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‘The Return of Entrepreneurship in America’
There has been a massive surge in new business formations, and it wasn’t driven solely by layoffs.
Here are today’s highlights:
Influencers are finding it very easy to take advantage of restaurants: “Deciding not to play is less and less an option.”
You can probably stop worrying about a UPS strike.
The economists are still debating whether we’re going to get a recession.
Obituary: A business owner who devised his own non-digital CRM.
The pandemic appears to have driven a sustained increase in entrepreneurship: “The massive disruption brought about by Covid-19 reshaped the entrepreneurship landscape overnight. That, combined with increasingly lower costs to start a business and more Americans willing to take the risk, led to a massive surge in new business formations. In July 2020, after millions of Americans were thrown out of work, new business formations spiked to 552,214, the highest month recorded by the Census Bureau since its data began in 2004. And while business formations have not been as strong as they were in 2021, Census data showed roughly 5 million new businesses formed in 2022, up from about 4.5 million in 2021 and far above the 3.5 million before the pandemic.”
““That surge was driven not just by people seeking to capitalize on the Covid-19 disruption or from being suddenly unemployed, but by a diverse group of entrepreneurs more willing now than ever to take the leap into business ownership.”
“In recent months, the Census Bureau has recorded more than 400,000 new business applications; before the pandemic, it was rare to crack 300,000. In June 2023, there were 465,906 new business formations, up from 438,798 in May and up from 427,241 the previous year.”
“The top 10 major American metro areas in terms of new businesses per 1,000 residents is dominated by Southern cities — with Miami at the top, followed by Atlanta and Orlando, Tampa and Jacksonville in Florida. Denver was No. 6, the only city not in the South to make the top 10.”
“‘This is a huge deal, to see the return of entrepreneurship in America,’ [Luke Pardue, a senior economist at payroll and benefits provider Gusto] said. ‘It took a once-in-a-century, a once-in-a-generation pandemic that sparked a surge in entrepreneurship and dynamism, and we are starting to see that dynamism take hold as people take advantage of opportunities that they might not have had in the past.’” READ MORE
Influencers are shaking down restaurants: “Here is how it works: An influencer walks into a restaurant to collect an evening’s worth of free food and drink, having promised to create social media content extolling the restaurant’s virtues. The influencer then orders far more than the agreed amount and walks away from the check for the balance or fails to tip or fails to post or all of the above. And the owners are left feeling conned. The swap of food for eyeballs is nothing new in our digital age; businesses can fail from a lack of exposure. But the entitled disregard — with emboldened influencers making outsize demands but not always fulfilling their end of the bargain — is a more recent phenomenon.”
“In a business without boundaries, anything goes. Brian Bornemann, the chef and a co-owner of the restaurants Crudo e Nudo and Isla in Santa Monica, Calif., said that while there are reliable influencers, the ‘lower echelons’ see a free meal as a way to build their personal brands.”
“And the most entrepreneurial influencers, whether they have sophisticated skills or merely a prospector’s zeal, offer an ascending roster of fee-based services. Exposure packages can cost upwards of $1,000 for a prescribed number of Instagram stories, posts, and a professionally made video, sometimes with performance bonuses tied to views.”
“I don’t know what the future holds for restaurants, because there are no rules to this game, and deciding not to play is less and less an option. Influencers add another cost to an already volatile and low-margin business, but they aren’t going away any time soon, and the serious ones drive traffic.”
“Mr. Bornemann tells influencers he hasn’t worked with to come in on their own dime, once, before he’ll do business. ‘If they balk,’ he said, ‘they’re bogus.’” READ MORE
UPS and its employees have a tentative agreement, perhaps averting a disastrous strike: “UPS handles about one-quarter of the tens of millions of packages that are shipped daily in the United States, and the strike prospect has threatened to dent economic activity, particularly the e-commerce industry. Representatives from more than 150 Teamster locals will meet on Monday to review the agreement, and rank-and-file members will vote on it from Aug. 3 to Aug. 22, according to the union.”
“‘We demanded the best contract in the history of UPS, and we got it,’ the Teamsters president, Sean M. O’Brien, said in a statement. ‘UPS has put $30 billion in new money on the table as a direct result of these negotiations.’”
“The minimum pay for part-timers will rise to $21 an hour — far above the current minimum starting pay of $16.20 — and the top rate for full-time delivery drivers will rise to $49 an hour. Full-time drivers currently make $42 an hour on average after four years.”
“A 10-day UPS strike would cost the U.S. economy about $7 billion, according to an estimate from the Anderson Economic Group.” READ MORE
The four-day workweek continues to gain traction: “The results come from a series of four-day-workweek trials conducted in the U.S., Canada, the U.K., and Ireland over the past 18 months. Dozens of companies ranging from design agencies to manufacturers and nonprofits tested the four-day concept, an approach that is gaining traction as employers and employees rethink the traditional ways of work. Workers were given a paid day off a week but the same workload to see whether they could get as much done working more effectively. After six months, workers said they had less burnout, improved health, and more job satisfaction, and had cut their average work time by about four hours to 34 hours a week. Those who continued the schedule a full 12 months reduced working times even further, to about 33 hours a week, researchers say. Meanwhile, they continued to report better mental and physical health and work-life balance.”
