You Don’t Have to Go Fishing
Do you still have passion for running your business? If so, says Lou Mosca, there’s no reason to be in a rush to retire.
Good Morning!
Here are today’s highlights:
Shawn Busse thinks QuickBooks is setting itself up for a fall.
Are hair salons better positioned than restaurants to go gratuity-free?
Signet Jewelers is using AI to personalize its homepage offerings based on where else customers shop.
A startup wants to be the Zillow for small businesses.
MANAGEMENT
In this week’s video, Lou Mosca encourages older business owners not to rush into retirement: “When I turned 65, the thought of slowing down or retiring never crossed my mind. For many business owners who began their entrepreneurial journey in their 30s or 40s, the dedication and effort put into building something special for themselves and their families remain a driving force, regardless of age. I think about a friend in Buffalo, who started his business as a young pup, but even now—he’s a couple of years older than I am—his business is still his baby. The passion and burning desire to see his business thrive has not diminished with age. If you have the passion, keep pushing forward.” CONNECT WITH LOU
PRICING
Shawn Busse isn’t happy about getting another price increase from QuickBooks: “Once more they are referring to me as ‘their Valued Customer’ (capital letters, even!) and talking about how much they've improved their services over the last year. I don't know about you, but I certainly don't feel any Earth-shattering improvements. Of course, we all know the truth. With software as a service, customers are mostly captive and have little choice but to accept price increases. Shareholders love ‘free margin,’ and this is reflected in the stock price of all these tech-companies.
“Entrenched businesses like QuickBooks continue to go up market, raising their prices. Meanwhile, new competitors arise and feed off the lower end of the market that's looking for a better deal. Eventually there's a tipping point, and the entire market shifts away from the incumbent.”
“I saw this happen with Quark (95 percent market share!) when Adobe entered the desktop publishing market in the late 90s. Today, NO ONE uses Quark. Fusion 360/Sketchup did the same thing to innumerable CAD offerings over the last decade. Blackberry, anyone???”
“As owner-run businesses, we don't have to succumb to the same forces that drive QuickBooks to expensive mediocrity. We can shift and change our businesses and look to the long-term opportunity. Wall Street and private equity have no choice but to overprice their products for the benefit of shareholders (and at the expense of clients).” READ MORE
In the Bay Area, hair stylists are doing away with tipping: “The shift, one undertaken by a growing number of Bay Area salon owners and stylists, has upended the ingrained, albeit unpopular, tipping culture in the beauty industry. An estimated 15 percent to 25 percent of U.S. hair stylists’ income comes from tips. And despite how much customers hate tipping — 66 percent of those surveyed by Bankrate said they dislike the practice, and 30 percent said it is ‘out of control’ — it’s so deeply entrenched that many stylists have found it impossible to uncouple the service from the service gratuity.”
“But gratuity-free pricing is having a moment in the Bay Area hairstylist community, much as it did several years ago in the restaurant industry. In that case, many restaurants had to quickly backtrack after facing blowback from servers or customers. Stylists, however, may be better positioned to enforce an equitable pricing model that promises a better experience for all parties.”
“Emma Maciaszek, a 24-year-old hair stylist, opened Poppy Salon in February in the Inner Richmond. This was the first time Maciaszek — who specializes in color services such as “lived-in” blond, highlights, and balayage — had full ownership of her work, and she was ready for a paradigm shift. ‘On June 1st, I will be updating all services to hourly, gratuity-free pricing,’ she announced on Instagram.”
“Gen Z clients are especially receptive to gratuity-free pricing, said Maciaszek, who removed the ‘add tip’ option from her Stripe checkout. She charges $165 an hour, a price chosen based on her eight years of experience and the expenses she incurs. It’s roughly equivalent to what she earned with tips, she said — previously, she charged around $285 for highlights, which typically takes around two hours on fine hair; with a 20-percent gratuity, it came to $342.” READ MORE
SUBSCRIBER REMINDER
This is a great time to become a member of the 21 Hats Community: “Starting August 5, only paid subscribers will receive the full 21 Hats Morning Report, which curates the most important news of the day specifically for business owners. Paid subscribers also get access to the 21 Hats Sounding Board, our dedicated Slack channel, where you can exchange recommendations and ideas and questions with like-minded owners. Paid subscribers also get access to a variety of workshops and events.
Here’s what it will cost: Just $9 a month, or you can make one annual payment of $99 and get a free month. Or you can join as a Founding Member, which entitles you to attend our monthly mastermind Zoom where owners compare notes on what’s working and what isn’t and also meet special guests who share their expertise and experiences.
“The guiding philosophy of 21 Hats is that you do indeed have to wear a lot of hats to build a business, and no one is expert at all of them. We believe the most valuable support an owner can get comes from engaging with other owners on similar journeys to get the kinds of insights only another owner can offer.”
Read a detailed explanation of the change and of the 21 Hats business plan.
MARKETING
The CEO of Signet Jewelers talks about how she’s trying to drive more online sales: “The parent of chains such as Zales, Kay Jewelers, and Diamonds Direct, as well as online retailers like Blue Nile, surveys millions of dating couples nationally about which milestones they have experienced in their relationship. Signet identified 45 milestones—such as moving in together, meeting your partner’s parents, and saying ‘I love you’ on social media—and uses those milestones to deliver personalized marketing messages about engagement rings at just the right time. It’s part of a push by Signet Chief Executive Virginia ‘Gina’ Drosos to better connect with jewelry customers as she seeks to accelerate the company’s pivot away from shrinking shopping malls while boosting sales online.”
“There was a belief within the company that e-commerce would cannibalize store sales—and that no one would ever buy an engagement ring online. In fact, e-commerce has increased store sales.”
“We’ve introduced multiple digital experiences that create more trust in buying decisions. These include virtual jewelry consultants—live people whom customers can connect with.”
“We have the biggest opportunity to grow our market share in lower-priced fashion jewelry and self-purchases in and out of malls. Think about women buying jewelry under $500 for themselves.”
“AI is becoming increasingly important in how we do business because it’s personalizing everything. The most obvious online one is the home page. It isn’t one universal storefront. If you went to one of our websites, you would see a different home page than what I would see. Your home page is personalized based on things you’ve been shopping for online elsewhere.” READ MORE
HUMAN RESOURCES
In California, a court ruling has preserved the gig-economy business model: “California’s Supreme Court upheld a lower-court ruling that said Proposition 22, a 2020 ballot measure that allowed the companies to continue classifying their drivers as gig workers, was constitutional. Some ride-share drivers and a labor union had challenged that decision, leading to a prolonged legal fight that wound up in the state’s highest court. Uber and others are in a global tug of war with regulators over whether and how to grant more benefits such as paid sick leave and health insurance to workers in the so-called gig economy, where apps distribute individual tasks to a pool of people whom companies generally regard as independent contractors.”
“Under Proposition 22, the companies offer a minimum earnings guarantee, health insurance for drivers who work 15 hours or more a week, occupational accident insurance coverage and other protections. Critics say that the benefits fall short of those awarded to full-time employees.”
“Proposition 22’s successful passage set the tone for gig-worker regulation in the rest of the country. Washington state later passed a law preserving the companies’ independent-contractor models. The companies reached a settlement with the attorney general of Massachusetts last month that promised workers a minimum wage alongside some benefits, mirroring Proposition 22.” READ MORE
MANUFACTURING
We are building a lot of manufacturing capacity right here in the U.S.
STARTUPS
SMB.co wants to be Zillow for small businesses: “The goal, [CEO Joe] Brown said, is to make it easier to buy and sell small businesses – a process his startup believes is complicated and outdated. Brown said 98 percent of small business owners don’t know what their business is worth, and 86 percent lack an exit plan. Of the small businesses that do go to market, 80 percent never exit successfully. SMB.co, initially, will act as a matchmaker for buyers, sellers, and brokers.”
“It’s estimated 2,500 small businesses are bought and sold every day, Brown said – a number that’s picking up steam as Baby Boomers look to retire. Boomers are poised to sell or bequeath $10 trillion worth of assets in the coming years – assets they hold in more than 12 million privately owned businesses nationwide, according to the California Association of Business Brokers.”
“‘There's a lot of businesses where it’s just a retiring owner, and they have nobody to hand it off to – whether in their personal family or in their direct network,’ Brown said. SMB.co’s M&A platform will ‘open that (opportunity) to their local community, and every other investor in the marketplace,’ he said.”
“The company also will offer a database of available small businesses as well as automated business evaluations. ‘If you know the value of your home, you should know the value of your actual business,’ Brown said.” READ MORE
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