What We Learned in 2023

Never stand in front of a 7-Eleven. That's just one of the many important lessons business owners learned this past year. A look back at the year's highlights in this special end-of-year wrap-up.

Good morning!

Here at the 21 Hats Morning Report, we scour the web daily, looking for the most important stories, posts, podcasts, videos, and tweet threads for business owners. And then, at the end of the year, we review everything we’ve highlighted, looking for the best of the best -- the most important lessons, the most insightful analyses, the most inspirational profiles. And that’s what we’ve highlighted below, featuring thoughts from the likes of: Nick Bayer, Shawn Busse, Jason Fried, Adam Grant, Dan Kahn, Ami Kassar, Jim Koch, Karim Lakhani, Gene Marks, John Oliver, Carey Smith, and Karla Trotman.

As we reviewed the year, lots of trends emerged, including: There’s pretty much no limit to what people will spend on their pets. Property insurance rates continue to surge (in places where insurance is still available). The labor shortage has eased but is very much still with us. TikTok is a serious marketing channel for all kinds of products targeting all kinds of demographics. Private equity is devastating big swaths of the economy. Interest in a four-day work week continues to grow — and not just among employees. Post-pandemic business models continue to evolve. And they’re going to keep evolving as artificial intelligence takes hold. 

This year’s highlights:

MARKETING

John Oliver gave a local plumbing company’s movie-parody ad a rave review: “It's been two months since late night TV host John Oliver challenged Radiant Plumbing & Air Conditioning to make a movie parody for charity and we've got an exciting update: The Austin company not only completed the challenge, they also gave a masterclass in filmmaking. Radiant Plumbing & Air Conditioning, whose wacky ads include movie parodies like ‘The Toiletnator’ and ‘Toilet Dune,’ was featured on the March 5 episode of ‘Last Week Tonight with John Oliver’ on HBO. Oliver challenged Radiant to make a parody of a movie of his choosing and he would donate $10,000 to Central Texas Food Bank. Five days later, Radiant was on a Zoom call with Oliver. Oliver told the team he chose the 1999 movie ‘Magnolia’ for them.”

• “The Radiant team devoted a Sunday to watching ‘Magnolia’ in their separate homes before coming together to plan out a script. The movie is three hours long and [Brad Casebier, co-founder] spent six hours watching it and taking notes. ‘My house started looking like some detective's who's manically trying to solve a mass murder crime with charts going everywhere and strings connecting different characters, because the movie's hard,’ Casebier said.”

• “The parody, aptly called ‘Magtoiletolia,’ includes an incredible attention to detail, copying scenes exactly from the movie. It also includes shots of a mini set with mini toilets, a first for the plumbing company.”

• “The parody took five days to shoot, a couple hundred bucks, some wigs and costumes. Everyone in the parody works at Radiant already or is a family member of an employee there, Casebier said.”

• “The feedback the company has received since the parody aired on Oliver's show has been great, Casebier said. There's a sense of Austin pride, he explained. Many have followed the company and their fun ads for decades.” READ MORE

Even everyday businesses have turned to influencers: “Once primarily the domain of industries like beauty, fashion, and wellness, influencer marketing has taken a turn for the banal. Insurance agencies, tax specialists, and other services are turning to people who are building careers on creating content posted to platforms like TikTok and Instagram. In some cases, in exchange for social-media promotion, influencers may receive services free or at a discount. For businesses, the payoff is the exposure to new audiences and the influencer’s branding sheen.”

• “With its fleet of purple, pink, and blue trucks wrapped in cheeky taglines (including ‘We’ll be careful with your kid’s toys. And your adult toys’), [Ross] Sapir’s Roadway Moving has become a social-media star in its own right as influencers share testimonials about the company on Instagram and TikTok in exchange for free or discounted moves.”

• “On a recent Friday morning, Isabel Tan waited for Roadway’s movers to arrive at her Manhattan one-bedroom to pack up her kitchen, her shoe closet, her bedroom and all of her furniture. It was the third year in a row that Ms. Tan used the company’s moving services, free of charge, as a barter agreement in exchange for content.”

• “I don’t want it to just be like, ‘Hey, look at them pack,’” said Ms. Tan, a 27-year-old beauty, fashion, and lifestyle influencer known to her nearly 300,000 Instagram followers as @prettyfrowns. She posts five to 10 ephemeral stories a day, and about one post a day to her Instagram grid. ‘There needs to be more of a story.’” READ MORE

In a social media age, the wall mural may be more important than the food: “If you’ve set foot in a trendy, high-concept bar or restaurant in the Greater Boston area lately, there’s a good chance you’ve been greeted by the work of the multimedia artist, whose real name is Erica Hagler. Her bright colors, pop-art style, and spray paint-flecked designs have helped define the new look of a nightlife scene that is giving local artists a chance to sell their work like never before.”

• “These days, businesses of all kinds are reaching out, including corporate offices, high-end apartment buildings, shoe brands, and everyone in between. A family in Back Bay recently paid her to paint a mural in their brownstone’s game room.”

• “‘Even if the restaurant down the street has the best food on the planet, but all the walls are white, and it’s a very stale environment, you’re still going to take [your friends] to the place next door that has all the energy. That’s all everyone’s looking for: a vibe.’”

• “She’s been expanding outside the city, too, and now has projects slated for Philadelphia, Washington, D.C., Arizona, and California. In many cases she doesn’t need to travel to paint by hand. Instead, a portion of her commissions are for vinyl wall wraps, which can be designed at home and then shipped out and installed by customers.” READ MORE

TikTok has become more of a search engine and thus a channel for even big-ticket retailers: “Increasingly, local car dealerships and other brands selling big-ticket items say they’re finding success on TikTok given the app’s low barrier to entry, preference for authentic, organic content, and new search functionality. The latter of which has become a bigger focus recently, with advertisers and the platform itself shifting to keep up with young people’s changing online search habits. ‘[Consumers], in the past, may have gone to Consumer Reports [to research big purchases],’ said Yunilda Esquivel, director of strategy at Laundry Service agency. ‘Not unsurprisingly, TikTok is a search engine for Gen Z consumers—how to do things, where to find things, especially when it comes to things like travel and discovering new brands.’”

• “Matt Eldridge, product expert or BMW Genius at BMW Tuscaloosa, Ala., started TikTok-ing last year with an organic approach. Because of TikTok’s reach, he’s been able to get the dealership in front of a broader audience and sold at least four high-end, specialty cars because of it, he said.”

• “It’s a similar story at Lockhart Cadillac, where Jason Fox serves as brand manager, spending a few hours per day managing @lockhartcadillac’s 141,200 TikTok followers. Per Fox, TikTok presents more opportunities to go viral and reach a broader audience than platforms like Instagram or Facebook, mostly because of its algorithm. ‘We’re always out here trying to crack that code and get our video pushed even further,’ Fox said.” READ MORE

This TikTok food reviewer has changed the fortunes of independent restaurants: “When a food critic comes to a city that is proud of its dining scene, restaurants and their devotees take notice. But rarely does a traditional reviewer cause as much excitement as Atlanta has seen with the recent visit of Keith Lee, a food obsessive with a vast army of 14 million followers on TikTok.  Mr. Lee, known for his ability to revive a small business with his legions of fans, was often frustrated with what he believed to be odd rules at different restaurants. ‘Butter’s a dollar? At a breakfast place?’ he asked in a video on his first day in Atlanta, eating takeout in his car. Mr. Lee, who is based in Las Vegas, mostly reviews independent, mom-and-pop restaurants, many of them Black-owned. He often orders takeout and has his family pick it up, so he does not receive star influencer treatment.”

• “Mr. Lee has made videos from Detroit, Chicago, and Los Angeles, but the response in Atlanta has been notable. For many of his followers there, his critiques appear to have opened a valve for their long-held gripes with some of the city’s restaurants.”

• “The grievances include surcharges for items like hot sauce or syrup and the lack of options for reservations or pickup orders. Some of the complaints involve rules that are common in many other cities: for example, a requirement that an entire party be present to be seated.”

• “Some restaurateurs saw real results, for better or for worse, after Mr. Lee’s visits. One restaurant, after a glowing review, sold out for the first time in its history and had to extend its hours. At another restaurant where Mr. Lee had a frustrating experience, its inbox quickly filled with vitriol and threats.” READ MORE

THE ENTREPRENEURIAL LIFE

Looking back, Jim Koch, founder of Boston Beer Company, concluded he could have done better with that work-life thing: “When your business is growing, it's very hard to prevent work from overtaking your life. If the business is succeeding, you're busting your ass to grow. If it isn't succeeding, you're busting your ass to save it. Life becomes a constant triage of work, family, friends, and health, and nobody gets it right. Brian Dyson, the former CEO of Coca-Cola Enterprises, likened work-life balance to juggling. The key, he said, is to understand that some balls are rubber and some are glass. Family and health are glass balls that can't be dropped without causing damage, while the work balls are rubber. They bounce back to you.”

• “In the first few years of Boston Beer, I prioritized my two young kids. I was recently divorced, so time with them was crucial. My relationships with friends suffered, however. While I stayed in touch with a couple of friends and one even served on my board for many years, I lost contact with many others. Fortunately, I have reconnected with some of them.”

• “Recently, my youngest daughter waited three hours for me to show up for a dinner. I was involved in an all-day mediation of an eight-figure contract dispute. It ended three hours late with no resolution. A rubber ball. My 25-year-old daughter spent the time writing a poem about all the times she lay in bed waiting to see me before she fell asleep and asking why, after all these years, I was still failing her. Ouch. Like I said, some balls are glass.”

• “If I had it to do over again, I would be more ruthless about making time for my family—and showing up on time for them. I would have dropped a few more of those rubber balls.” READ MORE

MANAGEMENT

Dan Kahn wrote about the many entrepreneurs in his family who have watched their fathers—and learned what not to do: “My grandfather saw what happened with HIS father and vowed to walk a different path. He was thrifty and stayed in the same small house with my grandmother for over 50 years, but retired in his early 60s… bought an RV, a fishing boat, etc. But his health wasn’t great, and he didn’t really have a hobby to keep his mind busy. So, he started fading not long after retirement. He stayed with us for many years after that but was never quite the same. He spent huge amounts of time sitting in a La-Z-Boy just watching TV.”

• “My dad went to work in the family business in the mid-1960s. For a time, they were one of the biggest residential HVAC dealers in Southern California and their billboards and trucks were everywhere. Top of the world. Because of what he witnessed with HIS father, my dad vowed he wouldn’t retire. He didn’t want to be the guy in the La-Z-Boy.”

• “But I think he held on a little too long, and doing business through the pandemic really put him through his paces. He’s now 76, the business is still stable, but he doesn’t have the energy he once had. After a few health scares, he asked me to help him sell the business. After nearly six months of work, stress, planning, pitching, financial analysis, late night and early morning conversations and, honestly, a few tears … we closed the deal this week.”

• “I suppose this post is less about succession, and more about fathers and sons and that unique relationship. My forebears were all entrepreneurs, and each of them made critical decisions about retirement and succession based on what they’ve learned not to do from what they observed in their own father’s experience. I am 44 and my business is not only healthy but we are at the top of our game right now.”

• “My plan includes multiple life insurance policies to protect my family and cover any business debt in the off chance that I get hit by the proverbial bus. We have been in a growth phase and are building a second agency over the last two years, both of which have vacuumed up most of our net profit. My plan starting next year is to refocus on profitability and stability, not growth. Be able to spend more time with my family while I’m here and the kids are young enough to want to spend time with me.” READ MORE

Jason Fried suggested a better way to brainstorm: “At most companies, people put together a deck, reserve a room (physical or virtual), and call a meeting to pitch a new idea. If they're lucky, no one interrupts them while they're presenting. When it's over, people react. This is precisely the problem. The person making the pitch has presumably put a lot of time, thought, and energy into gathering their thoughts and presenting them clearly to an audience. But the rest of the people in the room are asked to react. Not absorb, not think it over, not consider — just react. Knee-jerk it. That's no way to treat fragile, new ideas. At 37signals we flip the script.”

• “When we present work, it's almost always written up first. In long form. A few hundred words, maybe a thousand. A complete idea in the form of a carefully composed document. Complete with rough sketches where visual communication shines a brighter light. And then it's posted to Basecamp, which lets everyone involved know there's a complete idea waiting to be considered.”

• “We don't want reactions. We don't want first impressions. We don't want knee-jerks. We want considered feedback. Read it over. Read it twice, three times even. Ponder. Sleep on it. Take your time to gather and present your thoughts — just like the person who pitched the original idea took their time to gather and present theirs. That's how you go deep on an idea.” READ MORE

OFFICE SPACE

With commercial real estate in crisis, signing an office lease became much riskier in 2023: “There's a lot potentially at stake if a company signs a medium- or long-term deal at a building that'll face issues when its loan matures. Distressed buildings could be taken back by their lender, throwing tenants into chaos and uncertainty. Some landlords are even giving the keys back on buildings they no longer see as financially viable to retain. Tenant brokers today frequently are advocating for subordination, non-disturbance, and attornment clauses when their clients are signing an office deal, said Giles Wrench, vice chairman of financial services at Jones Lang LaSalle. Those agreements spell out the rights of the tenant, landlord, and any interested third parties — a lender or other investors, for example. Such clauses could prevent a tenant from being evicted if the building goes into foreclosure.”

• “There's an estimated $47 billion in office loan debt coming due in 2024, according to Moody's Analytics. Among commercial mortgage-backed securities loans backing office properties, Moody's estimates three-quarters of that will struggle to refinance next year.”

• “Before a deal is even close to being signed, brokers say they're having to exercise more scrutiny on behalf of their tenants, and they're doing so earlier in the process. [Katy Redmond, managing director of integrated portfolio services at JLL] said with companies her team works with, there are questions in requests for proposals to landlords about a building's capital stack, to try and gain a clearer picture of things such as a property's financial condition and whether there's an upcoming loan maturity.”

• “On the whole, landlords that are in a relatively stable position financially are willing to share those details, brokers say. For landlords that aren't as transparent, those buildings might be eliminated in a space decision. ‘It’s a massive red flag if you run into a landlord that’s being opaque,’ Wrench said.” READ MORE

LITIGATION

Two things became clear this year: One, never stand in front of a 7-Eleven. Two, if cars pull up to your storefront, buy bollards: “A 57-year-old suburban man who became a double amputee after a car pinned his legs against the front of a Bensenville 7-Eleven will receive a $91 million payout from the convenience store chain. The 2017 crash was one of the thousands of similar incidents identified in discovery for the case, collisions that frequently resulted in crippling injuries, said James Power, one of the attorneys representing the plaintiff, who wished to be identified as ‘Carl’ to avoid drawing attention to his windfall.”

• “The case was the first in which attorneys had access to some 15 years of reports from 7-Eleven, which identified some 6,253 storefront crashes at 7-Eleven stores across the country, Power said. Data from a previous lawsuit against the company identified another 1,525 crashes between 1991 and 1996.

• “The crashes could have been prevented if 7-Elevens had installed bollards — thick posts anchored in the ground — between storefronts and parking spaces, Power said.”

• “‘We have evidence 7-Eleven had been getting sued for these kinds of incidents going back to 1990,’ Power said, noting the total number of storefront crashes identified in the case indicated that, on average, a car crashed into a 7-Eleven store about once a day.” READ MORE

• But it’s not just a 7-Eleven problem: In fact, more than a hundred drivers crash into storefronts every day. READ MORE

REGULATION

Can a moving company tout its strong, young workforce? Not according to the EEOC: “The Equal Employment Opportunity Commission sued Fresno, Calif.-based Meathead Movers this year for violating age-discrimination law by not hiring enough older workers. Employment attorneys and trade groups say the case will offer clues as to how the agency will approach anti-discrimination laws now that President Biden’s picks are installed. Commissioners voted seven times on age-discrimination matters since Democrats gained control in August, compared with three age-related matters earlier in the year. EEOC Chair Charlotte Burrows, whom Biden elevated, has said she would vigorously enforce age-discrimination laws as older workers regularly face age bias, stereotypes, and discrimination.”

• “Youthful-looking employees pump iron before grabbing furniture, according to a recent social-media advertisement. Employees compete in the Meathead Olympics in which they compete to assemble and leap over boxes. Numerous corporate Facebook posts show workers flexing with biceps bulging. Employees, dubbed ‘Meatheads,’ must jog from truck to house when not carrying furniture.”

• “Many of the EEOC’s allegations against Meathead focus on marketing and hiring practices that could discourage older workers from applying. Current employees are asked to scour local gyms, colleges, and places where they would hang out normally for new hires, according to the EEOC.”

• “The agency and the company tried to negotiate a settlement. The agency initially wanted around $15 million and then lowered that to around $5 million, according to an email from a Meathead representative to commissioners that was reviewed by The Wall Street Journal. Meathead offered $750,000 to settle.”

• “‘We are 100 percent open to hiring anyone at any age if they can do the job,’ said company owner Aaron Steed. ‘People love working at Meathead, or they are turned off by how hard it is. You have to move furniture and run to get more.” READ MORE

HUMAN RESOURCES

Pay transparency has brought a big shift in job postings that has helped businesses: “An analysis of postings on job board Indeed found the share of postings including employer-provided salary information more than doubled from February 2020 to February 2023, rising from 18.4 percent to 43.7 percent, according to data from Indeed's HiringLab. Experts have said employers need to get comfortable talking about pay in job postings because an increasing number of candidates expect it in a tight labor market. But the data suggests state laws are playing a role, as well.”

• “The analysis found pay transparency is highest in the West, where pay transparency laws are most common, and lowest in the South. Colorado, Washington, and California are among the states with dedicated transparency laws.”

• “But salary transparency in postings is growing even in areas without legislation. More than 50 percent of job postings in Salt Lake City contained salary details, with Boise, Idaho; Albuquerque, New Mexico; and Madison, Wisconsin; all seeing substantial gains even without legal requirements.”

• “Many candidates want to know how much a position pays but are often too concerned about asking the question too soon since it could be seen as a negative. But experts say including salary information can streamline the hiring process for employers, since it saves time, cuts down on negotiations and leads to faster hiring and onboarding.” READ MORE

There’s evidence that pay transparency motivates employees to work harder: “New laws mandating that pay ranges be included on job listings have gone into effect in recent months in New York City, California, and other places. In states where there are no such laws, companies still have to contend with national job boards, such as Indeed.com, that often put their own salary estimates on job advertisements. The new laws mean more employers are weighing how much detail to share with their current workforces, according to human resources executives. Many executives say they are worried about the impact such information could have on productivity and morale. A prevailing fear: If workers know what their colleagues make, it could create tension in the ranks, undermining performance.”

• “Now, a growing body of research from scholars at Indiana University, Harvard Business School, and the University of California suggests that when employees find out how their earnings stack up against peers, it can compel them to work harder.”

• “Exabeam, a cybersecurity firm in Foster City, Calif., started publishing salary ranges in January. Gianna Driver, chief human resources officer, said the move prompted an employee to ask why she was on the low end of the pay range for her role. The worker, who earned $130,000 in base compensation, saw a job posting that advertised a range of $120,000 and $180,000.”

• “Ms. Driver explained the worker was earning less than some of her peers because she had recently been promoted. It’s typical for recently promoted people to start on the lower end of a position’s pay range. Making more money, she added, requires spending time mastering the job.” READ MORE

Even manufacturers have tried four-day workweeks: “Advanced RV builds custom, luxury motorhomes out of Mercedes-Benz cargo vans in Willoughby, Ohio. It is one of more than 200 companies and only a handful of manufacturers that have taken part in an ongoing global trial led by the organization 4 Day Week Global. For six months, businesses agree to reduce working hours while maintaining the same pay. The goal is not to do less with less but to maintain 100 percent productivity by bringing more energy and efficiency to the workplace, while lessening fatigue and burnout. The success stories coming out of the trial have offered a work-weary public hope that a better work-life balance is achievable. Of the 41 American and Canadian companies that began the trial in 2022, none has reported going back to working 40 hours a week.”

• “‘Think about it. What more impact could a person have on a number of people that work for them than giving them 50 holiday days a year, a three-day weekend every weekend?’ says [CEO Mike] Neundorfer. ‘It just seemed like the most significant thing I could do as a business owner and manager.’”

• “Neundorfer knew it was a gamble, one he thought had a 50/50 chance of success. The vast majority of other companies in the four-day workweek trial employ office workers. Many of them are nonprofits. Still, as a small business, he says it was easy for him to experiment. Advanced RV has 50 employees, no shareholders other than Neundorfer and his wife, and no formal board.”

• “Neundorfer says Advanced RV did see a dip in output as a result of moving to a 32-hour workweek. ‘You lose productivity,’ he says. ‘And when you lose productivity, you lose some volume, and you lose profit.’ Now a year and a half into this experiment, he says the company has nearly recovered those productivity losses.” READ MORE

More businesses have outsourced HR to professional employer organizations: “A PEO is not a staffing company that provides workers. Instead, it takes over not only payroll for existing workers, but the administration of health, retirement, and other benefit plans, which includes tax filings, workers’ compensation, compliance, policy-making and other functions that an internal HR manager would perform. As regulations have increased, many small business owners are deciding to outsource this function to firms that are better equipped to handle the complexities. Steven Sweeney, the President of NEMR Total HR, a PEO service located in Marlton, N.J., says that his average client has about 20 employees, but he serves companies with as few as five workers in industries ranging from manufacturing to health services.”

• “‘Generally clients come to me when they’re growing but they’re not at the stage of affording a full-time HR executive,’ he said. ‘They’re looking to make sure things are uniform and consistent and that they’re keeping up with all the changes in the rules.’”

• “This is probably the biggest issue that business owners raise when considering a PEO service: the employees of the business are no longer technically its employees. With a PEO, your company is no longer the employer of record.”

• “PEOs generally charge a percent of the payroll they manage. But by creating a pool of employees from all of their clients, the PEO can then benefit from the economies of scale and negotiate better rates on health insurance and other benefit programs as a larger purchaser.” READ MORE

​​The owner of a Florida restaurant demanded a change in immigration law: “Richard Gonzmart, the fourth-generation owner of the iconic Columbia Restaurant chain based in Tampa, says it’s time for politicians to start listening on immigration. When federal immigration authorities arrived at his Sand Key restaurant in Clearwater to find outdated and noncompliant work documents for 19 of his employees, he was forced to fire them all — including seven people who had worked with his family for decades. ‘With 2,000 employees, it becomes very difficult to monitor it,’ Gonzmart said in an interview. ‘We think they’re legal but, when we had to check, we found seven people who have been with me 30 years — paying taxes, had children, grandchildren — and we were required to terminate them.’”

• “It’s a scenario that’s playing out across Florida with restaurants, construction companies, and farms searching for workers as the political rhetoric over immigration is clanging up against a tight labor market and expanding population.”

• “Gonzmart said that many of his employees were hired at a time when the state didn’t require companies to obtain documents showing proof of eligibility to work. Under Florida’s new law, state and local law enforcement officials are authorized to enforce federal immigration laws and, even before the state law took effect on July 1, he said, ‘many people with papers did not renew them because of the concern that the government was sending them back.’”

• “‘I told them I wouldn’t let them go, and they threatened to arrest me,’ he recalled. ‘I said, That’s a good idea. Why don’t you all come and arrest me? But let me know when, so I can have cameras here! Then, they sent me a $500,000 fine, and I let them go.’” READ MORE

A Philadelphia-based coffee chain has been training college students to run its coffee shops: “Saxbys now has ‘experiential learning cafés’ across five states, and recently opened its 18th location, this one at the University of the Arts in Philadelphia. The student CEO manages, on average, ‘an annualized million-dollar business with anywhere between 40 and 60 employees,’ [Saxbys CEO Nick] Bayer says. ‘They make hundreds of decisions, big and small, every day with real consequences. It’s one thing to learn in the classroom, but this is a real live business.’”

• “At Saxbys, experiential learning in campus cafés made up about a quarter of its business before the pandemic. That’s when Bayer says he realized ‘the world didn’t need another coffee company,’ and pushed forward with plans for the privately held company to earn B Corporation status and focus exclusively on expanding the student-run locations on college campuses.” READ MORE

A new study found that a higher minimum wage can create jobs: “A 2010 op-ed from Michael Saltsman of the Employment Policy Institute provides a characteristic rendition of the argument. Saltsman warned that if state legislatures raised the minimum wage for fast food workers, ‘The BurgerTron 3000’ would soon take their jobs. ... Over the next thirteen years, a long list of cities and states enacted minimum wage increases of unprecedented size. Between 2014 and 2022, California increased its minimum wage by 56 percent in inflation-adjusted terms. Over a similar time period, New York raised its wage floor by 72 percent. Permanent double digit unemployment did not ensue. In fact, not only did these historically large minimum wage hikes fail to put all fast food workers out of job, but a new study indicates that they actually induced job growth.”

