The Weight of Personal Guarantees

Today’s Highlights: Productivity is surging. The main reason startups fail. And advertising on Facebook keeps getting trickier.


Advertising on Facebook keeps getting trickier: “In something of an A/B test, [marketing consultant Kyle] Jewell spent several thousand dollars on two types of Facebook ad. The retargeting ads would introduce Chris’ Coffee to Facebook users who had already visited Chris’ website and presumably would be predisposed toward the company. And for several hundred dollars, they netted the company six sales worth thousands of dollars each, a solid return. But not so the video. ‘What happened was a remarkable failure,’ says Jewell. ‘We spent a couple thousand dollars and got — I think the return in the reports was somewhere south of a hundred dollars. Someone bought a bag of coffee.’”

  • “‘Our brand wasn’t that strong,’ says Jewell. ‘You can’t do brand awareness for a brand that doesn’t exist.’”

  • “Some advertisers and consultants say the company charges a lot more than it used to. Others say Facebook suffers from ad fatigue.”

  • “And some businesses worry about being associated with a platform that has been plagued by privacy issues, political scandals, and antitrust allegations.“ READ MORE


Even in good times, debt guarantees weigh heavily on business owners: “Nearly 60 percent of small businesses with employees that took out loans used personal guarantees to secure business debt, according to a survey released by the regional Federal Reserve Banks in 2020. Forty-four percent of small firms with employees have more than $100,000 in debt and 8 percent owe more than $1 million, according to a separate regional Fed survey released this year. The weight of personal guarantees has grown as the pandemic has stretched on, increasing the amount small-business owners owe and forcing many to draw down savings.”

  • “Townsend Wentz borrowed from his family to open his first Philadelphia fine-dining restaurant in 2014. The chef tapped the equity in his home, erased any semblance of a retirement account and diverted college funds for his daughter into his business.”

  • “Roughly $1.5 million in personal investment now sits in the balance. The pandemic repeatedly closed his five locations for portions of the year.”

  • “The guarantee weighs on Mr. Wentz as he juggles phone bills, tax obligations, rental payments and other expenses. ‘It’s like trying to stand in quicksand,’ he said.” READ MORE

An analysis shows how underrepresented entrepreneurs struggled to get PPP loans: “The government relied on banks to make the loans, creating an obstacle for borrowers who didn’t have established banking relationships. Some banks favored their larger and wealthier clients, which pushed ordinary customers to the back of the queue. ‘Mystery shopper’ studies found that Black applicants were consistently treated worse than white counterparts. The program also largely locked out sole proprietors and independent contractors — two of the most popular structures for minority-owned businesses. Those companies weren’t eligible to apply for the program’s first week. When they got access, a rule barring loans to unprofitable solo businesses — a restriction that didn’t apply to larger companies — prevented many from getting help. Most nonbank lenders, including those that specialize in underserved communities, were shut out for weeks while they waited for the Small Business Administration to approve them.” READ MORE

  • “When the Paycheck Protection Program for small businesses started last April, so many of Southern Bancorp’s customers didn’t qualify for the relief money that the Arkansas bank’s chief executive, Darrin Williams, turned to donors to raise money for $1,000 grants so it wouldn’t have to turn applicants away empty-handed.”

  • “Of the 1,300 Paycheck Protection Program loans that Southern Bancorp made last year, many went to customers who had been turned away by larger banks, Mr. Williams said.”

  • “‘The financial system doesn’t get to truly small business, Hispanic businesses, women-owned businesses. It just doesn’t,’ [said Pilar Guzman Zavala, founder of Half Moon Empanadas, a small chain of restaurants that employed 100 people before the pandemic].


Thanks to the pandemic, our productivity drought may be ending: “Forced to operate with less contact between customers and workers, companies plowed money into technology, automation and videoconferencing software. Consumers have had to embrace digital services such as electronic commerce and telemedicine, and many find they like it. ‘The pandemic shocked older people into using technology and has shocked the economy in general into adopting technology,’ said Constance Hunter, chief economist at KPMG. ‘We’re going to see continued investment in productivity-enhancing technology because the pandemic really made it so clear that we need to have this digital backbone.’”

  • “Business investment rose 17 percent in computer equipment, 6 percent in software, and 1 percent in research and development, even as GDP fell 2.4 percent in the fourth quarter from the same period a year earlier.”

  • “Investment in automation and technology accelerated to 7 percent year-over-year growth in the third quarter of 2020 from 5 percent growth in the same period a year earlier, according to a McKinsey Global Institute analysis of 4,000 U.S. companies’ financials.”

  • “Remote work could deliver a one-time 4.7 percent  lift to productivity after the pandemic, though a large share of the growth will stem from shortened commutes that government productivity data won’t fully capture ...” READ MORE

March’s strong jobs report fuels optimism: “U.S. employers added 916,000 jobs last month, twice as many as in February and the most since August, the Labor Department said Friday. The unemployment rate fell to 6 percent, its lowest level since the coronavirus pandemic began, and nearly 350,000 people rejoined the labor force. The data was collected early in the month, before most states broadened vaccine access and before most Americans began receiving $1,400 checks as part of the latest federal relief package. It was also before the recent rise in virus cases, which economists warned could slow the recovery if it worsened. But on balance, forecasters are optimistic that hiring will remain strong in coming months.”

  • “‘March’s jobs report is the most optimistic report since the pandemic began,’ said Daniel Zhao, senior economist for the career site Glassdoor. ‘It’s not the largest gain in payrolls since the pandemic began, but it’s the first where it seems like the finish line is in sight.’” READ MORE

American factories are desperate for workers: “Matt Arnold just spent $5,000 to run help-wanted ads for his company’s five trailer factories scattered from Pennsylvania to Utah. ‘We hired two from the ads,’ said Arnold, just a fraction of the 125 he needs to get back to full strength of 673 workers. Half the welding jobs at his Texas plant are open, for instance, creating a bottleneck in an operation that builds trailers on metal frames. ... ‘I’ve never seen it this bad,’ said Arnold, president of Look Trailers, based in Middlebury, Indiana. Look builds utility trailers, which are in heavy demand from small businesses such as landscapers and plumbers as well as hobbyists who use them to haul motorcycles or other bulky sports equipment. The lack of workers means lost business for Arnold and his customers.”

  • “One of his dealers normally has about $2 million in inventory on his lot, but right now only has about $200,000. The average price of a trailer is $3,400.”

  • “Wages at his trailer factories are already far above state or federal minimums. The average starting pay is $19 an hour, while workers with skills such as welders make $24 an hour or more.”

  • “‘People talk about the oil boom in the Dakotas—how workers would get in their car and drive out to get jobs. We have the same thing here, a jobs boom. But nobody’s coming.’” READ MORE


Steve Schlafman writes about the main reason startups fail: “I’ve been working with co-founders as an investor and coach for a decade, and while I’ve helped many co-founders improve their communication and deepen trust, I’ve witnessed countless co-founder splits. This includes numerous clients, friends, and even my wife. I’ve seen close friends, college roommates, and former colleagues come together only to drift—or break—apart. I’ve seen long-time and close relationships end sadly. I’ve also seen the conflicts among co-founders damage and sink companies. The majority of startups fail due to business partnerships that sour. According to Noam Wasserman, a former Harvard Business School Professor, co-founder conflict is the number one killer of startups. His research suggests more than 65 percent of startup failures are due to co-founder issues.”

  • “Think of your co-founder relationship like a car. It needs gas to get from point A to point B. Without fuel you won’t arrive at your destination. Furthermore, it needs a tune up and oil change every 5,000 miles.”

  • “Conflicts among co-founders that aren't resolved in a healthy way or treated as opportunities for growth can not only lead to bad decisions for the direction of the company, but create a toxic environment for employees.” READ MORE



Whatever happened to Annie of Annie’s Mac and Cheese? “Annie Withey isn’t easy to find. That wasn’t always the case. In the 1990s, Withey’s phone number was actually listed on every box of her mac and cheese — yes, Annie’s — which was slowly, steadily lining New England grocery store shelves. Strangers called Withey at all hours of the day. Once, at 3 a.m., she was awakened to a voicemail by an ensemble of partying surfer bros on the West Coast who wanted to know how to get their hands on a bulk order of mac and cheese. Funnily enough, Annie’s Homegrown is now based out west; its brightly colored headquarters, which includes a lovely looking garden, was established in Berkeley in 2011 and is where 50 or so employees normally work. Withey never relocated to California though. She lives quietly, privately on a farm in Connecticut. In 1988, then in her 20s, she succinctly told Inc. magazine, ‘I don't really like business.’”

  • “The long and the short of it is Solera Capital became the majority investor in Annie’s in 2002, then General Mills bought out Annie’s in 2014 for a whopping $820 million. Withey was listed as ‘inspirational president’ during the Solera Capital era, then left completely when General Mills took over.”

  • “She’s remained in Connecticut in an early 1900s Victorian farmhouse with her husband because that’s what brings her happiness. She has four cows, seven sheep, a burro, two horses, two flocks of chickens, a dog and of course two house rabbits, who she says offer ‘entertainment and comfort.’” READ MORE


At least 55 of America’s largest corporations paid no federal tax last year on billions in profits: “The sweeping tax bill passed in 2017 by a Republican Congress and signed into law by President Donald J. Trump reduced the corporate tax rate to 21 percent from 35 percent. But dozens of Fortune 500 companies were able to further shrink their tax bill — sometimes to zero — thanks to a range of legal deductions and exemptions that have become staples of the tax code, according to the analysis. Salesforce, Archer-Daniels-Midland and Consolidated Edison were among those named in the report, which was done by the Institute on Taxation and Economic Policy, a left-leaning research group in Washington.”

  • “Twenty-six of the companies listed, including FedEx, Duke Energy and Nike, were able to avoid paying any federal income tax for the last three years even though they reported a combined income of $77 billion. Many also received millions of dollars in tax rebates.”

  • “Companies, for example, saved billions by allowing top executives to buy discounted stock options in the future and then deducting their value as a loss.”

  • “The Biden administration announced this week that it planned to increase the corporate tax rate to 28 percent, and establish a kind of minimum tax that would limit the number of zero-payers.” READ MORE

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Episode 55: Confessions of an Entrepreneuraholic: Jay Goltz explains his five-point test for whether he should start a new business: First, what kind of upside does the business have? Two, what’s it going to cost to launch it? Three, what if things go bad? Can I get out of it? Four, is this going to be a pain in the ass? Is this going to require a ton of employees? Lastly, do you have some special expertise to leverage to give you an advantage in the marketplace? In this episode, Jay put his latest scheme (an online art gallery) to the test. He does the same for Dana White's cannabis business. And Laura Zander assesses the damage done to the yarn industry by two venture-backed rivals.