Would Your Business Pass the Bus Test?
The bus test, says Michael Girdley, is just one reason you should be standardizing and documenting your business practices.
Good Morning!
Here are today’s highlights:
Gene Marks writes about the big changes coming to the real estate business.
The SBA increases its maximum loan amount.
The hottest job market in a generation comes to an end.
There’s an easy fix to building codes that might help solve the housing crisis.
MANAGEMENT
Have you documented your standard operating procedures? “Each person at a company is key to running a specific function or role. They develop specialized knowledge that makes them the best at what they do. So what if they get hit by a bus? Can someone step in and fill the gap? If so, how much time, money, and disruption will it cost you? Probably a lot. And on a small team, that level of interruption can cause major problems for your business. But SOPs are valuable beyond unscheduled employee–bus interactions. Standardizing your processes also saves time, highlights which parts could be automated/delegated/outsourced, and makes it easy to set measurable performance standards.”
“It’s easy to jump off the deep end and say everything needs an SOP. But start slow. First, get the company together and build a list of tasks and processes that meet some or all of these criteria: critical to the business, impact your bottom line, error-prone or have a history of mistakes, require a high degree of accuracy or precision, repetitive, difficult for new employees to learn, governed by regulations or safety guidelines.”
“Before you start writing your steps, make sure you have everything you need to hand. Get input from anyone on your team who may be able to provide insights. Collect any existing policies, procedures, or documentation — especially any official regulations, if they apply to the process. Then, critically, observe the task or process to better understand the steps involved, and any potential issues that may arise.”
“Ask someone on your team to test out the SOP. Get their feedback about the ease of use, clarity, etc. Does each step work as it was written? Is every step in the correct order? Can the task be performed as instructed? Is it complete? Anything missing? Anything incorrect?” READ MORE
REAL ESTATE
Gene Marks writes about how Philadelphia-area real estate agents are adapting to the new rules: “Under the new system, commissions will no longer be paid entirely by sellers, and most buyers will enter into written agreements with their agents about how much they will pay. Previously, real estate commissions — which generally range between 5 percent and 6 percent of a home’s sales price — were generally considered to be non-negotiable. Now, everything’s up for grabs. If you’re a homebuyer or seller, this will give you more flexibility and could lower your costs. If you’re running a real estate agency, however, this change could introduce new challenges, and for some, new opportunities.”
“Some agents, like Mark Wade, a Philadelphia-based Realtor at Berkshire Hathaway HomeServices and Fox & Roach Realtors, believe this could drive many Realtors out of the industry. ‘The new rules will eventually change the business model of selling real estate in many ways, and I think the NAR will lose a significant amount of membership because of it,’ he said.”
“Wade thinks that this will also bring big opportunities to those Realtors that are open to change. ‘Because the fee structure is changing, I think there will be a new kind of Realtor, a transactional coordinator, who will help buyers navigate a transaction with a la carte services,’ he said.” READ MORE
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Read a detailed explanation of the change and of the 21 Hats business plan.
FINANCE
The SBA is increasing its maximum loan amount and targeting green projects: “The agency's move — branded as the SBA's Green Lender Initiative — targets its Community Advantage program, the mission-driven component of the SBA's prime 7(a) loan program. The agency is increasing the maximum loan size available through the program to $500,000 — up from a current $350,000 cap that also requires projects to be in specific geographic areas. The agency will be creating an application process for participating lenders to expand their geographic reach. It also will allow lenders to apply to expand their loan sizes up to $1 million — or $2 million for climate-related projects.”
“The SBA's latest actions would allow businesses — with the help of partner lenders like banks and Community Development Financial Institutions — to tap into parts of the Environmental Protection Agency's $27 billion Greenhouse Gas Reduction Fund.”
“That fund, authorized by the inflation Reduction Act signed into law by President Biden, provides financing for climate-friendly projects, including residential and commercial energy-efficiency projects across the country.” READ MORE
HUMAN RESOURCES
The Wall Street Journal says the hottest job market in a generation has come to an end: “The red-hot hiring and rock-bottom unemployment that helped millions of workers find new gigs, boost their wages, and reinvent their careers are giving way to more prosaic times. While the market is still healthy by many measures, signs of difficulty are creeping in. The unemployment rate ticked up to 4.1 percent last month—the first time it has crossed above 4 percent since 2021. That’s still low by historical measures, but it’s up from 3.4 percent early last year. Workers have stopped quitting jobs at a frenzied pace, and college grads are having a hard time breaking into the market at all. The number of open positions for every unemployed person is back to the pre-pandemic level of 1.2, down from over 2 in 2022. And while the risk of getting laid off is still low, hiring has fallen beneath its pre-Covid level.”
“The U.S. economy is still adding a solid number of jobs each month—206,000 in June—continuing an impressive 42 consecutive months of employment growth. Last month’s hiring was concentrated in a few sectors, however, including healthcare, construction and government work. Other occupations, such as restaurant work and certain white-collar jobs, have plateaued or dipped after feverish gains during the pandemic.”
“Last week’s beige book, a regular economic update from the Federal Reserve’s regional banks, reported that some employers are still struggling to find skilled workers for manufacturing, engineering, accounting and other jobs.”
“But most regions also described signs of labor-market cooling. The Minneapolis Fed said job fairs and job centers were experiencing increased traffic. Hotels in Boston are ‘finally adequately staffed’ after labor shortages, according to the Boston Fed. And many businesses in the Kansas City Fed’s district have reduced staff hours and pulled back on job postings.” READ MORE
REGULATION
Do we really need two stairwells? “In their quest to build more and bring down costs, YIMBYs have identified one overlooked hang-up: stairs. Yes, the humble stairwell is an unlikely but powerful foe. More specifically, they're taking aim at a widespread rule that requires almost every new apartment building in the U.S. to include at least two separate stairwells. This part of local codes, they say, is an outdated safety measure that really just makes apartment units smaller, more expensive, and darker (yes, darker).”
“When developers are forced to devote more square footage to stairs, that means less space for living rooms or bedrooms. Entire units might end up on the cutting-room floor. In many cases, the wasted square footage is enough to hamstring the builder's profit and sink a project.”
“Tweaking building codes wouldn't mean sacrificing safety in the name of efficiency. In a moderately sized apartment building of five or six stories, advocates argue, a single stairwell, combined with the latest fire-stopping materials, sprinkler systems, and limits on the number of units, is more than enough to ensure safety.”
“In fact, moving to this type of layout would bring American apartments in line with European and Asian countries that have allowed this kind of development for decades.” READ MORE
CUSTOMER SERVICE
This app has concluded that being mean to its customers pays off in profits: “Across the internet, nearly a decade's worth of posts, comments, and blogs lament Duolingo's brusque bedside manner, which one Redditor half-jokingly described as an attempt at emotional blackmail to spur reengagement. The nagging goes beyond email subject lines and push notifications; inactive users might look down at their phones to find that the Duolingo app icon suddenly depicts a sadder and older version of the owl's face — or one that's melting into a carnivalesque nightmare. Parents have even complained that the capricious owl is attacking their children's brains and making them cry. Though it's widely accepted that Duolingo can be a real jerk, some have gone so far as to suggest the company's manipulative messaging is flat-out unethical.”
“For Duolingo, though, the relentless nagging seems to be a boon to its bottom line. Following the first quarter of 2024, the company reported 54-percent year-over-year growth in daily active users (to over 31 million), 45-percent growth in revenue, and record profitability. Not too shabby for an app whose affect has been described as ‘psychotic,’ ‘unhinged,’ and ‘abusive’ — attributes that, if anything, the company appears to be leaning into.”
“It might be an overstatement to call tough love the secret sauce for engaging Gen Z customers. But marketing experts say it's part of the package for Zoomer-marketing magic. ‘Younger age groups engaging with marketing are looking for a company that has a special, unique personality that's memorable and feels authentic,’ said Brian Honigman, a marketing consultant based in Philadelphia.”
“A Duolingo spokesperson told me the company began leaning into its owl's sassy online persona a few years after an ‘evil Duolingo owl’ meme went viral on Tumblr in 2017. ‘Since then, we've had numerous social-first marketing campaigns that embrace the meme,’ the spokesperson said.” READ MORE
PRICING
The FTC is launching a probe into what it calls surveillance pricing—the use of AI to change prices rapidly: “The FTC says the practice allows companies to charge different customers different prices. The agency is serving eight companies with a mandatory request for information — all companies it says that advertise their AI and other tech tools along with a trove of customer information to target prices to individual customers. The list includes Mastercard, JPMorgan Chase, Accenture and consulting giant McKinsey. It also includes software firm Task, which counts McDonald’s and Starbucks as clients; Revionics, which works with Home Depot, Tractor Supply, and grocery chain Hannaford; Bloomreach, which services FreshDirect, Total Wine and Puma; and Pros, which was named Microsoft’s internet service vendor of the year this year.”
“The FTC is demanding information about the types of products and services offered; how the companies collect consumer data; who their customers are; how the clients are using this product or service; and what impact it has on consumer pricing.” READ MORE
FROM OUR SPONSOR: The Great Game of Business
Here’s why I love the Great Game of Business Conference: Going back more than 15 years, I have been to this conference more times than I can remember, and I’ve seen some great speakers, great presentations, great discussions. But here’s the thing: that’s not why I love this conference. I love it because it attracts an amazing array of entrepreneurs and business owners. I’ve made countless friends, and I’ve learned so much from the willingness of Great Game businesses to share their journeys – the good, the bad, and the ugly. This year’s conference is in Arlington, Texas. It runs from September 10th to 12th. As always, it will focus on engaging and educating your staff to build a company culture where employees feel valued and where owners don’t have to solve every problem. If you do sign up, be sure to use the code “21hats” which will get you $150 off the list price. GET MORE INFORMATION
THE 21 HATS PODCAST
When They’re Not Quite Bad Enough to Fire: This week, Paul Downs, Liz Picarazzi, and Jaci Russo discuss how they review employees and how they make the hard calls when someone is right on the cusp. The conversation starts with a couple of tricky situations that Paul is trying to think through and then progresses through several other issues: Do you use personality tests to avoid or resolve personality conflicts? Paul, Liz, and Jaci have very different takes on Myers-Briggs and the like. Do you make sure no one is ever surprised by a negative review? Do you keep mediocre performers even when you find someone who might be better? “I need to go shut the door before I say this,” Paul tells us.
Plus: Jaci finds a use for ChatGPT. Liz may have found an alternative manufacturer in an unexpected country. And a business owner asks whether he should report a competing company that is endangering its customers and employees. Should the owner report them even though he believes he could face retaliation?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren