Kapitus, banks, small business lending, banking collapse, Signature Bank, Silicon Valley Bank

Is Your Bank at Risk of Failing? These are the Signs You Should Look For

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How well do you know your bank? As we’ve recently found out with the high-profile collapses of Silicon Valley Bank (SVB) and New York-based Signature Bank, financial institutions are not infallible. If their collapses prove anything, it’s that whenever your small business deposits money or otherwise does business with a bank,  you run the risk of your bank collapsing and losing any money beyond $250,000 (the amount insured by the federal government) that you may have tied up in that bank. 

Wall Street has a fancy term for all this – systemic risk. This risk is almost treated as an abstract risk since banks don’t collapse very often – the fall of SVB and Signature marked the first time financial institutions collapsed since the Great Recession began in 2008 – but the way the two banks collapsed, and how quickly they collapsed, should remind everyone that dubious investment choices and changing market conditions could lead to your bank’s insolvency. Most importantly, the collapses are once again a stark reminder that systemic risk shouldn’t be seen as abstract, but as a very real risk. 

What Happened and Why is it Important?

Silicon Valley Bank, collapse, small business owners, cash

Silicon Valley Bank’s sudden collapse should prompt SMB owners to take a close look at their own banks.

SVB’s collapse was caused, in part, to investing much of its deposits in US Treasury bonds. When interest rates were hiked, the value of those bonds plummeted, setting off a domino effect: SVB, short on liquidity, sold those bonds at big losses, prompting customers to seek to withdraw their money en masse. This caused the bank to collapse and the Federal Deposit Insurance Corp. (FDIC) to take over to ensure that customers got their money back. 

Signature Bank, whose customers included Silicon Valley startups as well as high-margin small businesses in the real estate and legal professions, faced a cascade effect when SVB collapsed. According to regulatory filings, nearly 90% of its $88 billion in deposits were uninsured, meaning that most of its customers had more than $250,000 in holdings with the bank (remember, the FDIC only insures up to $250,000). 

Both Signature and SVB were also one of the few banks to take on cryptocurrency deposits. Cryptocurrency firms such as Bitcoin have been steadily declining for roughly a year. 

Not ‘Too Big to Fail’

We all learned from the 2008 financial crisis that financial institutions aren’t ‘too big to fail’ as they once claimed. The same goes true for regional and local banks, and the collapses of SVB and Signature Bank prove that. Collapses are contagious as well. If one bank collapses, customers of other similar banks may panic and want to take their money out. 

Many Signature Bank customers panicked after SVB’s collapse and sought to withdraw their cash en masse – a terrible situation for banks since most banks typically don’t have all the cash on hand to back up all of the money that their customers have entrusted them with. New York banking regulators and the FDIC took over the bank to assure customers that their money, uninsured or not, was still available to them. 

What Should You do? 

The bottom line:  This situation should underline the fact for small business owners that you always need to be on the lookout for signs that your bank is in trouble. After all, banks have the right to scrutinize you, the small business owner, whenever you ask for a loan. Conversely, you have every right to scrutinize your bank by always being on the lookout for signs that it may not be financially healthy before you trust them to hold your hard-earned money. 

This, of course, doesn’t mean that you should hide your small business’s cash reserves under your mattress. You can, however, keep a checklist of things to watch for to make sure your funds are safe in your bank.

#1 Check the Share Price

In 1999, the federal government repealed a long-standing set of banking regulations that formed the Glass-Stegall Act, thus allowing financing institutions to be publicly traded. Once the repeal took effect, it wasn’t just large financial institutions that went public, but many regional and local banks went public as well. A quick glance at your bank’s share price should give you a quick snapshot of its financial health, if its shares drop suddenly, it could indicate that there’s a problem.

#2 Is Your Bank FDIC Insured?

You should only deposit your business’ money in banking institutions that are FDIC insured. Almost

FDIC, Silicon Valley Bank, Signature Bank, savings, small business owners

The FDIC only insures up to $250,000 per individual or business, so make sure you keep your money in several banks if necessary.

every reputable bank is, but it’s worth making sure anyway.

#3 Is Your Bank Selling Assets?

You should check the news once in a while to see if your bank is taking any actions indicating that it may have liquidity problems. For example, if you have a loan with your bank and you suddenly see that it is being serviced by another institution, it could indicate that your bank has sold some or all of its loan portfolio in order to make quick money. While this isn’t always the case, selling assets could mean that your bank is running out of cash, so this should act as a reminder to just look a little deeper. 

#4 Is Your Bank Making Cuts?

Is your bank actively trying to save money? If your bank is taking actions such as closing branches, laying off workers, and eliminating cash-back rewards or other incentives, it could indicate that it is hemorrhaging cash. 

#5 What Does Your Bank Invest in?

Banks keep the insured portions of deposited money in FDIC banks to gain interest, as well as a portion of it in an on-site bank vault to handle customer withdrawals. Banks can also invest a portion in stocks, bonds and real estate as a way to make more money. If your bank is publicly traded, you may want to check out its most recent annual report (form 10K), which should reveal what it is investing in. If your bank is investing in high-risk assets, then it could be at risk for a liquidity crunch if those investments go south. 

#6 How is Your Bank Rated?

The FDIC keeps a running list of banks it considers to be problematic, but isn’t obligated to make that list public. However, Weiss Bank Ratings rates banks and largely uses the same guidelines as the FDIC in identifying high-risk banks.

#7 Are you Diversified?

If you own a high-margin small business such as a doctor’s office or law or accounting firm and have more than $250,000 in cash reserves, your best bet is to diversify the list of banks in which you deposit your money so that no single institution has more money than what is federally insured. 

Stay Vigilant

If your bank does collapse, getting your money back could be a long process, even if it’s FDIC insured. Therefore, it’s important to do your research on any bank that you are seeking to do business with. Keep a checklist of factors to watch for that could indicate that your bank is having liquidity problems.

Small business legislation, State of the Union address, President Joe Biden

Legislative Proposals Small Businesses Should Worry About in 2023

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Small business owners should be keeping an eye on the current 118th Congress. While it’s only a month old, there are several pieces of legislation and proposals that could have wide-ranging impacts on small- and medium-size businesses should they pass, and issues such as  manufacturing costs, tax breaks and whether a popular government grant program survives could all be in play in 2023.

So as the year progresses, here are the legislative issues small business owners should keep on their radar screens.

Made in America

“Tonight I am announcing that all construction materials used for federal infrastructure projects to be made in America,” said President Biden during his State of the Union Address on February 7. While “Made in America” is always a great talking point for a politician, it really isn’t feasible for small construction companies and contractors to execute without ballooning the costs of construction projects.

The 2022 Infrastructure Investment and Jobs Act (IIJA) included the Build America Buy America provision that currently requires that only 55% of the materials used by a contractor for a federal project be made in America. If Biden’s statement comes to fruition, it would cause considerable difficulty for independent contractors and small construction firms to stay on budget if they win a federal construction contract. 

Patriotism is always appealing of course, but according to Construction Dive, a news site for contractors, forcing contractors to use 100% American-made supplies could raise project costs by 25% on average. 

The reason for this is that the most vital construction materials such as lumber, steel, copper, aluminum and cement, are all imported from countries in Asia, South America and Canada. Those offer those materials at a far lower cost due to lower labor costs. 

STEP Renewal Act

This bill, introduced by Sen. Jeanne Shaheen (D-NH), would renew the popular State Trade Expansion Program (STEP) and would direct the SBA, which administers millions of dollars in STEP grants through local and affiliate offices every year, to make it easier for small businesses to apply for these grants. With a Republican-controlled House that wants to cut federal spending, there could be a partisan showdown on whether the STEP grant program gets renewed. 

Since 2011, the SBA has administered millions of dollars in grant money to small businesses starting out or expanding into the import/export business through its State Trade Expansion Program (STEP) grant program. In the past 12 years, the agency has awarded over $200 million through state and affiliate offices to support US small businesses in learning to export products, participating in foreign trade missions and designing international marketing campaigns, among other activities related to international trade. 

Easier to Obtain Microloans?

In late January the House unanimously passed HR 1487, the Microloan Transparency and Accountability Act, sponsored by Rep. Tim Burchet (R-TN). The bill is designed to ensure that the funding for the microloan program is, in fact, being disbursed to small businesses in underserved and rural communities as it was intended to through greater oversight of the SBA. 

The Microloan is one of the most popular lending programs that the SBA offers. These loans have far less restrictive lending requirements, are one of the few SBA lending programs that can help fund startup businesses, and are crucial to small businesses in rural and low-income communities. 

The bill, if passed, would offer 5% technical assistance grants to the program’s affiliate lenders if they lend to businesses in rural communities, and would require them to make at least 25% of their lending funds to rural businesses to qualify for the 5% grant. It would also require the SBA to produce an annual report on the number of loans that have defaulted as well as the number of loans made to small businesses in rural areas.

More Audits?

As part of the Infrastructure Investments and Jobs Act (IIJA), the Internal Revenue Service was given

A new bill could prevent further audits of small businesses – a bill that’s opposed by the Biden Administration.

more funding to conduct additional audits on companies and individuals that produce $400,000 or more in gross annual income, with the idea that this would increase tax revenue by forcing multi-billion dollar corporations and wealthy individuals to pay more in taxes. 

In January, HR 23 was introduced in the House to rescind that additional funding – a move adamantly opposed by the Biden Administration, which insists that the additional audits would only affect large companies and the country’s ultra-wealthy elites.

In reality, $400,000 or more in gross annual income for a pass through business would likely make the small business owner financially well off,  but it certainly wouldn’t make the business owner ultra wealthy. Once parcel out payroll, taxes, inventory purchases and other expenses are all parceled out, a small business owner would be left with far less than $400,000. If the IIJA provision is kept, it would mean a higher tax rate and further audits of high margin small businesses such as law and accounting firms and doctors offices, so one can expect a showdown between House Republicans and the Biden Administration over this bill. 

Easier to Unionize?

President Biden, as expected, made a plea to Congress to pass the Protecting the Right to Organize (PRO) Act during his SOTU address, which would make it easier for workers in any business to organize and form unions. Of course, Democrats and Republicans have always been far apart when it comes to supporting unions, but the issue has garnered far more attention in the past two years due to the tightening labor market and highly publicized unionization attempts by workers at large companies such as Starbucks and Amazon.

This obviously affects small businesses that are already feeling the brunt of the labor shortage and rising wages. More unions would ultimately lead to rising labor costs that some small businesses would have a difficult time being able to afford. 

Should the Tax Credit Stay?

One issue that has concerned small business trade groups such as the National Federation of Independent Businesses (NFIB) is the possible sunsetting of the Qualified Business Income (QBI) tax credit, which was created by the Tax Cuts and Jobs Act (TCJA) of 2018. Shortly after taking office, President Biden promised to rescind elements of the TCJA to ensure that large corporations and the wealthy pay their share of taxes.

While Biden did later say that he was not considering eliminating the QBI deduction, it is scheduled to sunset in 2025. The NFIB continues to actively lobby to make the deduction permanent, as it claims many small businesses have come to rely on that deduction to stay afloat amid the myriad of economic challenges they are currently facing. President Biden has not commented on this deduction in the past year, but if he does indicate a move to eliminate it, it would set up a showdown between him and the GOP.

The QBI deduction allows eligible self-employed and small-business owners to deduct up to 20% of their qualified business income on their taxes. In general, total taxable income in 2022 must be under $170,050 for single filers or $340,100 for joint filers to qualify.

Expect Gridlock

All-in-all, while the Biden Administration has made  progress in passing bi-partisan legislation to reduce inflation and rebuilding the nation’s infrastructure, we can probably expect more gridlock over the next two years with Republicans controlling the House.

Men and women sitting at a round table

The Pros and Cons of Your Business Taking on Private Investors

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Running a small business requires a constant and considerable flow of capital; and getting a small business idea off the ground requires just as much (if not more). While there are several kinds of financing geared toward sustaining and expanding small businesses, another option to consider when looking for capital is taking on private investors. Private investors can come in many forms but most frequently operate as venture capital firms or seed funds, also known as angel funds. But not all private funding falls into those two categories. In truth, private funding encompasses all non-bank and non-financing routes for getting capital into your business from a third party. Today, we are specifically addressing the potential pros and cons of accepting investments from private persons into an existing business.

Pro: Let Your Business (Not Your Credit) Speak for Itself

Convincing a private investor to support your business is a completely different process than if you were to seek funding at a bank or online financing company. While banks and all secured financial institutions blanketly require seeing your credit score, and frequently your entire financial history, private investors are often interested in different elements of your business. Specifically, private investors want to be certain their money will make them (and you) more money and that you, the business owner, are a reliable mast with which they can knot their sail.

Working with investors gives you the freedom to sell yourself and your business on the merits which truly excite you; the best investors will match your excitement and see that as a reason to trust your business. Private investors are a great source of capital, then, for newer businesses with a shorter credit history or businesses that can meaningly convey their plans to expand and make investors’ money expand as well; banks and financial institutions don’t get excited for your business’s growth in the same way an investor might.

Con: Investors Expect Influence in Your Business

A private investor, especially one making a major contribution, can want a decision-making seat at the table of your business. This is something all publicly traded companies deal with regularly; but in the case of small businesses the investor and business owner relationship can play out in many ways. At the very least, investors will anticipate that their input and ideas will be genuinely considered and that they will have a legitimate outlet to voice them.

As a small business transfers into the space of equity and investment, it can feel unnatural to become beholden to investors after having truly been your own boss, as many small business owners will attest that the freedom of making your business’s decisions is one of the high points of running your own operation. Taking on investors is both a structural and emotional changing for a business and a business owner

Pro: Private Investments aren’t Always Paid Back Like a Loan

When a private investor puts money out on your business, they are the one taking in the risk. Very often, an investor’s capital is paid back to them in the same way you would pay back a loan. While there are examples of “investment loans” in which the business owner pays back private investors their principal plus interest, those are much less common compared to equity investments. In cases of equity investments, the business owner exchanges the investor’s capital for a negotiated stake in your company with which they then receive a proportional amount of your company’s profits as you earn them.

Consider as well that if your business fails or is bought out, you can’t default on an investment. That investor’s bet on your business has no protection; as the equity value of your business fluctuates, as does the value of that investor’s initial capital.

Con: Unlikely to Benefit Smaller, Local Businesses

Private investors and venture capital firms are large, capital-heavy forces. Private investors also have an understandable interest in making money. They are most frequently attracted to businesses with a wide reach and near-certain potential to grow in a significant way. If you are, for example, a construction firm servicing the greater New England area with no interest in expansion or going national, it is unlikely you will find private investors lining up at your door. This isn’t because our hypothetical business isn’t successful, it’s because that business’s success and continued revenue doesn’t offer extraordinary growth for investors’ capital. Investors want a bomb primed to blow, or more specifically, a bomb primed to blow their investment sky-high. Private investors prize ambition and potential above all else, and it is essential to understand that not all small businesses are likely the right partner for private investors.

Every small business can’t reinvent the wheel, nor does every small business have massive or international ambitions for expansion. But this borders on common sense; businesses who are actively seeking investors likely already have a firm list of reasons why. Private investors aren’t backing every one-location pizzeria and bodega in America, but those pizzerias and bodega who see bigger, equity-based futures for their business may have a different story.

Pro: Trusted Investors Can Become Valuable Partners

A private investor willing to take equity in your company likely both believes in your mission and has existing industry expertise with which they found your business a suitable partner. Your investors have just as much interest in the success of your business as you do; being that your financial success also means financial success for them.  You and your investors (especially in the small business space) are likely to become close partners in managing big-picture projects. Adding experienced and educated voices to the large decisions in your business can only be a good thing.

What this section and others before it has hinted at is that taking on investors is as much your decision as it is the decision of the investor. Being that your investors will – in a way – represent your business, you have every right to decide who will become your partner through private investment. Being that your small business likely isn’t on the open market, you have the final say as to whose venture capital funding you want to take on. If an investor or team doesn’t seem like the right fit, you have every right to keep looking.

Invest in Your Business. One Way, or Another

Private investors likely aren’t the right match for many true small businesses but in those cases where small businesses see themselves becoming medium-to-large companies in the future, convincing private investors that your plans are feasible may just be the next step in your business journey. No matter if your business is right for private investors or not, the mentality and presentability that attracts investors is attractive and healthy for any and all businesses. Show your ambition and make detailed plans for the future of your business if not for private investors, perhaps for yourself and your most trusted staff. The good practices that come with attracting investors are in no way restricted to businesses on that certain path. Invest in your business’s future, one way or another.

Colorful main street with several small businesses

Small Businesses Give Their 2023 Predictions

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A month into 2023 and we’re already seeing some new issues to pile onto those that have crossed over from 2022. Most small business owners are already up to their necks in planning how to mitigate next week’s issues, but what about preparing for the rest of the year?. Planning ahead as a small business owner is a luxury rarely afforded. Especially in this new era of unbelievably fast globalization and interconnectedness, keeping track of current events means being a world news expert. While business leaders across the globe have already posed their thoughts on the state of the new year’s economy and job market, it is perhaps even more valuable to hear from the people living the small business reality day in and day out. Consider, then, these collected hypotheses from real small business owners and thinkers about what they (and you) ought to be aware of pushing further into 2023.

Economic Slowdown

In today’s market, one business’s slowdown is another’s ramp-up. Consider, then, the prediction and recommendations of Stacy Elmore, the Co-Founder of The Luxury Pergola, SEE Home Improvements, and LouveRoof Luxury Pergolas. Her business keenly knew that consumer spending had changed and was determined to beat the trend.

“For our business, we are seeing a rapid slowdown in the economy. We’ve had to shift our product from a “dealer focused” distribution model to a direct-to-consumer DIY product. The reason for this is that with home equity (for many) shrinking, consumer debt rising, and retirement accounts shrinking. We are noticing more people prioritizing necessities in their spending, and luxury products are the first to dip in performance.

“Locally, our installation of Louvered Pergolas is down, so by supplementing with a DIY kit, we’ve seen our sales improve. I expect revenues to drop for small businesses across the country until mid-2023. As interest rates rise, expensive products (that are financed) will continue to drop in gross revenue. Businesses have 2 options: Either raise Prices (but have lower volume) or pivot to grow revenue. Unfortunately, many businesses don’t have many, if any, places to pivot. It’s best to get creative.”

Stacy Elmore, Co-Founder of The Luxury Pergola, SEE Home Improvements, and LouveRoof Luxury Pergolas

The Future of Advertising

As a business owner, you make the decisions that affect not only your livelihood but that of your employees. Small business co-owner and small business consultant Chris Glarner has abundant experience dealing with strategic cuts both in his own business and those he consults. Glarner poses that the rules of the game are likely changing for advertising, especially for companies with smaller budgets. 

“The livelihood of business owners and their employees directly relies on the owners’ decisions, which makes each decision and outcome a personal one. For some, fear tends to rule, and the fear of poor economic conditions is causing hesitancy in moving forward with key projects and investments.

“More specifically, marketing and advertising are already being discussed as one of two key areas to make budget cuts. The top priority for budget cuts is, of course, “non-essential” expenses.

“Microsoft has sent us offers to “Spend X dollars, get 2X dollars free” to start or continue running ads. We have seen pay-per-click ads decrease in cost by 9% in November – December compared to the two months prior.

“By cutting advertising and marketing, especially in online advertising such as PPC, the cost of advertising in certain markets will likely decrease. This will drive a higher ROI and grow market share for the businesses that have the funds and are willing to continue investing in growth through 2023. These businesses will be in the best position to thrive in 2024 and beyond.”

Chris Glarner, Business Consultant

Smarter not Harder

With economic changes and restrictions, small business owners have found increasingly inventive ways to keep above water. And going into 2023, small business owners will likely have to double down on cost-saving that is more unexpected and creativity-driven. This financial awareness is the mindset of business growth specialist Ryan Niddel, who, along with his prediction, has an abundance of practical advice for business owners preparing for the new year.

“For many companies, 2023 will be a pivotal year in which we will be forced to handle the crisis of a potential global recession. I have taken the stance inside of my company, MIT45, to shore up the vulnerabilities that could create issues during a crisis season, and I would encourage other business owners to do the same.

“What we have done is to buy as deep as we’re able to in all material goods. This prepares us for the potential of increased expense not only on physical goods, but also on transportation. We have pulled back on wasteful spending. Wasteful spending is the creep that happens over a period of time of continuity billing on software services. It is not to eliminate fringe benefits for employees. We have also gone through our employee roster and instead of cutting back, we have encouraged personnel to exceed our expectations so that the yield that they produce is above a level that justifies their employment.

“These are all ways to prepare for an impending crisis in 2023. It becomes paramount that we go through the four Fs in a crisis – we get stuck in feelings, which is the second half, but we must first get clear on the facts that created the feelings. Once we acknowledge the feelings exist, we get clear on the facts that created them. Then we can pivot and look to the future and determine where we want our focus to go. Once we determine our focus, we can see what the fruit of our focus is. This is a simple exercise to manage the emotional response that happens during a crisis season.”

Ryan Niddel, CEO and Founder of Ryan Niddel Strategies

Cyber-Security and Cookies

It’s no news that digitalization will continue to reinvent the business landscape going into 2023. But what can small business owners expect to change, or in what ways will they have to change to keep in-toe with digitalization? Brian David Crane, e-commerce business expert and owner of several successful enterprises has very clear advice.

“2022 was a year of cyber hacks and scams. As phishing attacks and identity thefts rise, more and more businesses are compelled to rethink their data security protocols. Data security is the next frontier, and the growing relevance would mean more investments and focus on Cybersecurity.

“Without third-party cookies, consumers will have more control over their data as more intrusive ways of data gathering come to an end. Marketers will be limited to gathering data from direct sources like surveys, community polls, direct mail, mobile notifications, SMS answers, and sign-up forms. I also believe that businesses’ marketing spending will increase as they find novel ways to access first-party data and implement it productively. In a world without third-party cookies, the focus would be more on personalization as companies find creative ways of getting to know customers’ needs and pain points at a more granular level.”

Brian David Crane, Founder of Callersmart

A Stronger Year for All Businesses

While no two businesses will have the same 2023, the hope is that every business will have a better 2023 with the right mindset and education. Business owners who fully prepare and insulate their businesses  have the most to gain. So spend 2023 not with the doomed chant “recession, war, defeat,” but instead think locally and insularly! Control and protect the enterprises you know best, and the rest will fall into place.

TFTI Experience, Brian Andaya, Building Resilient Businesses Contest, Small Businesses, Kapitus

BRB Stories: Creating Libraries-worth of Unforgettable Memories!

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Congratulations to TFTI Experience, a Houston-based small business that takes “selfies” to a whole new level, for winning the 2nd place prize in Kapitus’ inaugural Building Resilient Businesses contest! TFTI, which stands for “Thanks for the Invitation,” will receive $50,000 to help grow their business

Picture Perfect

TFTI launched its first “selfie” exhibit at the Marq’E Entertainment Center in Houston in 2018 and became an immediate success. The business creates specially designed rooms that are ideal places for individuals, families and friends to take selfies. TFTI then took their unique business idea to showrooms in Atlanta and Dallas. 

After surviving the worst of the COVID-19 pandemic, TFTI took off by opening a 5,000 sq. ft. space in

TFTI Experience, Brian Andaya, Kapitus, Building Resilient Businesses

TFTI’s Love Room has been the setting for many romantic gestures, including marriage proposals.

the Galleria in Houston which features 15 custom-designed rooms that provide unique experiences and backdrops for  customers to take the perfect selfies. 

“They say a picture is worth a thousand words, and if that’s the case, then we’ve created libraries worth of unforgettable memories with all of our guests,” said Bryan Andaya, founder and partner at TFTI. “TFTI is the original photo experience concept and we’re ready to create more. We are family-owned and started by first-time entrepreneurs who have learned so much since our opening back in 2018. All we need is the fuel to grow. Our name TFTI stands for the popular social media acronym ‘Thanks For The Invite,’ and we definitely want to thank Kapitus for inviting us to this wonderful opportunity.”

The Upside-Down

TFTI Experience, Building Resilient Businesses, Kapitus, contest, Brian Andaya

TFTI’s Upside-Down Room is one of its most popular attractions.

No, we’re not talking about the parallel universe in Netflix’s hit show “Stranger Things,” but we are referring to one of the coolest rooms at TFTI’s space at the Galleria – the room that mimics an upside-down apartment. The ceiling consists of hardwood floors and a fully decorated Christmas tree. Wrapped boxes and basic furniture are bolted to the ceiling. Photos of guests are turned upside-down, giving the appearance that they are defying gravity. 

There’s also the cherry blossom room where guests can sit on a swing, as well as the space station room where customers can put on astronaut gear and pretend that they’re floating in a space station. These are just some of the creative rooms TFTI has created for its guests. 

“People come just for the upside-down room,” said Andaya, adding that the room will change once the holiday season is over. He added that the “Love Room” has been used for marriage proposals, and the entire space has been rented out for parties. The creativity of the business is still flourishing, despite the bumpy economy. 

Expanding the Lens

Andaya said that the company will use the $50,000 to enhance the specialized rooms by installing high-quality photo booths in them. 

“TFTI plans to use part of the winning funds to start building photo booth systems in our interactive rooms,” said Andaya. “This will allow guests to take high-quality photos and receive them via text message or email on the spot. Perfect for guests who may not have the latest phone or [hightest] quality camera.”

Part of the prize money will also be used to enhance the company’s marketing strategy, said Andaya, noting that online advertising is the company’s biggest challenge. 

“Our biggest challenge currently is the rising cost of online advertising spend. Most of our guests can be found on popular social media platforms, but with online privacy changes and rising costs, they are becoming more difficult to target,” he said. “We work to overcome this by doing continuous organic postings, reaching out to local influencers in our area for partnerships and focusing on interacting with potential customers organically by commenting and liking their posts.”

Moving Forward

Andaya and his partners plan for continued success and expansion for TFTI, which was a natural offshoot of another company Andaya launched nearly 12 years ago, Lucky Shots. The company rents out portable photo booths that can print out custom, branded photos and has been used for events for big clients such as the Houston Texans, Houston Astros, CITY CENTRE and the Houston Rodeo.

Learn the stories of all of our small business winners:

BRB Stories: After Devastating Setback, Play Pits Takes First Place in Kapitus’ BRB Contest!

BRB Stories: Relying on Faith and Passion for Business Success

Strands of Faith, Ameka Coleman, small business, Building Resilient Businesses, Kapitus

BRB Stories: Relying on Faith and Passion for Business Success

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For small business owners, it’s all about keeping the faith – not only in God, but in yourself and your ability to succeed. That’s what drives Ameka Coleman, founder and CEO of Strands of Faith and one of the 3rd place winners of Kapitus’ inaugural Building Resilient Businesses contest. Strands of Faith is one of five 3rd place winners, and Coleman received $20,000 to help maintain and grow Strands of Faith. 

Starting her own business in 2018 took a tremendous amount of faith, courage, and hard work for Coleman, who gave up a lucrative career as a clinical researcher for pharmaceutical contract research giant PPD to become a small business owner. The Christian mother of four took the plunge into entrepreneurship when she realized that her passion was hair care.

Coleman was able to fill a need by creating a line of cruelty-free, non-toxic hair care products that

Ameka Coleman, Strands of Faith, Building Resilient Businesses, Kapitus, Contestof Faith

Ameka Coleman, founder and CEO of Strands of Faith, used her personal credit card, a small amount of savings and her faith to launch the business.

contain no parabens or silicone-based materials, yet keep hair moisturized and healthy.

“I launched the business in 2018,” said Coleman. “Prior to this, I never thought that I would one day own a business. I was in a career, Clinical Research, that I loved. It was truly a scenario of passion meeting purpose. Starting in 2006, I developed a passion for loving and embracing my natural hair and I was equally passionate about making progress in the field of clinical trials. Eventually, my science background and real-life experience merged into one to make a beautiful faith walk with purpose!”

A Wing and a Prayer

Like most small business owners first starting out, Coleman had few resources. She used a small amount of savings and personal credit cards to fund the launch of Strands of Faith, and her biggest assets during that time were support from her family and her passion for making clean hair care products. Even though she took a huge gamble by starting her own business, she found the resilience to push through the COVID-19 pandemic through hard work.

“Building Strands of Faith has been a journey of faith, hope, and resilience,” said Coleman. “If you would have told me 6 years ago that I would one day start a business, I wouldn’t have believed it simply because I didn’t have the mental fortitude, faith, and self-confidence to bet on myself. However, little did I know, my journey leading up to it was the perfect segway to creating my brand. While I was on a journey to finding myself, it resulted in me falling in love with the hair that God blessed me with. I then found great joy in encouraging and motivating other women to do the same.” 

Expansion Plans

Strands of Faith has found success through some rough times, and has grown to 10 employees and dozens of product lines, as well as a successful blog on hair care. Coleman said that she plans to use the $20,000 in prize money to help expand her team and strengthen its marketing efforts to serve customers both in the US and internationally. 

“This business became bigger than me,” she said. “I was led to create products that could help further the

Strands of Faith’s Holy Grail collection of natural hair care products has helped launch it to success.

mission by providing clean products for textured hair that would make women feel confident about their hair regimen. This entire journey has been one of faith. Starting out, I didn’t have many resources, but I didn’t let that stop me. I put my best foot forward, juggled all of the roles, and trusted God to lead the way. I was working my full-time job while also being a mom to 2 kids and a wife. It was rough but the vision made me stay committed.

“Now, as a mom of 4, I strive daily to be the best example to my kids, and it gives me great joy for them to see me keep pushing along this entrepreneurial journey. Building this business has impacted my life and others in so many ways but the most impactful way has been the reminder to simply keep the faith! This grant by Kapitus is such a tremendous blessing in allowing me to expand my team and marketing efforts so that we can continue to serve women all around the world.”

Maintaining Balance

Coleman may be unusual among small business owners in that she’s achieved something that many small business owners have not: balance between her personal and business lives. Her secret is putting her family and faith first. That balance, she said, is a key part of the success of Strands of Faith.

“I did the groundwork in the beginning and worked super hard to lay a foundation, so I now have a team who has helped tremendously with taking off some of the workload. Now, these days, though the business still needs much of my time to run, my priorities have shifted, and it is all about family first! Business now comes second to my family. I intentionally did the groundwork in the beginning when my kids were younger. Now that they are older, I am super intentional about being present for them!”

Advice to New Entrepreneurs

Coleman said that the beginning days of Strands of Faith were the most difficult as they are for most small business owners, but she advised new entrepreneurs that the learning experience of launching a business is well worth it. 

“I would say that the most challenging parts, in the beginning, were wearing many titles,” she said. “I now appreciate the process of first getting the experience in each role because over time it built me up to be an efficient business owner. I have learned that entrepreneurship is not just a journey by itself but, instead, it is also a personal healing journey! There will be many times where the journey may feel lonely, but this is when it becomes super important to lean on your self-confidence and focus on the past wins to get you through and, of course, God’s given strength.”

Congratulations to All the Winners

Kapitus’ inaugural BRB contest awarded $250,000 to 7 small businesses that are the epitome of strength and resilience – two crucial ingredients needed to launch and operate a small business. The first-place prize was $100,000, the second was $50,000 and five third-place winners each received $20,000. All of the winners also will receive a complimentary, 8-hour consulting/advisory session to help their business. Kapitus also looks forward to this being an annual contest starting every spring.

Learn the stories of all of our small business winners:

BRB Stories: After Devastating Setback, Play Pits Takes First Place in Kapitus’ BRB Contest!

Play Pits, Building Resilient Businesses, Chantel PowellKapitus

BRB Stories: After Devastating Setback, Play Pits Takes First Place in Kapitus’ BRB Contest!

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Congratulations to Play Pits, an African American-owned producer of specialty deodorants made from all-natural ingredients, for being named the winner of Kapitus’ inaugural Building Resilient Businesses (BRB) contest. The Atlanta-based family business will receive $100,000 and 8 hours of complimentary educational consulting/advising sessions on its business. 

Embodiment of Resilience

Chantel Powell, Play Pits, Kapitus, Building Resilient Businesses, contest

Chantel Powell’s small business has endured the COVID-19 pandemic and a warehouse fire, making it one of the most resilient businesses out there.

For Chantel Powell, creator and CEO of Play Pits, resilience isn’t just a trait, it’s a necessity. The four-year-old company suffered through the pandemic shortly after it was created – a period in which nearly 40% of all black-owned businesses were forced to shut down. As if that weren’t enough, in September 2022, its Atlanta-based headquarters and warehouse (where all of its inventory was stored) were completely burnt to the ground in a fire – a catastrophic event that left Powell and her family reeling.

In the aftermath, however, instead of giving up, Powell and her family members are determined to rebuild the business and will use their $100,000 prize to help do so, making  Play Pits the very embodiment of everything for which BRB stands..

“It’s by the grace of God that we won the Building Resilient Businesses Contest because in the last few weeks, Play Pits has proven that we are the personification of a resilient business,” said Powell.

A Family Commitment

Play Pits. Chantel Powell, Kameron, Kapitus, Building Resilient Businesses, Contest

Chantel Powell was inspired to launch Play Pits by her son, Kameron.

After spending nearly six years as an executive assistant at Viacom International Media Networks and graduating Summa Cum Laude from Clark Atlanta University with a degree in fashion design and merchandising, Powell had picked up the skills she needed to pursue her passion for launching her own small business. All she needed was an innovative idea and a product to sell.

That idea came in 2017 when she picked up her six-year-old son, Kameron, from basketball camp. Like most active kids coming home after attending a sweaty sports camp, Kameron’s body odor hit Powell hard. 

“My exact words to him were, ‘You smell like a grown man!’” said Powell. She was determined to make him wear deodorant but didn’t want to use the typical ones that were filled with toxic chemicals. When she searched for deodorants that used natural ingredients, she found them to be boring products that she knew she would have to fight her son to get him to use them. 

Powell spent days in her kitchen using organic ingredients to make an all-natural deodorant that she felt comfortable with her son wearing. To her surprise, Kameron loved the deodorant and suggested that she make it for all his friends at camp.

“After my initial refusal, I quickly reconsidered once it hit me that Kameron had a genius business idea!” she said.

Hard Work and Self-Sufficiency

Like many seeking to achieve the American Dream, Powell put in a lot of hard work and $3,500 of her own money to start Play Pits. With no outside investments, she spent nine long months perfecting the secret formula to create the first all-natural deodorant free of aluminum, parabens, synthetic fragrances and other harsh chemicals found in most deodorant products, and one specifically designed for active kids. 

She officially launched Play Pits in March of 2018, and success came quickly for the new business. Powell saw 497% growth after just 20 months in business, with over 12,200 units sold. Play Pits soon had both out-of-state and international customers, and distributed through both Amazon and Target, as well as directly.

Powell also worked hard by engaging in one of the toughest types of marketing campaigns a business can engage in: word-of-mouth. Powell works extremely hard to market the company through social media and customer recommendations. She also doesn’t keep herself on the company payroll. “Every dime made is completely due to us bootstrapping our business, getting out there and hustling. It has been the best method for us to advance and grow Play Pits,” she said.  

“Quietly, Play Pits has become the nation’s largest 100% black-owned deodorant company,” said Powell. “This grant money is going to be invested in scaling our company by allowing us to purchase larger amounts of raw goods and materials at reduced costs, increase our marketing efforts into youth and professional sports, and to add knowledgeable professionals to help us meet customer demand by expanding our product line and increasing revenue.”  

More Than Just Survival

As Play Pits recovers and rebuilds from the devastating fire, its mission to educate parents about the

Play Pits, Chantel Powell, Building Resilient Businesses, Contest, $100,000, Kapitus

Paly Pits has endured the pandemic and a devastating fire to come back better than ever.

dangerous ingredients found in commercial deodorants and to provide a healthier, all-natural solution for their children, remains the same. The business is still seeking to grow both domestically and internationally, and to never forget where it came from. Since launching, Kameron has been named the company’s Chief Inspiration Officer and is still active in sports, while Powell continues to work hard to market and sell the company’s products. 

“As we start recovery from this tragic event, this grant money is needed now more than ever as it will play a key role in helping us to rebuild, replenish lost inventory/materials, equipment etc., while still allowing us to continue our initial expansion plans,” she said.  

Small business legislation, small business lending Kapitus Vince Calio

Small Business Legislation: Childcare, Credit Card Fees and Part-Time Benefits Proposals That Could Affect You

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Small businesses should be keeping an eye on this current session of Congress as well as the upcoming midterm elections. There are three bills still being debated in this current session of Congress that, if passed, could make it easier for small business owners to fund childcare for themselves and their employees, as well as lower credit card processing fees and give part-time workers additional benefits. 

The Credit Card Competition Act of 2022

A controversial bill to reduce credit card processing fees for small businesses could be in the works this year.

This bill, S.4674, and an identical bill in the House, H.R. 8874, are easily the most controversial pieces of small business legislation being debated. It was introduced by Sen. Richard Durbin (D-IL) in July and, if passed, would require credit card companies to offer two options for credit card processors whenever a customer makes a purchase with a small business. The goal of the legislation is to reduce the credit card processing fees that merchants, including small business owners, must pay in exchange for giving their customers the ability to pay with a credit card. 

Critics and Supporters

The typical credit card processing fees range from 1.5% of a purchase to 3.5%, raking in hundreds of billions of dollars in profits for credit card issuers. These fees are typically priced into the costs of products and services offered by small businesses. Small business advocates such as the National Federation of Independent Businesses support the bill, saying that it will reduce the credit card processing fees charged to small businesses that are already feeling the burden of inflation, rising interest rates and other economic issues. 

Banks and credit unions, however, are against the bill, saying that banks will cut cash-back rewards and other credit card perks as a way to offset the losses they will suffer if the bill gets passed. Many of them point to the controversial Durbin Amendment that was attached to the Dodd-Frank Act in 2010, which limited the interchange fees banks charged on debit cards, as a forewarning of the consequences consumers will suffer if the bill passes. That amendment, critics claim, did nothing to lower the cost of banking and led to retail banks eliminating rewards and perks offered on checking account debit cards. 

Likelihood of Passing?

Democrats in Congress are pushing for the bill to be voted upon in the current session of Congress. The Senate Committee on Banking, Housing and Urban Affairs even tried to attach the bill as an amendment to the National Defense Authorization Act (an annual defense spending bill that Congress almost always passes), but the effort was rejected. The likelihood of passage rests greatly on the results of the midterm elections, as it will most likely die if Republicans gain control of Congress. 

Part-Time Worker Bill of Rights Act of 2022

This is probably the most partisan piece of legislation being debated in Congress as it pertains to small

Kapitus small business lending part time workers

Part-time workers could be eligible for full-time benefits if Democratic legislation is passed.

businesses, as Democrats have been pushing for versions of this legislation since 2015. Renewed debate has once again begun on this bill, H.R. 6699,  and Congressional Democrats may want to push this bill out for a vote before the current, 117th session of Congress expires in January. 

The one section of the bill that most pertains to small businesses is the one stating that if a part time employee has been with a company for a year or more, that employee is entitled to the protections of the Family Medical Leave Act. This act allows employees to take up to 12 weeks of unpaid leave for medical reasons as well as the birth of a child without fear of being fired. This could have an obvious impact on small business owners who are already facing labor shortage problems. 

Another provision in the bill would affect high margin small businesses that offer retirement plans to their workers. This provision would allow part time workers who have worked at least 500 hours per year for two consecutive years for a company to participate in any retirement plan that company offers. If the bill were signed into law, it could cost small businesses that offer matches to their employees’ contributions to their 401(k) or other retirement plans, as they would have to make more matching contributions. 

Likelihood of Passing?

The eight co-sponsors of the bill, all Democrats, are pushing hard for a full vote on the floor of the House before the 117th session of Congress expires, especially if Republicans win back control of Congress. If that happens and the bill isn’t voted upon and signed into law by President Joe Biden before January, the bill will almost certainly die. 

Childcare DESERT Act

Kapitus childcare small business lending

New legislation could make it easier for small businesses to fund childcare for their employees.

This bill, S.5022, is a bi-partisan bill introduced in late September 2022 that, if passed, would allow small businesses to use a portion of the proceeds of the popular Small Business Administration 504 CDC loan to provide childcare services to employees. This would help address a serious problem that small businesses face in hiring and retaining employees. Goldman Sachs found in its most recent 10,000 Small Businesses study that 80% of small business owners cite childcare as a hiring issue, and just as high of a percentage of those surveyed said that they support the government providing childcare assistance to workers. 

Right now, qualifying small businesses can borrow up to $5 million through a SBA 504 CDC loan through Certified Development Companies to finance new equipment, build new facilities or purchase or lease additional land. The loan can also be used to improve storefronts and existing facilities, and the borrower must demonstrate that the proceeds will be used to create new jobs and help develop the community in which they operate. 

Likelihood of Passing?

This bill has a high chance of passing, as it was introduced by Sen. Chuck Grassley (R-IA) and co-sponsored by prominent Democrat Senator Gary Peters (D-MI). The bill was introduced in the Senate and will be debated by the members of the Senate Committee on Small Business and Entrepreneurship. Given that it is receiving bi-partisan support, the biggest threat to the bill being passed is time. There are only two months left in the 117th session of Congress, but if it isn’t voted upon within that time frame it could get reintroduced in the next session.

Show Your Support (or Opposition)!

There are several pieces of legislation being debated in Congress right now that you can show your support for. You can view upcoming bills and how they can affect your small business by clicking here. The site, Legiscan, also gives you access to the specific Representatives and Senators in your state and allows you to write to them to show your support or opposition to current bills circulating in Congress.

Kapitus small business halloween

This Halloween, Slay Your Biggest Fears as a Small Business Owner

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Children may be afraid of ghosts and goblins during the Halloween season, but for small business owners, things that go bump in the night are nothing compared to their real-world fears. If you’re a small business owner, you’re likely more afraid of an auditor from the IRS knocking on your door than you are of Michael Myers or Jason coming at you with a knife. 

In the spirit of Halloween, here are some of the biggest fears that small business owners face, as well as tips to overcome them. 

#1 – Fear of Catastrophe

Halloween Kapitus small business

The fear of catastrophe monster can be slain with some planning and insurance.

The COVID-19 pandemic proved disastrous for small businesses, as it forced more than 300,000 small businesses to close their doors permanently. Many small business owners that survived had to take out PPP loans and other government assistance to survive, and many are facing challenges with having to pay back rent the last two years are suffering from anxiety. 

Now, with inflation and interest rates out of control and the labor shortage persisting, small business owners are waiting in fear for the next catastrophe – be it a full-blown economic recession, a fire, a natural disaster or some other event that can drive them out of business.

Slaying the Monster – It’s important to remember that the pandemic was a historic once-in-a-century event, and while hurricane Ian did devastate parts of Central Florida, natural disasters don’t occur very often. Just in case disaster does hit, however, you want to be prepared. Some steps you can take now are: 

  • Take out small business hazard insurance. It may be an added monthly expense for your business, but it could prove to be worth it when the next crisis hits.
  • Check out SBA Disaster Mitigation Assistance. This SBA program allows businesses within declared disaster zones to apply for additional funds specifically for improving their businesses to better protect against future disasters. 
  • Take out a business line of credit (BLOC). BLOCs are offered to qualified borrowers from both traditional banks and alternative lenders, and can provide you with emergency cash to help you quickly recover when disaster hits.
  • Protect your business records. You should always have a backup of your most important business records. You can do this by storing important information on a separate hard drive or through cloud computing. 

#2 Rapid Growth

Having more customers or receiving too many demands simultaneously from clients than you can

handle is another monster that may be hiding under the beds of small business owners. While some may say that this is a good problem to have, this fear can threaten your business if you aren’t in a position to quickly obtain additional inventory or are understaffed.

Slaying the Monster –If your business is growing at a rapid pace, the first thing you should do is take pride in knowing that you’re doing something right. After you give yourself that little pat on the back,  your first priority should be customer service. Be ready to explain politely to them that they need to have patience because you are experiencing overwhelming demand but assure them that their needs will be taken care of. 

You should also have a plan to add more hourly or full-time staff if you find yourself overwhelmed with customer demands, or consider hiring a virtual assistant. If you need more inventory fast but don’t have the cash upfront to pay for it, you may want to consider purchase order financing to help you.

#3 Employees Quitting

Kapitus small business halloween

The fear of all your employees quitting can be very spooky, so make sure you’re treating your workers well!

Small businesses in nearly every industry are feeling the brunt of the labor shortage, as workers are increasingly demanding higher salaries and better working conditions. The prospect of your best employee – or all of your employees – suddenly quitting at roughly the same time is scarier than the thought of Freddy Kreuger visiting you in your dreams, especially if you employ hourly workers that don’t get benefits.

Slaying the Monster – Every business, no matter how small, must deal with employee turnover. The scenario you want to avoid, however, is having all of your employees quitting in a short period of time. You want to create a system that doesn’t overly rely on a single employee, no matter how good that employee is. You also want to make sure that you create a company culture that your workers feel comfortable and safe in. You should also look to offer small perks, such as quarterly bonuses or limited essential coverage plans that your workers will appreciate. 

#4 Getting Audited

There are few boogeymen that are scarier to small business owners than an IRS auditor – which could

mean that you inadvertently misreported finances and that you suddenly owe a fortune in back taxes. 

Slaying the Monster – As a small business owner, you shouldn’t be too worried about getting audited if you’ve kept your books in order throughout the year. Only 1.5% of small businesses in the country get audited on a yearly basis, but to prevent yourself from being among them:

  1. Make sure you keep track of your business finances. It’s especially important to carefully separate them from your personal expenses.
  2. Carefully document your business expenses throughout each quarter. Sometimes the line between a business and personal expense can be blurry, so make sure when you document a business expense you have a good reason why it should be a business expense. 
  3. Consult with an accountant on how much in taxes you should pay each quarter. You’re probably better off being conservative when reporting your business expenses and getting a refund at the end of the year. 
  4. Stay up to date on new tax laws. The see-saw battle between Republicans and Democrats over who controls Congress and the executive branch has never been more volatile. Expect the tax code to change every time the balance of power shifts to make sure you’re not missing out on new tax deductions. 

#5 Continued Inflation

While inflation has slowed a bit in the past two quarters, it is still growing at a rapid pace thanks to continued supply chain disruptions, rising gas prices and higher wages for workers across the board. Indeed, the inflation monster has forced small business owners to raise their prices and fear losing customers as a result. 

Slaying the Monster – The prospect of having to raise the prices of your products and services is always  scary for small business owners, but here’s the good news: inflation is showing signs of slowing, and while consumers resent having to pay more for goods and services, they’re still spending, according to a recent JPMorgan study. Also, if you raise your prices carefully, you can actually beat out your larger competition, since they’re also raising their prices.

#6 Failure

This fear is probably the most prevalent among new business owners. Having to close your business due

to lack of sales does count as a tangible definition of failure, but there are other definitions of the word that haunt small business owners, making this fear much more opaque. Those fears can include the fear of not providing enough income for your family, losing control of your business, or losing confidence in your ability to run your business. An overwhelming fear of failure can take its toll on your mental health, as any unexpected problem can cause you to go into full-blown panic mode.

Slaying the Monster – Fear of failure is normal among small business owners, but having that fear to an unhealthy degree is not good. One of the most important things to remember when it comes to the fear of failure is that, more than anything, it’s psychological. Sometimes overcoming this fear is as simple as developing a positive mindset. Here are some steps you can take:

  1. Set daily goals. If you feel overwhelmed in the number of tasks you need to complete, try breaking down those tasks on a daily basis. Be realistic in what you can get done every day, and feel good about accomplishing those tasks afterward – they can serve as reminders that you’re succeeding.
  2. Adopt a philosophy of learning. Failure, in many cases, isn’t a dirty word. Some may argue that there are no such things as failures – just lessons. If you experience a setback, solve it, learn from it and move on with no regrets. 
  3. Prepare for obstacles. As a small business owner, you will face obstacles, both big and small, every day – there may be a delay in the delivery of important inventory; your credit card processing machine may break down, or an employee might unexpectedly not show up.  It’s important to prepare for these obstacles by having a backup plan.
  4. Find relaxation time. Constant stress can lead to serious mental health problems over time. Try to carve out time every day to take care of yourself. This can be in the form of meditation, exercise and spending quality time with your family.

#7 Slowing Sales

Kapitus small business halloween

The prospect of slowing sales can be terrifying, but don’t worry, there are ways to prepare for that.

Every small business owner fears a sudden slowdown in sales, especially now that we’re living in uncertain economic times. This fear is often exacerbated by the holiday period – a time when many small businesses rely on seasonal sales to survive. 

Slaying the Monster – Overcoming this fear comes down to your marketing strategy. Are you offering the proper discounts during the holiday season? Are you implementing a strategy to retain existing customers and gain new ones? Are you offering something different and better than your competitors? Focusing on marketing throughout the year should help you overcome this fear.

Happy Halloween!

This Halloween, don’t allow your fears to stand in the way of running your business successfully. If you find yourself overwhelmed by fear, it’s important to face those fears head-on by making good decisions and celebrating victories and milestones in your business.

Labor shortage, small business lending, economy

Which Industries Are Getting Hit Hardest By The Labor Shortage in 2022

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The labor shortage remains stubbornly high for businesses across several different industries despite the high number of job openings, even as many predict that the current recession will eventually level the playing field between employers and workers. Small business owners continue to feel the brunt of the shortage, as many of them can’t compete for workers in the labor force with larger competitors when it comes to salaries. 

So which industries are getting hit the hardest in terms of unfilled job openings and worker shortages? Based on information gathered from the Bureau of Labor Statistics, the worker shortage continues to affect companies with both hourly and full-time workers for different reasons. Here are some of the most impacted industries.

Accommodation and Food Services

Restaurants had a quit rate of 7.6% in September 2022 – the highest of any industry measured by the BLS – with 193,000 job openings compared to 139,000 new hires, leaving 60,000 job openings. These include table servers, cooks, bartenders, and other staff. The National Restaurant Association (NRA) predicts the shortage will continue for the rest of this year and into 2023. 

Restaurants laid off thousands of workers during the COVID-19 pandemic, and those workers have been slow to return. The reasons include low wages – the federal minimum wage for tipped workers is still $2.13 per hour (the NRA, ironically, has lobbied Congress every year for a decade against raising that wage). Restaurant jobs also often require long hours, low pay, and no benefits. According to a study by Blackbox Intelligence and Snagajob, 15% of restaurant workers left the industry during the pandemic to move into different industries that offer higher wages and benefits, such as education, warehouse jobs, and starting their own businesses. 

Retail Trade

Retail workers had a quit rate of 4.9% in August 2022, with job openings outpacing new hires by more than 25,000. This follows the laying off of over 2 million retail trade workers due to store closings at the height of the COVID-19 pandemic. Amazon predicted in a recent report that it could run out of warehouse workers by 2024. Many retail workers laid off during the pandemic decided to switch careers or retire. 

Despite the median salary of retail workers increasing to $18.50 per hour in August 2022 (from $14 per hour before the pandemic), a study by Cogsy showed three main reasons retail stores are having a hard time finding workers:

  1. Low compensation. The retail industry has never been a high-paying field, and most jobs don’t provide benefits.
  2. Customer-facing retail workers are usually the first people to be laid off during an economic downturn – that job instability was magnified by the pandemic, and
  3. Difficult working conditions. This has been a problem facing retail workers for decades, especially since the “just in time” inventory technique (companies being lean on inventory based on seasonal expectations) was invented to cut costs at large retailers. This inventory technique generally made it possible for retailers to cut the hours of retail workers and put them on often unpredictable, makeshift schedules. 

Transportation

The transportation industry, including truck drivers and rail workers, saw a 4.6% quit rate in August

Truck driver, labor shortage, Kapitus

A nationwide shortage of truck drivers has contributed to supply chain disruptions and inflation.

2022, as the US faces a shortage of about 2.6 million truck drivers overall, despite a general increase in pay. This shortage not only affects the roughly 3.1 million transportation and warehouse small businesses in the US, but it also is one of the root causes of the recent global supply chain disruptions. 

Like with many industries, the worker shortage in transportation existed before 2020 but was compounded by the global pandemic. According to business consulting firm MossAdams, the primary causes of the shortage isn’t salary, it’s due to the fact that the job requires long hours away from family, the fear of contracting COVID-19 and the fact that the transportation workforce is aging, and few millennials and GexXers are willing to replace them. 

Healthcare

Industries that require skilled workers are also facing a massive labor shortage, and salary may not be the overriding reason. In August 2022 there were 1.7 million job openings in this industry, particularly for nurses, while only 717,000 were hired. According to the American Medical Association, the country will also face a shortage of some 38,000 to 124,000 primary care doctors over the next 12 years, even though salaries in these professions are typically higher than the national median household income. 

According to the AMA, many medical school graduates are becoming discouraged by the fact that independent primary care doctors’ offices are being quickly swallowed up by large health care providers. That, combined with doctor burnout from the pandemic; rising medical school debt; increased medical malpractice insurance premiums, and the red tape that independent doctors often face when it comes to sharing electronic health records, many hopeful doctors have been discouraged from entering into the industry.

One-Third of Nurses Plan to Leave

A study by Fierce Healthcare showed that one-third of nurses across the country plan to leave their job over the next year, exacerbating a problem that the healthcare industry has been suffering from since before the pandemic – a national nurse shortage. Last year, BLS data showed that the country is going to need an additional 275,000 by 2030. Despite a median national income of over $82,000 per year for registered nurses in the US, many are quitting due to burnout, according to the study. 

Most healthcare facilities were already suffering from a high patient-to-nurse ratio, and COVID-19 greatly expanded that number. The study also found that 65% of nurses endure constant beratement, and in some cases, physical assault, from patients. Most don’t feel appreciated by the doctors they are assisting. This is compounded by a current shortage of nursing schools and faculty in the US.

Construction 

The quit rate among construction workers was 4.7% in August 2022, and in the same month, the industry was short by over 33,000 jobs. Cornerstone, one of the leading publications for the construction industry, expects that the current overall shortage of 430,000 construction workers in the US will expand over the next two years, as new construction projects will increase with the passage of the Infrastructure Investment and Jobs Act in 2021.

Several factors are contributing to the shortage, according to a study by Cornerstone: 

  • First, many construction workers were forced out of their jobs during the pandemic and decided to retire. In total, 40% of the construction workforce is expected to retire over the next decade. 
  • Second, there aren’t enough carpentry trade schools in the US to meet the increased demand for skilled construction workers – contractors, designers and workers with the knowledge to build specialized construction projects. 
  • Third, many contractors in the US have yet to embrace digital technologies to make projects more efficient, on time and on budget, thus slowing down the number of projects that they are qualified to complete.

To compound that, wages are still relatively low for construction workers – the median annual salary for a construction worker was only $39,190 as of September 2022. The pandemic made working conditions hazardous.

How Can Companies Combat Labor Shortages Going Into 2023?

Unfortunately, for small business owners struggling to find workers, there are no easy answers. The labor shortage is persisting, and it appears that it isn’t just a passing fad – it can only be solved by making permanent changes. Study after study has shown that employees in some industries are demanding better pay and benefits, while in other industries, workers are demanding a better work-life balance and better working conditions. The best solution to this problem is to examine the workplace you are providing for employees and look for ways to improve it.

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