Should We Tell the Employees?

Introduction:

This week, Shawn Busse, Jay Goltz, and Laura Zander talk about the buying and selling of businesses. Laura thinks her recent purchase of a small distribution business could change the trajectory of her whole company, helping her finesse the challenge of selling wholesale products to her retail competitors. Jay, meanwhile, has been trying to help an aging business owner sell the kind of business that too often just fades away. Underlying both discussions is an intriguing question: While it’s common practice for owners trying to sell their business to keep the potential sale a secret, fearing employees might otherwise flee, is that really the best approach? Or is it actually a betrayal? Plus: We answer a listener’s question about finding the right balance between being a kind boss and being a pushover. And we play a quick game of Who Said It: Elon Musk or Mr. Burns?

— Loren Feldman

Guests:

Jay Goltz is CEO of The Goltz Group.

Shawn Busse is CEO of Kinesis.

Laura Zander is CEO Jimmy Beans Wool.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Full Episode Transcript:

Loren Feldman:
Welcome, Shawn, Jay, and Laura. Great to have you all here. Laura, let’s start with you. A few months ago, I think, you told us you were really excited about possibly buying another business. And then I think you decided against buying it in part because you didn’t want to take on the additional hassle and the additional risk. Anything new?

Laura Zander:
Yes, so we did decide to buy a small business. It’s a distributorship, so it’s not the one that we were looking at about nine months ago. It was a one-woman operation, and we are operating it out of Texas. We do have something else on the horizon, but I can’t tell you. And I don’t want to do it, but I think it might be the right thing for the business. I don’t know what we’re gonna do. We’ve got to figure it out.

Loren Feldman:
It sounds like we should talk about that, Laura.

Laura Zander:
Oh my God. Yeah, it’s a tough one. It’s a business that we could get for pennies on the dollar. Again, from a business standpoint, it would be a great fit. But I don’t know if I want to work that hard. So anyway…

Loren Feldman:
Is it a business with a lot of employees?

Laura Zander:
Not a ton. No, not a ton—a manageable amount. But we did acquire a distributorship October 1st, October 3rd, or something. We moved it to Texas. And actually, what I was doing this morning—I’m in Texas right now—is training the team here on how to manage that business. And we have a great staff here. And we’ve got a great computer system that this business just kind of folded itself into. So we bought this distributorship and are now the exclusive North American distributor of this iconic brand that’s been around for 130 years from Scotland, from the Shetland Islands. And what ended up happening was, we realized that we could also distribute a couple of other things out of our space in Texas.

So we are now going to create a distribution company so that it’s less confusing to the end user. We’re going to create 528 Supply, and 528 Supply will be based in Texas, and it’s going to distribute this yarn from Shetland. It’s going to distribute Madelinetosh. It’s going to distribute another yarn line from the Netherlands, potentially our handbag line. So we’re building the flexibility, and Doug is working on the software for this right now so that we have the flexibility to grow our distribution. I’d be really curious to know, Jay, I know you’ve got decades, maybe centuries, of experience in this area.

Loren Feldman:
Before Jay responds to that, Laura, let me ask you—

Jay Goltz:
No, my lawyer will be responding. I’m not responding.

Laura Zander:
You did this in the last century, didn’t you?

Jay Goltz:
Yes, I did, actually.

Loren Feldman:
Laura, you said that you’re trying to eliminate confusion. Is the confusion you’re trying to eliminate the fact that you have a business, Jimmy Beans Wool, that is a retail e-commerce business, and this is a distribution business you’re discussing that sells to stores that compete with Jimmy Beans Wool?

Laura Zander:
Yes, exactly.

Jay Goltz:
She’s doing exactly what I did. That’s why I have a separate company. We sell molding to other frame shops around the country. So yes, I actually do have some experience with that, that I’d be happy to share with you.

Laura Zander:
Yeah, I would love it. And yes, correct, Loren, because people at these yarn shops are a little confused. They’re like, “Wait, do I look on the Jimmy Beans website for the inventory that we want to order for our shop?” And trying to build something that’s flexible enough that we can grow it, and try to take kind of the Jimmy Beans name out of it. So that every time somebody places an order, they’re not thinking about their competitor.

Jay Goltz:
There’s another fundamental issue, which is, the framing industry is very similar to the industry you’re in. Are they going to be mad at you? “Oh, I don’t want to give her business. She’s a competitor.” And the answer to that is—because I’ve certainly had to deal with that—if I didn’t own this gigantic retail framing business, I couldn’t have brought these moldings in, and I could have never gotten the expertise to run this business as we do.

So the answer is: It’s good for everybody. I’m not opening stores around the country. You’re not opening stores around the country. I couldn’t do the wholesale thing without the retail thing. So most of the customers have figured out, “You know what, this is good for them. And they’re able to leverage off of our expertise of being retailers and picking the right moldings.” You’re in the exact same situation. If you didn’t have this large retail presence, you wouldn’t have the expertise to run such a good wholesale business. So they’re all benefiting from that.

Laura Zander:
One hundred percent. And our goal is to be the best wholesaler, and we want to have really great customer service and really good turnaround the same way that we did that on the retail side. That’s our competitive advantage, is that we make life easier for you. Our mission is to help small business owners be successful.

Jay Goltz:
Here’s the issue in our industry: The people who are distributing frames, many of them, most of them, do not deal with the end user. Therefore, they don’t know if there are problems with the molding. We know about it 10 minutes after it comes in, because we eat our own dog food, as they say. We’re using the frames ourselves. You’re selling product right to the end user. If there’s a problem, you’re going to find out about it in 24 hours. So it helps you maintain the inventory, curate the inventory, and quality control. And that’s the same thing I have. So like I said, it’s actually an advantage that you’re both wholesaling it and you have the connection to the customer.

Loren Feldman:
I think one thing is worth clarifying. Jay, when you refer to your business as a “gigantic retail business,” you’re saying it’s gigantic by framing-industry standards.

Jay Goltz:
Yes.

Loren Feldman:
You sell primarily, if not exclusively, in the Chicago area, right?

Jay Goltz:
No, only in Chicago. But my point is, my main location is probably 15 times bigger than the average frame shop. So we use a lot more molding than most frame shops would use.

Loren Feldman:
But Laura’s situation is a little bit different and more complicated because it’s e-commerce, and she’s selling it all around the country, competing directly.

Jay Goltz:
That’s true.

Laura Zander:
Maybe. I think it’s very similar.

Jay Goltz:
Well, the other thing is, there are some people who just simply do not want to buy product over the internet, and they’re gonna go into the local store. So yeah, you’re right, it is a little more complicated, because we’re not selling nationally, direct to the customer. But the point is, there are some people who won’t buy from her. I’m sure there are some people who won’t buy from you.

Laura Zander:
One hundred percent.

Jay Goltz:
And the answer is, “Okay, fair enough. You can do what you want.” But there are other customers. It’s kind of like the old phrase, “If you can’t beat them, join them.” The question is: Are they better off working with her? Or do they really think they’re going to cause a devastating blow to her if they don’t buy from her? They’re not going to, so they’re better off working with her because, as she’s just illustrated, she’s got some iconic brands now. How cool is that?

Laura Zander:
Yeah, we have iconic brands, and we’ve got great service. And like you said, we eat our own dog food. So we knit with these yarns, and we understand it. One small difference, Loren, between our industry and Jay’s is that you can buy stuff online, but you have to be able to go into a shop to learn. I mean, you don’t have to, but you go in there to learn new skills, to have in-person community. It’s not transactional, these independent yarn shops. So we can’t compete with that online. That’s not our goal. We’re really trying to drive people into these yarn shops.

Jay Goltz:
How big is the industry? Do you have a clue?

Laura Zander:
Yeah, about a billion dollars.

Jay Goltz:
Okay. In the framing industry, I’ve determined… And I’ve had big suppliers agree with me when I come with this number. I believe the custom framing industry—not the big chains, independent framing stores—is a $2 billion industry. Which, in the scheme of things, we’re like a rounding error for Coca Cola. Most companies you know of are bigger than either of our industries. So we’re a tiny little speck of the GNP.

Shawn Busse:
I think something that’s interesting about both of your businesses is, it feels to me a little bit like clothing, in that I can buy clothes online, but I really hate it. I really hate that process. Because you just don’t get a sense of the fabric, you don’t get a sense of the fit. It’s so annoying to have to return things. And from what I know about artists and people who are creative, they really want to touch the thing, feel the thing, see the thing. And I think that’s a little bit of a built-in advantage for both of you, in terms of your customer base.

Jay Goltz:
Well, my biggest advantage is, custom-picture framing, by definition, is not a good thing to be shipping.

Shawn Busse:
No.

Jay Goltz:
You’re hinging the artwork, so it doesn’t get damaged. You’re shipping artwork, and it’s not like a framed poster all the time. Sometimes it’s what’s called “hinge,” where I don’t even know how you can ship that and not have it get destroyed. So it’s extremely difficult to ship framed artwork. Plus, picking it out, you’re looking at a computer screen, and the frame is represented by an eighth of an inch sample. It’s not ideal. So that’s my advantage, and Laura’s advantage is that people want to talk to other people. And so we both have businesses that are far better served by the local vendor than—

Laura Zander:
And they want to touch and feel, like Shawn said.

Shawn Busse:
There’s one other thing to think about. I always like to evaluate: How sophisticated is the manufacturing base, in terms of the ecosystem? And an unsophisticated manufacturing base is usually to your advantage—meaning from an e-commerce and technology standpoint—because it’s hard to go direct-to-customer for long-term manufacturers. And my guess is, in your industry, Laura, that the yarn manufacturers are probably not awesome at e-commerce. And so you’ve got probably a really long runway before they even think about doing it.

Laura Zander:
Right.

Shawn Busse:
Maybe I’m wrong on that. That’s just a hypothesis. I don’t know your industry that well.

Laura Zander:
No, it’s a great point.

Shawn Busse:
In other industries, it’s a super risk, because some of these manufacturers are getting really good at marketing and going direct-to-consumer.

Jay Goltz:
I have the answer to that. We’re in such tiny industries that the quote-unquote big suppliers in the industry are little companies. Whereas if you’re in other industries, you’re competing with $100 million-a-year companies, and we’re not.

Shawn Busse:
Yeah, that’s a good point.

Loren Feldman:
Laura, has this changed the way you think about the potential for your business?

Laura Zander:
Yes, 100 percent. I think the pivot here is going to be for us to be a distributor. We’ve watched our retail business in Reno. It’s just very stable. It’s not growing much.

Loren Feldman:
When you say retail…

Laura Zander:
It’s our brick and mortar. And then it’s our e-commerce. I mean, those together are retail to me. We’re selling to the end user. And those channels aren’t growing a ton in the way that they used to grow, for a variety of different reasons. I think I was looking at our numbers. It was something like 10 years ago, 90 percent or 100 percent of what we sold were products from other people. And now it’s like 70 percent of the stuff that we sell are products that we either make or distribute ourselves. That’s where our growth is. Our growth is not in the sale of products that other people make.

We’ll continue to do some different product development and manufacturing ourselves. We have our own yarn line coming out in a couple of months. But I really think, to Jay’s point, because we have the retail store and the e-commerce, we now have the expertise. We have the staff. We have the connections to the mills and to the manufacturing to be able to start doing things at a greater scale that we couldn’t do before. And that distribution, I mean, we’ve got people coming to us all the time, “Do you want to buy our company? Do you want to start something?”

Now that we have proven, over the last three years with the acquisition of this Madelinetosh brand, that we can work with yarn shops, and they’re not all going to quit working with us because we’re quote-unquote Jimmy Beans, and a competitor, we’ve kind of proven that we can operate in the best interest of the yarn shops and operate our own yarn shop. We think that there’s a ton of opportunity, and we think we can do a really good job of serving the local yarn shops. And from kind of a hippie perspective, that’s the best thing to do for our industry. If we can do things to help keep our industry and keep these local yarn shops profitable, then that helps the entire industry, because that keeps more people coming into the shops. We create more knitters. We create more crocheters. Blah, blah, blah.

Shawn Busse:
That’s such a change of philosophy, too, because like when I was coming up in my business, I was always told: “Competition, competition, competition. Do not talk to others who are trying to do what you’re trying to do. Secrecy, secrecy, secrecy.” And I really think we’ve shifted from a competition-centric landscape to a coopetition-centric landscape.

Laura Zander:
We have to! And part of it is just access to information. So now you can’t protect all that stuff anymore, so you’d better embrace it, like lean into it. It’s funny that you mentioned that, because we are developing our own yarn line that’s coming out in a couple of months, and that’s with our mill in Peru. And we had this conversation about the mill in Peru is Fairtrade-certified, so if you’re going to put the Fairtrade mark on the label, you have to say where it came from. You can’t just say it’s Fairtrade. You have to say it’s Fairtrade, and it’s spun by this mill. And so we had this conversation: Do we want to put our source on the label? And we decided: Yes. Ten years ago? No. But now we do. Because everybody knows. I mean, it’s no secret. If you want to find a place to buy yarn, you can access that information.

Loren Feldman:
Laura, can you tell us what the difference is between the decisions you’ve made to proceed to buy and build in the distribution area, versus the business you decided you did not want to buy?

Laura Zander:
Yeah, that’s a great question. It’s funny, Doug, and I were just talking about this the other day. The company that we did not buy was another e-commerce-slash-retail company, and so it was very similar to Jimmy Beans. It just had a different audience. It had a different curated selection. So it would be like Banana Republic buying Old Navy—and actually, it was kind of the reverse. It was a little more upscale. We thought it made sense, because they had a customer list that was somewhat different than our customer list. And they had developed some proprietary products that we thought would be a really good fit.

And I don’t know that that was a bad idea, but somehow it just seemed more complicated. They used a different software platform, blah, blah, blah, blah, blah. But where we’re leaning into now is more on the volume side, and using our strengths of, again, distribution. Space in Texas is inexpensive compared to Nevada, or Chicago, or Seattle, or New Jersey. So space is more inexpensive. I have told you before, we have a waiting list of people who want to work here. So that’s not a problem. So let’s lean into those things. And we’re already set up to serve hundreds of wholesale customers, so let’s just serve them more—if that makes sense.

Jay Goltz:
I think one of the issues with that deal that you turned down, it continued to get more complicated as it went along. You kept finding out things that were not good. And I remember telling you, “Whatever you find, it’s going to be three times worse when you actually end up in there.” So that was smart.

Shawn Busse:
That was smart, yeah.

Laura Zander:
Yeah, and this one that we did just buy is, like I said, one woman running it who worked 20 hours a week. Like simple, simple, simple, simple. And I love simple, because then we can just go and put our own stamp on it and do it the way we want to do it.

Shawn Busse:
Maybe I missed this earlier. What’s the kind of technology level that she’s at right now? Where do you want to take it?

Laura Zander:
I could share the website with you, which I think was built in 1982. [Laughter] Like, it’s so retro that it’s almost cool. You know, it’s got the three dots. I mean, it’s funny, we were just training on like the email platform that she’s using. It’s basically AOL.

Shawn Busse:
Oh my gosh!

Laura Zander:
It’s a source of great fun, actually. So there’s nowhere to go but up, and I’m finding for me, personally—because it’s all about me, personally, right?—I actually love this challenge of kind of turning things around and taking something that’s got a good core or a good base and then just exploding it. So yeah, we have all kinds of really fun technology goals.

Jay Goltz:
She’s got a chain of fax machines there?

Laura Zander:
You don’t even want to know. She wouldn’t take new customers. I mean, we’re getting like two or three new customer requests, new shop requests, a week, because she would just tell them, “Ahh, I’m busy. Call me back in six months.”

Loren Feldman:
Laura, you’ve now bought a number of companies. You bought a company in China, you bought a company in Vietnam, along with the ones we’ve been discussing. What have you learned about the process?

Laura Zander:
I’ve learned that I love it. I mean, it’s my favorite part.

Loren Feldman:
Buying a business is your favorite part?

Laura Zander:
Oh, absolutely. Are you kidding? It’s like traveling. You get to explore, and you get to look at their P&L, all their different financial statements that tell you this whole story of what’s been happening and learning about their business and learning what’s working and what’s not and what you could do differently and what you could do not better, but better. Yeah, I absolutely love it.

Loren Feldman:
All right, I want to talk about how hard it can be from the other side, meaning to sell a business. Jay, I know you’ve been kind of mentoring someone who’s trying to sell a business. And I think it’s, from what you’ve told me, a difficult situation that a lot of business owners find themselves in. Could you tell us a little bit about that?

Jay Goltz:
Well, a little history. From my observation—and since I have a lot of frame shops I sell to—it seems to me probably 90 percent of frame shops just close one day. No one takes it over. Because we would know. Somebody would call and say, “Hi, I just sold the shop to so and so.” It doesn’t happen that often. And I realized that a lot of them can’t sell because they don’t make enough money, and no one’s going to pay money to just buy a job. You know, they’re making $30,000 a year or something and no one wants to pay money for that.

This particular case, it’s somebody I’ve known for years. He and his wife built, a very successful, nice business and bought a building, which I told him to do years ago, and it worked out great. And now he’s attempting to sell it, and he hired the business broker, and he found the best one he could find, but I just accidentally found out he was trying to sell it. I happened to go to a wedding out of town, and I found myself right in front of his store. So I went in there, and he wasn’t there. But he called me back, and he told me he was trying to sell it. And he’s been trying since February, and they were getting no traction. And I looked at the proposal from the business broker. It’s not good.

Loren Feldman:
Not good in what way?

Jay Goltz:
Lots of ways. The first thing was—and I’m learning this from other places—the first mentality for people who do that stuff is, “Oh, we’ve got to keep it a secret.” Well, that’s a problem. I just happened to have gotten an email from a business broker that goes, “Art and framing business in the Midwest is looking to sell.” So I signed the NDA, and I found out who it is. And it’s pretty hard to play that, to go and try to keep everyone’s secret, and at the same time, try to sell it.

Loren Feldman:
Did you do that, Jay, because you were thinking you might be interested in buying it?

Jay Goltz:
I don’t know. I figured it couldn’t hurt to go look at the financials and get an understanding of it. I don’t know, I just figured I had nothing to lose. And I figured I’d check into it, especially since I’m trying to help this other guy. I’m just trying to see what else is out there. And so I convinced him, “Stop hiding behind this. Tell them you’re selling it.”

Loren Feldman:
Wait, tell who they’re selling it?

Jay Goltz:
The population. Put it out there, instead of this vague, “Frame shop art business for sale in…”

Loren Feldman:
Well, that’s pretty standard. A lot of businesses do that, because they don’t want the employees to know, or vendors, I think.

Jay Goltz:
I know, and I’m suggesting that the cure is worse than the disease. I’m suggesting: Tell the employees. Just tell them. They know you’re in your 60’s. They know this isn’t gonna go on forever. Get over it. Tell them you’re looking to sell it. You’re going to find a buyer that’s going to take care of them and take care of the business. Trying to keep this whole thing secret I just think is problematic. And then you run into the problem of: How do your long-term employees feel when they find out behind their back you’ve been trying—I just find the whole thing… I squirm thinking about it.

Loren Feldman:
Laura, Shawn, do you guys have any thoughts about that?

Laura Zander:
I don’t know…

Jay Goltz:
Well, Laura, you do know. You bought these companies. Did their employees know?

Laura Zander:
Well, three of them didn’t have any employees.

Jay Goltz:
Okay, that makes it simpler.

Laura Zander:
Yeah, it was much simpler.

Loren Feldman:
Madelinetosh being the exception.

Laura Zander:
Yeah, that was the exception. They had 30, 40, 50 employees. No, they didn’t know. I mean, I think they kind of knew. They were in fear. They knew it was gonna go away, unless somebody bought it.

Jay Goltz:
Which is why I’m saying I think the concern over—like I said, they know you can’t go on forever. What’s wrong with sitting down with people and saying, “Listen, guys, I’m going to put the business up, and I’m going to find the right buyer,” and letting them know about it? And he’s fully embraced it now. It’s going to use their name and everything, and his employees all know about it.

Laura Zander:
I guess the fear that I heard with the one that we didn’t buy, they really didn’t want their employees to know. And I’m with you. I’m like, “Why don’t we just tell them?” And I guess part of it is: What if it doesn’t go through? And like this didn’t go through, and they were going to continue to operate it.

Jay Goltz:
You find someone else.

Laura Zander:
But the fear was that the employees will leave.

Jay Goltz:
Why would they, though? That’s my point, especially if you say, “Hey, listen, when it sells, I’m gonna give you all a nice bonus.” There are ways of mitigating that. For instance, I had a supplier, a guy who was probably 15 years older than me, and he manufactured framed pictures. And I was really friendly with him. And I used to say to him, “Hey, one of these days, I’m gonna buy your company.” So he calls me one day, “Hey, listen, I’ve decided I need to sell it.” I said, “Okay. I’ll come out Thursday. Give me a tour, and we’ll talk about it.” He calls me Wednesday: “No, you can’t come. Everybody knows who you are. And if they see you, they’re going to know what’s going on.”

“Okay. Well, all right. Well, call me back when we can do it some other time.” Didn’t hear from him again. Instead, he sold it to his son’s friend, who was a CPA. The guy bought it, took out a line of credit, and it was bankrupt within six months. And now the guy died, it turns out, and now I’m at the auction thinking, “It didn’t need to go this way.” It just didn’t. I probably could have kept the thing going. And I just think that this paranoia of, “Oh my God, everyone’s going to find out,” that the downsides are so dramatic. And the guy was in his late 60’s at the time. Who do you think you’re kidding? What’s the shame in saying, I’ve decided I’m gonna sell.

Shawn Busse:
My understanding is, anything under $5 million, you’re getting not awesome representation.

Jay Goltz:
Right.

Laura Zander:
Well, yeah.

Jay Goltz:
You’re getting one step above retail realtors. One step above.

Shawn Busse:
This is so interesting, Jay, because what it makes me think about is compensation and how, for the longest time, compensation was this secret black box. You didn’t talk about it. You know, it was all about secrecy. And then a number of businesses figured out, “Well, actually, if we peel back the reality here, and we start to share with our employees, and then we educate them about what it takes to run a business…” And then you have open-book management. And generally, you see open-book management companies have higher morale, lower turnover.

Laura Zander:
Oh, Shawn, you’re really going to open this box right now? [Laughter]

Jay Goltz:
I was gonna say, “Loren, please shut this down. I’m waiting for you to shut this down, please.”

Shawn Busse:
Oh, man. Look, Jay, you’re the one who’s advocating for transparency.

Jay Goltz:
No, no. You’re not wrong.You’re not wrong.

Loren Feldman:
Shawn, just to clarify, talking about the issue of compensation, were you talking about business owners being open about their own compensation or what they pay employees?

Shawn Busse:
The latter. Essentially, what Jay is advocating for is treating employees like adults, right? And saying to them, “Hey, I am transitioning out. I’m at a different phase in my life,” because they’re gonna figure this stuff out themselves.

Jay Goltz:
And I would categorize it, like, “Here, let me put it in a different package.” I would call this destructive secrecy.

Shawn Busse:
Yes.

Jay Goltz:
Whatever you think is the advantage of the secret, it ain’t worth it. Like, really? It would be the end of the world if you actually sat down with your employees and told them? I mean, it’s just not worth the trouble. And people are so paranoid. I see it all the time. When you go on listings for businesses, most of the time, they don’t even tell you who they are. And you’re thinking, “What’s the big secret here?” Maybe someone will go, “Oh, I’ve seen that place,” or, “Oh, that’s right near where my brother-in-law lives.” There arelots of reasons why listing the name of the company could be a benefit to selling it, but instead, everyone’s got this paranoia.

Shawn Busse:
I think the thing that’s really interesting is that just like with open-book management, you can’t just throw out everybody’s salary into a spreadsheet and share it with everybody. It’s a whole process of education and kind of bringing people into this in a very methodical way. And I think the same goes if you’re going to put something on the market. You can’t just plaster it out there, because then employees are going to wonder what’s going on.

But I think your idea has a ton of merit. Because if you educate folks, especially with a lot of these businesses where, let’s just be real, for a lot of these employees, it’s a job. It’s not really a career. And so it’s like, if they generally know they’re being cared for and that the owner is being thoughtful about the transition, I think a lot of them are gonna stick with it. But if you don’t give them any information, they’re gonna make stuff up. And the making stuff up is the toxic part.

Jay Goltz:
Not just that, but let’s think about this: Everyone talks about, “Oh, I care about my employees.” I don’t know how you can look yourself in the mirror, and then say, “All right, we have to have a meeting. Everyone, I’ve sold the company.” Like, what? How do you do that to people?

Laura Zander:
I totally agree.

Shawn Busse:
That’s a betrayal, yeah.

Jay Goltz:
Right. I mean, “Oh, and I care about you so much, I’ve been making the meetings at night.” And I would ask the question, “What’s the point? What are you afraid of?” At the end of the day, he was afraid, “Well, customers will hear about it.” So what? You’re looking for a buyer who’s going to take care of the business. Like I said, this guy’s in his 60’s.

I just had a customer say this to me the other day. She goes—maybe I should take this as an insult—“You can’t close this business.” I go, “Okay, I’m with you on that. I’m not going to. I’m working on a plan here.” God, I must have looked bad that day or something. And then it turns out, talking to this woman, she’s also in her 60’s, and she’s got a business with 375 employees. And she stays up at night worrying about it. So I had a really nice conversation with her about some plans of what you can do with it. But people have got to get out of their own way sometimes. There’s nothing wrong with saying, “I care about my business. I care about my employees. I care about my customers. I’m looking for a transition, and we’re going to be putting it out there.”

Laura Zander:
So what are you doing?

Jay Goltz:
I’m working on a big plan, which I will reveal.

Shawn Busse:
He’s going to ESOP it.

Jay Goltz:
All right, you just revealed it. I don’t know. I’m looking into things like ESOPs. No, I am. I’m looking into that.

Loren Feldman:
The funny thing about that, Shawn, is he’s interested in going with employee ownership, which will require him to share numbers with his employees.

Laura Zander:
Open-book management.

Jay Goltz:
I’m looking into selling part, 30 percent, doing an ESOP. It’s very interesting. So I’m looking into it. It’s very interesting.

Loren Feldman:
Before we get too far away, I want to go back to one point we were talking about, which is the issue of not having really qualified brokers dealing with businesses like these. And you know, it’s easy to lose sight of the human side of this. You think about the numbers in the listings. But somebody puts their life into building a business, and it means a lot to them. They hope to get something out of it at the end, and then they’re stuck dealing with people who aren’t really qualified to help them, in many cases. Shawn, have you seen anything work for those under-$5-million businesses that struggle with this?

Shawn Busse:
Yeah, I mean, I don’t think any of my clients have been under that $5 million threshold that have either bought businesses or been bought. I think it’s a grist mill. I mean, it just grinds these…

Laura Zander:
Whoa, what does that mean? You use a lot of fancy words.

Jay Goltz:
No, no, the grist mill, it means they just churn them through. They put a bunch of listings up. They see if some of them sell. They just put some more up and put some more up and they just keep throwing crap at the wall. Sometimes it sticks, or sometimes it doesn’t.

Shawn Busse:
There’s just not enough money in it.

Jay Goltz:
Right.

Shawn Busse:
That’s the problem. It’s a little bit like selling a house for $250,000 at a 3-percent commission. That’s just not very much money for a realtor, so why are they going to put that much work into it?

Laura Zander:
I’m curious, because again, we get people coming to us all the time, and there’s a lot of turnover in our industry as well. Most of the businesses are doing half a million dollars in sales. Like you said, with a lot of the frame shops, the owners are paying themselves $30,000 in salary.

Jay Goltz:
Even 50. Let’s say $50,000. There’s nothing left. There’s nothing left.

Laura Zander:
So what do you sell that business for? I mean, with all the news about tech companies being sold for multiples, there are a lot of misconception about how much your business is worth.

Jay Goltz:
Well, let me tell you my experience, which I believe would be the same for you. They think, when you say, “What are you selling the business for?” “Well, I’ve got $80,000 worth of molding and equipment.” They think they’re going to get their inventory and their equipment out of it.

Shawn Busse:
And their equipment at price.

Jay Goltz:
And like, no one gives a shit. They’ll literally get 10 cents on the dollar for their inventory. And EBITDA is a foreign term to them. Most of them have never heard of the phrase EBITDA: earnings before interest, taxes. They don’t know about that. So I have to explain to them, “You’re asking someone to give you $100,000 a year, or $200,000, whatever it is, to make $45,000. Why wouldn’t they just go get a job and pay nothing?”

Shawn Busse:
Yeah.

Laura Zander:
That’s a big one.

Shawn Busse:
Do you think they overvalue the inventory because they see it on their balance sheet, and they think that that’s what it’s worth? Or is it just an emotional thing?

Laura Zander:
No, it’s because that’s what they paid for it.

Jay Goltz:
They paid for it, right. They’re sitting on inventory and equipment, and then they’ll throw in, “Well, there’s goodwill.” None of that means anything if the bottom line is—Oh, I left out another big piece, which probably is the same in your industry. The $45,000 they’re making? There’s a big wink, wink in there. They didn’t put it on their tax return because they pocketed all the cash. I left that part out.

I keep telling people, “You really want to get wealthy? Pay taxes. Go borrow money. Act like a real business.” Because they’re still operating in the 1930’s mentality of three things: Don’t pay taxes, don’t borrow money, and don’t trust anybody.” That’s not going to work. It’ll work. You’ll make a living your whole life, but I don’t know anybody who’s really done well that subscribes to those three things.

They don’t even have evidence of what the gross sales are because their kid comes in, “Dad, I need to buy new shows.” “Okay, register open.” I don’t even know if there is a register these days. They open the cash drawer, and they give the kid 100 bucks. I mean, that’s how it works in small business in America.

Loren Feldman:
All right, we’re almost out of time. I want to do something a little bit different. I have a quiz for you guys this week. I’ve taken a few questions from a quiz published by the New Republic. I’m going to read three sentences to you. You have to tell me whether each one was spoken by Elon Musk or by Mr. Burns on The Simpsons.

Laura Zander:
Oh my God. Is there a prize?

Loren Feldman:
No. Here’s the first sentence: “The politicians and unelected bureaucrats who stole our liberty should be tarred, feathered, and thrown out of town.” Elon Musk or Mr. Burns?

Jay Goltz:
I’m going with Elon Musk.

Shawn Busse:
I’ll go with Burns just to be different.

Loren Feldman:
Elon Musk.

Shawn Busse:
No!

Loren Feldman:
Number two: “That’s my lesson for taking a vacation. Vacations will kill you.” Elon Musk or Mr. Burns?

Jay Goltz:
Elon Musk.

Shawn Busse:
Musk.

Laura Zander:
Mr. Burns.

Loren Feldman:
Elon Musk. Last one: “I would tell those people, ‘They will get to see their families a lot when we go bankrupt.’”

Shawn Busse:
That’s Musk.

Laura Zander:
Yeah.

Jay Goltz:
I would say Burns on that one.

Loren Feldman:
Elon Musk. They’re all Elon Musk. [Laughter]

Jay Goltz:
You know what I’m afraid of—and this really bothers me—that Elon Musk is now another face of, “This is what an entrepreneur is.” The guy is clearly brilliant. No doubt about it.

Loren Feldman:
Well, he’s raising a little bit of doubt.

Jay Goltz:
I got it, but he’s clearly a genius. I’m not arguing that. But I’m afraid that the word entrepreneur now, “Oh, well, there’s [Elon],” and I don’t want him to be representing entrepreneurs.

Laura Zander:
I don’t know. He’s so far out there.

Loren Feldman:
Yeah, he’s in his own category at this point. All right, I opened this can of worms, but I’m gonna close it. Let’s move on. One quick last thing: Jay, you got an interesting question from a listener. Tell us what the question was.

Jay Goltz:
She’s a somewhat new manager, and she’s struggling. She says, “How do you balance being the nice boss with not being a pushover?” And I think most people, at some point, struggle with that concept.

Laura Zander:
Totally, absolutely. You know, one thing that has really helped me a lot—and I hate to jump on the Brené Brown bandwagon, but I read a book that she wrote.

Jay Goltz:
Wait, who would that be?

Laura Zander:
Brené Brown. She’s the vulnerability PhD. She did a TED talk. So she’s all about how we should be more transparent and more vulnerable.

Shawn Busse:
She’s Laura’s spirit guide. [Laughter]

Laura Zander:
No, she’s not.

Jay Goltz:
Okay, I have no interest in following up on this, but go ahead.

Laura Zander:
No, but she wrote a book that I did read, and the statement that has really stuck with me is, “Be clear, but kind.” Clear but kind. And so I just keep kind of remembering: It’s about being clear, but you can still be nice. I heard a story from a monk, which also helps me a ton. He says his advice is, “Always be kind, but honest.” So if you see somebody on the street who you know who you don’t like, when you see them crossing, you don’t say, “Hey, it’s nice to see you.” Because it’s not nice to see you. I don’t want to see you. You say, “Oh, it’s really sunny out right now.” You know, or something like that. So always being honest. And so those two things together have helped me—

Jay Goltz:
Okay, can you hear my eyes rolling in my head? I just don’t want to be distracting. I would say, the answer to that is, I believe that firing somebody or telling them, “Listen, you can’t do that,” is not not being kind. So I believe I’m always kind. But I believe that the answer to not being a pushover is: “Everybody knows what the program here is. We need to show up on time and take good care of customers and be respectful to each other.” And when they’re not, they’re told, “Listen, you can’t do that again.” And that’s not being a pushover. So I do not think there’s a conflict between kind and being a pushover.

Laura Zander:
I don’t either. But there are those of us who aren’t as far along the journey as you are. And so I worry a lot about what other people think of us. We want people to like us.

Jay Goltz:
Excellent. You’ve nailed it.

Laura Zander:
I’m just saying “clear but kind” is a stepping stone to learning how to set those boundaries and how to be a little more direct and forthcoming and not worry so much, because I know I’m being kind.

Jay Goltz:
Okay, very good. I fully accept that. And well-put. And I would say in your whole thing, you just said the answer to what I would say to people.

Laura Zander:
Was it okay for me to say? Did that upset you? Just kidding.

Jay Goltz:
No, you said it all very well. But I would say this is the difference between—Oh, it was one of those jokes again. Okay, I would say I fully understand and can appreciate what you’re saying. The one piece I would say is: I gave up a long time ago thinking that everyone was going to be happy with everything. I recognize when I tell someone, “You know what, you were told when we interviewed you, we told you the first week you need to be here on time. Customers expect you on time. You don’t have to buy into that. You don’t have to agree with that. But I’m just telling you, if you can’t get to work on time, you really should be working somewhere else.”

Loren Feldman:
But Jay, that’s an easy example.

Jay Goltz:
Okay, it doesn’t matter. There are 50 others. The point is, when I’m done with that conversation, I don’t go home worrying, “I hope I didn’t offend them. I hope they’re not mad at me.” I don’t think about it. I recognize, “That’s my job. And I’m on a good and noble cause here. And I don’t have to apologize to people about having standards and about taking care of customers and about treating other employees with respect.” I don’t apologize about it. I don’t feel bad about it. And I’m saying to you, your next level of enlightenment is, you’re going to eventually—and I mean this—”Yeah, they’re not always going to like what I tell them. Got it.”

Laura Zander:
But you just nailed it with the next level of enlightenment. But for the woman who was asking you this question, she might be seven levels down, right? So she’s got to figure out: What’s the one change I can make to be a little more clear and kind? She can’t jump those seven levels to get to the top of the hill, like where you are. So what are those steps that we gradually kind of have to work through to gain that confidence and to understand that it’s okay that not everybody likes us?

Jay Goltz:
See, and my answer to that is very simple: Kind is not part of the equation. We should always be kind. Kind means you’re not insulting people, you’re not yelling at people. So take kind out. It should be clear and responsible—meaning, “You need to understand. If you come in late…” Whatever the situation is. “If you ship another order out without making sure that we’ve got a signed credit app on it, I’m going to feel terrible about it, but you’re gonna get fired that afternoon.” This is the pushover part. So my antidote to the pushover part is very clear, that, “If you do this again, you’re not going to be working here.”

Loren Feldman:
But Jay, part of it, I think, is what Laura was referring to, which is, you’ve been doing this long enough that you know what your standards are.

Jay Goltz:
Yes.

Loren Feldman:
It’s more difficult for someone who’s figuring that out: What are you willing to put up with—especially in the middle of a labor shortage?

Jay Goltz:
I’m not criticizing anyone. I went through the same thing myself. It took me years to figure this out.

Laura Zander:
That’s a great point on the labor shortage, Loren. So I think one of my biggest fears is that everybody’s going to quit, and they’re going to leave. It’s this fear of abandonment. So what if I criticize this person? Or what if I set them straight and they quit and they leave? And now I’ve got to do the job? Or it all goes to shit?

Jay Goltz:
And my answer is that it’ll happen occasionally. But if you subscribe to that, you’re working for them and the customers are gonna get screwed.

Laura Zander:
One hundred percent. But it takes some time to get comfortable and to understand that it’s not the end of the world when they quit and when they leave.

Loren Feldman:
We gotta go. But we haven’t heard from Shawn on this. Shawn, have you ever been a pushover? Have you ever worried about that?

Shawn Busse:
Oh, yeah, I mean, I think most entrepreneurs want to please and delight people, at some level at some point in their career.

Jay Goltz:
Absolutely.

Shawn Busse:
I think that one of the better antidotes to this challenge is to do the work ahead of time to understand what your working agreements and values and acceptable behaviors are in the organization. And then to talk about that over and over and over again and make that part of the hiring process, make that part of the job descriptions. Because the best outcome is you can ask the employee a question and say, “Hey, how do you think your behavior X aligns with our value Z?” And the best outcome is they look at you and go, “Uhh, I don’t think I actually am aligned with that value.” “Exactly. Let’s talk more about that.” So giving them clarity on what’s acceptable and what’s not, before the event happens, and so that when it happens, you can point to it and look at it. That’s the advice I would give them.

Jay Goltz:
That’s a key word: acceptable. Here’s the key: Holding people responsible does not make you unkind. That’s my point. That word has nothing to do with it. Having a customer come in at nine o’clock, and the door’s locked, and no one’s there to take care of them, does not make you unkind to say to the person, “We need to open the door on time.” I mean, it’s not kind to the customer, because that’s where the problem with this whole thing is. Every time you let this behavior continue that’s not part of your mission statement, the customer is paying for it. That’s the problem. The customer’s paying for it. And I don’t want to punish my customers.

Laura Zander:
So one other quick solution, Loren, before we have to go is: You can do what I did, and just hire somebody. You can continue to be a pushover and just hire people who aren’t pushovers to manage everybody else. [Laughter]

Jay Goltz:
Maybe. No, that’s not a terrible strategy. That works.

Laura Zander:
Yeah, it’s easier.

Shawn Busse:
That’s knowing what brings you joy, and then structuring the organization to minimize …

Loren Feldman:
There’s more than one way to solve a problem.

Laura Zander:
Totally. And I’ve actually learned a ton from watching our general manager be clear and kind all the time.

Loren Feldman:
All right, I could talk to you guys all day, but we can’t do that. My thanks to Shawn Busse, Jay Goltz, and Laura Zander. Thanks for sharing, guys.