Posted: 1:18 p.m. Monday, April 29, 2013
By Erik Sherman
Small businesses embrace a higher minimum wage, a VC doles out sage advice, and innovation comes to two products that don't need it: beer and donuts.
A round-up of stories to read this week:
The Minimum Wage Hike Debate
As soon as President Obama said that he wanted a $9 per hour federal minimum wage, opponents were claiming that it represented business disaster. Especially for small businesses, said the National Federation of Independent Business. Big companies would barely feel it while small ones were most likely to have minimum wage workers and could least afford the cost increases.
But apparently not all small businesses agree. According to a relatively correctly done survey by an advocacy group, 67 percent of small businesses support a minimum wage hike. Two-thirds thought that increasing the minimum wage would help the economy by giving those with the lowest incomes more to spend. Also, 85 percent of the businesses paid all their employees more than minimum wage. Call it enlightened, painless self-interest.
But all that's OK. A new study claims that skilled foreign workers actually drive down the cost of labor in the U.S.
Advice From a VC
Fred Wilson, a co-founder of Union Square Ventures had a couple of good posts worth your attention. One was on whether you have the right product and the wrong business model. The example was Real Media, which was one of the first in behavioral targeting and wanted to sell the service to publishers. But the publishers didn't want to spend $10,000 to $20,000 a month. Brad Burnham, another Union Square co-founder, made the suggestion that Real Media create an ad network, place the ads with publishers, and send them checks. Eventually AOL bought the company for $275 million.
His other post was about what he called return and ridicule. He's seen a high correlation between companies that do well and ideas that people laugh at. Think of it this way: If everyone knew it was a good idea, you couldn't make a killing. Just remember the other aspect of return and ridicule: A lot of VC companies end up going nowhere. People may think you're a clown because you actually wear a red nose. But, hey--being an entrepreneur is a tough balancing act.
"Innovation" in the Food & Drink Industry
Innovation in beer cans? Apparently. Budweiser developed its new bow-tie can that offers a bit less beer than before but is "striking and original." Apparently the brand wanted to distinguish itself in the marketplace because, you know, Budweiser is such an unrecognizable name in beer.
Boston Beer, brewers of Sam Adams, is apparently also finally coming out with a canned beer. Developing the vessel over "two years of sensory and ergonomic research" cost $1 million. If we just saw the right product in the wrong market, what are the chances that these will be the wrong products in the right market?
Depending on your upbringing and aesthetic taste, you might think that the doughnut breakfast sandwich--that's right, bacon and egg inside a glazed doughnut--would be dead in the water. Dunkin' Donuts, however, thinks this new product will capture the interest of the American male. (The outcome of which may say some pretty sad things about half of the population of the country.) It just may work. A couple of years ago, vendors introduced cheeseburgers inside glazed doughnuts at big county and state fairs. High-efficiency cholesterol: You get your meal and dessert all at once.
Responding to Tragedies
GE Capital has halted lending to gun shops so they can purchase inventory. GE felt the heat, and given that the business was "immaterial" to the company's results, it beheaded the program. The change came months after the Newtown, Connecticut shooting, which is close to GE's corporate headquarters.
One case of a much faster reaction was Williams-Sonoma, which pulled pressure cookers off the shelves in their Massachusetts stores after the Boston Marathon bombing. The perpetrators used a pressure cooker as a basic component. The retailer, though, may have been hoping for a loud public splash, because just a couple of days after the devices came off the shelves, they were back on. Apparently the move done out of respect for the victims was only intended to be temporary. Still waiting for all black backpacks to be taken off shelves in similar oh-so-useful gestures.
Health Insurance Updates
Remember the Affordable Care Act, also known as Obamacare? Apparently some 26 million people might be eligible for health insurance subsidies next year. According to one analysis, it could be all families making between $47,100 and $94,200. How many will get them? Hardly any.
The problem is that they don't even know the money will be available through state exchanges. Subsidies aren't going to cover the whole amount, but, still, if you could get 25 percent or more off your bill, you might want to. That's why the government will use mass marketing to try and get the message across.