The Capacity Catastrophe

On the Tuesday after Thanksgiving in 2023, a man with a phone camera walked into a four-table dessert shop in a strip mall south of Houston, and he ordered banana pudding. Nine days later, the woman who owns that shop was standing in front of an urgent care clinic filming a message to her followers. She had a diagnosis, a strained chest muscle from stirring pudding.

Because that man's video review went out to millions of people, and by the next morning, the line outside her little shop wrapped all the way around the building, and it never stopped. She was living the dream every small business owner shares. Everyone shows up at once, and it was breaking her, her processes, her supply, her actual body.

So she did the thing that you're never supposed to do in the middle of the biggest rush of your life. She closed the store. Today, what happens when demand finally arrives and your business just can't hold it? Also on the show, the federal agency that just told Americans to expect fewer answered phone calls at peak times after it had already fixed that exact problem once, and the most American business there is, the one that earns nearly its entire year of revenue in a single month on purpose.

That's all coming up on Marginally Better.

Every organization has their version of April fifteenth. A stretch on the calendar when most customers arrive all at once. Black Friday, back to school, wedding season, tax season. These surges are the most predictable events in commerce, and yet every year they manage to break somebody. So before I tell you the story about the woman with the banana pudding, I wanna look at how some of the biggest operations in the country handle crowds they already know are coming.

And we'll start with the federal government, because nobody on Earth has a more predictable busy season than the Internal Revenue Service. In the United States, Tax Day has been April fifteenth, give or take a couple days, since nineteen fifty-five. Now, in January, the Treasury Inspector General for Tax Administration, uh, their nickname is TIGTA, that's the IRS's in-house watchdog.

They published a readiness review for the twenty twenty-six filing season. The numbers describe an agency walking into its busiest months with fewer resources than it's had in a long time. Staffing down about nineteen thousand people, back to where it stood in the fall of twenty twenty-one. And a pile of unprocessed work, including amended returns, taxpayer letters, mandatory paper filings, that was sitting at about two million items in December of twenty twenty-five, more than double what it was before the start of the pandemic.

And then there's the phone lines, because for the past few filing seasons, the IRS had set a goal of answering eighty-five percent of the calls where a taxpayer wanted a live human. Now, that's a number that many insiders already admit is a compromise from where they'd like to be. But for twenty twenty-six, TIGTA reported the agency lowered that goal to seventy percent, and the last time the IRS actually landed below seventy percent was back in twenty twenty-two, when that number came in at just eighteen percent.

And that's fewer than one in five callers getting through to a person. Now, here's why I think this is a business story and not just a Washington story. The IRS already fixed this once because after that eighteen percent year, Congress handed the agency a massive hiring budget. It staffed back up, and by fiscal twenty twenty-four, it was beating the eighty-five percent goal on its own yardstick.

Now, keep in mind, for a variety of internal administrative reasons, that level of service only includes certain phone lines, roughly a quarter of the calls the IRS gets. That's according to the National Taxpayer Advocate. But by any measure, the phone support got dramatically better. And that raises a question for any business owner that's listening right now.

When your busy season goes badly, is that just bad luck or bad timing or a decision that you made months ago that you may not have even thought through all the way? Now, I don't wanna speculate here in this case if that decision was deliberate or an unintentional outcome from broader budget cuts. But even experienced tax professionals with enhanced agency access say they can only now rarely get through to an actual human at the IRS.

Now, the biggest retailers at least treat an expected surge like the main event that it really is. Back in September, Boston Consulting Group published its playbook for the twenty twenty five holiday season. I wanna read you one sentence because I think it's the thesis of this whole episode. "The holidays offer a disproportionate chance to win," BCG writes, but, quote, "The window to make the right moves is narrow.

The stakes of failure are high, and a poorly executed holiday sales season can amount to a beautifully wrapped disappointment even for the strongest brands," end quote. Now that's what a surge does to an unprepared business. All that demand, all that attention, and it arrives at a company that can't convert it.

And notice what BCG actually prescribes in this report. Not heroics in December, homework in September. Reassess your targets. Line up the hero products with the inventory you actually have. Stand up what they call a command center, one cross-functional team empowered to make fast calls when the season starts moving.

The firms with the most money and the most data have concluded that you don't win the busy season during the busy season.

You win it before, usually months before. Now, shrink that down to a shop with one owner and no command center. Last October, Retail Dive's Daphne Holland reported on how small retailers were heading into the holidays, and she cited research from Xero with an X, the small business accounting platform. They found 37% of small business owners worried about Black Friday foot traffic.

Another 32% worried about running out of holiday inventory, and three in 10 worried about plain old burnout. The weeks that pay for the whole year are the weeks the owners both love and dread. One Portland, Maine shop owner in that story had her inventory lined up for the season and was already losing sleep over whether her suppliers would have anything left for the following year.

Now, for a big chain, a surge is a project to be managed. For a small operation, it can feel like weather, something that happens to you. But at least Black Friday sends a save the date. What happens when the busiest day of your business's life shows up unannounced in the form of one man ordering dessert?

When we come back, a one-woman pudding shop outside Houston becomes the most talked about dessert counter in America overnight, and the owner makes a decision in the middle of all of it that many business experts would call crazy, and it probably saved her company, maybe even her life. That's next. It's Marginally Better.

A quick word about the team behind this show. Marginally Better is made by all of us working at Johns & Taylor. We're a user experience consultancy, which is a fancy way of saying we help businesses figure out why customers get stuck on their websites, in their checkout lines, on hold with their support team, and we help our clients figure out what to fix first.

Now, we're big believers in data over drama. Fewer opinions, more evidence, and no redesigning things that aren't broken. So every week we write up what we're learning, including the research behind episodes like this one, plus practical ways to apply it to your own business, and we put all of that over on our Johns & Taylor blog and in our Tuesday newsletter.

They're free, they're short. We've written these for owners, not just for engineers, and you'll find all of it at our website, johnsandtaylor.com.

It's Marginally Better. I'm Joe Taylor Jr. Pearland, Texas. It's a suburb south of Houston, and in a strip center on Broadway Street, between the kind of neighbors that every strip mall has, there's a dessert shop called The Puddery. It has four tables. The specialty is banana pudding, along with an invention called the Oreo croffle, half croissant, half waffle, which is the kind of thing that you would drive across town for if you lived there.

The Puddery is run by a woman named Janelle Prater, and run by is underselling it. By her own description at that point, the shop was a one-woman show. Janelle made the pudding, Janelle worked the counter, Janelle packed the shipping orders. And on busy weekends, her daughter came in to help, but that was the whole org chart.

Not because she wanted it that way, but because, as she said herself, the business had never brought in enough money to justify hiring anybody. Which, by the way, is the capacity math for nearly every small business in America. You staff for the demand you have, not for the demand you dream about. Now, that's rational and responsible, and it also means the dream, if it ever arrives, lands on a system that's built for a typical day in the life.

And on November 28th, 2023, that dream walked in the door. A former MMA fighter named Keith Lee had become, improbably, one of the most influential food critics in America. A TikTok influencer with millions of followers who eats in his car, speaks in deadpan tones, and he scores what's in front of him with brutality and total honesty.

Now, a lot of small restaurant owners have been teaching their teams to watch out for this guy's headlights in their parking lot so they can get ready. His fans talk about the Keith Lee effect. And so Keith Lee tried The Puddery. And he said... Again, remember, former MMA fighter here, he's not really a dessert person.

But then he called the croffle immaculate and said the menu overall was, in his words, absolutely insane. Gave the shop a very rare nine out of ten. From him, that is about as good as it gets. And he pushed this review out to an audience that's about the size of a mid-sized country. So Janelle watched the review go up and didn't believe it.

She would say later that even when Keith Lee posted the review, she said she was still in denial. Quote, "I don't know if y'all are really gonna come." End quote. And then when she looked out the window, she told reporters, "When that line formed, I was like, 'Oh, crap. It's happening.'" And that line formed within hours, and it stayed.

Out the front door, down the sidewalk, around the side of the building Day after day for nine days, for a week and a half, the puddery was running at a volume it had never been designed to survive, powered entirely by one woman's two hands. What does that mean physically? It means every cup of banana pudding in that display case exists because Janelle mixed it.

The wave of new customers didn't just empty her case, it turned her into a factory running double shifts, but with nobody else to hand off to. She had to suspend her online orders entirely just to triage the line, and even that wasn't enough. So nine days in, her body filed a complaint: chest pain. She went to urgent care, and the diagnosis was a strained chest muscle, overworked from mixing and preparing too much pudding.

The best thing that ever happened to her business was physically injuring her And now here's where Janelle said something for her customers in a video right outside that clinic. She said, "Usually I would just thug it out and work through it, but because of all of the influx of all of the customers we have, I really feel like I need to stop for a second and make sure I'm okay.

Because the weekend is coming, I wanna make sure that I'm on point for all the customers that we have coming this weekend." And then she did it. She followed through with a line of brand-new customers forming every morning, customers that she's been waiting years for. She closed the shop for three days until the following Saturday.

Now, let's be clear about how counterintuitive that seems and why I think her decision was the right one. Because every instinct and frankly, a lot of business advice says you never turn off the faucet when the water's running. Viral attention decays fast, and those customers might not come back. They might even get online and complain about the fact that you're closed, and that may offset all the goodwill that you've built up from that viral attention.

So Janelle looked at the biggest revenue days of her life and decided the thing at risk was not this weekend's sales, it was everything after. Because if you serve that crowd badly and the Keith Lee effect becomes 10,000 first impressions that you fumbled, the review said this place is worth the drive, the experience had better keep that promise.

But even worse, Janelle had no backup. Thugging it out could've cost her her life. So I don't think that closure was a retreat. She used that pause to rest, to rethink her processes, and to actually start hiring and training some neighbors and total strangers from the community who showed up and offered to help work the rush.

So the one-woman show finally started auditioning a cast. And so here's what her next 18 months looked like after that. The Puddery reopened, all staffed and stocked. The crowds kept coming, and now the shop could keep up with them And with the new revenue, Janelle bought a food trailer. That meant she had a second serving line that she could park wherever the demand was.

And then she signed up for larger space in the same shopping center that was purpose-built for volume that her old four-table shop was never meant to handle. And in March of twenty twenty-five, Keith Lee came back, this time with a camera crew and a check. Because in partnership with Toast, the restaurant point-of-sale company, he presented the Puddery with a fifty thousand dollar grant to help finish the move into the bigger location.

Now, it would be easy to file all of this under happy accidents. I think that misses what actually happened. Because at the moment of maximum pressure, Janelle made a capacity decision that most much bigger companies often get wrong. And remember, all of this happened because she already had the kind of product that impressed somebody like Keith Lee.

She recognized in the moment that her scarcest resource wasn't pudding or parking, it was her. One irreplaceable person with no backup. And instead of riding that resource until it failed for good, she stopped on her own terms and rebuilt that system underneath the demand. So let's recap what we've talked about this week.

First, the IRS answered its phones when it bought the capacity to answer them. With no capacity, no phone calls. BCG's retail clients win December because of what they do in September. And a dessert shop in Texas is thriving because its owner understood nine days into a stampede that that viral surge wasn't really the emergency.

So a question for you. I want you to picture your best possible month arriving unannounced. What happens if you triple your customers starting tomorrow morning? What breaks first? Because whatever you just pictured, that is not a hypothetical weakness. That is a decision that you're making right now by default.

Janelle got to make hers from an urgent care parking lot. You get to make yours from wherever you're sitting.

Now I wanna end this week with the one business that never gets surprised by its surge because the surge is all there is. And you probably saw them last week if you drove pretty much anywhere in America before the 4th of July holiday, the fireworks tents. They materialize in grocery store parking lots and roadside gravel lots at the end of June.

They blaze away for a week or two, and then they vanish. Zachary Crockett covered them on Freakonomics' radio show, The Economics of Everyday Things, and the numbers are huge. Consumer fireworks, the backyard stuff, it's a $2.2 billion a year industry in the US. A typical stand grosses somewhere between 25 and $60,000 in just a couple of days around the fourth. And owners told Crockett that netting 20% of that could make a good year.

Phantom Fireworks, one of the biggest players, runs about 1,500 of those pop-up tents nationwide. Its vice president, Alex Zoldan, told the show something that should sound pretty familiar by now: 80% of the company's entire year happens in one month. He said, "It's a brutal run, but it's like going through a whole month in a few days."

So how do you build a company where the busy season is functionally the only season? Zolling gave the answer. Quote, "Our business is 90-plus percent planning and 10% executing." The fireworks arrive by container ship from China. That's a six-week voyage on the short list of vessels that's allowed to carry them into an even shorter list of ports that's allowed to receive them.

And that means the orders for next July have to be placed by this July. So the tents you saw last week, Phantom was already buying next summer's inventory while customers were shopping in them. And in California, roughly 1,000 of Phantom's stands aren't even run by Phantom. They're run by nonprofits, church groups, veterans organizations, cheerleading squads.

They work the tent, they keep a share of the profits. The cheer team's uniforms get funded by a week of selling things called, and I have learned that this is a real product name, grounds for divorce. The fireworks business never has to survive its busy season because it never pretends the busy season is a surprise.

It inverts the whole year. 11 months of capacity building aimed at one week of catching everything that falls, all for a product that just goes boom

That's our show for this week. If you take one thing away, I want it to be this: your busy season is not weather, it's an appointment. The IRS's phone lines, a retailer's December, a pudding shop's viral moment, in every one of those stories, the capacity to serve a crowd was decided long before that crowd showed up.

The businesses that break under a surge usually didn't fail in the moment, they failed months earlier in a budget meeting or in a hiring decision, or by saying, "Ah, we'll, we'll deal with it when it happens." And the ones that thrive, like a one-woman pudding shop in Texas, they treat the crush not as an emergency, but as the moment they've been building for all along.

So if you want help thinking through where your own business would crack under its best month, that is the kind of question that our team at Johns and Taylor works on with clients every week. Come read about what we're building at johnsandtaylor.com. Thanks for listening to Marginally Better. If something here was useful, please send this episode to one person who runs a business.

That's how the show grows, one episode at a time. And a review wherever you listen helps one more business owner find us. For show notes and the research behind today's episode, head to marginallybettershow.com or follow the link wherever you're listening. Marginally Better is a Calufrax Radio production.

Our producer is Nicole Hubbard with research by Connie Evans. I'm Joe Taylor Jr.