“Jenise Uehara, chief executive and co-owner of Search Engine Journal, a digital marketing publication that participated in one of the U.S. trials, said she proposed moving to a four-day workweek last year as the company wrestled with growing pains.”
“As part of the experiment, the company declared a ‘meeting bankruptcy,’ wiping all meetings from the calendar for a month, then thinking hard about which were really necessary. Some meetings became shared documents instead, where participants would update each other with progress reports and other notes as they happened.”
“Within six months, the company’s turnover had dropped, productivity held up, and clients didn’t notice the business had moved to a four-day week, Uehara said.”
“‘We couldn’t keep doing things the same way we’d been doing them,’ she said. ‘We had to figure out a way to work more efficiently.’” READ MORE
Economists are still debating whether we’re going to have a recession: “A survey of economists at leading U.S. businesses released this week showed a large majority put the risk of a recession starting in the next year at 50 percent or less, a significant improvement from this spring. Jan Hatzius, the chief economist at investment bank Goldman Sachs, was even more bullish, estimating in a recent research report that there is just a 20 percent chance of a recession. The good feelings appear to be contagious, as consumer confidence — the closely watched metric of average views on the economy — jumped to its highest level in two years, according to a report released Tuesday.”
“The U.S. economy is performing better than those in most other developed nations, according to a report Tuesday from the International Monetary Fund. The organization boosted its outlook for U.S. economic growth this year to 1.8 percent, up a bit from an April estimate, as part of a slight upgrade of the global economy’s prospects since the spring. The improved world outlook helps the United States by creating more demand for its exports.” READ MORE
Startups are producing real dairy without cows: “Plenty of milk alternatives have hit café counters and supermarket shelves in recent years. Plant-based beverages made from things like soybeans, almonds, and oats make up 15 percent of all milk sales by value in America and 11 percent in western Europe, reckons the Good Food Institute, a think-tank. Yet lovers of real dairy, which plant-derived products cannot quite mimic, still need cows, goats and ewes. ‘Precision fermentation’ companies like Better Dairy hope to change that—and take a fat slice of the $900 billion global dairy market.”
“Remilk, an Israeli startup, has recently received approval to sell its fare in America, Israel, and Singapore. Perfect Day, a Californian one, already sells synthetic milk, ice cream, and cream cheese. It recently signed contracts to sell its proteins to Nestlé, a food giant, and to Starbucks.”
“Synthetic dairy dispenses with certain undesirable aspects of milk and milk-making. Lactose, to which some people are allergic, and hormones, which have been linked to some adult diseases, can be stripped out.”
“Fermentation tanks do not need to be pumped full of antibiotics and can be set up anywhere—handy at a time of rising worries about food security and climate change.” READ MORE
Gregory Z. Thomajan, owner of a renowned Boston haberdashery who devised his own non-digital CRM: “The secret to Greg Thomajan’s success, customers would say, was Greg Thomajan. ‘If you give good service to this customer, he won’t go anywhere else,’ Mr. Thomajan told the Globe in 1997. That was the case for decades as he ran the store his father founded in 1933. He sold it in 2018 and stayed on part-time until the Liberty Square retail location closed during the 2020 pandemic shutdown — nearly 60 years after he began working for his father.”
“Customers stayed loyal to the store for as long as they needed suits, and remained friends even longer. The reason, Mr. Thomajan said, was simple. ‘This is a store where men buy the clothes they work in,’ he told the Globe in 1997, ‘and these men hate to shop.’”
“The door into Zareh Inc., named for Mr. Thomajan’s father, might as well have been a time machine to a bygone era. ‘He did things the old-fashioned way and he did just fine,’ said his wife, Andrea, who handled the store’s bookkeeping. ‘Technology was not his thing. He couldn’t use a computer, and he never used a cellphone.’”
“He kept all necessary details about each customer on index cards ‘with their sizes and tastes and everything they bought.’ Glancing at a customer’s index card, she recalled, he could say: ‘You bought that suit in 1980. You need a new navy blue suit.’” READ MORE
THE 21 HATS PODCAST
Escaping the Valley of Death: This week, Shawn Busse tells Jay Goltz and Jennifer Kerhin that he’s realized that his business, too—like Jennifer’s—is stuck in the valley of death that we first discussed a couple of episodes ago. Shawn’s realization prompts a discussion of what it takes to cross the desert and get out of the valley. We also have a surprisingly entertaining and enlightening conversation about insurance that makes clear why you should occasionally review what policies you have and why you have them. “I have something called directors insurance,” says Jennifer, “and I don't really even know what that is.” Shawn notes that he found a company that helped him reassess several of his insurance lines. “What I like about that,” he told us, “is that while insurance brokers are incentivized to oversell you, because they make commissions,” this company sells its expertise and not policies.”
“Plus: we start the episode with Jay explaining why binge-watching HBO’s Succession brought back all of his worst nightmares about owning a family business.
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Thanks for reading, everyone. — Loren