The Mother of All Supply Chain Problems

Omicron is about to sweep through China, locking down factories and ports.

Good morning!

Here are today’s highlights:

• Don’t use your CRM tool for email marketing.

• A new corporate structure allows business owners to lock in their values.

• After lying low, predatory online lenders have resurfaced.

• Flying taxis may arrive sooner than you think.

MARKETING

Gene Marks advises against using your CRM system for email marketing: “Why? Because if I were to send out thousands of emails I will likely cause wrath with either my internet service provider or email service provider. My emails will likely be flagged as spam by recipient systems, which are now smart enough to know when an email is coming from an unknown sender or server. My campaigns will be ineffective, and I could be blacklisted.”

• “The better email platforms have tests. They monitor for potential spammers. They question customers who are sending out emails that fail their internal tests.”

• “These applications will do a better job than a CRM system because that’s their only job: to make sure your emails get delivered to the intended recipients. Their entire business model is built around this objective.”

• “The makers of most mainstream customer relationship management applications like to say that their products can also do email campaigns. They can. But they’re really not very good at it.” READ MORE

SUCCESSION

Colorado has announced an employee-ownership tax credit: “On January 1, the Employee Ownership Office at the Colorado Office of Economic Development and International Trade announced it is now prepared to accept applications for the Colorado Employee Ownership Tax Credit. Businesses in the state that convert to employee ownership are eligible for a state tax credit covering up to 50 percent of the cost of the conversion.”

• “In a series of new state policy blog posts, Corey Rosen, founder of NCEO, identifies four actions that states can take to create a more policy-friendly environment for employee ownership conversions.”

• “In addition to tax incentives, Rosen recommends launching state employee ownership centers within state governments, like the Colorado Employee Ownership Office.” READ MORE

The Purpose Foundation has created a new corporate structure that allows business owners to lock their values in place—even after they’re gone: “It’s a kind of a legal hack, based on rules in an obscure corner of trust law. Normally, trusts have human beneficiaries. But it’s also possible to create what’s known as a perpetual-purpose trust—a trust that exists not for the benefit of particular individuals but to fulfill some purpose. In the past few years, the Purpose Foundation team has helped more than a dozen retiring business owners transfer their ownership shares to perpetual-purpose trusts. The trusts become the legal owners of these businesses, and the business owners now have a fiduciary duty to fulfill its purposes, which might include sharing profits with workers, protecting the environment, and hiring the formerly incarcerated. Perpetual trusts last indefinitely, preventing future owners from discarding pro-social policies in favor of higher profits.”

• “Setting up new ownership structures might seem like a circuitous route to a more humane version of capitalism. But the dry, technocratic details of trust law conceal tremendous power.”

• “One major goal of Purpose Foundation is to develop a streamlined template for such business conversions, which have both legal and financial dimensions.”

• “‘There’s no road map for doing an alternative ownership, governance, financing structure,’ [said Camille Canon, co-founder of Purpose Foundation]. ‘We’ve figured out how to make as many decisions without lawyers in the room, in order to avoid eight-hundred-dollar legal hours.’” READ MORE

THE COVID ECONOMY

Omicron is about to sweep through China: “With Covid-19 flaring up across China, major manufacturers are shutting factories, ports are clogging up, and workers are in short supply as officials impose city lockdowns and mass testing on a scale unseen in nearly two years. The prospect of continued disruptions in the world’s second-largest economy, which has a zero-tolerance strategy for combating the pandemic, is heightening fears that the disruptions will ripple through the global economy. Already, companies including memory-chip maker Samsung Electronics, German automaker Volkswagen, and a textiles company that supplies Nike and Adidas are suffering production hitches.”

• “‘We could take a huge step back in terms of supply-chain bottlenecks,’ said Frederic Neumann, co-head of Asian Economics Research at HSBC. ‘This time, the situation could be even more challenging than last year given China’s increasingly significant role in global supply.’”

• “The risk is that ‘over the coming months we’ll experience the mother of all supply chain stumbles: an Omicron-driven stall in factory Asia,’ said Mr. Neumann.

• “Goldman Sachs on Tuesday cut China’s 2022 growth forecast to 4.3 percent from 4.8 percent in light of the latest Covid-19 developments.” READ MORE

Companies are giving up on predicting return-to-office dates: “The postponements have unnerved office landlords and small businesses that are being stretched thin by a dearth of demand in office districts. An average of only 28 percent of the workforce last week returned to the office in the 10 major cities monitored by Kastle Systems, a nationwide security company that monitors access-card swipes. That compares with more than 40 percent the first week in December.”

• “Rather than devising an officewide return date, companies are working on systems that would vary the number of employees in offices depending on the Covid-19 infection rate for the indefinite future, human-resources executives say.”

• “Some businesses also are working on strategies that would base office returns on the needs of specific groups, these executives say.”

• “Under this system, managers would ask employees who are working on a sales or marketing presentation to gather in offices to collaborate, and then return to mostly working at home when it is finished.” READ MORE

FINANCE

Ami Kassar says predatory online lenders are resurfacing: “Here is one way NOT to deal with supply chain pressures. Earlier this week, I spoke to an entrepreneur whose suppliers are now demanding pre-payment for products and services to get ahead of the queue. In a nervous pinch, he signed up for a loan that he had a year to pay back. I estimate his APR to be about 70 percent. His cash flow is now so tight; there are many other problems to contend with. We will help this entrepreneur and take out his short-term online loan with an SBA loan that he could have gotten in the first place. But, in the meantime, he could have saved himself a lot of sleepless nights.” READ MORE

STARTUPS

Bloomberg takes a look at the nascent flying-taxi industry: “Flying taxis are coming, sooner than many think. A couple dozen startups, promising quieter and safer rides than in helicopters, have resulted in a crowded industry, backed by billions of dollars in investments and SPAC deals. So far, results have been mixed.”

• “Archer says its prototype electric Maker aircraft completed a first hover test flight on Dec. 16. The Palo Alto-based company plans extensive flight tests of the two-seater this year as it continues working to develop a four-seat version. It aims to obtain U.S. certification in 2024.”

• “Burlington, Vt.-based Beta, whose investors include Fidelity and Amazon.com, intends to deliver first to the U.S. Air Force and then begin commercial shipments. United Parcel Service has ordered a cargo version of the electric eVTOL that it plans to use to shuttle packages between sorting hubs.”

• “Joby’s first production aircraft is slated to roll off its California assembly line in 2022. The company aims to become a certified Part 135 aircraft operator this year, then get the regulatory permits to make and fly its aircraft. It plans to begin commercial passenger service in 2024.” READ MORE

THE 21 HATS PODCAST

Maybe it’s not the marketing: This week, we introduce a new member of the 21 Hats Podcast team, Shawn Busse, who tells Jay Goltz and Laura Zander about an intriguing challenge he faces. Twenty-two years ago, Shawn co-founded a marketing firm called Kinesis, but now he’s trying to convince clients that it takes more than just marketing. Sometimes, it’s not enough just to drive more leads. Sometimes, you have to step back and take a deeper look at your business, which not every client is ready to do. In fact, it took Shawn 10 years (and the Great Recession) to do it with his own business.

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

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