• “In ‘High Minimum Wages and the Monopsony Puzzle,’ a team of economists at the University of California, Berkeley examined 47 large U.S. counties where the minimum wage had reached $15 an hour by the first quarter of 2021, and compared their wage levels and employment figures to those of similar counties that hadn’t raised the minimum wage since 2009.”

• “First, raising the minimum wage successfully increased hourly pay for workers in the bottom 10 percent of the income distribution without reducing wages for those in the middle.”

• “Second, the implications for employment were very slightly positive: Counties that enacted minimum wages saw more job growth, not less.” READ MORE

Adam Grant wrote that stay interviews are better than exit interviews: “Grant urged more leaders to better time the exit interview and prioritize its more proactive and effective siblings: entry interviews and stay interviews. Both processes play an integral role in retaining valued talent, pinpointing gaps in corporate culture, and reversing quiet quitting, especially when leaders ask the right questions. ‘I’m seeing a lot of CEOs scramble and say, ‘Ok, we’ve got to do exit interviews to figure out from the people who actually left what we can do to keep the people we want to stay. I’m a big fan of exit interviews. Just one little issue: It is the dumbest time to run them,’ said Grant, who believes such discussions should be ongoing from the time employees join the company.”

• “‘Why would you wait until people have already committed to walk out the door to say, ‘If only I had a time machine, I would go back to the past to convince you to stay.’ What I would much rather see employers do are entry interviews and stay interviews.’”

• “Alternatively, stay interviews target more tenured employees at the company. The objective is to learn how employees feel about the organization before it’s too late. Generally, stay interview questions inquire about personal satisfaction or dissatisfaction, career goals, and areas of concern.” READ MORE

Karla Trotman demonstrated the value of writing an authentic job listing: “I told them that Electro Soft was a minority-, woman-, and family-owned manufacturing company. I stated what our core values were and my desire to take the company to the next level as the Gen2 owner. The ad mentioned that no experience was fine because we could train folks on how to build electronics. We were just looking for good humans with a desire to build things. And I posted two pictures. One of the type of work that we do and the other is below. It shows me and my father looking at a blueprint before he retired. And do you know what happened? Within one day I received over 40 applications.”

• “That may not seem like much, but for a small company, one that used to receive eight applications over a two-week period, it was HUGE.”

• “In the pool of candidates were some incredible people, many of whom when asked what attracted them to apply said the following:”

• “‘I liked your family atmosphere. The last place I worked, no one cared about you. They only cared about the piece work and how many you produced.’” READ MORE

CUSTOMER SERVICE

Some businesses have learned how to handle negative reviews: “Most consumers read reviews before purchasing a product or service, and they don't seek out only positive ones. In a 2021 PowerReviews survey, at least 96 percent of respondents said they sometimes looked for negative reviews, while about half of them said they were suspicious of businesses with perfect ratings. ‘A small amount of negative reviews helps legitimize the authenticity of your brand's review pages, making it not only an inevitable part of business but one that is respected by consumers,’ Adam Leff, a cofounder and the chief strategy officer of the reputation-management firm Merchant Centric, told Insider.”

• “One of the biggest benefits of negative reviews is that they identify areas where companies can improve, Leff said. Business owners can use this information to make changes to boost operations and create better customer experiences.”

• “When he gets a negative review, [Ben Kuhl, CEO of Shelf Expression] said, he responds as quickly as he can. He acknowledges the review and expresses regret, and if the company makes a mistake, he apologizes and offers a solution.”

• “‘The positive reviews are great, but we don't grow from those,’ Kuhl said. ‘We grow from the negative reviews and the feedback they provide, especially if the feedback is warranted.’” READ MORE

Carey Smith suggested talking to your customers: “Frontier Airlines recently made headlines for eliminating its telephone customer service, instead requiring customers to converse with boxes on a screen. In the airline's investor presentation, the justification was revealed: Actual human calls were characterized as ‘unscalable, inefficient, and expensive.’ Not only that, the presentation went on to say that those phone calls left open an ‘avenue for customer negotiation.’ Imagine that!”

• “It never ceases to amaze me how the same companies that gladly fork over vast sums of money to marketing agencies to ‘build their brands’ then go to such extraordinary lengths to undermine them. How difficult is it to part with a few more pennies and actually do the right thing, when it pays off in spades?”

• “If you want to keep your good name, and keep those five-star recommendations coming (and why wouldn't you?), then it's vital to keep your customers happy when they ask for help. And that includes some good old-fashioned conversation between one human and another.”

• “At the company I founded, Big Ass Fans, we … didn't view the customer as someone out to make trouble; for us, the customer really was always right, especially when they told us what we were doing wrong.” READ MORE

When a bookstore owner vented about a customer who took advantage of the store,  the tweet attracted more than 5 million views—and a slew of orders: “Little kids ripping pages out of pop-up books before putting them back on the shelf. Not-so-sly customers buying books, reading them and then bringing them back — like at a library. Rebecca George has become accustomed to such irritations as a co-owner of Volumes Bookcafe, an independent bookstore with shops in Wicker Park and downtown. But those didn’t drive George, 42, to post a gripe on Twitter, a tweet that had generated 5.3 million views as of Tuesday evening. She started typing after a customer spent about $800 on art books in the crucial Christmas shopping season and then, this week, said she wanted to return them all.”

• “‘Turns out one of our biggest sales last month was for the person to stage their home for the holidays, and now they want to return them all. Please don’t do this to a small business, people. …’ George tweeted Monday.”

• “Unfortunately for the customer, she called a few days after the 30-day return period had expired. After ‘much negotiation,’ the bookshop and the customer agreed on a store credit, George said.”

• “On the plus side, George said, ‘We’ve been getting tons and tons of orders overnight from all over the U.S., and we are so thankful for it.’” READ MORE

Like it or not, those iPad tip screens continue to work: “Business owners—helped by more versatile software—are resetting our social norms and habits around tipping. Tip screens, popping up at a wider range of businesses from cafes to fast-food chains, have turned gratuities into a multiple-choice test. In addition to letting business owners choose which tip suggestions to present to customers, point-of-sale devices offer businesses many options. Owners can show tips in dollar amounts versus percentages, choose whether suggested tip amounts are calculated before or after tax, or decide whether the tips are based off the full or discounted value of a transaction.”

• “By tinkering with the default options and settings in point-of-sale screens, businesses can nudge their customers to give bigger tips, software designers and behavioral economists say.”

• “The range of options has also short-circuited the normal decision-making process. Not leaving a tip used to be a passive decision. Now prompts on screens have turned it into an active choice.”

• “So far, it seems to be a successful strategy for business owners. A 2017 Cornell University study found that larger suggested tip sizes increased how much customers tipped while having little impact on customer satisfaction, spending, or retention.”

• “Setting suggestions meaningfully above the social norm, or higher than 25 percent, caused fewer people to tip but increased overall tip revenue since customers who decided to tip gave more.” READ MORE

ARTIFICIAL INTELLIGENCE

A guy asked ChatGPT to help him start a business: “Jackson Greathouse Fall, a brand designer and writer, took to Twitter last week to share a prompt that he gave the chatbot. ‘You have $100, and your goal is to turn that into as much money as possible in the shortest time possible, without doing anything illegal,’ Greathouse Fall wrote, adding that he would be the ‘human counterpart’ and ‘do everything’ that the chatbot instructed him to do. After a number of subsequent queries, the bot instructed Greathouse Fall to launch a business called Green Gadget Guru, which offers products and tips to help people live more sustainably.”

• “Thanks to ChatGPT — along with other AI tools like image-generator DALL-E  — Greathouse Fall said that he managed to raise $1,378.84 for his company in just one day, though Insider could not verify that amount.”

• “The company is now valued at $25,000, according to a tweet by Greathouse Fall. As of Monday, he said that his business had generated $130 in revenue, though Insider was not able to verify that amount or how it was generated.”

• “He also used AI to build a professional-looking website for his business. The site includes mock products like green gadgets and sustainable kitchenware. He said that he is open to manufacturing products or selling existing products for commissions, if the chatbot tells him to.”

• "’We're actively exploring partnerships to sell some of those things,’ he told Insider in an email. So far, he's happy with the results. ‘TLDR I'm about to be rich,’ he tweeted.” READ MORE

Consumers started using ChatGPT to shop: “Over the past few months, Matt Bahr, founder and CEO of the New York City-based post-purchase survey company Fairing, noticed an emerging trend. When asked how they first heard about a product or brand, customers increasingly gave a new answer: ChatGPT. While those responses weren't exceptional in number, there were enough to pique Bahr's interest. In his experience, the early adopters harbinger many more to come. ‘In the first month that we saw TikTok listed as a response, there were about 50 mentions, and now there are hundreds of thousands,’ he says. So far, customers are finding products through ChatGPT by searching relatively open-ended queries, Bahr says. One response to a post-purchase survey for a jewelry brand said that the shopper had prompted ChatGPT to recommend a gift for their wife.”

• “That may unlock a slew of new opportunities for retail brands to capture new customers. But they'll have to commit to playing the long game: Currently, ChatGPT is trained with data that cuts off at September 2021, so any products released after that date or website updates made since then won't have an impact on what a person asks the large language model today.”

• “The general expectation, however, is that ChatGPT and other generative A.I. models will eventually be able to crawl the internet in real time—so it may be wise to act sooner rather than later.” READ MORE

Early on, Shawn Busse saw ChatGPT as the stock photography of writing: “When I started my career, stock photos were just hitting the scene. The ad agency I was at would buy these ‘discs’ of photos, and I would have to dig through hundreds of banal images to make something work for the client's design. These images were a far cry from hiring a REAL photographer who could generate a unique image that fit the client. But, my employer cared more about margin than quality. The clients didn't have access to these discs, so my employer could charge a stiff fee for these images. Not as much as a ‘real’ photographer, but also a LOT more than the cost of the disc. Over time, stock access became ubiquitous.”

• “ChatGPT will change everything. The algorithm makes producing cheap, ‘okay’ copy infinitely available. Clients of digital marketing agencies will start to wonder why they are paying ANYTHING for a blog post if they can just tell a robot the outline of an article and keywords to use.”

• “So what is a business owner to do? First, don't pay for something that has low value. Stock photography is great for some things—if I need a photo of a wrench, I buy a 99-cent image. But, if I have a page on my website that talks about the team and how great they are, I need to show REAL PEOPLE.”

• “With writing, tools like ChatGPT can be great for summarizing a set of information. Like meeting notes—I can see recording a meeting and pushing it into the computer to summarize the findings. Conversely, when it comes to communicating remarkability, showing something new, or talking about your specific culture, trust in humans.” READ MORE

Karim Lakhani, a Harvard Business School tech guru, said even the smallest businesses should start using ChatGPT: “For small business owners, Lakhani said, the AI journey should begin by looking across three platforms: OpenAI’s ChatGPT+ (which can be purchased for $20 a month), Microsoft’s Bing Chat (which is free) and Poe, which offers access to a variety of gen AI tools. Starting to experiment with these tools will quickly show small business owners the power that AI offers to their core tasks.”

• “One example: a venture capitalist in California who was working with immigrant owners of lawn-care and fencing businesses. The owners did not have great English skills, and it could be costly to use translation services for customer communication campaigns, from email to text. ‘Now these entrepreneurs can put their ‘broken English’ into ChatGPT and get perfect Harvard or Oxford English, any English you want. Now they had this superpower,’ he said.”

• “The place to start, according to Lakhani, is YouTube: ‘YouTube is your friend. I can’t tell you how much I’ve benefited as this revolution has happened. ... I have been spending so much time on YouTube. There are great creators who spend all their time and effort thinking about problems and solutions through ChaGPT and gen AI. Start to build a crash course on YouTube. It has a great AI algo to guide you along the way.’”

• “‘Machines won’t replace humans, but humans with machines will replace humans without machines,’ Lakhani said at CNBC’s Small Business Playbook virtual event on Wednesday.” READ MORE

FRANCHISING

Here’s what it costs to open a Chick-fil-A: “Despite its success, Chick-fil-A charges a franchise fee of $10,000 to open a new restaurant, and the company told Business Insider it doesn't require candidates to meet a threshold for net worth or liquid assets. Those fees are cheaper than most other major fast-food chains in the U.S., including McDonald's, whose operators view Chick-fil-A as its biggest rival. McDonald's, for example, requires potential franchisees to pay from $1.4 million and $2.5 million in startup costs — including a $45,000 franchise fee. Potential Taco Bell franchisees pay the same $45,000 fee with startup costs ranging between $1.3 million to $3.4 million for a traditional restaurant, according to the chain's FDD. Total costs to launch a franchised Chick-fil-A restaurant range from $219,055 to $2,912,697, according to 2022 FDD documents.”

• “Chick-fil-A, however, makes up for the loss of upfront capital investment with other costs to franchisees, such as real estate, restaurant construction, and equipment, which it leases to the franchisee.”

• “Chick-fil-A prohibits most of its franchisees from opening multiple units, which can limit potential profits, and franchisees must devote their full time and attention to operating the actual business.”

• “Most locations average about $8.1 million in sales per year,  according to 2022 FDD documents. Mall locations average sales of $3.2 million.”

• “‘That's more than double a McDonald's, and McDonald's is no slouch,’ veteran restaurant analyst Mark Kalinowski said of Chick-fil-A's non-mall restaurants.” READ MORE

There are indications that the franchising model may be broken: “In the past year, and more frequently in recent months, franchisees that were once big money makers for such brands as Burger King, McDonald’s, Popeyes, and Hardee’s have started to file for bankruptcy. On Tuesday, a major Wendy’s franchisee—Florida-based Starboard Group—sought debt protection for 73 restaurants. In its Chapter 11 filing, Starboard wrote that both its estimated assets and liabilities were in the $1 billion-to-$10 billion range. Starboard’s CEO, Andrew Levy, faulted his Wendy’s corporate overlords for mandating that they undertake extensive remodels requiring ‘substantial capital expenditures’ with ‘modest or no equivalent returns.’”

• “But he also noted what seemed to be a string of bad luck for fast-food operators collectively: a ‘combination of post-Covid consumer habits, ever-increasing costs to do business, and significantly higher interest rates’ that have ‘placed many QSR [quick service restaurant] franchisees in similar situations nationwide.’”

• “McDonald’s just announced that starting next year, it will hike the fees that U.S. franchisees pay by 25 percent—from 4 percent of their annual revenue to 5 percent. Wendy’s similarly increased its take, leading it to report in November’s earnings statement that operating profits had climbed 3.6 percent the previous quarter ‘primarily from higher franchise royalty revenue,’ coupled with crafty declines in other corporate-level expenses.” READ MORE

PRICING

Surge pricing has surged—even at restaurants, movies, gyms, and bowling alleys: “Alex Yenni recently endeavored to take his wife and 5-year-old son bowling with another family in Petaluma, Calif., close to their home. The plan quickly went into the gutter. Mr. Yenni, a 42-year-old advertising executive, tried to book online in advance at AMF Boulevard Lanes, where he wanted to reserve two lanes for two hours at 3 p.m. on the last Thursday of the year during winter break. The price quoted by the website, run by national operator Bowlero, knocked him over: $418.90. ‘This strikes me as outrageous for a pedestrian family activity,’ he said.”

• “Debbie Roxarzade, founder and CEO of fast-casual restaurant chain Rachel’s Kitchen in Las Vegas, introduced dynamic pricing for takeout orders from three of its eight locations on third-party apps during the pandemic.”

• “Prices swing by the hour by roughly 10 percent to 15 percent depending on the time of day and demand, she said. A few guests have commented on the higher online prices, though she said pushback has been minimal.”

• “Rachel’s Kitchen will potentially use dynamic pricing for those dining in also, according to Ms. Roxarzade, although she acknowledged the practice could be a tough sell for regulars, and would require extra training for staff who ‘would have to explain to guests why they spent $15 yesterday and $16 today.’” READ MORE

FINANCE

More small businesses raised capital by selling bonds to their own customers: “As it gets harder for small businesses to land conventional loans, more of them are turning to a new source of funding: their customers. Using a relatively little-known financing tool, businesses are able to sell bonds to hundreds of customers and community members—with some investing as little as $10. These businesses are capitalizing on a regulatory change that lets them solicit investments from nonaccredited investors—those with relatively modest income or assets. As they have watched beloved local businesses struggle since the pandemic began, these investors see the bonds as a way to support those businesses while also generating a financial return.”

• “When Palm City Wines set out to raise $250,000 by issuing a small-business bond in April, Kashuk pledged $200. Within five days, the Palm City Wines bond—which pays 9.5 percent interest on customers’ investment monthly over five years—was oversubscribed. The company increased the cap on the amount it could raise, ultimately raising more than $400,000.”

• “Dennis Cantwell, co-founder of Palm City Wines, says that the money raised will enable it to open a second store. Having taken a Small Business Administration-backed loan to open the first branch of Palm City Wines, Cantwell says that he had no more collateral to offer to a bank for a second loan.” READ MORE

The SBA finalized a new lending rule that makes it easier for employees to use SBA loans to purchase portions of the business they work for: “Before, 7(a) loans could only be used if the employee — or group of employees — wanted to purchase the entire interest of an owner in the company. Chris Hurn, CEO of Fountainhead, one of only 14 nonbank lenders approved to make SBA loans, said the tweaks to the SBA lending programs were a good thing and would encourage some businesses to use SBA services.”

• “‘I think the removal of the mandate that you had to buy out 100 percent of another party’s interest on behalf of a buyout transaction is a huge step in the right direction. I think that's definitely helpful and that's in alignment with the SBA’s mission to try to expand entrepreneurship,’ Hurn said.”

• “The SBA's new rule would also create a new pathway for businesses or lenders to appeal the denial of SBA loans. The rule allows the SBA to designate a career employee at the agency to review loan denial reconsideration requests or reserves that right for the administrator.” READ MORE

An anonymous founder wrote about life in the venture-backed lane: “We were growing sustainably, making even our pickiest customers happy, but it was a euphoric time in the world outside our Zoom screens; you might be having fun sober at the party, but it’s hard not to watch your friends on drugs and wonder what it’s like. The irony that selling fiction to investors was making these founders richer than selling a bona fide product to paying customers wasn’t lost on me. But it wasn’t just the money: After years of work, I had the temerity to be proud of the culture and product we had built. I had started to believe we could actually make a difference.”

• “I could have tried roughing it without venture funding, what the industry calls ‘bootstrapping.’ The venture world has a condescending label for bootstrapped companies without scale potential: a ‘lifestyle’ business, which roughly translates to: Good for you, now back to the sandbox until you’re ready to play with the big boys.”

• “At work, there’s some sense that we’ve missed the windfall, the easy IPO, the fairy godmother of acquisition that taps some lucky people and makes them rich. You’d think that would suck for morale. But from what I can tell, our team seems happy.”

• “What venture capitalists are now telling startups to do — forget ‘growth at all costs’, be profitable — is what we, partly by accident, have been doing all along. With the exception of the new wave of A.I. companies, the skies are full of Icaruses crashing to earth, but we’ve been here the whole time.” READ MORE

FAMILY BUSINESS

A McKinsey study found that family-owned businesses—or FOBs—perform better than their reputations for dysfunction might suggest: “The nation's first family-owned businesses were the foundation of the early U.S. economy, and they remain critical to its ability to create value today. It turns out, they're also a great deal more profitable, efficient, stable, and productively managed than other kinds of companies, according to a new study by global consulting firm McKinsey. The report offers insights all owners and managers should contemplate amid their efforts to enhance the operation, results, and even longevity of their enterprises--whether a company is private or public.”

• “Family-owned businesses, defined as companies ‘in which founders or descendants hold significant share capital or voting rights,’ generated average profits of $77.5 million and total shareholder returns of 2.6 percent between 2017 and 2022. Non-FOBs, by comparison, produced average profits of $66.3 million and shareholder returns of 2.3 percent.”

• “Here is the formula: A focus on purpose beyond profits that place company longevity, customer satisfaction, employee well-being, community benefit, or other objectives on par with or ahead of corporate urgency to create quarterly value for shareholders.”

• “ A long-term perspective prioritizing long-term reinvestment in the business, making both shorter-period payouts to investors and the FOB's own moves to cash in holdings for immediate profits secondary concerns.” READ MORE

COMPETITION

Carey Smith wrote that business owners worry too much about their competitors: “At Unorthodox Ventures, we see this problem a lot. Many founders we talk to spend an unhealthy amount of time and energy looking over their shoulder, afraid someone might be gaining on them, or changing course because of what they perceive the competition is doing. We've watched as companies signed one-sided distribution deals just to squeeze out potential competitors. Let the competitor make that bad decision. And we've watched as others have raced to market and made entirely preventable mistakes. ‘Don't worry about the competition,’ I tell them.”

• “They're fixated on the competition because they think they'll lose out if they don't, when in fact the opposite is true: They'll lose out because they do.”

• “Possibly the saddest victim of competition anxiety I've ever encountered was a fellow who owned a single hardware store in downtown Indi­an­ap­o­lis. He and I crossed paths at a televised business event years ago. This poor guy defined his competition as Lowe's and Home Depot, and was fixated on matching their prices.”

• “I told him to cut that s--- out and focus on his strengths—like his easily accessible downtown location and individualized service—and to offer customers special tools or services that no big-box store could match. Put the energy you're wasting on worrying to far better use by differentiating your business.”

• “Unfortunately, his store closed a few years later. The world needs more local hardware stores run by people who know how to fix things. It most definitely could have used his.” READ MORE

BUYING AND SELLING BUSINESSES

Teamshares brought its total of small businesses bought since 2020 to more than 80. It wants to buy a thousand by 2030: “It was 2021 and [Joe] Noblit was looking to sell his mattress business. Over the previous 20 years, Noblit had built Yankee Mattress in Agawam into a chain of four stores across Western Massachusetts, with a staff of 14. Now he wanted to retire and enjoy the fruits of his labor. But Noblit didn’t know if anyone would bite, well aware that small businesses in the United States often fail to find buyers and simply fold. Then his broker called: Teamshares, a new kind of private equity firm backed by some of the biggest names in venture capital, very much wanted to buy Yankee Mattress. Not only was Teamshares’ offer ‘very, very generous,’ Noblit said, but the company also wanted to keep Yankee Mattress independent and eventually give the business back to the employees.”

• “‘The current version of capitalism is not working,’ said Michael Brown, co-founder and CEO of Teamshares. ‘It’s not too inclusive.’ But Teamshares’ motives are not completely altruistic. The company, which has raised $245 million from investors, sees plenty of opportunity to make money. How? In part by selling business products such as credit cards and insurance to the small businesses it owns.”

• “It has a longer game, too. Over 20 years, Teamshares will grant dividend payments and stock to the employees, which the company hopes will motivate those workers to boost sales and profits.”

• “Teamshares isn’t your average private equity firm. The company looks for small businesses that are relatively healthy, with $400,000 to $2 million-plus in annual profits and owners compensation in two of the past three years. And it has a very different long-term plan.”

• “Once Teamshares acquires a business, the company immediately starts to grant stock to its employees, which also carries with it dividend payments. The better the business performs, the more stock and dividends Teamshares pays out.” READ MORE

More MBAs have been looking to buy small businesses through search funds: “Called entrepreneurship through acquisition, or ETA, it differs from the better-known, venture-backed startup model because it entails buying an existing company, not starting one from scratch, with the potential for more autonomy and ownership. ETA began at Harvard in 1984, when entrepreneur-turned-professor Irv Grousbeck helped some students develop an investment vehicle that enabled the aspiring entrepreneurs to buy and manage a company. Grousbeck soon moved to Stanford’s Graduate School of Business and took the search fund concept there.”

• “That’s where it stayed for years, limited primarily to a handful of Harvard and Stanford MBAs. But a surge in interest and investment more recently has propelled ETA to a much higher profile. That’s partly because interest in entrepreneurship picks up when job prospects dim for MBAs, as they have in 2023.”

• “First, one must decide what type of search to conduct and the kind of business to target. ETA typically happens one of two ways: It’s self-funded or done through what’s called a ‘core’ search fund. The latter requires raising money from investors in two stages.”

• “The initial capital (generally about $425,000 per person) pays for all search-related expenses, like travel and administrative costs, plus the searcher’s salary. The much larger second tranche funds the actual acquisition, typically within two years.”

• “Failure is part of the process: one out of three searches ends without an acquisition being made. Discerning the whims of small-business owners, many of them baby boomers looking to retire comfortably, can require a degree in geriatric psychology.” READ MORE

Private equity firms have been chasing plumbers and lumber yards: “Local plumbers and lumber-yard owners across the U.S. are feeling a bit like tech entrepreneurs of late — juggling multiple offers from private equity-backed firms that increasingly are targeting mom-and-pop businesses. Wall Street has been buying into fragmented Main Street industries for years, with dental and veterinary practices among the favorite targets. It’s known as the roll-up strategy – and it’s catching a tailwind right now, and expanding rapidly in household services and building materials.”

• “Especially prized are firms with steady revenue, subscription models, and electronic billing, says John Wagner, a New Mexico-based investment banker who helps small and midsize companies find buyers. Better yet, he says, is a locally owned firm with strong revenue but high expenses — an opportunity to cut costs, increase efficiency and quickly boost the firm’s value.”

• “John Loud gets as many as 30 solicitations a month for his Kennesaw, Georgia-based alarm-installation firm, Loud Security Systems, which has about 60 employees and more than $7 million in annual revenue. ‘It’s a non-stop barrage,’ Loud says, and it’s been going on for years.”

• “Nowadays, though, Loud is entertaining offers. His two kids aren’t interested in running the family business, and at 56 he feels closer to the end of his career than the start.” READ MORE

But is private equity gutting America? “Companies bought by private equity firms are far more likely to go bankrupt than companies that aren’t. Over the last decade, private equity firms were responsible for nearly 600,000 job losses in the retail sector alone. In nursing homes, where the firms have been particularly active, private equity ownership is responsible for an estimated — and astounding — 20,000 premature deaths over a 12-year period, according to a recent working paper from the National Bureau of Economic Research. Similar tales of woe abound in mobile homes, prison health care, emergency medicine, ambulances, apartment buildings and elsewhere. Yet private equity and its leaders continue to prosper, and executives of the top firms are billionaires many times over.”

• “Consider the case of the Carlyle Group and the nursing home chain HCR ManorCare. In 2007, Carlyle — a private equity firm now with $373 billion in assets under management — bought HCR ManorCare for a little over $6 billion, most of which was borrowed money that ManorCare, not Carlyle, would have to pay back.”

• “As the new owner, Carlyle sold nearly all of ManorCare’s real estate and quickly recovered its initial investment. This meant, however, that ManorCare was forced to pay nearly half a billion dollars a year in rent to occupy buildings it once owned. Carlyle also extracted over $80 million in transaction and advisory fees from the company it had just bought, draining ManorCare of money.”

• “In 2018, ManorCare filed for bankruptcy, with over $7 billion in debt. But that was, in a sense, immaterial to Carlyle, which had already recovered the money it invested and made millions more in fees.” READ MORE

EMPLOYEE OWNERSHIP

The sale of an ESOP-owned insurance company turned employees into millionaires: “Six years after workers acquired their company from second-generation owner William A. Graham IV through an employee stock ownership plan, the 215 people who now work at Graham Co. are selling the Philadelphia-based business-insurance agency to national broker Marsh & McLennan Agency. Graham leaders confirmed Tuesday that their board has agreed to sell. The buyer, part of global insurance giant Marsh McLennan Cos. Inc., which is based in New York City, won’t say how much it’s paying, but industry observers say recent transactions suggest that Marsh McLennan agreed to pay five times Graham’s expected yearly sales, which works out to about $375 million.”

• “Filtered into a retirement plan that makes the sale tax-free, the total adds up to more than $1 million per worker, even after discounting a slice that will be used to pay down debt.”

• “The millions won’t be split evenly. Staffers, including Graham, who is still the board chairman, are assigned shares prorated based on their responsibilities and years of service. But no one executive owns as much as 10 percent, according to Mitchell and Ken Ewell, 65, Graham’s president and chief operating officer.”

• “‘It is mind-blowing,’ said Sara Kurtz, a Graham production specialist who joined the firm in 1990 and helps producers put together complex, data-rich sales pitches.” READ MORE

INSURANCE

The insurance crisis has spread from homes to businesses: “Naomi Silverman got the news in the mail in April: Her business property insurance was not being renewed, and she had just two months to find a replacement. When the third-generation owner of Mendels, a family-run art and fabric supplier on Haight Street [in San Francisco], started contacting insurance brokers, she said they had few policies to offer. And insurers have become very picky: One company declined to give a quote because Mendels doesn’t have sprinklers, and another because there was graffiti on a neighboring building. ‘It just seems so unfair,’ Silverman said. ‘I was so worried because I’ve heard so many horror stories.’”

• “A perfect storm of rising inflation, soaring construction costs, increased crime concerns, and mounting fears of catastrophic wildfires has combined with insurers’ long-term frustration with California’s regulation of insurance premiums to turn off the taps.”

• “Commercial property insurance costs have risen 7.6 percent annually on average since 2017, according to Moody’s Analytics, but in 2023, commercial property premiums increased 8.8 percent in the first quarter, more than they had in over 20 years, according to a survey from the Council of Insurance Agents & Brokers. In the second quarter, they ticked up another 8.9 percent. For the year as a whole, rates will rise more than 20 percent.”

• “Across the bay in Oakland, small merchants are struggling even more with the insurance issue as that city has been beset by soaring crime rates in 2023. In late September, Oakland merchants went so far as to hold a one-day business strike to call attention to rampant crime.” READ MORE

BUSINESS MODELS

A chef in San Francisco figured out a model that he thinks could be the future of restaurants: “Standard restaurant logic dictates that your dining room be as big as possible, but we cut ours in half (to just 35 seats) so the business has an additional leg to stand on: a retail shop that is open all day selling freshly made pastas, sauces and high-end pantry items, all of it prepared and curated for people to make easy dinners at home. Our consistent retail traffic balances most seasonal ups and downs; when young diners are at Burning Man, families still swing by to grab bucatini and olive oil. Granted, a minuscule dining room means no massive Friday night sales, but that’s a welcome trade-off for better consistency throughout the week, and that consistency gives us the freedom to operate with less complexity and fewer moving parts.”

• “Our restaurant is walk-in only, so we don’t pay an online reservation platform or lose money on no-shows. Our tiny menu is efficient and minimizes waste. Our product, pasta, is affordable enough to keep profit margins sufficient even during inflationary periods.”

• “Most important, guests order at the front door with the host before being pointed to their (fully set) table, which eliminates 15 minutes of profit-killing dead time at the beginning of each meal.”

• “It’s becoming common for us to do more than four turns on a table at night. The faster we turn tables, the stronger our sales are. The more we do with less, the better our margins are.” READ MORE

Many car dealers concluded they are facing an existential crisis: “Some are training staff to be EV experts as customer demand grows for electric cars. Others are emulating firms like Carvana and moving some parts of the buying process online. Dealers also are investing in expensive renovations, building features like lounges and dog parks to lure shoppers to their showrooms. As they experiment with new strategies and customer perks, some dealers remain uncertain about what the future of selling cars will look like.”

• “‘When Covid first hit, nobody knew exactly what the new car business was going to look like,’ Scott Kunes, COO of Kunes Auto and RV Group in the Midwest, told Insider. ‘Same thing with EVs.’”

• “Automakers are pressuring dealers to quickly get up to speed and help make their multi-billion-dollar EV ambitions a reality, with GM even telling Buick dealers to go all-in on EVs or get out. Yet they are still relying on dealers, in the near term, to sustain the majority of their business through gas-powered car sales and service.”

• “Some dealers are having a hard time committing to changes when the return on investment — especially with EVs — isn't yet clear. ‘The manufacturers are asking us to make large investments in our facilities, and we're willing to do it, once we have a clear and concise plan,’ Kunes said. But he said the dealership hasn't been provided with enough EVs to justify the changes.”

• “‘I mean, if we're only going to get 25 EVs a year, how can you ask us to invest $1.2 million on our facilities?’ he asked.” READ MORE

THE PET INDUSTRY

Pet insurance has become an increasingly popular employee benefit: “One of the primary reasons employers should consider including pet insurance in their benefits package is its power to attract and retain employees. Studies show that 63 percent of pet owners believe pet-friendly benefits increase their likelihood of staying with a company. This statistic is particularly relevant in today’s competitive job market, where talent acquisition and retention are critical for business success. By offering pet insurance, employers signal their commitment to employees’ holistic well-being, recognizing the emotional importance of pets in their lives.”

