You Have Three Jobs
Alan Pentz says business owners should ignore the “leadership industrial complex” and focus on three things they need to do.
Good Morning!
Here are today’s highlights:
AI apps are starting to have a real impact on the construction industry.
Your periodic reminder: Business-interruption insurance? Cyber insurance?
After a partnership ends in litigation, an entrepreneur gets a second chance.
In California, a contractor shifts from building pools to building ADUs.
MANAGEMENT
Alan Pentz says job one is setting the vision: “When I started my company, I would go to great lengths to try to develop a vision by committee. It always ended badly. Your employees’ job isn’t to set vision. If it were, they’d be owners and leaders. They want to work within someone else’s vision. This doesn’t mean you don’t get ideas and input from people. Of course you do, but just remember if you are the leader, it’s your vision.”
“Where most leaders fail on resources, however, is in not having the stomach to reallocate them. Different groups or people within a company will fight for staff and budget. If you peanut-butter-spread your resources across everything, you get a whole lot of not much. If you don’t have the stomach to take resources from one group and give them to another you aren’t going to get what you want. No one else is going to do this.”
“Most companies get stuck because the team isn’t capable of growing to the next level. All leaders allow loyalty and personal feelings to affect their judgment in this area. It’s inevitable as we are humans but unfortunately the cost is worse performance for the company as a whole. I’ve certainly done it over and over but when I was able to face the truth and have more mature conversations with people on my management team and to replace them when necessary, the changes caused breakthrough growth.”
“Beware the Leadership Industrial Complex: Beyond these it’s all a bunch of bullshit in my view: being vulnerable, putting your people first, blah blah blah. It’s all happy talk that’ll get you fired or put you out of business in the end.” READ MORE
SUBSCRIBER REMINDER
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ARTIFICIAL INTELLIGENCE
Gene Marks says AI apps are ready to have an impact on the construction industry: “Search for articles on how AI is used in the construction industry and, if you’re like me, you’ll start getting frustrated. There are countless thought pieces from thought leaders about all the ways that AI can and will change the industry, but very few that tell actual stories of actual technologies that are actually being used by actual construction companies. The good news: this is starting to change. AI apps for construction companies are hitting the market and maturing. These are actual technologies from actual companies that are actually available right now.”
“Geekwire’s Kurt Schlosser tells the story of a pilot program in Seattle where builder Skansa is using robots from Nextera Robotics to provide high-resolution, 360-degree photographic images so that Skanska’s development team can keep ‘near-constant eyes on a project site.’”
“A startup called Togal.ai has launched a ChatGPT-based application that enables construction companies to upload charts, designs, documents, and other files into its own large language model so that workers can chat, query, and get answers to questions conversationally.”
“A Bay Area-based company called Resolve is now selling virtual and augmented reality apps that use AI to walk though job sites and then ‘virtually perform safety inspections, emergency procedures, or lock out/tag out to ensure alignment with building operations needs.’”
“In a case study, Resolve says it saved one construction client more than $3 million by flagging ‘over 1,000 potential issues during collaborative VR review sessions’ that would have been ‘missed with traditional review processes.’” READ MORE
FINANCE
Here’s another cautionary tale about partnerships—but with a happy ending: “Earlier this month, [Chloe] Coscarelli opened an all-day cafe called Chloe at 185 Bleecker Street in New York City. That's the same address where she opened her groundbreaking vegan cafe By Chole in 2015—only to exit the business two years later in a messy dispute with her business partners. ‘It's an incredible feeling! Everything just feels right,’ says Coscarelli, reflecting on her first two weeks of operations. ‘I wasn't necessarily planning for it to happen in the same location where I first opened By Chloe, but when I heard the space was available and I walked in to look at it, I couldn't imagine re-starting anywhere else.’”
“Coscarelli was one of the first chefs to make plant-based cooking fashionable. In 2010, she became the first vegan chef to win Food Network's cooking competition Cupcake Wars. In 2015, she partnered with ESquared Hospitality, a company that owned several New York City restaurants, to open the original By Chloe.”
“The collaboration started out as a buzzy story of twenty-something women making it in the city. Coscarelli co-founded the new restaurant with ESquared's Samantha Wasser, whose father owned the hospitality company. In 2017, Inc. reported that By Chloe had grown to seven restaurants and was expected to take in $30 million in revenue by the end of the year.”
“By then, however, Coscarelli was no longer involved with the restaurants that bore her name. Coscarelli claimed in a 2016 lawsuit that ESquared had changed the terms of their agreement and kept her out of ownership of future restaurants. A mediator sided with ESquared, which cut ties with Coscarelli.”
“She later sued the restaurant group for trademark infringement for the use of her name and had her ownership stake reinstated in 2020, but ESquared filed for bankruptcy soon after, and the original By Chloe restaurants all rebranded or closed.” READ MORE
INSURANCE
Her business suffered catastrophic flooding twice in three weeks: “Maria Vance was ready to restart her small business in St. Johnsbury, Vt., on Tuesday, but then the torrential rains came — again. ‘This is insane. I never would have imagined this would happen, especially twice inside of one month,’ Vance said in a telephone interview on Tuesday. ‘It’s crazy.’ Just three weeks ago, the remains of Hurricane Beryl blew through the area, unleashing devastating floodwaters and destroying much of Vance’s custom printing business.”
“On July 11, that storm pushed 5 1/2 feet of water from the nearby Passumpsic River into the former Grange Hall on Memorial Drive where she runs cheaptotes. ‘I lost all of our inventory, most of our machinery, and just a lot of equipment, she said. ‘We just bought the business three years ago, so we don’t really have a choice — we have to get back up and running.’”
“They brought in new machinery and restocked their supplies. The plan was to restart full operations on Tuesday. But what she expected to be a minor rain event turned instead into a deluge. Vance’s husband managed to make his way into St. Johnsbury early Tuesday and move some of the equipment to an upper level and out of danger, she said. But the mud has returned.”
“Last year, Vance said the business generated $500,000. Her weather-related losses for the first seven months of 2024 equal $200,000, she said. Vance said she bought the business after working at the company for four years. She was able to purchase the operation with financing from two banks. Both told her she would not need flood insurance, she said.” READ MORE
The growing price tag of the CrowdStrike outage is a stark reminder for businesses to get cyber insurance: “A report by cloud monitoring firm Parametrix Insurance estimated the direct financial loss among Fortune 500 companies —excluding Microsoft Corp. — from the CrowdStrike outage that disabled computers around the world on July 19 was $5.4 billion. Meanwhile, the portion of the loss likely to be covered under existing cyber insurance policies will be no more than 10 percent to 20 percent. The biggest loser by industry is the health care sector, with a nearly $2 billion loss, followed by banking at $1.15 billion.”
“Since CrowdStrike mostly impacted larger companies, its fallout was more limited than people originally worried. ‘It’s not quite the systemic event that I think most of the insurance markets fear could happen,’ [Christopher Keegan, cyber insurance leader at Brown & Brown] said.”
“That means smaller businesses need to take this moment to revisit their own insurance and decide if their coverage is sufficient. Keegan said many plans offer more than monetary damages when things go south.”
“Most policies set up a small business owner with experts in the event something bad happens. That includes experts who can deal with ransom demands from ransomware attacks, or public relations teams that can help with data breach fallout.” READ MORE
HOUSING
In California, a contractor shifts from building pools to building ADUs.: “L.A. has permitted more accessory dwelling units per capita than any other county in the state, with lower- and middle-income cities approving the most construction, the data show. It’s too early to tell if the ADU boom has changed the region’s housing-affordability crisis, which has pushed some to leave the region in search of more affordable homes. But the data suggest that some cities that built the most ADUs saw smaller population losses than those that built the least.”
“Hector Lopez, 55, has worked in construction in the San Fernando Valley since he was 16. He now runs a family contracting business, which allowed him to help build three ADUs in the city of San Fernando since 2021 for his children’s homes. ‘It’s really hard nowadays for the new generation to buy a house,’ he said, voicing a common complaint. So he built less-costly ADUs to generate the rental income that helps his children afford their mortgages.”
“At his daughter’s home, his company completed two ADUs: a 450-square-foot converted garage that rents for around $1,500 a month, and a 1,200-square-foot stand-alone unit that brings in $3,200.”
“Lopez’s firm once specialized in building swimming pools, but since state regulations changed in 2016 to allow ADUs in an effort to relieve a statewide housing shortage, customers have flocked toward building rentable square footage. Pools are nice, he said, but with ADUs, customers ‘know they’re going to get something back from them.’” READ MORE
STARTUPS
Business Insider lists 13 sports startups that are poised to shake up the industry: “We asked top venture-capital firms and other investors in sports to nominate companies they have and have not invested in. They recommended a wide variety of early-stage companies across the sports landscape. The startups ranged from upstarts tapping into the rise of running clubs to businesses building responsible gaming tools for sports betting to an upcoming women's basketball league. Some aren't traditional sports companies but have developed tech that could transform the industry.”
“Commonwealth is a platform where people can buy into an athlete's career and get a cut of their earnings. It's facilitated offerings for racehorses, including 2023 Kentucky Derby winner Mage and Country Grammar, winner of the 2022 G1 Dubai World Cup, and it expanded into golf and tennis last year. In athlete offerings, the athlete agrees to share a percentage of their annual income with investors over a set period of time in exchange for the money raised.”
“Bandit is a New York-based running apparel brand that's built a cult following through content, commerce, and community-building, including hosting pop-ups at marathons and other running events. Running clubs are thriving right now as young people turn to them, sometimes to curb loneliness. Bandit is helping drive this trend and is poised to benefit from it.”
“Boomerang is a lost-and-found platform for sports venues. Lots of companies are innovating on the in-venue experience, but the lost-and-found space isn't one that's seen a ton of disruption. Boomerang is helping stadium operators run more efficiently, and customers recover lost items. ‘Boomerang will transform the sports and entertainment industry by reuniting fans with their lost items,’ said Wayne Kimmel, managing partner at SeventySix Capital, which is an investor in Boomerang.” READ MORE
Meanwhile, a baseball-oriented version of Top Golf is coming to the U.S.: “Named Batbox, the concept combines hospitality, sports and an immersive baseball experience. Utilizing Strikezon, a proprietary baseball simulator, they aim to provide an experience designed for people of all ages to compete with friends and family in a social and competitive atmosphere. The brand has just closed its $7.3 million Series A funding round.”
“This capital infusion will drive the company's growth strategy, with plans to establish over 25 locations in the U.S. by 2030 including cities like Dallas, Houston, and Boston, and other Major League Baseball markets. Their first U.S. location is set to debut in Addison, Texas early next year.”
“In groups of up to 18 players per bay, customers can compete in teams in a full 3-, 6-, or 9-inning ball game or challenge their friends in a Home-Run Derby or pitching contest. All the while, they can cheer for their favorite sports team on television and enjoy a food and beverage offering.” READ MORE
THE 21 HATS PODCAST
Beyond Trust Falls: An Event Planner Plans an Offsite: This week, Shawn Busse, Jay Goltz, and Jennifer Kerhin talk about what it takes to plan and execute an employee retreat—especially in our post-Covid, more-remote environment. Do you go offsite? Do you take everybody? Do you delegate the planning? Do you try to measure the ROI? Jennifer tells us about the interesting responses she got when she encouraged her employees at her retreat to ask her anything. Shawn explains why he let his leadership team do the planning—and didn’t set a budget. Jay, meanwhile, offers a slightly different perspective: “My company retreat,” he tells us, “is I cut back on my advertising. That's my retreat.”
Plus: How well does The E-Myth hold up as a playbook for business owners? Is it still relevant? Or was it written for a type of business that is far less prevalent today? And Jay tells us what he thinks of Wayfair opening a massive brick-and-mortar furniture store right down the expressway from his furniture store.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren