The Tax Break No One’s Talking About
On our latest Dashboard, Gene Marks talks “quiet quitting,” lonely bosses, and the good stuff in the Inflation Reduction Act.
Yes, we’re on vacation. We just wanted to remind you that there’s a new Dashboard episode published today and that we will continue to publish 21 Hats Podcast episodes as usual on Tuesdays. But so long as we’re here, we also have a few quick highlights for you. The Morning Report will return for real right after Labor Day.
How businesses are communicating their price increases to customers.
Changes to Instagram are threatening the businesses that rely on the platform.
Since the pandemic, China has actually increased its share of global manufacturing.
Businesses are giving far more thought to how they communicate price increases: “‘I was very nervous to hit send,’ admitted Mélanie Masarin, the founder and chief executive of Ghia, which makes nonalcoholic aperitifs that now cost $38 a bottle (up from $33 as of June). Her message to customers, which she said she ‘rewrote about 20 times,’ featured the subject line ‘This is a price increase email :/’ and went out on a Tuesday at 8:45 a.m. Ms. Masarin spent the rest of the week hovering over her computer, watching sales numbers and monitoring the company’s inbox for responses from disgruntled customers. Her biggest fear? Coming across as opportunistic. ‘The concern is that customers don’t believe that you have to raise prices, and that you’re just trying to make a bigger profit,’ she said. ‘I didn’t want people to think it was corporate greed. We waited to increase prices until we absolutely couldn’t anymore.’”
“By that time, Ms. Masarin said, Ghia was losing money on almost every order, squeezed on all sides by higher costs of shipping, labor, product ingredients, glass bottles and even cardboard packaging.”
“Ghia’s customers certainly seemed to understand. ‘I was very pleasantly surprised, because we haven’t seen a drop in sales,’ Ms. Masarin said. The company experienced a temporary increase in orders right after she sent the email (during the window of time before prices went up), and since then, its subscription pool has expanded by 30 percent.”
“‘We also got a lot of responses to the email from customers applauding our transparency,’ she said. ‘If we’d known that the reception would be so positive, we maybe would have done it a bit sooner.’” READ MORE
Instagram offers further proof that you do not want your business to be dependent on any one platform: “After losing her construction job early in the pandemic, Kaitlin Tokar decided to try selling some of her vintage furniture and housewares collection on Instagram. ‘It took off way faster than I expected,’ she said. Her account, Midnight Tokar Vintage, has racked up nearly 6,000 followers since launching in September 2020 and she's started a second account centered on resale clothing. Even with a relatively modest following, Tokar, a 30-year-old single mom living in New York City, was able to make the Instagram shop her full-time source of income about a year ago. But more recently, her posts haven't been reaching as many of her followers and regular customers, which has meant items have been selling much slower, issues she thinks may have something to do with recent changes to Instagram's platform.”
“‘Things just aren't being seen. ... I still will get messages months after [posting something] like, Oh my god, I never saw this,’ Tokar said.”
“Many small business owners are also frustrated by the platform's focus on video, and say they feel they must create videos or Instagram Reels in order for their posts to be seen, whether or not the format makes sense for their products.”
“In response to questions regarding small business owners' concerns, Anne Yeh, a spokesperson for Instagram parent company Meta, reiterated that Instagram is temporarily reducing the number of recommended posts in users' feeds in response to user feedback.”
“‘We recognize that changes to the app can be an adjustment, and while we believe that Instagram needs to evolve as the world changes, we want to take the time to make sure we get this right,’ Yeh said in a statement.” READ MORE
For many, the labor shortage is far from over: “Susan Sarich founded SusieCakes in 2006 and has grown it into a 26-bakery chain, the vast majority of which are in California. But her head count has plunged from nearly 500 before the pandemic to just over 200 now—and rebuilding those ranks has become more and more difficult. With gas prices in California still at around $5.30 per gallon, many prospective employees say they can no longer afford to commute an hour or more, Sarich said. ‘We increased hourly pay close to 20 percent, [but] the cost of living is off the charts,’ she said. ‘Some are commuting upwards of an hour and a half each way and you add on gas prices and it's like, how does the math work?’”
“To cope, her bakeries remain closed two days a week and are open shorter hours. She has cut her product offerings, including dropping customer favorites like iced sugar cookies based on a beloved family recipe.”
“‘The demand was there, but we didn't have the people, so we had to pivot pretty quickly to a reduced labor model. For us, that meant fewer days, fewer hours a day and fewer products,’ she said, adding that she is still down from her pre-pandemic revenue by about 15 percent.”
“A recent Alignable survey found that only about a third of small businesses are making 90 percent or more of their pre-pandemic revenue, Groves said. That's worse than the results of a similar survey conducted last year, when 42 percent said they had recovered 90 percent or more of their pre-pandemic business.”
“A number of factors are behind this, economists say: An ongoing shortage of care workers, lower immigration rates and a pervasive fear of the pandemic. ‘A lot depends on, do people feel confident that we've got Covid under control?’ said [David Dollar, a senior fellow at the Brookings Institution.] READ MORE
America’s largest employer is expanding its abortion coverage: “Arkansas-headquartered Walmart, which has 1.6 million employees in the United States, said it would cover abortions ‘when there is a health risk to the mother, rape or incest.’ It will also pay for the procedure in the event of miscarriage, a lack of fetal viability, or an ectopic pregnancy when a fetus implants outside the uterus. The company will provide ‘travel support’ for employees and dependents if they require access to a health service covered by Walmart’s insurance plan but there is no viable provider within 100 miles of their location. Walmart’s top human resources officer said in an internal memo that the new benefits are effective immediately.”
“About 53 percent of Walmart’s employees in the United States are women. It operates more than 2,000 stores in states that have either banned abortion or imposed near-total restrictions on the procedure.” READ MORE
During the past two years, China has actually increased its dominance of global manufacturing: “Though some of China’s gains in global markets may unwind as the effects of the pandemic fade, the trend nonetheless highlights just how hard it is to unplug from the world’s largest factory floor. Such ‘decoupling,’ as it is known in policy circles, is especially challenging as Chinese factories extend their reach into higher-end products like chips and smartphones and new technologies such as electric cars and green energy. The U.S. and some of its allies have grown wary of their dependence on China over concerns ranging from national security to the fragility of global supply chains.”
“Part of the explanation is prices. The cost of consumer goods has risen as inflation has taken hold worldwide, so the U.S. dollar value of Chinese exports has gotten a leg up.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
This week, Gene Marks talks about the rise of “quiet quitting.” He also discusses the phenomenon of bosses who come into the office to set a good example even as their employees phone it in from the beach. But most importantly, Gene points out something few others have noted about the Inflation Reduction Act. It extends a huge tax break for business owners that was nearing expiration. And that’s just one of many aspects of the bill that Gene thinks will help owners. So would Gene have voted for the bill? You might be surprised.
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An expansion of clean energy loans may be the “sleeping giant” of the Inflation Reduction Act: “The law authorizes as much as $350 billion in additional federal loans and loan guarantees for energy and automotive projects and businesses. The money, which will be disbursed by the Energy Department, is in addition to the more well-known provisions of the law that offer incentives for the likes of electric cars, solar panels, batteries and heat pumps. The aid could breathe life into futuristic technologies that banks might find too risky to lend to or into projects that are just short of the money they need to get going.”
“‘This is a sleeping giant in the law and a real gold mine in deploying these resources,’ said Dan Reicher, a former assistant energy secretary in the Clinton administration. ‘This massive amount being made available is a big deal.’” READ MORE
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