kick. ‘We’ve built a legacy. We’ve become a contender in a space where women never went.’”
“In 14 years since she founded the brand, Kick has built BuzzBallz into an alcohol industry powerhouse. In addition to distribution across the United States, the brand is now sold in 29 countries with annual revenue that Forbes estimates is roughly $500 million.”
“The 61-year-old Kick, in turn, has become one of the alcohol industry’s biggest success stories, with one of best exits ever for a woman. The former public school teacher from Plano, Texas, never sold a stake in the company, but did give 24.5 percent to each of her two sons, Alex and Andrew, now president and vice president of BuzzBallz.”
“The Louisiana-based spirits conglomerate Sazerac, owned by billionaire William Goldring, acquired BuzzBallz in May in an all-cash deal that Forbes estimates is at least $500 million. Neither Kick nor Sazerac would comment on the size of the deal, but, without providing documentation, Kick says that the actual figure is much higher.” READ MORE
FINANCE
Mainvest, a Massachusetts-based crowdfunding site that let small investors buy shares in MaIn Street businesses, is shutting down: “Mainvest was one of a cohort of startups that formed around 2016, when the US Securities and Exchange Commission relaxed the rules that previously limited investing in young companies to ‘accredited investors’ with more than $1 million of net worth, sometimes called ‘angel investors.’ After that, companies that had difficulty raising money from traditional sources — or who wanted to allow early customers and supporters to own a stake — began using sites like Mainvest, StartEngine, Wefunder, and Boston-based Netcapital. (Two of the best-known crowdfunding sites, Kickstarter and Indiegogo, largely focus on letting customers pre-purchase products or support creative projects, rather than buying equity.)”
“But now Mainvest, a so-called equity crowdfunding site that allowed regular people to buy a stake in fledgling businesses, says it will shut its doors in June. One factor was the April bankruptcy of a financial intermediary upon which Mainvest relied, San Francisco-based Synapse. Another was Mainvest’s inability to raise additional funding back in 2022.”
“Matthews says that Mainvest helped more than 100 companies in Massachusetts raise capital, including Nightshade Noodle Bar in Lynn, the Boston restaurant mini-chain Mike and Patty’s, and Drawing Board Brewing Company in Florence. In 2020, a former employee of the Allston rock club Great Scott raised $346,000 to try to save the club, or reopen it in a new location; that hasn’t yet happened.”
“Heather Higgins Yunger relied on the site to raise $130,000 for her Dorchester bakery, Top Shelf Cookies, which opened in 2021. ‘We wouldn’t have our storefront without it,’ Yunger says. ‘Trying to expand in the middle of a pandemic — for us, there was no other option.’ Yunger says the bakery previously operated out of a shared kitchen; today it employs four people.” READ MORE
FAMILY BUSINESS
Here’s how one family manages a diner: “Just after 5 a.m. on a recent Friday, Bendix Diner, a small, family-run business, began frying up eggs on the griddle to make the first of dozens of dishes it would serve to a steadily rotating cast of regulars. From daybreak through lunch, 46 customers ate over 87 eggs and 36 strips of bacon, and drank gallons of coffee. This classic diner in Hasbrouck Heights, N.J., just 15 miles from Manhattan, offered a glimpse into so many things gripping the country right now. Above the din of cooking and a TV blasting a courtroom show, we could hear people bemoaning the rising cost of gas and goods. Some debated who should be the next president, while others discussed marijuana laws.”
“The one constant was the sense of community that diners found in the place — and its owner, John Diakakis, a 56-year-old blind man whose family has owned the restaurant since 1985, (though it has been around since the 1940s).”
“Despite not being able to see, Mr. Diakakis zips around — delivering food, refilling drinks, handling money. He is helped by a small team: his three sons, who pitch in on weekends; a longtime cook, Julio; and a part-time dishwasher who is known as Tiny (though he is well over six feet tall).”
“Running a small business like Bendix has always been precarious. Weekdays are hit or miss, he said. Weekends are hectic (the diner regularly goes through 1,000 eggs). But it’s become even tougher in the last couple of years as rapid inflation has made operating costs unpredictable.”
“‘This place makes a decent living. But, it’s laborious work to run a diner,’ Mr. Diakakis said.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
Gene Marks Says CEOs Will Not Be Replaced By AI: This week, Gene responds to a New York Times article suggesting that CEOs should be among those worrying about whether artificial intelligence will take their jobs. For one thing, companies could save a lot of money replacing their leaders with bots. But Gene’s not buying it—although he does see Microsoft and Google making big progress with their AI offerings, so much so that he’s adjusting the services his own business offers. He says it’s time for owners to start paying more attention to AI.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
ARTIFICIAL INTELLIGENCE
Meanwhile, Google’s flagship search engine is hallucinating: “Google tested out AI overviews for months before releasing them nationwide last week, but clearly, that wasn’t enough time. The AI is hallucinating answers to several user queries, creating a less-than-trustworthy experience across Google’s flagship product. In the last week, Gizmodo received AI overviews from Google that reference glue-topped pizza and suggest Barack Obama was Muslim. The hallucinations are concerning, but not entirely surprising. Like we’ve seen before with AI chatbots, this technology seems to confuse satire with journalism – several of the incorrect AI overviews we found seem to reference The Onion.”
“The problem is that this AI offers an authoritative answer to millions of people who turn to Google Search daily to just look something up. Now, at least some of these people will be presented with hallucinated answers.”
“In my experience, AI overviews are more often right than wrong. However, every wrong answer I get makes me question my entire experience on Google Search even more. I have to assess each answer carefully. Google notes that AI is ‘experimental’ but they’ve opted everyone into this experiment by default.” READ MORE
HOUSING
In parts of Florida and Texas, the once-booming housing market is showing signs of distress: “The likely reasons: rising property taxes and insurance premiums and higher interest rates that make it increasingly difficult for homeowners struggling with mortgage payments to sell their properties or refinance their way out of trouble. Because of storms and other natural disasters, insurance costs in recent years have been rising faster in those states than in much of the rest of the US. What’s more, the median local property tax bill in Texas for single-family residences had climbed $1,015 by 2023 from 2019, the biggest jump in the U.S.”
“In Houston, foreclosure filings jumped 37 percent in the first quarter from a year earlier, according to data from property tracker Attom. That was the biggest increase among the 15 metro areas with the most filings, followed by Orlando, Tampa and Miami.”
“Increases in Houston and elsewhere in Texas and Florida stand out because foreclosure levels are down overall in the U.S. ‘Homeowners have been the winners in this skyrocketing market,’ says Daren Blomquist, vice president of market economics at Auction.com, an online marketplace for distressed properties. ‘But the surprise for some homeowners is those rapidly rising home values came with a price.’” READ MORE
FEEDBACK
Jim Kalb, a Morning Report reader and longtime friend of 21 Hats, has a response to Lou Mosca’s comments last week about golf: “In fact, I think they do a disservice to golfers and business owners. In my own experience, I have learned far more from golf than I have reading business books. I think that Anthony Jeselnik, a comedian, put it best: ‘My father always believed that you could only learn something by actually doing it—not by simply reading how to do it in a book. So when my brother was only 5 years old, my father threw him in the deep end of the swimming pool—and that’s how my father learned CPR.’ So here are 10 things I’ve learned playing golf that I could NEVER have learned from a book:
“No one gets good at the game overnight—just as no one builds a company overnight. And no one ever truly becomes an expert.”
“You can only hope to get good with practice, doing the same thing over and over and over again. The more time I spent practicing my sales techniques, the more products I sold.”
“Let’s face it, there are some real idiots who play golf. Sometimes they’ll loudly cuss and throw tantrums. They sulk, throw clubs, or drink until they can’t even drive a golf cart safely. Learning to play with these types of people can be challenging—and hard to avoid. You can be matched up with any bozo on the first tee. Learning to keep your head down and just play your own game can be one of the greatest skills you can learn.” READ MORE
THE 21 HATS PODCAST
How to Sell a Business That Won’t Sell: We’re calling it a We-SOP. The term, coined by Jay Goltz, refers to a business transition that is something of a do-it-yourself ESOP, or employee stock ownership plan, but without the expense and complication and debt of a full ESOP. It’s a transition that lets owners get money out of what has been their life’s work. It’s a transition that lets loyal employees keep their jobs and preserve the company’s culture. And it’s a promising solution for the Silver Tsunami of retiring Baby Boomers because it can provide a sales path even for owners who have never managed to extricate themselves from their day-to-day operations.
And in this week’s episode, we take you through an example of how it can work. Jay introduces us to Jill and Paul Choma, co-owners of a business, Gilded Moon Framing, that Jay recently guided through the We-SOP process. As you’ll hear, all three believe that what has worked—at least so far—for Jill and Paul could also work for many other business owners.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren