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Edition #11

September 20th, 2019


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We make missteps often, and thankfully we've heard feedback that the name of our weekly newsletter felt "off." It turns out that our inside joke about the rigors and daily battle of operating a small business came across differently than intended. You'll now receive the adventur.es Weekly with the same stream of content for those who grind away in small business.

How Adam Neumann's 'over-the-top-style' built WeWork (
Wall Street Journal $)
+ Here at adventur.es, we love buying simple businesses that produce goods and services profitably while serving customers with excellence. At the other end of the complexity scale, when you mix high confidence, grand visions, and 'tech' investment, companies like WeWork are born. Here are a few lessons to keep in mind in the wake of the postponed WeWork IPO:

1. Incentives matter. When Adam Neumann was cashing out his stake in the company worth hundreds of millions of dollars, analysts were forced to ask about the optics of a captain jumping ship while his crew remained aboard.

2. Profits still matter. While many venture-backed companies burn cash to achieve escape velocity (generating free cash flow), there comes a time in every company's timeline when it must become self-sustaining. As we near the late part of the economic cycle, private companies have been attracting ever greater sums of money to subsidize losses and growth. Public market investors seem to be growing more impatient for sustainable business models with the latest crop of cash-burning businesses coming to the market.

3. Business models matter. In WeWork's case (matching short term assets - subleases - with long term liabilities - leases), there is inherent leverage built into the business model. As everyone knows, leverage only magnifies results. Whether or not you believe WeWork as a company will ultimately be successful depends on whether you believe in its business model, not necessarily whether you believe that the company can execute. It doesn't matter how well a company executes if it executes on a bad business model.

In other news, stay tuned over the next few weeks for the release of our free annotated audiobook The Messy Marketplace in podcast format!

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The strategy behind TikTok's global rise (Harvard Business Review)
+ "His strategy of dual versions of Tik Tok – one for China’s internet censored market and another for the rest of the world – could be a new model for other digital content companies aiming for such global reach – including China-based digital startups with new ambitions to venture out beyond the home market. Their story may also hold lessons for American companies who have watched similar ventures into China meet serious constraints."

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Casper, the direct-to-consumer mattress company, is vying to become the "Nike of sleep" (New York Times)
+ While direct-to-consumer operating models can put pressure on sleepy incumbents, it isn't a cure-all. Casper is an illustrative case for how DTC brands are being forced into new verticals to find a path to profitability.

MoviePass is shutting down September 14th (The Verge)
+ While the $10 monthly fee for unlimited movie tickets was a fan favorite, its ultimate demise was caused by a financially untenable business model. Turns out, it's hard to "lose money on each unit and make it up in volume."

An overview of US retail bankruptcies and store closures in first half of 2019 (BDO)
+ "Retailers of all scale and size have closed a combined 7,000 stores so far this year, already exceeding all prior full years. For 2018 overall, total store closures were just under 6,000, while Coresight Research predicts over 12,000 stores will be closed this year."

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Toilet paper startups show how to get creative with marketing (The Hustle)
+ "But these rump-wiping rookies may have found the crack in Big TP’s — ahem — business model… and if consumers prefer these well-made wipes, Charmin and the gang may have to start pushing some premium paper."

How Instagram became the new mall (Modern Retail)
+ This post details how Insta is slowly but surely becoming a new face of retail for DTC and online brands.

The UAW's first strike in a decade could cost GM $100 per day (   The Hustle   )  + "The UAW also represents employees who work at Ford and Fiat Chrysler… but the union specifically chose to attack GM for prioritizing profits over ’ployees. Over the past 3 years, General Motors made $35B — but last year the automaker closed 4 factories."

The UAW's first strike in a decade could cost GM $100 per day (The Hustle)
+ "The UAW also represents employees who work at Ford and Fiat Chrysler… but the union specifically chose to attack GM for prioritizing profits over ’ployees. Over the past 3 years, General Motors made $35B — but last year the automaker closed 4 factories."

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The 20 biggest landowners in the USA (Business Insider)
+ As the saying goes, land's an interesting investment because, well, no one's making any more of it.


Here at Adventur.es, we're in the business of helping small to mid-sized business owners run, grow, and transition ownership of their business more effectively. With that goal in mind, enjoy this issue of The Knife Fight, a weekly newsletter for operators in the trenches.


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