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When Buying an Unsexy Business Becomes Sexy
Two entrepreneurs who walked away from successful careers to buy blue collar businesses share their experiences.
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Here are today’s highlights:
A former CEO offers advice on hiring an executive assistant.
At a thriving Philadelphia pizza business, everyone has done time.
Movie theaters desperately need a new business model.
A corporate employee who left to start his own advertising business has no interest in going back: “I’ve seen the light.”
THE 21 HATS CONVERSATION
When Buying an Unsexy Business Becomes Sexy: This week, instead of a conversation with our regulars, we talk to two people who walked away from promising careers to buy blue collar businesses. Long before search funds and sweaty startups became all the rage, Bob Schwartz left a Wall Street investment banking career to buy a chain of laundromats, SuperSuds, which operates in Delaware, Maryland, Pennsylvania, and Virginia. More recently, Mills Snell left a prominent private equity firm to buy a roofing contractor, Aqua Seal Manufacturing and Roofing, which is based in Columbia, South Carolina. In this conversation, Schwartz and Snell talk about what they were thinking, what they learned about buying a business, what they’ve learned about operating a business, and whether they’re looking for an exit.
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Ryan Caldbeck talks about how to hire an executive assistant: “It’s the type of question I felt insecure asking our investors about even though I think it’s one of the most important hires a CEO can make. It creates, or destroys, leverage. I can think of several CEOs, including those of unicorns, who won’t pull in their EA to help with calendaring ‘because my EA is really bad but I’m afraid to fire [her/him].’ Conversely, I had an EA as CEO that made me dramatically better at my job (and helped provide awesome leverage for the company).”
“At a VC’s CEO conference I attended about five years ago, a CEO brought up the challenge of knowing when to hire an EA. After some quick polling amongst the 80 CEOs in attendance, it seemed like internal communication and internal ops tend to break down when the company reaches about 50 people if there is no EA.”
“You need a job description. Try to include some personality — try to show who you really are. Also, don’t hold back on the actual tasks you want done. If you need the EA to bring back lunch for you every day or schedule dentist appointments because you haven’t found time to do that for seven years (as is the case with one CEO I know), don’t be afraid to mention that up front.” READ MORE
Everyone at this Philadelphia pizza business has done time: “Down North Pizza has quickly made national best-of lists for its Detroit-style square pies. The buzz is so big that the bestseller often changes depending on what was recently featured in the press, said executive chef [and co-founder] Michael Carter. ‘Because of The New York Times, it's been the Uptown Vibe,’ he said. That's the shop's vegetarian pie, laden with julienned peppers, sauteed mushrooms, kale, red onions, and their spin on tomato sauce, called ‘norf’ sauce: A secret recipe that is sweet, spicy and smoky. But that runaway success is built on a mission: to hire formerly incarcerated people, and convince other employers to do the same.”
“‘We have over 60 years of jail time in the kitchen,’ said owner Muhammad Abdul-Hadi. ‘We are all living proof that you can build a business around the formerly incarcerated.’”
“Down North Pizza is in a neighborhood that sees 1,000 people return from prison annually, according to the Philadelphia Reentry Coalition.” READ MORE
Small manufacturers like DPS Skis have had to reinvent their supply chains: “Until this year, DPS bought the Paulownia species of hardwood for the core of many of its skis from China, but shipping delays meant that running out of the material was a real possibility. At one point as supplies dwindled in October, ‘we were holding our breath,’ Mr. Adema said. DPS found a supplier of Paulownia in North Carolina, and after much testing, the specifications matched up. ‘You can’t just swap species,’ Mr. Adema said. ‘We’re excited about getting the wood from North Carolina in terms of sustainability and less environmental imprint. Any time you can throw something on a train in the U.S., it’s better than a ship or plane.’”
“Not everything is available domestically, however. Ski poles and ski bindings still come from Europe, and DPS has been forced to resort to air freight to bring in supplies of these items, even though it’s four times as expensive as shipping by sea.”
“And while DPS ships by boat whenever possible, it’s hardly cheap — the price of shipping a container has gone from roughly $5,000 to $20,000 in some cases, Mr. Adema said. Overall, raw material costs for DPS are up 10 to 15 percent.” READ MORE
The pandemic has unleashed an historic burst of entrepreneurship: “The move helps explain the ongoing shake-up in the world of work, with more people looking for flexibility, anxious about Covid exposure, upset about vaccine mandates or simply disenchanted with pre-pandemic office life. It is also aggravating labor shortages in some industries and adding pressure on companies to revamp their employment policies. ... Early in the pandemic, [Marcus] Grimm, a married father of two grown children, was laid off. He logged onto Upwork, a website that connects freelance workers from a wide range of industries with potential clients. He fielded several assignments doing ad campaigns for big companies, charging a low hourly rate.”
“Business flowed in. He has steadily raised his rate, to $150 an hour. Mr. Grimm said he now earns more than in his old job, which paid $130,000 a year.”
“His favorite part is not having to deal with corporate politics or any bureaucracy. He can go kayaking in the middle of the day.”
“One client offered to hire him full-time, but he declined, Mr. Grimm said. ‘I told them, I’ve seen the light.’” READ MORE
We got some interesting responses to our recent question about the mechanics of raising prices—including this one from Mike Faith, CEO of Headsets.com: “We played with pricing for years. There's a great book on pricing that I love, called, Confessions of the Pricing Man. We recently tried reducing all our prices, we love to be contrarians, and it's given us a real leg up on Amazon rankings for our headsets. Price increases are good, but sometimes being different is even better. I'm not saying we've got this right, we're just testing. :)”
And this one from Josh Patrick: In my experience, almost all businesses are under-priced for where they could be. Unless you're hearing no at least ten percent and hopefully twenty percent of the time, your prices are too low. For most of the customers we work with we've been steadily raising prices for the past two years and have had little to no negative effects. I've been using this strategy with our consulting business for years and it's worked well.” READ MORE
THE COVID ECONOMY
Cyber Monday online sales fell for the first time ever this year: “This year’s tally marks the first time that Adobe has tracked a slowdown in spending on major shopping days. Adobe first began reporting on ecommerce in 2012, and it analyzes more than 1 trillion visits to retailers’ websites. Last Cyber Monday, retailers rang up $10.8 billion in sales on the web, as more people stayed home and avoided shopping in retailers’ stores due to the ongoing coronavirus pandemic. It marked a record day for ecommerce purchases in the United States.”
“It follows a similar pattern that played out on Thanksgiving day and on Black Friday this year, as shoppers appeared to have spread out their dollars onto more days rather than squeezing their shopping into ‘Cyber Week.’” READ MORE
Movie theaters need a new business model: About 49 percent of prepandemic moviegoers are no longer buying tickets. Some of them, roughly 8 percent, have likely been lost forever. To win back the rest, multiplex owners must ‘urgently’ rethink pricing and customer perks in addition to focusing on coronavirus safety. Those were some of the takeaways from a new study on the state of the American movie theater business, which was troubled before the pandemic — attendance declining, streaming services proliferating — and has struggled to rebound from coronavirus-forced closings in 2020.”
“Over the weekend, ticket sales in the United States and Canada stood at roughly $96 million, compared to $181 million over the same period in 2019.”
“‘The research clearly shows that theaters are suffering because the pandemic intensified, accelerated, amplified all of the nascent trends that were already underway,’ Ms. Ong said.” READ MORE
Meanwhile, face mask sales are booming again: “‘We’re holding on to dear life at the moment but the deck is really stacked against us,’ said Brian Wolin, the chief executive of Protective Health Gear, a N95 start up in Paterson, N.J., that last summer scrambled to rehire dozens of workers who had been fired in the months before the arrival of the Delta variant, which led to an uptick in sales. To win approval from the National Institute for Occupational Safety and Health — and the right to print the words NIOSH and N95 on its masks — Mr. Wolin and other U.S. mask-makers must navigate a rigorous, costly testing regimen.”
“Chinese KN95s are not subjected to similar regulatory vetting, although KN95 standards are overseen by the Chinese government. Both KN95s and N95s are meant to filter out 95 percent of tiny airborne particles, but the standards for N95 are considered more stringent.”
“Mr. Armbrust said he had given up trying to prod Amazon or government regulators, and instead his company began producing its own KN95s in October. The masks are nearly the same as his N95s, but consumers, he said, have been misleadingly programmed to favor the KN95.”
“Last month, he began selling the masks, and within a week, he said, they were already outselling the more protective N95s. ‘If you can’t beat 'em,’ he said, ‘join ’em.’” READ MORE
Some states are paying people not to get vaccinated: “At least four states — Florida, Iowa, Kansas and Tennessee — have recently extended benefits to workers who are fired or quit over their employers’ vaccine requirements. For context, workers who are fired for cause or who quit voluntarily are usually not eligible to receive unemployment benefits. With limited exceptions, only those laid off through no fault of their own have been able to receive such aid.” READ MORE
There is one full-service Sears store left in Pennsylvania: “Sears is breathing its last gasps in Pennsylvania, a sad end for America’s once-largest retailer that employed thousands at a huge, mail-order complex on Roosevelt Boulevard and Philadelphia-area mall stores. Just one full-service Sears department store remains open in Pennsylvania this holiday season, and that’s in Willow Grove, while a stripped-down Sears in Camp Hill sells only mattresses and appliances.”
“Battered by Walmart, online sellers led by Amazon, and a run of bad management, Sears has been disintegrating without much publicity.”
“This month, Sears closed its last department store in its headquarters state of Illinois and the last one in Hawaii.”
“[Author Vicki] Howard noted that Sears ceased publication of its catalog right before the internet and online commerce. Had Sears kept its catalog, Howard said, its transition online would have been easier.” READ MORE
If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren