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When Do You Take Money Off the Table?
In our latest 21 Hats Podcast episode, we talk about what to do with your profits—if you have them.
Here are today’s highlights:
It sounds like an oxymoron, but PE firms are promoting employee ownership.
Remote work is encouraging two big creeps, meetings creep and workday creep.
As the supply-chain chaos continues, more manufacturers are turning to Mexico.
In case you didn’t notice, the economy is booming.
THE 21 HATS PODCAST
Do You Take Money Off The Table? This week, Shawn Busse, Paul Downs, and Jay Goltz discuss their philosophies about taking money out of the business. Of course, you can’t take money off the table unless there’s money on the table. Paul tells us that he once calculated his average earnings for his first 22 years in business and they came to about $11 an hour. But he now expects to make more money in the next five years than he did in the previous 35. We also talk about content marketing, direct mail, and trade shows. Plus: Was the Paycheck Protection Program, despite the billions of dollars in fraud, a success?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Giant private equity firms are putting more than $50 million into supporting employee ownership: “A coalition of more than 60 groups that also includes banks, pension funds and others has signed on to back a new nonprofit aimed at promoting broad-based stock ownership, officials told The Wall Street Journal. Ownership Works, as the new organization is known, will help companies roll out share-ownership programs for employees from top executives to lower-level workers. It launches Tuesday with a goal of creating at least $20 billion in wealth for low- and middle-income employees over the next decade.”
“Ownership Works is founded on the idea that giving stock to lower-level employees, on top of regular benefits and wages, is essential to financially elevating working families, improving racial equity and creating better alignment among workers, management and shareholders.”
“Ownership Works is the brainchild of Pete Stavros, co-head of private equity for the Americas at KKR. The son of a road grader for a construction company who sought but never achieved profit-sharing, Mr. Stavros has devoted much of his career to studying the benefits of shared ownership.”
“KKR began implementing ownership programs at its industrial companies in 2011. The firm has since rolled out programs at nearly all of the companies in its U.S. private-equity portfolio, including garage-door maker CHI Overhead Doors, specialty-films business Charter Next Generation, and 1-800 Contacts.” READ MORE
Remote work has produced a terrible side-effect: too many meetings: “Something else is pushing work into our evenings: White-collar work has become a bonanza of meetings. In the first months of the pandemic, Microsoft saw online meetings soar as offices shut down. By the end of 2020, the number of meetings had doubled. In 2021, it just kept growing. This year it’s hit an all-time high. ‘People have 250 percent more meetings every day than they did before the pandemic,’ says Mary Czerwinski, the research manager of the Human Understanding and Empathy group at Microsoft. ‘That means everything else—like coding and email and writing—is being pushed later.’ Workday creep and meeting creep aren’t two separate trends; they’re the same trend.”
“Traditionally, the researchers said, white-collar workers—or ‘knowledge workers,’ in the modern parlance—have had two productivity peaks in their workday: just before lunch and just after lunch.”
“But since the pandemic, a third and smaller bump of work has emerged in the late evening. Microsoft’s researchers refer to this phenomenon as the ‘triple peak day.’” READ MORE
Amazon continues to upend the advertising industry: “Amazon has become the third-biggest digital advertising company behind Google and Facebook, hitting $31 billion in ad revenue in 2021. Under new CEO Andy Jassy, Amazon is shaking up its ad business to attract TV ad dollars. It's also seeking out new frontiers for ads — including placements in its physical Whole Foods stores. Its growth has also led Walmart, Instacart, Walgreens and other retailers to build their own retail media platforms.”
“Marketers have complained that Amazon is tough to navigate. Amazon said its complex approach is by design, but has rolled out tools to make it easier for marketers to buy and measure ads. Nonetheless, its structure has spawned a cottage industry of firms that specialize in helping marketers navigate the site.”
“Advertising is a tiny sliver of Amazon's business, but it's one of the company's fastest-growing areas, up 32 percent in the fourth quarter, when it broke out its ad business for the first time.”
“Other big retailers and delivery companies including Walmart, Albertsons, and Instacart are scrambling to build their own ad businesses, and hiring top talent to do so.” READ MORE
The supply-chain chaos has manufacturers turning from China to Mexico: “Last year, large American manufacturers solicited chemicals, produce and construction materials and other goods from six times as many suppliers based in Mexico as they did in 2020, according to procurement software firm Jaggaer. At the same time, the number of suppliers in China that received procurement bids declined by 9 percent in 2021, Jaggaer said, using data from its 30 biggest U.S. manufacturing customers with an average of over $30 billion in annual revenues.”
“‘If you’re a manufacturer and you used to have strategic relationships with one or two suppliers that produce the same good or a similar good, we’re now seeing that same manufacturer have relationships with three or four different suppliers,’ said Jim Bureau, chief executive of Morrisville, N.C.-based Jaggaer.”
“The added suppliers tend to be closer to the buyer and its customers, he said. The company tracked a 514 percent increase from 2020 to 2021 in Mexican suppliers receiving bids from its big U.S. buyers and a 155 percent increase in Latin American suppliers receiving bids over the same period.” READ MORE
A CEO talks about building a half-Ukrainian medtech startup during the war: “Literally three days before the start of the war, we signed a deal for a new tranche from our current investors. But in these unfortunate circumstances, even investors were forced to redistribute their assets according to new priorities. We are now actively attracting support from the Ukrainian diaspora in Chicago and from the business community in New York City in order to provide our employees and their families with a stable income. It’s a temporary measure, but if the company survives it will only prove our will to work.”
“Our product combines software and hardware. The latter was produced locally in Ukraine; now the manufacturing has been put on hold as neither our suppliers nor other factories are working.”
“We are currently looking for a contractor in Asia, the U.S. and Europe to relocate some of our manufacturing operations and resume building our product.”
“We plan to not only restart the manufacturing with the new version of our core product, but also to donate a part of our planned batch of 5,000 devices to our veterans when the war ends.” READ MORE
A new survey from the Small Business Majority advocacy group finds business owners increasingly concerned about anti-competitive practices: “Small business owners report experiencing a variety of difficulties in trying to compete fairly and are looking for solutions to these issues. A majority (56 percent) of small business owners say that one or more large companies dominate the market in their industry, and the same percentage agree with a statement that, ‘Large companies have an unfair advantage in my industry or line of work.’ Nearly half (44 percent) agree that there has been an increase in monopolistic practices in recent years.”
Importantly, small businesses agree (82 percent) that our economy is changing and it’s time to update our laws for the modern age. The survey looked at a wide range of practices that create an unequal playing field, such as technology platform practices and contracting.”
“Self-preferencing (where a platform features its products or services over those of another, smaller business) and predatory pricing (such as when a large company sells its products at a loss, undercutting small businesses) each have affected more than one-third of respondents.” READ MORE
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New Jersey is emerging as a national leader in offshore wind: “Not one turbine has been installed off the coast of New Jersey. In fact, not one turbine has been built. And it’s not expected the state’s fledgling offshore wind industry will really take flight until at least the end of 2024 when the first blades start churning out utility-scale megawatts of renewable energy. Yet, a group of industry insiders say they are already hiring, or gearing up to train or hire tens of thousands of specialized workers in coming decades, from painters to scientists to surveyors needed as New Jersey emerges as what they believe will be a national leader in wind.”
“Gov. Phil Murphy has committed to 7,500 megawatts of offshore wind energy by 2035, enough to power about 3 million homes. That means a completely new infrastructure has to be built in the state, including hundreds of skyscraper-high turbines, cables, offshore and offshore substations, and transmission grid connections.” READ MORE
By the way, the economy is booming: “Employers are adding hundreds of thousands of jobs a month, and would hire even more people if they could find them. Consumers are spending, businesses are investing, and wages are rising at their fastest pace in decades. So naturally, economists are warning of a possible recession. Rapid inflation, soaring oil prices and global instability have led forecasters to sharply lower their estimates of economic growth this year, and to raise their probabilities of an outright contraction. Investors share that concern: The bond market last week flashed a warning signal that has often — though not always — foreshadowed a downturn.”
“The United States has regained more than 90 percent of the jobs lost in the early weeks of the pandemic, and employers are continuing to hire at a breakneck pace, adding 431,000 jobs in March alone.”
“The unemployment rate has fallen to 3.6 percent, barely above the pre-pandemic level, which was itself a half-century low.
“But to the doomsayers, the recovery’s remarkable strength carries the seeds of its own destruction.” READ MORE
Senate negotiators have agreed on $10 billion more in Covid spending: “The extra funding is good news for businesses, especially for those with employees who frequently get tested. While it's not required, many businesses are still opting to only allow vaccinated employees into the office, or those who can show a recent negative Covid test. Still other businesses encourage everyone to get tested on a regular basis. In the absence of funding for the past couple of weeks, Covid-testing sites across the U.S. had begun requiring insurance information and billing test takers' insurance companies or the test-takers themselves.”
“As of January this year, insurance companies are required to cover at least eight Covid tests per month per person, but that doesn't mean they're free.”
“Insurance companies can start to raise premiums if their costs spike. That would impact both employers and employees, depending on the type of plan and the level of coverage.” 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