Time to Raise Prices?
Today’s Highlights: An entrepreneur’s guide to Clubhouse. For some reason, an electronics chain with poor service has failed. And should PPP loans be grants?
PRICING
Is it time to raise your prices? “Corporate leaders are increasingly confident that they can charge more for their products without losing business. On recent earnings calls, plenty of executives said they boosted prices in response to the higher costs they’re having to pay. And many expect further increases, with economic growth speeding up and commodity prices showing no sign of coming off the boil. ‘There is a cost headwind and we continue thus far to be able to experience pretty positive ability to price,’ said Melinda Whittington, chief financial officer of La-Z-Boy Inc., on the company’s Feb. 17 earnings call. ‘There’s no doubt at some point that might have some impact on end consumer demand. We certainly have not seen that thus far.’”
“In industries ranging from equipment manufacturing and construction to furniture-making, more corporate leaders are pointing to sharp rises in the cost of materials and transportation, after the pandemic upended supply chains.”
“The same forces are pushing small-business owners to raise prices too. ‘All of our distributors have indicated that price increases are coming,’ said Don Katzenberger, chief executive officer at S&K Roofing, Siding and Windows.”
“He said the Eldersburg, Maryland company raised prices from 5 percent to 10 percent across the board in response, and still expects sales to continue growing in 2021.” READ MORE
THE COVID ECONOMY
Even with lumber prices soaring, tree growers are miserable: “Timber growers across the U.S. South, where much of the nation’s logs are harvested, have gained nothing from the run-up in prices for finished lumber. It is the region’s sawmills, including many that have been bought up by Canadian firms, that are harvesting the profits. Sawmills are running as close to capacity as pandemic precautions will allow and are unable to keep up with lumber demand. The problem for timber growers is that so many trees have been planted between the Carolinas and Texas that mills are paying the lowest prices in decades for logs.”
“The log-lumber divergence has been painful for thousands of Southerners who are counting on pine trees for income and as a way to hold on to family land.” READ MORE
GOVERNMENT SUPPORT
The IRS does not consider forgiven PPP loans to be taxable income, but many states do. Loan expert Ami Kassar has a map that will tell you whether your state is one of them. SEE IT HERE
RETAIL
One of the surprising things about the closing of Fry’s Electronics is that it took so long: “It was famous for its poor customer service. In 1997, Forbes wrote about a ‘hoops and hurdles’ policy designed to discourage customers from returning products. The employees tended to look a tad somnambulant, and it didn’t even occur to me to seek technical advice from them. Fry’s seemed to regard every customer as a potential shoplifter—it put your purchases in transparent shopping bags, and departing the premises involved showing them and your receipt to a staffer who (in theory) verified that they matched up. When it turned out that the company had been conned out of at least $65 million by an embezzling, Ferrari-driving VP, karmic justice seemed to be at work. Even the chain’s tagline—a booming ‘Your best buys are always at Fry’s!’—was freighted with disappointment.”
“On the whole, its prices didn’t seem any better than anyone else’s—though it was a good place to buy cables without getting gouged. No, the thing about Fry’s that was exciting wasn’t the shopping experience per se.”
“It was stuff—enormous quantities of it, from the sexy to the mundane to the just plain odd. And for years, that was enough.” READ MORE
LOGISTICS
Shippo wants to help small ecommerce businesses deliver like Amazon: “The Shippo platform helps e-commerce companies manage their shipping operations more seamlessly. The idea for Shippo came about after the co-founders, who previously founded an e-commerce business, found there was no easy solution for shipping like there was for processing payments. ... Shippo pulls an e-commerce business’ orders into its dashboard and displays the different shipping options and rates. Customers can sort through the options by cost and speed to figure out which shipping option is best. Shippo also provides the correct shipping label, packing slip for a warehouse, and sends tracking information and return labels to customers.”
“The company works with more than 50 carriers around the world, including the United States Postal Service, UPS and FedEx.”
“Shippo’s customers are typically small to medium-sized businesses and direct-to-consumer businesses.”
“Last year, Shippo more than doubled its customer base, according to the company, and more than 70,000 brands use the business.” READ MORE
President Biden has ordered a review of vulnerabilities in America’s supply chains: “The directive comes as U.S. automakers are grappling with a severe shortage of semiconductors, essential ingredients in the high-tech entertainment and navigation systems that fill modern passenger vehicles. Biden’s executive order also is aimed at avoiding a repeat of the shortages of personal protective gear such as masks and gloves experienced last year during the early months of the coronavirus pandemic.”
“The president’s order, which had been anticipated, represents the partial fulfillment of a campaign pledge. But mandating a government study will be the easy part.”
“Extensively modifying U.S. supply lines and reducing the country’s dependence upon foreign suppliers — after decades of globalization — could prove difficult and costly.” READ MORE
SOCIAL MEDIA
Inc. offers an entrepreneur’s guide to using Clubhouse: “Upon its launch last March, the social app quickly became popular among investors, who hold regular, live audio-only discussions, called ‘rooms,’ in some cases within various topics of interest to groups called ‘clubs.’Business owners soon followed, building a roster of virtual educational events and places to hone their storytelling skills, commiserate about entrepreneurial life, and share experiences with the likes of high-profile users like Daymond John and Jason Fried. If you can get an invitation--Kristin Marquet Chester, owner of New York-based Marquet Media, recommends starting by asking your closest friends and then making requests on social media if needed—here are three types of rooms and clubs worth checking out for entrepreneurs. To find these events in the app, search for the relevant speakers or the name of the club.”
“Deal or Bust: Founders Shoot Their Shot hosted by Nathan Latka, CEO of Founderpath.com and a business podcaster. In this room, investors wire money on the spot to promising startups, and Latka says he plans to run one each Monday moving forward.”
“Small Business Saturday. Every Saturday, Bria McNair, an HR professional who also runs a professional coaching business called Be Wise Forever, hosts a room in The Hustler Club for business owners to share their experiences and support one another.” READ MORE
TEAM DEVELOPMENT
You’ve heard the story of leaders considering development work. One asks, “What if we provide training and they leave?” After a pause, the other responds, “What if we don’t provide training and they stay?” How can investing in development support what your business needs, what you need, and what your growing leaders are looking for? We’re hearing of clients losing good employees to other opportunities that include personal development. Now is the time to invest in the employees you want to take your business forward. Your emerging leaders can join The Ripple Leader Program to increase influence in your company. They dig into Ripple: A Field Manual for Leadership That Works and purpose-based materials to explore effective leadership practices. Contact Trebuchet Group to LEARN MORE
THE MORNING REPORT PODCAST
Would you prefer an audio version of the Morning Report? Subscribe by searching for The Morning Report Podcast wherever you get podcasts.
READER FEEDBACK
Yesterday, we highlighted an item expressing the opinion that PPP loans should be converted into grants. That brought the following response from Toby Scammell, founder and CEO of Womply, which helps businesses apply for PPP loans:
“The wisdom of the PPP program (which I did not appreciate until after it started) was that the SBA 7(a) program provided a strong foundation and a built-in distribution network with private lenders. There are tons of people (lawyers, bankers, accountants, business advisors) who understood 7(a) and could build on that knowledge to implement PPP. Based on my discussions with congress, they wanted to give grants but didn't have the distribution network or confidence that SBA could do this well enough. We have to remember that during the early days of this pandemic there were no tools in existence to solve this problem. We needed an ARMY!
“So Congress created PPP under the SBA 7(a) program, loosened the rules, and then aligned incentives to motivate lenders and the rest of the small business industry to help. Then they added the forgiveness terms to make these ‘loans’ behave as much like grants as possible while still getting the benefit of the SBA 7(a) and lender ecosystem. No doubt this decision was imperfect—no one would argue PPP has been without major issues—however it's also the key reason why the program has been so successful: $650 billion deployed to ~6.5 million businesses? This is a greatly misunderstood and widely overlooked policy triumph.
“If you shift to grants, you are unlikely to be able to distribute them through lender networks. They're not in the business of distributing grants. Perhaps more importantly, there's no appetite among lenders for a completely new program. PPP still has significant emotional support from the people who built it and see it working. As a society we've spent billions of dollars building a very good tool with many willing participants. If we throw it away, we'll be starting from scratch. Best to keep the tool we have and continue to improve it over time. One move that Congress should consider at a future date is automatically forgiving some or all PPP loans.”
THE 21 HATS PODCAST
Episode 50: So You Bet the House? This week, Stephanie Stuckey tells Paul Downs and Jay Goltz, both of whom have manufacturing operations, about her decision to buy a manufacturing plant and bring production of Stuckey’s snacks in-house. We talk about her conflicted concerns about a minimum wage hike, what it takes to build a strong culture in a repetitive-task environment, why she paid above book value for the company she bought, and how she managed to finance the purchase of a business that is four times the size of Stuckey’s. She’s very happy with the SBA loan she got, but it was not an easy process: “I had to take out an additional life insurance policy and list the bank. I was just waiting for them to call me and tell me my firstborn son has to be collateral as well.”
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