• “Forty-five percent of pet owners will spend the same amount or even more on their animal’s health care than on their own, and a substantial 50 percent of dog owners express concerns about their ability to cover unforeseen veterinary expenses.”

• “By offering pet insurance, employers can demonstrate their commitment to the well-being of their employees and their pets, fostering a workplace environment where financial stress is lessened and employees can focus on their work with peace of mind.” READ MORE

The market for human-grade dog food took off: “Dog ownership boomed during the pandemic, with Americans buying or adopting millions of pets, including canines. Sales of dog food surged to around $25 billion last year, up nearly 39 percent from $18 billion in 2019, according to the consumer research firm NIQ. But as inflation has driven up the prices of even conventional kibble, the options in the dog food aisle have become increasingly bespoke and expensive. There are holistic, plant-based varieties, and those with freeze-dried goat and wild boar. Some options are frozen and raw. Last year, ‘Saturday Night Live’ poked fun at the industry with a skit featuring a couple in a grocery store chiding another shopper for not feeding her pet ‘real food.’”

• “Companies like The Farmer’s Dog, Ollie, and others are marketing their fresh pet food as less processed and more closely resembling human diets. Veterinarians and animal nutritionists say many of these new brands are targeting wealthier consumers who treat their animals as if they were children — so-called fur babies — and want to match their dogs’ diets to their own eating habits. Some are selling the food directly to consumers, through subscription services.”

• “‘Many are pushing natural or healthy, and people look at the ingredient list and assume because they recognize everything that the diet has to be healthier,’ Dr. Heinze said. ‘It’s giving these companies a health halo, even if there is no science behind it, and the other diet has 40 years of research.’” READ MORE

OBITUARIES

Jacqueline Gold, executive chair of Ann Summers sex shops: “In 1972, her father, David Gold, and his brother, Ralph, had bought two sex shops that had been founded a year or two earlier by the businessman Michael Caborn-Waterfield and been billed as ‘sex supermarkets.’ (He named the shops for his secretary and occasional lover, Annice Summers.) By the time Ms. Gold went to work for her father at 19 as an office assistant, the company was ‘dealing largely in top-shelf magazines for the raincoat brigade,’ as The Mail Online put it in 2018. ‘Although the head office was just like any other business,’ Ms. Gold told The Birmingham Post of England in 1995, ‘frankly, it was essentially run by men. The customers were men, and that annoyed me in a way. I felt angry there was all this for men and nothing for women.’”

• “She set about changing that, beginning by updating the thinking of the board of directors. ‘Their attitude was, Women aren’t interested in sex,’ Ms. Gold said. She proved them wrong, marketing sexy lingerie, swimwear, sex toys, and novelty items to women, who, she discovered, were eager for them.”

• “Among her biggest initiatives, introduced in 1982, was the Ann Summers party, similar to a Tupperware party, where a host sells kitchen products in her home, except that the products being sold at an Ann Summers party were sex-related.”

• “Soon there were hundreds of Ann Summers parties a week, then thousands. The company also built up its network of stores; there are now scores of them in Britain and beyond.” READ MORE

Joseph Zucchero, co-founder of Chicago’s Mr. Beef: “Joseph Zucchero, a co-founder of the popular sandwich shop that inspired the acclaimed FX restaurant drama ‘The Bear,’ and where much of the series was filmed, died March 1 at a hospital in Chicago. He was 69. His death was confirmed by his son, Christopher Zucchero, an owner of Mr. Beef, the family’s restaurant in Chicago’s River North neighborhood, who said a cause was not known. The restaurant specializes in the Italian beef sandwich, a Chicago classic made with thin-sliced roast beef and giardiniera or roasted peppers. All of that is typically piled on a sandwich roll, and it is either drizzled with or dipped in beef juice.”

• “To create ‘The Bear,’ a series about a young chef who leaves a career in New York’s high-end restaurant scene to run his family’s sandwich shop, FX shot inside and outside Mr. Beef, fictionalized as the Original Beef of Chicagoland in the show. It also created a replica of the restaurant’s kitchen in a Chicago studio, Mr. Zucchero’s son said.”

• “The series, which premiered on Hulu [in 2022], drew acclaim from food writers and restaurateurs. And in a fine example of life imitating art that imitated life, its success led to a nationwide surge in demand for the Italian beef sandwich, including at Mr. Beef itself.”

• “Mr. Zucchero was a movie fan, his son said, and his restaurant had admirers in Hollywood. Actor Joe Mantegna and comedian Jay Leno ‘would come in all the time,’ Christopher Zucchero said. He said that he has been friends with Christopher Storer, who created ‘The Bear,’ since the two were in kindergarten and that they spent time at Mr. Beef as children.” READ MORE

Stew Leonard Sr. created the Disneyland of dairy stores: “Mr. Leonard opened his original store in Norwalk, Conn., in 1969 as a destination that promised fresh milk because it was built around a bottling plant. ‘You’d have to own a cow to get it sooner,’ his advertisements proclaimed. Bryan Miller described it in The New York Times as the ‘Disneyland of dairy stores’; ‘Ripley’s Believe It or Not’ called it the ‘world’s largest dairy store’; and it earned a place in the Guinness World Records for having the highest dollar sales per square foot of selling space. In 2015, Business Insider praised Kroger’s customer loyalty program and Wegmans’s walk-in beer locker, but it concluded that anyone who had ever set foot in Stew Leonard’s ‘knows it is miles above the rest.’”

• “The magazine listed 13 reasons Stew Leonard’s was ‘truly America’s best grocery store.’ The first was its customer service policy: ‘Rule 1: The customer is always right. Rule 2: If the customer is ever wrong, reread Rule 1.’”

• “More than 50 years after the first store opened, Stew Leonard’s has expanded to encompass seven locations earning $600 million annually, and it remains family-owned and operated with an enormously loyal customer base.”

• “Mr. Leonard retired around 1990, but remained chairman emeritus of the company’s board. Three years later, he was sentenced to prison after pleading guilty to tax fraud for skimming more than $17 million in sales from the Norwalk store; at the time, it was the nation’s largest computer-driven tax evasion case on record.”

• “Many of his devoted patrons who were interviewed afterward seemed more saddened or disappointed than angry. At his sentencing, Mr. Leonard, leaning on a metal cane after hip surgery, said, sobbing: ‘I’ve hurt my family. I’ve hurt my children. I’ve hurt my customers.’” READ MORE

Jim Toole, former owner of Capitol Hill Books: “Jim Toole, a Navy rear admiral who commanded cruisers, destroyers and Mekong River patrol boats before taking charge of Capitol Hill Books, the Washington bookstore that became as well known for his endearingly grumpy presence at the front desk as for its stock of used and rare books, died Nov. 11 — Veterans Day — in the District. He was 86. Adm. Toole owned the shop for more than two decades before selling it to a group of longtime employees in 2018. He was still working there until his death and had attended its monthly Second Saturday wine and cheese party before having a fatal heart attack later that evening, according to his daughter, Laura Torres.”

• “‘When you walked into the bookstore, to him you were walking onto his ship,’ Burk said. ‘The front desk was the conn’ — or conning tower, where an officer controls the ship’s movements — ‘and he was piloting the store from the conn. When he would leave his ship, he’d say, Okay, lad, you take the conn. If you asked him, Hey, Jim, I’ve got a question, he’d reply, You may fire when ready, Gridley, which was [George] Dewey’s famous command from the Battle of Manila Bay.”

• “Adm. Toole’s system of ‘controlled disorganization,’ as he called it, seemed unlikely to pass Navy muster. ‘The store is anything but shipshape,’ Naval History Magazine once observed in an otherwise admiring article. Some books were arranged in precarious Jenga-like stacks, including a ‘Tolkien Tower’ and a ‘Wacko Stacko,’ home to books by Sarah Palin and Glenn Beck.”

• “At the front of the store, he hung a sign listing trite and overused words that were banned from conversation. That meant no use of ‘perfect,’ ‘awesome,’ ‘like,’ and ‘totally.’ For good measure, he also banned the words ‘Amazon’ and ‘Kindle.’” READ MORE

Thanks for reading, everyone. Have a Happy New Year! — Loren