We’re Making Good Money. I’m Not Sure How
In our latest podcast episode, the owners talk about their various efforts to understand and control their financial performance.
Here are today’s highlights:
Believe it or not, there’s another tranche of Covid-era funding headed toward small businesses.
A solopreneur who had failed with six software businesses manages to sell a niche content site.
A baby brand fires a worker for spending time with her baby in the NICU.
Research studies assessing the productivity of remote workers keep landing.
THE 21 HATS PODCAST
This week, Jay Goltz, Jennifer Kerhin, and Liz Picarazzi discuss their efforts to get a better grasp of what drives their profits: They ask how much they should manage their finances themselves. and how much they should rely on an accountant or a fractional CFO. When does delegation become abdication? Jennifer says she’s benefitted from hiring a fractional CFO who has taken an active leadership role, including setting up a database that helps Jennifer see in real time whether the fees she’s charging cover the labor she’s deploying. “Whatever she's charging me,” says Jennifer of her CFO, “it's absolutely worth it.” Liz, meanwhile, thinks she should be doing more herself. And Jay says he was paying big bucks for a full-time CFO until late last year. “And it was a complete waste of money,” he says, which is why he’s decided not to replace her.
Plus: Liz reveals her secret strategy for marketing directly to municipal government officials, some of whom have started to use the term “Citibin” generically. And the owners respond to a question from the head of a cost-reduction service who wonders why she’s struggling so much to get business owners to try her risk-free service.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Billions of dollars of SSBCI funds have started to flow to small businesses: “Iowa-based Kinetic Technologies, an advanced-manufacturing firm with a robotic welding table, got $175,000 in governmental funding at a time when it needed working capital to grow marketing distribution and sales. In Maine, the employee-owned Bell Street Builders residential construction firm was formed by merging two previous firms together and with $40,000 in governmental support. Both of those advances were made possible by the Treasury Department's State Small Business Credit Initiative. This current iteration of the program was authorized by the American Rescue Plan Act of 2021, which set aside $10 billion for states, territories, and tribal governments to set up their own programs to help small businesses access capital.”
“While largely overlooked during the pandemic amid the rush for emergency funding from the Paycheck Protection Program and the Covid Economic Injury Disaster Loan program, among others initiatives, the SSBCI funding will be flowing through state-level programs for years, offering small businesses a chance at a different pool of capital.”
“So far, California has reported the highest dollar amount deployed, with about $161 billion as of September 30, followed by Florida at $103 billion, Pennsylvania at $48 billion, and Maryland at just under $37 billion.”
SELLING THE BUSINESS
A solopreneur sells a niche content site for six figures: “In 2020, [Ash Read] was working for a social media management software company called Buffer.com when he started a new project: compiling a curated list of e-commerce brands in the home goods space. They were companies growing through Facebook and Instagram ads, outside of traditional retail channels. In one weekend, he built a website using Webflow, a no-code platform. He called it Living Cozy. He made his first revenue six weeks later when a user purchased bedding through an affiliate link on his site. ‘That was a really big moment. It made me believe, if I can get more traffic to this website I can drive revenue,’ Read said. ‘The first dollar you make online for yourself feels better than a paycheck.’”
“Initially, he wrote all the Living Cozy content himself. As an SEO and content marketing professional, he knew it would take six months or more to get traction for this type of site. ‘There were definitely some weekends when I definitely sat asking myself why I was writing about dining chairs on a Friday night,’ Read said.”
“But unlike Read’s previous businesses, Living Cozy found its footing in the first year. After about six months, Living Cozy was getting tens of thousands of pageviews, and by the end of 2020, Read felt like it was truly taking off. Until November 2022, Read continued to run the business as a side project on top of his full-time job. The time constraints were a huge challenge, he said.”
“Once the business was making a few thousand dollars a month in revenue, Read started hiring freelancers to write additional content. He wanted to add more product reviews, and since he was based in the U.K., where many brands wouldn’t ship, he needed U.S.-based writers. Read said he believed investing in skilled writers who had experience working for major publications like Architectural Digest or Apartment Therapy was worth the cost ...”
“Read decided to list his business on Flippa. It took five months to close the deal with two online entrepreneurs. He couldn’t disclose the buyers’ names or terms of the six-figure deal. But Read told us he prioritized getting the most upfront cash possible versus an offer that might include earn-outs or other contingencies.” READ MORE
Businesses in Detroit are enjoying the Lions’ playoff run: “Before this season, the team had won only one playoff game since Dwight D. Eisenhower was president. So Lions fans were justifiably delirious when their team won its division for the first time in three decades and broke its playoff drought this month, beating the Los Angeles Rams and the Tampa Bay Buccaneers. The team’s playoff run has provided much joy and a boost for local businesses around Ford Field, the team’s stadium.”
“Cesar Ramirez, an assistant general manager at Harry’s, said the restaurant had record sales during the Lions’ first playoff win against the Rams. ‘We’ve definitely seen a huge uptick in our business,’ he said, adding that the restaurant earned a little over $60,000 the day of the team’s first playoff win, up nearly $40,000 for a typical day’s earnings from the same period a year ago.”
“The businesses around Ford Field have benefited from the Lions’ playoff run, as well as from years of investment in Detroit’s downtown, a part of the city that has received particular attention after the city’s bankruptcy a little over a decade ago. Detroit is vast — 139 square miles — and some neighborhoods, long speckled with empty homes and vacant lots, have seen little change amid the Lions’ successes.” READ MORE
It seems like this PR disaster could have been avoided: “The CEO of Texas-based baby clothing company Kyte Baby has issued two apologies after denying a remote work request by an employee whose baby was admitted into a neonatal intensive care unit. In late December, Kyte Baby worker Marissa Hughes and her partner adopted a baby boy who had been born after only 22 weeks of gestation, who was ‘barely over a pound’ at birth and had ‘various health concerns,’ Hughes wrote on her GoFundMe page, asking for crowdsourced funds to meet the steep NICU costs as well as various adoption and legal fees. But when she requested to work remotely while staying with her baby at the NICU, the company fired her, according to a TikTok video posted Wednesday by a woman who says she is Hughes’ sister.”
“Founded in 2014, Kyte Baby is a small company that has grown in popularity (thanks in part to TikTok) for its alternative baby apparel. Kyte Baby CEO and founder Ying Liu said her daughter suffered from chronic eczema and her research discovered that fabric made from bamboo eased the irritation.”
“Liu’s initial apology was met with backlash on social media, with some commenters criticizing the fact that it appeared disingenuous and canned. ‘I am forever amazed at the tendency of corporate America to want to strip the humanity out of their communications, whether it be an apology or any other public statement,’ crisis PR expert James Haggerty told CNN.”
“Several hours later, Liu posted another TikTok acknowledging that the first video was scripted and that she was deciding to go ‘off script and tell you exactly what happened.’ ‘I was the one who made that decision to veto her request to go remote,’ said Liu, noting that she felt responsible as a mother and an owner of a baby company to set the record straight. ‘This was a terrible decision. I was insensitive and selfish ...’” READ MORE
New York City passed a law governing the use of artificial intelligence in hiring. Few companies are following it: “It has been six months since New York City began enforcing the nation’s first law requiring companies to disclose how algorithms influence their hiring decisions. So far, disclosures are rare. The law requires employers that use software to assist with hiring and promotion decisions—including chatbot interviewing tools and résumé scanners that look for keyword matches—to audit those tools annually for potential race and gender bias, and then publish the results on their websites. It was designed to encourage companies to identify and root out ways their technology might be unintentionally embedding bias into employment decisions.”
“Eighteen of nearly 400 employers analyzed in a new study had posted the information as of earlier this month, according to researchers at Cornell University who enlisted students to scour companies’ websites.”
“The requirement, called Local Law 144, has been closely watched by legislators and industry groups as a test case for future technology regulation. Similar rules are under consideration in Washington, D.C.; New York state; and the European Union, among other places, and the Equal Employment Opportunity Commission last year identified technology-related discrimination as a strategic priority.”
“Researchers said the results demonstrate that the law has very limited value for job seekers and, at best, might offer a road map for how to improve future regulations.” READ MORE
We’re still getting research results about the effect of WFH on productivity: “Another report, a working paper from economists at the New York Fed, University of Virginia and Harvard, looks at just one unnamed Fortune 500 company and found more nuanced answers.”
“Before the pandemic, software engineers at this company either worked all together in one building — one team in close proximity — or were more dispersed across buildings, a system that more closely mimics a WFH environment. Researchers looked at the differences between teams before and after the pandemic.”
“Working close together boosts mentorship, but may decrease productivity in the short term. Those working in close proximity to each other, pre-pandemic, received more feedback on their code. Sitting near teammates meant more senior colleagues gave more feedback to their juniors, the researchers explain. Once everyone went remote in 2020, the mentorship gap between workers in the two arrangements disappeared.”
“Engineers who worked in closer proximity before the pandemic wrote fewer software programs than those who were more dispersed. The decline in productivity was most pronounced for the senior coders — who were presumably busier mentoring colleagues.” READ MORE
This writer thinks the case the Supreme Court heard last week is a terrific opportunity to rein in regulatory agencies: “The case, which revisits a judicial doctrine known as the ‘Chevron deference,’ has been widely described as a conservative effort to limit government. But that’s not entirely correct. The case is better understood as a key part of the effort to restore the proper balance of power among the three branches of government.”
“Presidents have used the power of their executive agencies to promulgate new regulations without congressional involvement. Executive agencies publish 3,000 to 4,500 new rules per year, and these regulations have a substantial impact on the American economy.”
“Chevron disrupted the constitutional order by effectively giving the president the power to make, interpret, and enforce laws acting solely through his administrative agencies. It injected the presidency’s law-making abilities with steroids.” READ MORE
A startup is trying to destroy traditional health insurance by crowdfunding medical expenses: “With CrowdHealth, members pay cash for their medical services, often way less than what insurers would have to pay after CrowdHealth negotiates on the member’s behalf. And big bills? They’re crowdfunded.”
“CrowdHealth, born in Austin, Texas in 2021, is [founder Andy] Schoonover’s answer to health-care chaos. It’s meant to be the antithesis of the typical insurance nightmare — lean, efficient, and, most of all, humane. In its short life, it’s drummed up $12 million in funding, and, as of its last capital raise in 2022, flaunts a $30 million valuation.”
“CrowdHealth is not insurance. For their $50 monthly payments, members get a team of personal bargain hunters. A third party hustles to slash their medical and prescription bills, often by 30 percent, just by knowing the true cost of medical care after backing out the insurance companies’ cut and offering to pay providers quickly in cash.”
“‘Ventures like this work until they don’t,’ Larry Levitt, executive vice president for health policy at KFF, formerly the Kaiser Family Foundation, tells Forbes. ‘Seven thousand members sounds like a lot, but in a health insurance context that’s very small. It would take just a few cases of bad luck with subscribers to overwhelm a model like this.’” READ MORE
THE 21 HATS PODCAST: DASHBOARD
Is America really experiencing a startup boom? Well, yes, actually, but Gene Marks raises two questions: One, what exactly is driving the boom? And, two, are the startups substantial enough to matter? Or is this just about people losing their jobs and driving for Uber. Plus: what would you do if you owned fast food locations in California where the minimum wage for fast food workers will jump to $20 an hour in April? And what are business owners to make of the case the Supreme Court heard last week about the constitutionality of federal regulation?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren