‘You’re in the Valley of Death’
In our latest podcast, the owners talk about one of the most difficult stages growing businesses can face.
Good Morning!
Here are today’s highlights:
Jason Fried says your competitors are not your real competition.
Is now the time for businesses and brands to join the latest Twitter clone?
Employers are budgeting for healthy raises next year.
Michael Girdley says business owners can make things much easier for their loved ones by following the Green Box Exercise.
THE 21 HATS PODCAST
This week, Shawn Busse, Jay Goltz, and Jennifer Kerhin talk about that difficult transition when the owner of a growing business can no longer handle all of the most important tasks herself but also can’t quite afford to hire the people she needs to lighten her load. It’s part of the reason Jennifer, as she’s told us in previous episodes, has been working 12-hour days, six days a week. It’s a challenging transition, and it has a name: It’s the “valley of death,” says Shawn, who compares it to crossing a desert. We also discuss how big the owners want their businesses to get, why important tools and processes seem to break with every $500,000 of revenue growth, and what constitutes the proper care and feeding of salespeople.
Plus: Jay has an idea for owners who are having a hard time selling their businesses. The idea involves selling the business to a key employee in a transaction Jay is calling a WE-SOP. Get it? It’s kind of like an ESOP, but it’s a lease-to-own version of an ESOP. A WE-SOP.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
COMPETITION
Jason Fried, CEO of 37signals (formerly Basecamp) writes about understanding who your real competition is: “Of course your position in the market, and the perception of your brand, influences customers' purchasing decisions. And of course you need to be in the arena to compete, so you can earn customers who provide your revenue. But you can give yourself a better chance by staying small, keeping costs in check, and building a larger margin buffer. The lower your costs, the fewer customers you need to come out ahead. More heads down, less looking around. The competition is your spending.”
“Take Asana. It would be fair to say Basecamp competes with Asana, in a traditional sense. But in 2021, they lost $285 million. In 2020 they lost $210 million. And in 2019 they lost $118 million. And they're on track to lose even more with over $370 million in losses booked for the trailing twelve months. That's closing in on a billion dollars in losses over the last four years.”
“You may have seen their ads in the airport, sponsored posts in your LinkedIn feed, or their logo front and center at a conference. So it would be easy to say they're ‘winning.’ We aren't in the airport, we aren't buying ads on LinkedIn, and we aren't sponsoring conferences. So you might say we're losing.”
“Except that we're profitable. In the competition against our costs, we're coming out ahead. We have enough to run a successful business and serve our employees and customers well. It doesn't matter what Asana (or Monday, or Click Up, or any other company in our space) is doing.” READ MORE
MARKETING
Thread Creative Studio is a copywriting shop in Portland, Oregon, that has released a generative AI tool that writes copy for brands and ecommerce: “The tool is trained on the studio’s 15 years of copywriting and produces copy using five key words related to the product. It's designed for e-commerce customers who have high volumes of product copy. The tool streamlines the process by changing out and creating copy at scale. The studio has been developing its generative AI tool since late 2019, when Thread staffers first saw the potential for the technology in its space. ‘We were at a translation summit and the translators were using AI. That’s when it started, like, Oh, this is something that’s happening in our industry,’ said [Sarah] Lewis, whose role at the studio has been to spread AI literacy among the team. ‘I think one of the most important things during this time is AI literacy and having people really understand what AI is and what it can do,”
“I think bias is one (challenge). I think repetition and lack of creativity (is another). It depends on what you are working with, but we definitely see it in writing. AI doesn’t work without humans.”
“The reality is you can’t ignore the fact that with any sort of technological advancement jobs get lost. And also jobs get created. People talk about AI as if it’s something that is separate from humans, that AI will replace humans. But, like I said, AI doesn’t work without humans.”
“The biggest thing that I would recommend to business owners, to anyone, is to ask questions. Whether that is you read a headline and it's telling you that you can save a lot of money replacing your staff with AI, whether you have someone coming to you saying we can do this much faster and much cheaper than a human can. Question it.” READ MORE
For a few dollars, paid reviewers in Brazil will vouch for just about anything: “In Brazil, where jobs are scarce but digital know-how is common, these services can go for as low as 20 reais (just over $4) each. Tasks for which professional designers, influencers, and marketers would charge up to thousands of dollars can be found on gig work platforms like VintePila, 99Freelas, and Vinteconto for a fraction of the usual price. Among the many services on offer is the niche of gig reviewer: someone hired to make homemade, amateur-style videos to publicly vouch for a product.”
“The enthusiastic reviews posted by these gig workers, however, are not organic expressions of authentic admiration at all. Gig reviewers told Rest of World their paid testimonials are heavily scripted, with no room for real, honest impressions. This means reviewers have no idea whether a product works as they say it does — or, indeed, whether it exists at all.”
“Getting a reviewing job on platforms like VintePila and Vinteconto is a simple — if labor intensive — endeavor, gig reviewers told Rest of World. First, they apply to job ads created by the clients — usually small digital business owners. The offer tends to be accompanied by a script and extra details like the product’s background or the video’s tone.”
“Freelancers then estimate the length of the recording — one full page of the script usually results in at least one minute of video. Both parties agree on a fee, which usually starts at 20 reais (around $4). The client then pays the platform, and the recording begins.” READ MORE
MANAGEMENT
Michael Girdley says business owners can spare their loved ones grief by putting everything they would need to know in an easily found place:
SOCIAL MEDIA
Is it time for businesses to join Threads, now the fastest growing app in history? “Small-business owners might be tired of the constant stream of Twitter clones — but experts say they might want to give Threads a chance. Threads, launched by Facebook parent company Meta Platforms on July 5, quickly gained 30 million sign-ups, according to Meta CEO and founder Mark Zuckerberg. Built on top of Instagram, Threads allows users to bring their Instagram followers with them to a platform that is similar to Twitter. That, experts say, is the key that allows the platform to grow rapidly and ease the burden of testing the waters for businesses.”
“Liz Carter, chief marketing officer at Reputation, said Threads' launch strategy differentiates it from other social media startup options. ‘Instead of limiting it to a small number of influencers [at launch], they've opened the floodgates for anyone to download, sign up through their Instagram account, and quickly import your Insta profile and audience base,’ Carter said. ‘This gives brands, businesses and people instant access to their Meta audience on a new platform meant to be a public conversations app.’”
“Dillon Bernard, digital organizer and head of creative firm Team DB, said businesses should create an account and engage on Threads as a user first — but should only invest their time in social media platforms that feel the most natural to them.” READ MORE
HUMAN RESOURCES
Despite the softening labor market, businesses are budgeting for healthy raises in 2924: “Employers are planning an average increase of 4 percent in their salary budgets in 2024, according to a Salary Budget Planning Survey by advisory services firm WTW, formerly known as Willis Towers Watson. That is down from the actual 4.4 percent increase in 2023, but higher than the 3.1 percent salary increase companies budgeted in 2021 and in pre-pandemic years. The survey found 70 percent of U.S. employers budgeted for pay raises to be either the same or higher in 2023 than 2022. Just 14 percent of companies budgeted for pay raises to be lower than last year.”
“The high salary budgets are driven mostly by concerns over the tighter labor market, with 61 percent of employers citing the shortage of qualified candidates as a factor, with 60 percent citing inflationary pressure, while 24 percent cited higher employee expectations.”
“Retention is still a big issue, although not as big as in previous years as the Great Resignation has lost steam. About 51 percent of employers surveyed said they had difficulty attracting or retaining talent, compared to 57 percent last year. About 35 percent are expecting difficulties in 2024.” READ MORE
THE ENTREPRENEURIAL LIFE
These are stressful times for the people running tech companies: “All Points North, an addiction treatment center in Colorado, published a report examining the findings of a survey conducted by Censuswide among 501 tech executives working in firms with over 1,000 employees. The survey, titled ‘2023 Mental Health in Tech Report,’ was taken between April 27, 2023 and May 15, 2023. The results showed high rates of heavy alcohol use or alcohol-use disorder, substance use and misuse, and poor mental health among tech executives. Many tech leaders also reported being worried about the future of their careers — and whether or not they will have a job. Layoffs and the rise of artificial intelligence make some executives feel insecure in their positions, according to the survey.”
“Long hours and high stress levels cause executives to turn to substance use. Forty-five percent of executives surveyed reported using painkillers like Codeine, Oxytocin, and Vicodin, according to the survey. The use of stimulants and sleeping pills is also common, at 34 percent and 35 percent respectively, according to the report's findings.”
“Along with controlled substances, heavy alcohol use was reported by tech executives. Half of APN's respondents self-identified as heavy drinkers, or those that consume between three and seven alcoholic drinks a day.” READ MORE
OFFICE SPACE
What happens to all of that office furniture? “Herman Miller is one of the most revered makers of office furniture in the world, its designs so esteemed that its Aeron chair, which became a fixture of New York City cubicles, was put in the Museum of Modern Art’s permanent collection. This month, some Herman Miller chairs, which can retail for over $1,000, met a less dignified fate: an appointment with the crushing metal jaws of an excavator. More than three years after the coronavirus pandemic began, about half of the office space in the New York City metro area in June was occupied, according to Kastle Systems, a security-card company tracking activity in office buildings. The hollowing out of the city’s cubicles has raised existential economic and cultural questions, but also a big logistical one: What do you do with all that office furniture?”
“The answer can often be found in the back of a moving truck — en route to the auction block, a liquidator or, more likely, a landfill. Some of the furniture has found new purpose in schools, churches and movers’ living rooms; other pieces have been repackaged by hip resellers, or shipped across the globe.”
“Lior Rachmany, the chief executive of Dumbo Moving and Storage, said a rush of businesses put their furnishings into the company’s storage facilities in 2021 and 2022. Close to 2,000 midsize companies in the region, from law firms to tech start-ups, have stored office equipment in Dumbo’s three New Jersey warehouses since Covid hit. We have ‘never seen so many Herman Miller chairs,’ he said.”
“Despite efforts to reuse and repurpose office equipment, most still ends up in the trash, said Trevor Langdon, the chief executive of Green Standards, a sustainability consulting company that helps to minimize office waste. Based on 2018 federal statistics on waste, the latest year with available data, Mr. Langdon estimates that more than 10 million tons of office furniture in the United States end up in a landfill every year.” READ MORE
OPPORTUNITIES
These startups believe insect farming is the future of food: “The edible insect market is expected to grow to $9.6 billion by 2030. Another stat that’s going up is the global demand for protein, which is set to hit 60 percent by 2050. There are, of course, obvious (six-legged) challenges to adoption of edible insects. That’s why startups are easing in with a more palatable option: insect-based animal feed and pet food. That means farm animals and even our furry domesticated friends are up first to the bug buffet.”
“The impact of edible insects on the environment could be massive: Research suggests using insects to process waste generates 90 percent less greenhouse gas emissions compared to landfills or composting, and that insect farming saves 100 times the CO2 emissions compared to livestock.”
“Another venture, Ovipost, farms and sells insects to zoos, aquariums, animal rescues, and pet stores, but is similarly eyeing a shift to human consumption. ‘Insects are the most efficient and climate-friendly way to convert inexpensive byproducts into nutritionally dense protein,’ says Trina Chiasson, Ovipost's co-founder and CEO.”
“Chiasson says the Florida-based company, founded in 2017, is building its first human-grade processing facility in the next year to create insect-based protein powders for use in human and pet food.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
Are Your WFH-ers Really Working? This week, Gene Marks talks about what he calls the “TWATS,” which is shorthand for hybrid workers who choose to work in the office only on Tuesdays, Wednesdays, and Thursdays. Gene doesn’t think it’s a coincidence that they’ve chosen to work from home on Mondays and Fridays. Plus: Gene also points to what he considers the Achilles heel of artificial intelligence and says that business owners should think twice about listening to the Supreme Court when it comes to discriminating against groups of people.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren