What to Expect When You’re Expecting a Business
In our latest podcast episode, the owners talk about balancing building a business with building a marriage. Plus: four years after Covid’s arrival, how have the owners' businesses changed?
Good Morning!
Here are today’s highlights:
Maybe business owners should accept payment any way a customer wants to give it.
Are medical practices finally starting to think about customer service?
A company called Floratorium gets $40,000-plus to install fake flowers in restaurants.
Mike Keesee has a secret weapon he uses to recruit employees who’ve been offered the opportunity to work remotely elsewhere.
THE 21 HATS PODCAST
This week, Paul Downs, Jennifer Kerhin, and Liz Picarazzi discuss the challenges couples face when one spouse is building a business: Liz says it was important to let her husband know that she spent years working on a business plan before leaving her corporate job to start her first business. Paul explains why, when times have been tough, he hasn’t always shared the bad news with his wife. And Jennifer says too many couples planning for one spouse to start a business focus on best-case scenarios rather than the more likely worst-case scenarios. She also suggests some important questions for couples to ask themselves, including this one: “Will she still have faith in him if the business fails?
“Plus: Businesses fail all the time, of course, and Paul explains why he thinks it’s usually for one of three reasons. And four years after the pandemic arrived, we take a look back: What was each owner’s toughest moment? What was their best decision? How have their business models changed?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
PAYMENT
Gene Marks says business owners should let people pay the way they want to pay: “Some small business owners seem determined to either keep us counting bills or jump feet first into their idea of the future. Case in point from my hometown: the owner of the restaurant in South Philadelphia who ‘doesn’t accept credit cards’ and instead forces customers to use an ATM machine which — conveniently — charges a $4.50 fee to withdraw cash. Everyone has to do this because no one carries cash these days. Or there’s the convenience store operator near Rittenhouse Square who won’t take a credit card for purchases under $5, which either requires customers to purchase additional, unwanted products or to simply (as is my case recently) turn around and walk out the door. Or the deli in Margate, New Jersey, that has a sign warning that an additional fee will be levied on those heartless customers who deign to use a credit card instead of paying cash.”
“Then there’s the opposite: the army of franchise stores and other businesses that insist on operating their business ‘cashless,’ invoking the wrath of governments from California and Wisconsin to Washington, D.C., Florida, and yes, even Philly, in order to put a stop to a practice that clearly discriminates against those who aren’t in a position to own a credit or debit card.”
“Small business owners complain about higher costs and inflation. They struggle to cover their overhead. They battle for new customers in a slowing economy. All of these concerns are justified. So how then can these same business owners so blithely turn away actual customers with actual money because they don’t like their form of payment? It’s baffling to me. This is not a model for future growth.” READ MORE
CUSTOMER SERVICE
Medical practices may be discovering the merits of improving customer service: “Medical offices can be notoriously hard to reach, with patients finding it tough to break through automated telephone menus. Hackensack Meridian Health Care in New Jersey created a centralized patient-access center to take the burden of scheduling off individual doctor’s offices. Using a combination of calls, texts, and emails, the center has reduced both the time people spend on hold and the time it takes to get an appointment, according to Chief Executive Robert Garrett. For instance, last year it shortened the average hold time on calls by 26 percent to 28 seconds, compared with a national average of 126 seconds.”
“Doctor’s offices are also making it easier to book, cancel, and reschedule appointments online with intelligent-scheduling systems. ‘How come we can book airlines and a hotel without talking to someone but can’t book a doctor’s appointment?’ says Dr. John Farley, chief medical officer of Complete Health, a Jacksonville, Fla., primary-care group that owns 29 practices.”
“Complete also offers walk-in clinics that allow patients to see a doctor who may have a gap open in their schedule, such as a no-show or an appointment that ran shorter than expected. You may not see your regular doctor, but you will see someone in the practice who has your medical records and can see your history, says Farley.”
“University Hospitals [in Cleveland] also developed an automated wait-list feature, texting patients at the time they schedule an appointment to ask if they will want to be seen sooner if something opens up. Stacy Porter, the system’s vice president of digital transformation, says that last year, 25,000 patients were moved to earlier appointments using the technology.”
“Medical offices are using electronic-record data to identify staff and scheduling issues that are often at the root of the long waiting-room times, and are adopting time-management strategies to fix them. More practices are creating a ‘digital front door,’ sending texts to patients in advance with links to portals or websites where they can fill out forms, update medication lists, and confirm insurance coverage up to a week ahead of time.” READ MORE
DESIGN
All over the world, restaurants are sprouting fake flowers: “Sprawling, towering, flamboyant installations of faux flowers and leaves are fast becoming a new hallmark of restaurant design, the florid successor to past fixations like open kitchens, Mason jars, and those cordless tabletop lamps. In the last few years they’ve sprung up across the United States and in cities like London, Paris, Toronto, and Lagos, Nigeria. They form soaring arches, climb up dining room walls, and send their tendrils deep into social media, where they brighten many a weekend-brunch post.”
“What began as a pandemic-era solution for dressing up outdoor dining sheds has now outlasted plexiglass dividers and QR codes to become its own maximalist design movement, with [Carlos] Franqui as a chief trendsetter.”
“‘He is very much at the forefront,’ said Alsún Keogh, a New York City designer who hired Mr. Franqui’s company, Floratorium, in 2020 to cover the scaffolding outside the luxe Manhattan seafood restaurant Marea in blue-and-white cascades of fake hydrangeas. ‘If you have the installation done by Floratorium, that has a certain cachet.’”
“Floratorium has installed its work in more than 300 restaurants across the United States and Canada, charging about $40,000 to $50,000 per project. (The typical monthly floral budget for a fine-dining restaurant is about $5,000, Ms. Keogh said.)”
“Demand is so high that Mr. Franqui recently opened a Miami office to supplement his warehouse in Wood-Ridge, N.J. He has even trademarked his styling process under the name Biofauxlia. A factory in China recently called him just to ask who he was, since he was buying so many of its fake flowers.” READ MORE
FROM OUR SPONSOR: THE GREAT GAME OF BUSINESS
It kind of opens their eyes: Mike Keesee, CEO of Total Solutions Group, an architecture and engineering firm in central Florida, recently spoke about why he and his partner, Carl Brown, decided to open their books and adopt an Employee Stock Ownership Plan—and what difference that has made in their efforts to recruit and retain employees. I asked Mike if he’s had to raise wages in recent years—especially given that his competitors tend to let their people work remotely, a practice Mike refers to skeptically as “quote-unquote working from home.”
“Yeah, this costs us more money to hire people now. Which it really shouldn’t in the industry, but people are using that little carrot out there that if you come with us, you can be remote, yada, yada, yada. And so we just try to bring them in and talk to them about our culture, and how we run our business with open-book management.”
“And one of the big questions we ask most of the recruits that we get in here is, ‘Has any other company that you ever worked for—or other companies that you may have interviewed with—actually showed you a P&L every Tuesday during their huddle?’”
“And of course, the answer to that is no. And so we let them know, you get to know the health of our company every week. You don't have to guess whether we're making money or not making money. So we would think that kind of helps on our recruiting side.” READ MORE
OFFICE SPACE
If the office market is in turmoil (and it is), why are rents rising? “U.S. office markets are suffering from soaring vacancy rates, a record amount of available sublease space, and rising defaults. But curiously, office rents are holding steady or even climbing. Average U.S. asking office rents are $35.24 a square foot, compared with $34.92 in the fourth quarter of 2019, according to data firm CoStar Group. Higher asking prices are a reflection of the seemingly oddball way the commercial real-estate market works. Rents are a critical metric used by lenders and others to determine the value of a property. Owners will do everything they can to avoid cutting them, even if it means keeping space vacant because the rental prices deter prospective tenants.”
“Landlords who cut rents significantly to fill empty space ‘would significantly reduce the appraised values of their buildings,’ said David Bitner, the head of global research for Newmark Group, a commercial real estate services firm. ‘This in turn could lead to a covenant default on their loans or at minimum would make it harder for them to refinance.’”
“Office rents are expected eventually to tumble, probably after owners and lenders are forced to restructure mortgages or sell distressed properties. For now, landlords are trying to justify the elevated levels by lavishing new tenants with expensive interior build-outs, months of free occupancy, and other incentives.” READ MORE
STARTUPS
The titans of Silicon Valley fell for another one: “[Amira] Yahyaoui’s compelling background helped her stand out among entrepreneurs when she moved in 2018 to San Francisco, where she founded a student aid start-up called Mos. The app hit the top of Apple’s App Store, and Ms. Yahyaoui raised $56 million from high-profile investors, including Sequoia Capital, John Doerr, and Steph Curry, according to PitchBook, which tracks start-ups. Mos was valued at $400 million. In podcasts, TV interviews, and other media, Ms. Yahyaoui, 39, frequently discussed Mos’s success.”
“Among other things, she said the start-up had helped 400,000 students get financial aid. But internal company data viewed by The New York Times showed that as of early last year, only about 30,000 customers had paid for Mos’s student aid services. The rest of the 400,000 users included anyone who had signed up for a free account and may have gotten an email about applying for student aid, two people familiar with the situation said.”
“After Mos expanded into online banking in September 2021, Ms. Yahyaoui told publications such as TechCrunch that the company had more than 100,000 bank accounts. But those accounts had very small amounts of money in them, according to the internal data. Less than 10 percent of Mos’s roughly 153,000 bank users had put their own money into their accounts, the data showed.”
“Last year, Mos laid off approximately half its staff of around 50 and shut down its banking service. The company reverted to its original business of helping students find financial aid and began emphasizing its use of artificial intelligence. Ms. Yahyaoui referred questions to a Mos spokeswoman, who declined to comment.”
“When Ms. Yahyaoui was asked last year about Mos’s number of users, she posted on social media that female founders were often presumed guilty while male founders were presumed innocent. ‘Maybe today we should start applying presumption of innocence to also female founders,’ she wrote.” READ MORE
READER FEEDBACK
Here’s a comment from yesterday’s newsletter. I think I’m going to have to start listening to my customers: “Loren, for heaven’s sake, charge for this. I subscribe and pay for at least 6 different weekly or daily newsletters, but 21 Hats is the most concise, brisk, and relevant one. … I forward it all the time to my clients (I’ve worked with 50+ businesses over 30 years, invested in over 20, and led 6 of them). You’ve got great editorial content and the brevity of a sharp editor, focused on a specific audience that is too busy (I didn’t say I faithfully read all of my subscriptions). Charge for this!”
THE 21 HATS PODCAST: DASHBOARD
How Would You Spend $5,000 a Month on Marketing Now? Obviously, there’s no one-size-fits all answer to that question, but this week Shawn Busse offers a slew of smart considerations and guidelines to help business owners come up with an answer that makes sense for them. A couple of Shawn’s points: If you haven’t done so already, spend the money getting to know your customers better. Plus: it’s important to understand why digital marketing works for some but not for others.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren