Best Of: What It Takes to Build a Business
Introduction:
So, I decided to give the 21 Hats Podcast crew this week off. Between the Memorial Day holiday and our first 21 Hats in-person event the previous week in Chicago—attended by five of the podcast regulars—it seemed the right thing to do. It also seemed like a great opportunity to reprise one of our favorite all-time episodes. It’s not a used episode; it’s a certified pre-owned episode, or better yet, a greatest hits episode. We first published it in December of 2021, and it features highlights taken from the podcasts we’d published up until that point that cover many of the risks and rewards of business ownership, including what it’s like to sell your business, to fire an employee, to risk your own home in order to get financing, and even to deal with serious mental health issues. If you’re new to the podcast, I think you’ll find that these conversations bring real context to the journeys of the entrepreneurs you’ve been following here. But even if you’ve heard some of these discussions before, I think you’ll find them a refreshing reminder that choosing to build a business can be a noble mission, but it generally doesn’t come with an owner’s manual. We’re all figuring it out as we go.
— Loren Feldman
Producer:
Jess Thoubboron is founder of Blank Word Productions.
Full Episode Transcript:
As you’ll hear, I introduce each exchange in this episode with a few words to set the context. The first highlight, actually, comes from one of our closing episodes of 2020. In an exchange with Laura in Episode 42, “The Great COVID Churn,” William predicts that 2021 will be a year of turnover. As we now know, he kind of nailed it.
William Vanderbloemen:
I do think that this year—and the pandemic in particular—has accelerated a lot of things that might have taken a while to change, and it’s also decelerated some things that were going to change and didn’t. A quick way of saying that is: I think you’re gonna see—in fact, I know, because I’m already seeing it—you’re going to see 2021 as a year of, I’m calling it, The Great COVID Churn. In other words, it’s a year of turnover.
Loren Feldman:
What are you seeing that convinced you of that?
William Vanderbloemen:
You remember in elementary school there were the tests you take, and then there was the teacher’s edition that already had the answers in it? We kind of get the teachers edition on the job market, because we’re already seeing people tell us, “I’m ready to make a move.” It’s December, and who moves in December? You move in January, right? That’s when everybody’s gonna lose 10 pounds and balance their checkbook. But we’re already seeing—instead of January—“Okay, I’m ready to look around.” We’re seeing in December some pretty major moves.
It’s made me stop and say, “What’s really going on here?” A couple things. I’ll try not to ramble, but one, the pandemic put up a dam in the middle of what’s a normal flow of turnover. Turnover just happens in the job market. There’s healthy turnover, there’s unhealthy, but there’s always turnover—except when there’s a pandemic. Obviously, some companies had to lay people off because of the pandemic, so there was some churn there. But a lot of good people who would have made a natural move because of career stage or geographic need or a promotion or try a new thing—a lot of the people who would have made those moves voluntarily hunkered down during the pandemic, and what should be a natural flowing river of healthy transition, it actually got dammed up by the pandemic, so that’s one thing.
And now that the vaccine has been approved in the U.K. and should be here in the U.S. pretty soon, maybe it’ll take until the end of Q2 for everybody who wants a vaccine to receive one… By the end of Q2, I think the fear of moving will have gone away. That’s just to say, we’ve lived with a really uncertain year. And a lot of people who would have made a move have said, “I don’t need any more extra uncertainty in my life right now. So I’m gonna wait and make a move once this clears.”
Laura Zander:
Can I jump in? So where we live, in Reno, it’s a lot of—I don’t know what the statistic is, but there’s not a huge population of people who were actually born in Reno and are from Reno. It’s a lot of people from the East Coast and all around, and people are moving home. They’ve just decided, this is it. I’m done.
William Vanderbloemen:
Laura, I totally agree with you. I would say there are a myriad of reasons why this is going to be the year of turnover. One of them is, people who were waiting to start their own company, people who were waiting to take a job at a competitor, people who were there like, “No, I’m not doing that right now, no more uncertainty,”—now, right after that, there’s a whole lot of other reasons like we’re doing several searches right now for repeat clients where we placed an individual, and it’s only been three, four, or five years, and the individual has moved. And the client has rehired us to refill the spot, which you’d think, “Why would you rehire us if the guy only lasted that long?” And they say, “No, no, no. They did a wonderful job, but the pandemic has made them realize they want to live near their family of origin. They want to go back home.” So that’s only going to accelerate.
Then you add in, I’ve got some dear friends in Park City, which has been a quiet little mountain town forever, and now it is one of these bedroom communities outside of a major city, and Salt Lake’s growing like crazy. Well, Park City’s growing quicker, because—as Loren can relate—Princeton, Stanford, all the places Don and Betty Draper would have lived that everybody said was a dead real estate market, well it’s hopping. Everybody wants out of the city, so people are moving geographically, and that’s going to increase in ‘21. People are moving for family reasons; that’s going to increase in ‘21. People are moving because they would have moved in ‘20 and they put it off, and that’s going to increase in ‘21.
The other thing that’s happened is everyone’s job has completely changed, and a whole lot. I mean, I can’t tell you the number of people who are like, “This isn’t what I signed up for anymore.”
In Episode 44, “How Do I Manage My Managers?” the following exchange between Jay and Laura came in response to a question from a listener, Hap Cameron, who owns Happy Cones, a New Zealand-style ice cream company in Denver. Hap was looking for suggestions on how to manage his managers more effectively. And by the way, if you ever have questions for the podcast panel, you can send them to me simply by replying to your 21 Hats Morning Report.
Jay Goltz:
Number one—and most people don’t talk about this—the most important part of management is hiring the right person in the first place. So first, I put a lot more energy, or put good energy, into figuring out what kind of person is going to do the best job doing this. Put a great ad together, interview thoroughly, check references, and most entrepreneurs are not real good at it, including me. Why? Because we like people, because we like to talk about our companies, and we’re in a hurry. That’s not a good thing in hiring. Slow down the hiring process and do your best to find someone who has had experience doing something with customers. Ask good questions during the interview, like, “Tell me about a customer experience you’ve had.”
Loren Feldman:
Jay, is that realistic advice for an ice cream shop?
Jay Goltz:
Yeah. Why not? Maybe they haven’t worked in an ice cream shop, no question. But did they have a job before? They’ve never had a job? Okay, maybe they just graduated high school, college, whatever. They’ve never had a job, okay. But most people have had a job before, so I would ask them, “Tell me about dealing with customers.” Because at the end of the day, people are not going to be pissed at you because your chocolate ice cream wasn’t quite as good as the chocolate… No, they’re gonna be pissed because your person wasn’t nice.
Go to Yelp. That’s all you have to do. Just look at Yelp and see the reviews. Usually it’s about, “They’ve got an attitude in there.” Or, “They weren’t nice to me.” Or, “I hate them.” It’s usually not about the product. It’s usually about the people. You want to hire a nice person who’s going to give a wonderful feeling to your ice cream shop.
So you’ve got to figure out what kind of questions do you ask to tease that out? And the one I would ask is: “Tell me about a difficult customer situation you had, and how did you handle it?” And you can tell by just their body language… Do they sigh? Do they say, “Oh, wow, I had one, boy, six months ago…” And then you find out what they learned from it. You find out whether they’ve got an attitude about it, like, “Well, people are jerks sometimes,” versus, “Listen, I understand my number one job is to make sure people are happy—even if they’re not nice to me. I suck it up. It’s not a problem. I don’t take it personally.” I want to see how they handle that, how they process that.
Hiring, number one. Number two: set standards. In an ice cream shop, I’ll give you my top four. Make sure this door opens on time. How many retail stores do you go to that they’re not open when they’re supposed to be open, and you stand out in front waiting? I have a simple solution to that. My employees know our standards are, We open five minutes early, and we don’t lock the door ‘til five minutes after closing. There’s none of that screaming through the door pointing at your wristwatch, “We’re closed.” If we close at six, no one locks the door till 6:05. Easy. Versus getting into the fight with the customer. Setting standards like that. Cleanliness has got to be critical. You shouldn’t walk into your ice cream shop and find dirty napkins lying on the floor. Customer service. If someone’s not happy, how do you handle it? “Oh, no problem. Let me get you something else.” You need to train people on that stuff because some people think they’re doing the company a favor if they fight with customers. They think that’s their job.
Laura Zander:
Is it fair to ask this manager to write up those standards?
Jay Goltz:
No, not at all. Well, ask on the interview to see if they can do it. That certainly would be fine.
Laura Zander:
Could you make that part of their job? Could you say, “Look, part of the reason I’m hiring you is because I want you to create these standards. I want us to agree on them.”
Jay Goltz:
No, absolutely not. You’re no longer the owner. Now it’s like your employee is deciding who your store is. No. I don’t mind asking them, “What do you think? Mary, what do you think the four most important things to being a manager in the store are?” And see if she can come up with it. This ain’t brain surgery. They should come up with it. Customer service, cleanliness, making sure that we’ve got the place staffed properly for the right time. They should be able to come up with this if you want them to be a manager.
In Episode 46, “A Fabulous Conversation about Marketing,” we welcomed Stephanie Stuckey to the podcast. Later in the year, Diana Lee would join as well. (And by the way, in January, we will be adding two new members to the 21 Hats Podcast team.) But in this episode, Stephanie explained how she had bought back Stuckey’s, the family roadside stop business, which had once been everywhere, but had fallen into serious decline. Her plans to reinvigorate the business, she told Dana and Laura, included aggressive use of social media, including LinkedIn.
Stephanie Stuckey:
LinkedIn was the biggest surprise. I get so much engagement on LinkedIn. It’s the comments. And it’s not just “Well done” or “Kudos,” “I like that.” It’s “I really like this because…”
Today, for example, I can’t afford marketing research, so I’m deciding between two billboard designs, and I was really headset on one billboard design. And the owner of the store wants another billboard design. And I’m like, “All right, I’m just gonna put this up on LinkedIn. I’m going to ask people for their feedback, and everyone’s going to agree with me. And then I’m going to go show this to the store owner and say, ‘All right, see, I’m right.’”
Well, I posted it. I said, “I want your feedback.” I’ve already gotten a lot of feedback, and it’s been mixed. A lot of people like the way he likes the billboard. That’s just one example. But the feedback I’m getting is not just, “I like the top one.” It’s, “I like the top one because the logo stands out more.”
Laura Zander:
God, what a great way to grow this brand by having your community involved in all of these decisions.
Dana White:
This is exciting.
Stephanie Stuckey:
And I’m getting free consulting. Oh, this is my favorite: I put up display concepts. I’ve been working on this display. Because we’re so small, and we have limited budget, and we don’t own our own stores, part of my growth strategy is we get retail partners that sell our product, but they don’t pay us a franchise fee, like an Ace Hardware. So I’m working on these displays that look like a mini-Stuckey’s store with a blue roof and a little Stuckey’s sign. You get the experience of a road trip from the display, even though you may be at your local Ace Hardware store.
I got the inspiration for this display, shamelessly, from a Krispy Kreme display that I’d taken a photo of, and I showed it to this guy who makes displays. I was like, “This is my inspiration. Can you mock up something?” And so I had a prototype, and I put the prototype on LinkedIn. I said, “Can you all give me feedback? What do you think of this?” Got tons of great comments. This one guy messaged me and said, “I really like this. I have some valuable feedback. I’d love to have a phone call with you. It looks a lot like the display that I created for Krispy Kreme when I was their marketing director.” And he showed me a photo, and I was like, “Busted.” He’s now helping me, by the way.
Loren Feldman:
That’s great.
Stephanie Stuckey:
Yeah, at a very reasonable rate, because he said, “I love your brand.” He’s no longer working for Krispy Kreme. He just took time off for family reasons, and he’s like, “This is a fun project. I’m interested in helping you,” and he’s amazing. And I found that through LinkedIn—through a LinkedIn comment. I didn’t even say I was hiring.
In Episode 48: “I Want to Have Clean Hands,” Paul, Jay, and Dana talk about the mechanics of firing an employee and how to make the best of a bad situation.
Paul Downs:
I had an employee who I fired because he wasn’t showing up for work, and I did all the stuff documenting it, writing it down. We had the final meeting where his transgressions were to be reviewed, and I filmed it. And what happened was, I sat down, handed him a document, “Here’s your problem. Here’s the policy violation.” Started reading it to him, and he threw it in my face and jumped up, basically, “Screw you. I’m out of here.”
But he was smart. He said, “You can fire me if you want, but I’m not listening to this garbage,” and then he just left. And so then I did go and fire him, and then, of course, he claimed unemployment. I sent this movie in to the adjudicator, and I said, “Check this out. Like, how in the world is this not a quit?” And he said, “Well, it’s not a quit. He didn’t say he was quitting. He said, ‘Fire me.’ And you did. So it’s a fire.” But the guy took pity on me. He told me exactly how to play it so the claim would be denied, and it was. It basically was the guy had demonstrated that he couldn’t be managed, and that instead of me saying that he had quit, I should just say, “He couldn’t be managed.”
Jay Goltz:
That is a critical piece in this.
Paul Downs:
It wasn’t a question of competence, or whether he could do his job or not. And it wasn’t a question of who quit or who got fired. It was he had demonstrated very clearly that he could not be managed, and that was a legitimate reason for me to get rid of him.
Jay Goltz:
You hit on the key piece, which is, there are maybe half a dozen reasons why someone’s not eligible for unemployment. One of them is, they didn’t follow the agreed-upon rules. One is attendance. There are reasons.
Paul Downs:
Jay, before you say that in a blanket way, we should emphasize that these rules differ from state to state.
Jay Goltz:
Yes, yes.
Paul Downs:
What you say about Illinois and what I say about Pennsylvania may be really different in Alabama—or New York, for that matter.
Jay Goltz:
I’m 100 percent with you on this. You need to know the rules. And if you follow the rules, and you have to fire someone for those rules, you will win unemployment. But, at least in Illinois, you can’t say, “Oh, they weren’t doing a good job.” That’s not a reason they don’t get unemployment.
Loren Feldman:
I want to follow up on one aspect of what Paul just said: Do we all think it’s a good idea to videotape a session where you are letting an employee go?
Dana White:
I think it’s a bad idea because there shouldn’t be enough discourse to videotape. Termination should be quick, and you should always have somebody there with you. Some of the times, we’ve even had a quick sign off, a quick two- or three-sentence paragraph saying, “Yes, I’m being terminated on this day,” and done, but videotaping it?
Jay Goltz:
I haven’t found it necessary, and I find it to be just too adversarial. Personally—this is just my own personal thing—I don’t like the idea of we’re turning this into a court case right off. We’re going to videotape. I’m not comfortable with that. I have found that, by documenting it, it’s worked fine.
Loren Feldman:
Paul, what do you think? Have you continued to do that?
Paul Downs:
I haven’t, but I find the threat of it to be extremely useful. I did that one, and it actually was really helpful to me in the situation where I was trying to get the adjudicator to see what happened. I mean, the one thing about video is there’s no argument about what happened. But since then, what I’ve done is prepare documentation and have a witness. And what I tell the person I’m about to fire or discipline when they come in is, “Hey, I’m gonna do you a favor. I’m not gonna turn on a camera here.” What it does is, it lets them know it could be even worse.
They’re about to have probably the worst moment, or one of the worst moments of their adult lives, and I’m going to tell them that there is a further level of humiliation that I could subject them to, and I’m not going to do it. That has worked out well for me since then, in that I’ve discharged six or eight people for cause, and I haven’t had any unemployment claims from that because I try to always leave them with a sense that, “It’s not working out, but I don’t bear you any ill will.”
Dana White:
So by telling them, “Hey, I’m gonna do you a favor by not recording you right now,” I see the bully and I see the buddy, right? Let me help you help yourself.
Paul Downs:
There’s no way around it. You gotta be hard at some moments, as a boss. You just have to be, and you have to do hard things. They are humiliating, and they are dreadful for the person you’re doing them to, and that’s just part of the job. But there are ways to do it that make it worse or ways to do it that make it better. I’m not a hard person, but I will do a hard thing. If I feel like that employee’s continued employment is threatening the health of the rest of the team, that’s what makes me act. But I try to always pull back a little bit as the punch lands and try to make it as good as it could be.
Jay Goltz:
Well, let me give you my version of that. Clearly, you have to fire some people, and clearly, they’re usually not going to be happy about it. My approach has been: I want to have clean hands, which means they’ve been talked to about it before, they were given an opportunity to fix whatever the problem was, they’re given an opportunity to go look for another job, because you said, “Listen, I’m starting to get concerned you’re the wrong person for this job.” They’ve had all that opportunity.
When it comes the time that they have to get fired, I want clean hands. And if they go—which has happened—“I can’t believe you’re doing this!” I’ll say, “I can’t believe you’re surprised. We just had a conversation two weeks ago when I told you exactly where we’re at. And listen, Bob”—if their name is Bob—”you don’t have to agree with me. Maybe you’re right. All I know is, this isn’t working out for us here. Today is your last day. I wish you well.”
Paul Downs:
I think that one of the critical things is not the meeting that involves the firing, but the one before that. I bring out the full documentation. It’s all the same things you would do to fire someone with an escape valve at the end, so there is the written part, there is the witness, there is the policy violation. The person has to sign an agreement that they’ve been in the meeting, they understood what happened. But I always say, “I’ve laid out what I want to change in this document we’re both reviewing. I want you to stop doing X, and I want you to start doing Y. And if you do that, we’ll forget about this. It’ll be in your record, but I’m not gonna hold it against you.” It’s a real warning.
Jay Goltz:
You have just described having clean hands. You have just described what I was talking about.
Paul Downs:
Good employees change direction. Bad ones continue down the road, and then you fire them. But they’re not surprised.
Loren Feldman:
I just want to make clear, you guys are all performing at a very high level. I am never letting any of you go—except for right now, because we’re out of time.
In Episode 49, “How Do We Get Out of This Cage?” Laura takes us back to the founding of Jimmy Beans Wool. Before they started the business, Laura and her husband Doug were coders in San Francisco who did very well before the Internet bubble burst. After the bubble, they moved to Reno where they opened a neighborhood yarn store. But then, being coders, they turned it into the internet’s neighborhood yarn store with Doug engineering their platform himself. In many ways, they were far ahead of their time, but almost 20 years later, Laura tells Karen and William, they find themselves in a predicament.
Loren Feldman:
Laura, I’d like to start with you. I understand you have an important job opening. If I’m not mistaken, you’re looking to replace your husband.
Laura Zander:
Yeah, I am. God, if there’s a rich single man out there who would like an 11-year-old kid…
Karen Clark Cole:
I get him first.
Loren Feldman:
William, in your experience, how long does a husband search usually take?
William Vanderbloemen:
Well, if you’re willing to go the mail-order route, we can get it done pretty quick.
Laura Zander:
Perfect, perfect.
Loren Feldman:
In all seriousness, your husband is your co-founder, and I guess, kind of the chief technology officer at Jimmy Beans Wool. Is that right?
Laura Zander:
Yeah, he’s the Everything Technology Officer. But yes, we’ve been in business 19 years. He started full-time 17 years ago, and he has built pretty much every piece of software that we use.
Karen Clark Cole:
From scratch, Laura?
Laura Zander:
From scratch, yeah. So it’s all zeros and ones. It’s all like ASP.NET, JavaScript, VB.
Karen Clark Cole:
I just have to ask: Are there no systems out there you could have used? You had to make them?
Laura Zander:
Not 19 years ago, no.
Karen Clark Cole:
Oh, wow.
Laura Zander:
No, and that was actually our big, huge competitive advantage. I mean, sure, we probably could have spent $200,000 at the time. I mean, there was no Shopify. We started years before Facebook started.
Loren Feldman:
And also, you guys were both coders who made your living doing this.
Laura Zander:
Yes, so we started it with an inventory management system that linked to a website, which was the e-commerce [site]. Plus we had a point-of-sale system because we had a retail store. We had this platform that Doug built and then just expanded and expanded it. We’re in the yarn industry, and so we have all these interesting little things. It’s not apparel where you sell one T-shirt and one size. You sell two hanks of yarn if somebody is going to make a scarf. You sell three hanks of the same color if somebody is going to make this.
There are some complexities inherent to the industry that we’re in that make it so that you can’t just buy off-the-shelf software. Or you could, and then you could customize it, and that’s something that we need to think about. Now we have this 19-year-old legacy system that Doug has built, added on to. He’s invented some things, if you will, before things were available, like subscriptions. I don’t know what that subscription platform is, but he built a subscription platform for us before you could go buy one somewhere so that we could run subscriptions.
All of that said, he has built it, he maintains it. He maintains AWS for us. He maintains our phone system. He has two college-aged women who help him and he is training and teaching. Over the last 10 years, maybe 12 years, we’ve tried hiring. We’ve tried hiring college students. We’ve tried hiring $150,000-a-year people from Stanford. We’ve tried everything in-between. We’ve probably hired 15 people over the last 10 years.
Loren Feldman:
Wow.
Karen Clark Cole:
All to try to replace Doug, or to do different things?
Laura Zander:
He’s a bright guy, and he’s a creative. He designs our house. He’s an architect. He was a technical architect in the Bay Area before we started this. In an ideal world, he would have a team underneath him with somebody who managed the team, and he could do the new creations, and he could create new technologies. That’s what he’s uniquely talented at. Or he could just walk away. If we found somebody to replace him today, he’d get on his mountain bike and ride into the sunset and be very happy.
Loren Feldman:
I think you told us previously that his dream is to be a house husband.
Laura Zander:
His dream his whole life was to be a stay-at-home dad with no kids, and then I got pregnant. So we have the kid. [Laughter] But one of our employees, at one point, described it very well—Doug has built a cage around himself, and we need to figure out how to get him out of that cage, because the system can’t survive without him.
In Episode 50, “So You Bet the House?” Stephanie tells Jay about her decision to double-down on her investment in Stuckey’s by buying a manufacturing facility that will allow her to shell her own pecans and stop outsourcing the making of pecan log rolls and other candies. Stephanie’s hope is that this will allow her to control costs and quality more effectively. But even with a 50-50 partner, buying the plant was a significant investment and arranging the financing was a torturous process that culminated in her taking a risk that many non-entrepreneurs would find inconceivable.
Loren Feldman:
Stephanie, I want to take a step back and take the larger view of this for a second. You took a big leap when you bought the company in 2019. This seems like an even bigger leap. You’re even further invested, taking bigger risks, but of course, bigger rewards.
Stephanie Stuckey:
Absolutely!
Loren Feldman:
What are you most worried about? What concerns you the most?
Stephanie Stuckey:
You know, there’s one thing I meant to mention earlier, when we were talking about the risk from the initial purchase of Stuckey’s. This is a multiple of that amount of money to purchase this manufacturing facility. I did mean to bring up how we financed it, and it was through an SBA loan. We did a 7(a) loan. And I think it is important—so many people with the Cares Act talk about the PPP, which of course is a benefit that has been a huge boost to businesses, but these loans for acquisition of facilities are also benefiting from the Cares Act round two. The first six months of our payments, the SBA is going to pay up to $9,000 of our mortgage payments. That’s a boost that’s not always mentioned in the news.
Loren Feldman:
Nice.
Stephanie Stuckey:
What keeps me up, or what worries me about this, I guess, obviously, it’s a financial investment. The SBA loan, it’s a great thing if you can get it—that’s a whole other episode: Trying to get financing on a big acquisition for a small business. Because it typically requires you having good credit, which my business partner and I are fortunate to have, but you also have to have collateral. The SBA loans do require you to put up personal collateral.
Loren Feldman:
So you bet the house?
Stephanie Stuckey:
My house is collateral now, yup.
Jay Goltz:
Welcome to entrepreneurship! I’m glad there’s some honesty out there, because that’s the way it works. Because I gotta tell you, especially now with the banks, it’s about collateral, collateral, and collateral.
Stephanie Stuckey:
It’s incredible. Not only did I have to put my house up as collateral, but then I had to make sure that the home insurance policy listed the bank. I had to take out an additional life insurance policy and list the bank. I was just waiting for them to call me and tell me my firstborn son has to be collateral as well.
In Episode 57, “Dana White Decides to Franchise Paralee Boyd,” Dana tells Jay and Stephanie what she’s decided to do with the $200,000 she won at an entrepreneurship competition in 2020. Dana’s decision will loom larger as the year goes on and she lands another big opportunity—this one, to open company-owned salons on American military bases around the country, and even the world.
Dana White:
So, I’ve made the final decision as to what to do with my winnings from Detroit Demo Day.
Loren Feldman:
Interesting.
Dana White:
And it’s been a long back-and-forth journey, and I have decided to franchise.
Jay Goltz:
Wow.
Stephanie Stuckey:
That’s so funny. I’m actually trying to get out of franchising. I’m in the opposite direction.
Loren Feldman:
That’s why I wanted you here today, Stephanie. We’re gonna talk about that. But first, tell us, Dana, what brought you to this decision?
Dana White:
I had decided that it was time to expand, and so I had looked at going to Chicago.
Loren Feldman:
We talked about that. We had an episode.
Dana White:
Absolutely. I was going to Chicago and had a conversation with my operations manager. And she said, “I think Chicago would be an amazing move, but I hope you don’t mind me saying I’d like to talk to you.” And I said, “Sure, what’s going on?” And she said, “You know my background. I’ve worked with the Sports Clips franchise, Great Clips franchise, and Lady Jane’s operations.” And I said, “Yep, those are all hair salons.” And she said, “After having worked here for the time that I have, I’ve never seen anything like your business. And if you don’t mind me saying, I think you are perfect for a franchise model.”
And we really went in depth and had a conversation that inspired me to call up the franchise consultant and just have a basic conversation: What is the state of franchising after Covid, during Covid? What’s going on? And we had a very frank conversation. We talked, and he pointed me in the right direction to get the information that I needed. Then after that, I talked to people, read the reports, and called him back and said, “This is what I’m thinking, and this is what I can do.” And he was like, “Okay, I think it’d be a great idea, but you have to think it’s a great idea. So let’s get you comfortable with it.”
My network has stepped up, Ernst & Young has stepped up, Goldman Sachs [10,000 Small Businesses] has stepped up to give me as much information and support that I need to execute this perfectly. With IFranchise Group, I started my process. I’m about two weeks into a five-month process. And at the end of this process, I will be the first African-American woman beauty franchisor, and we’re already starting to talk about subsidiaries in other countries—five other countries.
This is the same franchise team that franchised Drybar, and so they’ve been able to impart their wisdom on what went right with that process, what could have been improved in that process, and what makes Paralee Boyd different. But I am extremely confident, using my resources, the people who I’ve talked to are away from my iFranchise Group family, as I like to call them—I told them, “I mean, of course, you’re going to give me great references. I want to talk to the people who have nothing to do with you, their franchises,” and they said, “Understood.” And that’s why I leaned on Goldman Sachs and Ernst & Young to put me in touch with their clients who either started franchises or have been in franchising for years, and that was it. We’re off and running to the races. It’s been a great process so far.
Loren Feldman:
Wow. Jay, any questions for Dana?
Jay Goltz:
Wow. A lot to take in. The franchise consultant? I mean, I’ve looked into this a little bit. There are 20 of them. So this one did Drybar. Okay, that’s good. Are you privy to what the numbers are from that whole thing?
Dana White:
What do you mean “the numbers?”
Jay Goltz:
Are they making money? How many lawsuits are coming from the people who bought the franchises?
Dana White:
First question I asked was about lawsuits. I’ve asked not only my iFranchise Group what is the number of their lawsuits, but other franchisors, and the numbers are low. And I said, “Okay, well, why do you have numbers at all?” And they told me why they have numbers at all. And so, are there some lawsuits? Yes. But a lot of it has to do with the franchise consulting firm that you start with.
Jay Goltz:
No question. There’s absolutely no question, and it comes down to being careful who you sell the franchise to. There is no question that franchising is one of the greatest inventions of the 20th century. But with that being said, there’s been lots of failures over the years. And I’m glad that it sounds like you did your homework on it. So, okay. Wow.
Loren Feldman:
Stephanie, how about you? Any questions for Dana?
Stephanie Stuckey:
I’m not so sure if it’s questions as much as some cautionary tales—although this all sounds great. I in no way want to dampen this enthusiasm, and I love that you would be—or will be—the first female African-American franchisor of a beauty salon chain. I’m all for it. I just have a very different experience, and part of it is that I purchased Stuckey’s, and we had a franchise system that had really gone awry after years of neglect. The challenge you have—and you know this—is ensuring consistency and quality and really capturing what’s unique, and making sure your franchisees get that. And in order to have that, you have to have a strong operations program and systems in place. We lacked that at Stuckey’s. We don’t have consistency, so I’m trying to do a lot of cleanup.
In Episode 65, “This Is Where We Get Into Therapy,” Paul, Jay, and Laura, well, they get into therapy. Laura acknowledges her discomfort with some aspects of being an owner: Does she work hard enough? Does she pay herself too much? Does she deserve her success?
Loren Feldman:
Laura, I’m curious. Given your feelings of guilt, are you uncomfortable with the idea that there are certain people at your company that know how much money you’re taking?
Laura Zander:
Sure, yeah. My salary is low. My payroll salary is low. I mean, not low, but I’m not the highest paid person at the business, and neither is Doug. So that doesn’t bother me.
Jay Goltz:
Wait, wait, wait, what? You have employees making more money than you’re making?
Laura Zander:
From a salary standpoint, yes.
Jay Goltz:
Okay.
Laura Zander:
But then we take distributions.
Jay Goltz:
Right.
Laura Zander:
Right now, we’re just paying back the loan that we made to ourselves. Certainly there are things that I get uncomfortable with, like our office manager, our accountant sent our taxes to her the other day, and I’m like, “No! I don’t want her to see all of it.”
Paul Downs:
Plus your Social Security number.
Laura Zander:
Oh, I don’t care.
Paul Downs:
You say that until it happens. Then you’re gonna find out.
Laura Zander:
Yeah, sure. So yes, it does bother me, because I feel guilt. I feel bad, but I’m learning a lot just from listening to you guys.
Jay Goltz:
I’m surprised, after all of the difficult times you’ve had—because I certainly used to feel like you did—that after all of the difficult, stressful times you’ve had, you haven’t finally figured out, “This is why I make money.” Because I did. And maybe just because I’m older than you, finally at some point I realized, “This is why I deserve,”—versus guilt, replacing guilt with deserve—“This is why if I happen to do well because of what I did, and the business is really profitable, I no longer have any guilt.” I certainly used to.
Laura Zander:
But it’s the deserve thing. Even taking this last week off, I feel so much guilt, because everybody else is working and I’m not.
Jay Goltz:
Don’t they get vacations, your employees?
Laura Zander:
They do.
Jay Goltz:
Okay, so what’s the problem with that?
Laura Zander:
I mean, we’re gonna get into therapy.
Jay Goltz:
I think we’re already in it. So just finish it out.
Laura Zander:
It boils down to the deserve thing. You don’t deserve it. You know, because I haven’t worked hard enough. I’ve made too many mistakes.
Loren Feldman:
You haven’t worked hard enough?
Laura Zander:
I could have worked harder.
Paul Downs:
You should go read the book—what is it? The Jungle.
Laura Zander:
Upton Sinclair?
Paul Downs:
Where the guy’s in the meatpacking industry, and every time he gets utterly screwed by everybody in sight. And then his reaction is, “Oh, I should work harder.” No, you’re getting reamed by the politics, the business, the government. Everybody’s on him. And you’re just seeing it. I don’t know who taught you to do that. You should go slap them, because you… I’m done.
Jay Goltz:
Laura, is this a surprise to you? Because it was a surprise to me when someone pointed it out to me 20 years ago. Would it be a surprise to you if I said that you’re obsessive? Do you know that about yourself?
Laura Zander:
Oh, absolutely.
Jay Goltz:
Okay, well, this is part of being obsessive. You don’t think you’re working hard enough. It’s all part of being obsessive. I was talking to my friend one day, and I said, “Boy, the guy in the article”—I think it was Bo Burlingham, actually—”he called me obsessive.” And I was telling my friend this, who’s known me since I was 10 years old. And he goes, “Jay, you are obsessive. You didn’t know that? You used to time yourself when you cut the lawn at home.” And I go, ”What do you mean, I used to time myself? So yeah, I’m obsessive. And now I recognize it, and I made some adjustments.
Laura Zander:
Yeah, no, you’re absolutely right. Yeah, of course. Do you mean you don’t time yourself to see how fast you can get the mail?
Loren Feldman:
You are competitive.
Laura Zander:
Oh, God, yeah.
Jay Goltz:
With herself, which is a problem.
Laura Zander:
Yes, it’s with myself. And I think there’s probably some, maybe it’s not narcissism, but it’s that I feel like I’m the center of the world. And so, everybody’s sitting there watching what I’m doing and paying attention to whether or not I’m working. I realize that that’s not rational and not accurate. But anyway, I’m fighting it.
In Episode 72, “It’s a Pile of Money,” Jay talks about how commonplace it’s become for job candidates to schedule an interview and then just not show up. Paul suggests that this may be because some of those candidates are getting snapped up by other employers. He then explains how much his own hiring process has changed because of the labor shortage. At least for now, Paul says, the days of “hire slow” are very much over.
Paul Downs:
I’ve noticed that when we interview people now, we really need to be ready to lock them down right that second. Make a decision, take them out of the job search, or they’re gone. Like the idea that we could spend time thinking about it and dragging our feet…
Jay Goltz:
I’m sure you’re absolutely right that that’s part of it. For sure.
Paul Downs:
Someone else will hire them. I mean, it’s just a different market now. We’re not in 2009 anymore. Employers are gonna have to make adjustments, and that’s one of them. You see someone you want, what I do is I hire them and try to get them in here, and then we’ll take our time to make a decision about it. But then we’ve removed them from the job market, and we have the chance to make the decision, as opposed to them making the decision. And that costs money. Basically, the way you do that is by, if they’re asking for $17, you say, “I’ll tell you what. I want to hire you right now, and I’ll give you $18. And you can start whenever you can, and then if it works out, it’ll be great. And if not, I’ll fire you.”
But at least they respect the honesty, and they understand what’s going on, and they’ve got to make a decision. They’ve been identified as someone who’s worth more than they think they are, and then I’ve got a chance to do whatever I want with them. And I have had people who we let go fairly quickly after hiring them because they didn’t turn out to be a good fit. But then there are others who were even better, and I was glad that I didn’t let them walk out the door at that interview and go get hired somewhere else, because someone else would hire them.
Loren Feldman:
But do you actually say to them, “If it doesn’t work out, I’ll fire you?”
Paul Downs:
Yeah, a lot of people actually appreciate a company that is clear about its standards. Now, I have a whole list of what we call the “new employee guidelines” to say, “Okay, here’s what you’re expected to achieve. Do you show up on time? Here’s a whole bunch of things. If you can answer yes to all these questions after three weeks, great. And if you can’t, then don’t take this job, because these are the rules of the game you’re playing. It’s not that hard to succeed. Do a good job and show up and be a good teammate, and you’re in.”
In Episode 73, “Get Rid of the Arsonists,” we tried something different. Mostly because no one else was available, I talked to Jay one-on-one. Having had these weekly conversations for two years, I wasn’t entirely sure what we’d talk about, but given his wealth of experience, we managed to pass the time. In fact, based on listener feedback, Jay’s detailed explanation of how he learned to delegate was easily one of our most memorable segments of the year.
Loren Feldman:
Have you always known how to delegate?
Jay Goltz:
No, clueless. Never had a job. Started by myself. I had to figure it out. So I’ll just give you this example. I don’t know, I was probably in business five or six years. I had 20-30 employees, and I kept reading books about delegation. Or maybe I scanned the book. Or maybe I just saw the front cover of the book, but I knew: Delegation, delegation, delegation. So I figured, “Okay, Jay, you’ve got to start delegating more.”
It happened to be the end of the year, and I’m in Chicago. You have to put a vehicle sticker on the windshield every December 31st. You have to change the sticker. So I said to myself, “All right, this is a good thing to delegate, because somebody else can do this. It’ll save me time.” So I get one of my guys, and I had a company van at the time, and I said, “Here, will you put the vehicle sticker on?” Sure, no problem. So he puts it on, and I’m feeling good about myself. Like, “I delegated. I saved myself 20 minute.” Or whatever. And I go out to the van that night, and the sticker’s like halfway up the window. Like, it’s supposed to be in the bottom right hand corner thing. For God’s sake, doesn’t he know that?
Loren Feldman:
Halfway up the windshield, right?
Jay Goltz:
Up the windshield, yeah. So for a year, like a dunce cap, I’ve got to look at this stupid sticker. Because once it’s on, you can’t get it off. So for a year, I had to look at this thing and remind myself, “I’m not good at this.” So a year goes by, and then I realized, “No, no, I didn’t understand delegation. You’ve got to give instructions.”
So the second year, at this point, I didn’t just have a company van, I was driving a car now. So had both a company van and a car. And I gave him the two stickers, and I gave him instructions. “Put the sticker on two inches from the bottom, two inches from the side. Here’s a paper towel, put it on the dashboard. Here’s a razor blade.” Laid it all out, because I’m becoming a manager. I’ve got this whole delegation thing.
So he comes back 20, 30 minutes later. “You get the stickers on?” He goes, “Yeah…” I go, “That sounds a little tentative. What do you mean, ‘Yeah’?” “Well, I lost the razor blade.” “Whoa, whoa, whoa. What do you mean you lost the razor blade?” “Yeah, I don’t know where the razor blade went.” And so I had to worry for the next year—I had two little kids at the time—that maybe my kid was going to sit on a razor blade, or I was going to find it somewhere. So for the next year, I had to worry about a razor blade.
Okay, that was the second year. Third year: All right, now I’ve got it. I’ve got the whole Murphy’s Law thing. I know whatever can go wrong is gonna go wrong. So now I’m a professional manager. I figured it out. I’m going to give them one sticker at a time. So I get another guy, and this year, it was particularly cold out. It was like zero degrees out, and it was the perfect time to be delegating something like this. I had a nice coat. So I figured, “Okay, here’s sticker one. Put it on the van.” Told him my same instructions. “And when you’re done, come back to me, and then I’ll give you the second sticker,” because I knew that they’d probably mix up the two stickers. So I’ve got it all figured out now, because I’ve become a manager.
Okay. Comes back after 15 minutes with the [old] sticker in one piece. He’s like, “Okay, I’m ready.” I said, “Oh my god. I’ve never gotten this sticker off in one piece.” I’m some kind of delegation genius. I got the right guy on the right job. I trained him. Look at this. So I happily give him the second sticker. And he goes off to put it on my car. So 20 minutes go by, 30 minutes go by, I don’t see him. So I go to find him, and I see him coming out of the bathroom, and he’s white as a ghost, like he’s sick. I said, “Did you get the sticker on?” He goes, “No…” “Why not?” “The windshield exploded.” He used a blowtorch to get the vehicle sticker off. That’s how it came off in one piece. And my right-hand guy was standing there, and he said, “You know, I saw him going through the showroom with a blowtorch. I wondered where he was going with that.” So he just blew up the windshield of the boss’ new Lincoln Continental.
Loren Feldman:
So what did you do?
Jay Goltz:
I got a new windshield. I didn’t go yelling at him. I mean, what are you gonna do at that point? I mean, I can literally remember when I was 7, 8, 9 years old, and my mother told me, “Don’t take a cold plate and put it in the oven.” And obviously his mother didn’t tell him that. So people go, “Oh my God, how stupid!” Well, if someone didn’t tell you that, how would you know that? So I put a new windshield in, and the lesson from that year was: When you delegate, some things get messed up sometimes. So, the next 35 years until today—I now have 10 vehicles between the cars and the trucks—and I put the vehicle stickers on myself. So if you ask me: What do I do? That’s one of the few things I don’t delegate, and I feel good about. And I like doing it.
Loren Feldman:
What is the lesson to be taken from this?
Jay Goltz:
The lesson from this is: I’ve delegated pretty much everything else in this company, except putting vehicle stickers on. I don’t mind doing it, and the city changed their date now. You don’t have to do it on December 31st. The dates float. All of the stickers go on in September, so the weather’s nice. That’s my sideline, and I haven’t blown up anyone’s windshield or anything. So I do a really good job on that. Do what you’re good at.
In Episode 74, “Every Day, I have to Force Myself to Get Out of Bed,” we ventured even deeper into therapy, as Laura talked about her lifelong struggle with depression. She spoke with Jay and Dana about the impact it’s had on her business and how she copes with it. After the episode aired, we received several very moving notes from listeners who have had similar experiences and who appreciated Laura’s willingness to talk publicly about depression.
Laura Zander:
I think what hit me—and you may want to cut this out—I realize one of the reasons that I share my lows more than I share my highs is, I mean, you guys know. I’m depressed, and I’ve always been depressed. Like, it is hard for me to get out of bed every day. I mean, every day, every day, I have to force myself to get out of bed, and to not just crawl under the sheets. And it’s been that way my whole life.
Jay Goltz:
That is a legitimate explanation. I might even feel bad now. But I don’t feel bad because it’s still good advice. But you’re right. I fully respect and appreciate that. So like I said, I’m not beating up on you. I’m not criticizing you. I’m just telling you—
Laura Zander:
No, it’s good. You’re totally right. I work so hard—and maybe I don’t get the same results as somebody else who works just as hard, right? But I work so hard on stoicism and trying to let things go and trying to be productive and not going down this hole. But you know, the last few years have been hard. And we’ve had lots of ups. I can tell you all kinds of great stuff that’s happened over the last couple of weeks. It looks like we’re gonna get the bank loan. It looks like this building’s gonna go through. We’re gonna get it at a great rate. Our staff is really stoked on it.
Loren Feldman:
We talked about this the last time you were on. You’re buying a new building.
Laura Zander:
We’re buying a new building. I’ve got a new brand that I’m gonna be the big thinker on and launch. But I feel like—and maybe this is the wrong thing to do—but I’ve always felt like nobody talks about the dark parts. And that’s not true. A lot of people do talk about the dark parts.
Dana White:
They mention it.
Laura Zander:
Yeah, they mention it. And so I’m very open with—I mean, I thought about killing myself last week. You know, like I was that low. Well, I mean, that’s because everybody in my family has killed themselves. So that’s just training. That’s the first place that you go.
Jay Goltz:
All right, there’s a little bit of an exaggeration there. I doubt that everyone in your family has killed themselves.
Laura Zander:
No. They haven’t. Good point. But multiple people—you know, my mom, her mom, my uncle, blah, blah, blah. So, you know, there’s some programming there that I’ve recognized intellectually that this is programming. It doesn’t mean I’m gonna do it. It doesn’t mean I’m seriously thinking about it. But I know that I’m going to a dark spot, which is an emotional spot. It just is. And all I can do is go for a run or sometimes just wait it out.
Dana White:
I’m sorry to interrupt you, Laura, but does your person that’s next to you in this company, do they know that?
Laura Zander:
Oh, totally. I’m super open about it.
Dana White:
And so here’s the thing. Ashley, my operations manager, does a very good job of managing how involved I get and what she brings to me.
Laura Zander:
Yes.
Dana White:
Because she knows how low I can go. Not low like I’m mean, but how much it’ll weigh on me. And she’s like, “I need you to focus on this so this company can grow. Don’t worry about what she said when we fired her. She’s gone.”
Laura Zander:
I will say, 97 percent of the time, that is the case here as well.
Dana White:
Okay, great.
Laura Zander:
We have just been pushing my number two, both of my number two’s—so my number four—have been pushing so freaking hard for the last six months. And I’m so grateful for that. Like, I couldn’t ask for them to work harder, and they’re working on the right things. But as a result, they haven’t had the energy—or perhaps they’ve slipped a little bit—and they’ve let things come to me that have affected me emotionally. And I have made the mistake of jumping in to try to help them, because we’re still building our teams.
Like Jay said, we’re still trying to figure out if this production manager is going to work. He may not. We’re on our third one. I mean, we lost five people two weeks ago. So we had five people leave, all at once. So we’re hiring and blah, blah, blah, blah, blah. It’s all good stuff. It’s all fine. It’s all gonna work out. But, you know, you take the Covid, the smoke, the overwhelmed. You take a couple of emotional people, you take me being emotional, blah, blah, blah, and it just hits you sometimes.
Jay Goltz:
Okay, just for clarity, you said, “We all know this.” I really didn’t know that it was that bad. And if anything gets cut from this, it shouldn’t be this part. It should be me going off on you, because I didn’t realize that. So you’d have every excuse to—I get it, I get it. Good for you. And good for you for being honest, because you’re certainly not the only person that’s dealing with that.
Loren Feldman:
Yeah, I wanted to say that, too. Thank you for saying this.
Dana White:
Yeah, that’s huge.
Laura Zander:
And I’m very grateful that, at almost 47 years old, like 99.8 percent of the time, I know: It just is what it is. I mean, my freakin’ chemistry is off. I create different levels of dopamine and serotonin and all this than other people do. Like, I know that. And I can see, I can look at it from the outside—most of the time, the gross majority of the time. But you know…
Jay Goltz:
Listen, I am painfully aware of mental illness. I have three sisters, and one of them, she killed herself. And I have a picture of me and her in my office just to remind me to be kind to people and just to remind me that life isn’t fair—because she had that life and I have this life. And so I absolutely hear where you’re coming from. And I will maybe wrap my pep talk in a little more niceness, or whatever you want to call it.
Dana White:
No.
Laura Zander:
You don’t need to.
Jay Goltz:
Yeah, because I have to tell you, I’ve certainly had horrible frustration and horrible stress and all that. But I’ve never experienced… And I’ll tell you, I’ve had the waking up in the middle of the night thing, which is this horrible, dark feeling, which I do think is, whatever that’s called, anxiety. I’ve had that a little bit. But yes, good for you.
Laura Zander:
My husband doesn’t have it. I mean, he hates his job most of the time, but…
Jay Goltz:
He hates his boss, that’s the problem.
Laura Zander:
Yes. But that just is what it is, like it doesn’t take him down some dark hole.
Loren Feldman:
Laura, when you’re in a dark place, do you have someone that you can talk to?
Laura Zander:
Yeah, I talk to you guys. And again, I’m experienced in this. I am able to step outside and be like, “Okay, I’m in a dark place. Don’t make any decision.” You know, it’ll pass. My dad actually told me—one of the few pieces of great parental wisdom that he passed on—I don’t remember who the artist was, but it’s this series of four paintings of this river. In the first painting, it’s a little baby on the boat going down the river, and it’s all nice and peaceful and beautiful. And then the second one is, it’s kind of exciting, and it’s a teenager on there. And then the third is, you and your kids are all in the boat, and it’s just rapids, and it’s crazy, and it’s chaotic. And then the fourth one is, you’re older, and again, it’s serene and beautiful, and the sun is setting.
And so I just keep thinking, “I’m in the rapids.” I mean, I’ve got a 12-year-old kid, I’ve got a husband who I work with. We have a lot going on. And I just keep pushing and pushing and pushing and pushing and pushing. I force myself to get out of bed. I force myself to go for a run. So when I do go to these dark places, I have the awareness to know that it’s happening, which is something I didn’t have 20 years ago, or even 10 years ago. Ten years ago, I would just drink to make it go away. Now, you know what? If I need to take a nap and just escape for an hour, I’ll take a nap.
In Episode 77, “Can an Entrepreneur Raise an Entrepreneur?” Diana and Jay talk about how they were both raised in businesses—Jay in his father’s dime store, Diana in her parents’ convenience store. The businesses that Jay and Diana have built are light years away from those of their parents, and yet Diana tells how, quite unexpectedly, she wound up following in her parents footsteps, in one respect.
Diana Lee:
My parents were entrepreneurs, but they actually came from a very poor country, South Korea, and we moved to the U.S. in 1974, when I was five years old. They had a very hard time with all the businesses that they had, because they self-funded everything and they were working 15-,18-hour days just to get by and make enough money. They came from pretty desperate times. My parents were held up at gunpoint multiple times while I was growing up, running their convenience stores or fish markets or whatever they actually owned at the time. Many of the reasons were because they had to actually open in pretty bad locations or locations where they could afford it. But obviously, they weren’t in the best places.
Watching them, throughout the years, they would come home, and they would have a bag of cash afterwards, because obviously, they’d have to take the money out of the registers. They would count the money as soon as they got home. And then they’d count the coupons of what they actually had to apply everything to, and I watched it my whole life. And as many times as I said, “I don’t want to turn out like them”—where I’m working 15-hour days, not sleeping much, working all the time, and completely ignoring me, their child—I ended up repeating the same identical thing. But in a bigger way.
Loren Feldman:
Tell us about that. When did you realize that you were repeating?
Diana Lee:
I started the business when I was 47 years old, so it was five years ago. I’m 52 now. My kids were in high school then. My husband had said to me, “If you’re going to actually build a business, you should do it now. Because our kids are in high school. They don’t really want you around as much, and they don’t want to be controlled, Diana. In the end, you’re gonna have a better relationship if you just go to work more.” So I was like, “Okay, fine, I’ll do it.” And because I’m a control freak, I wanted to make sure everybody’s okay all the time. And I was over-controlling about what they ate, how they dressed, all those things that I think most mothers are with their children.
And then, as soon as I start the business, I am so over-consumed. And now I have employees, I have people I have to support, but I feel like they’re my children as well. I ended up putting all this energy knowing that my kids want me to have less control of their lives. So that’s how it all started. It was all for the benefit of them, to have a better relationship with them. The business starts doubling year over year, and I just get more and more sucked in, more and more consumed. Having 100 employees now, every hour of my day has been consumed with work. So they recently all left for college. I have two in freshman year and one in his senior year. And I just feel like I haven’t been around for them at all for the last four or five years because of the business. And I feel guilty, but I ended up repeating the same thing my parents did for me.
In Episode 78, “I’m a Freak About the Numbers,” Dana, Diana, and Jay talk about how they track their financials, including how they stay on top of accounts receivable, how they avoid over-compensating sales people, and the importance of paying close enough attention to be able to spot mistakes.
Diana Lee:
Yeah, I have a report for everything. And the bigger, I think, that you scale, the less time that you have as a CEO. So instead of me trying to pull all these reports myself, I make it mandatory that my teams all send me a report on Friday. And so, of course, my PR report comes in, that shows all the lead generation and what they actually have. I have a sales report that shows a 30-60-90, in terms of conversion, percentage of conversion, based on everything that’s in a pipeline. On a financial perspective, I always look at receivables once a week, because people always think, “Oh, I generate the revenue.” But if you don’t actually collect, you’re going to go under. I look at the balance sheets on a monthly basis just to see where my assets and liabilities are. I look at an accrual report, which basically shows me how much revenue accrual that I’m doing on a daily basis. And that report is always coming from the finance department that shows me how much generated accrual there is.
I look at a P&L that’s accrual and cash, so that on the cash side, I always know cash flow where I am. Cash is always a lag indicator, so it’s usually 60 days behind the accrual if you collect everything. But the accrual is the beginning indicator that says that you sign that contract, and that’s actually coming. In 60 days, you should get payment on it. I also look at margins, because you always have to look at if margins are going up or down, based on all of your product lines.
I’m a freak about the numbers. And it’s because the numbers will never lie to you. They will always tell you a story. It doesn’t matter what your sales team says. The numbers tell the story, period. And obviously, you want to see an upward trend for every department that you have, so I do really track everything.
Jay Goltz:
Let me ask you a question. I get everything you said, it makes perfect sense. So one piece of the puzzle that I’m wondering about is: When you said your margins, it’s not like you’re buying a shirt for $12 and selling it for $19. How do you so accurately figure out what your true incremental cost of something is so that your margin, quote-unquote, is accurate? Because I don’t know what it is you’re selling. I know what you’re selling, but like your costs that go along with it. Do you feel like that’s always accurate? Or is that a moving target?
Diana Lee:
That’s such a great question, and I could tell you’re a true entrepreneur, because you’re asking that. So what I find is that I have a lot of product lines. I have A package, B package, C package—all over the place. And each package is a different one for every manufacturer that I deal with. So we have invented our own billing calculator, because it was so damn complicated, in terms of what we came up with. But what I realized with the sales department and the account teams: They just want to make a deal. And so you could see that the longer I’m in business, many of them have the autonomy to make their deal. And so because at certain times they’re trying to meet the quota, they’re going to go down on margin. And this is important to me, because when I track it on a monthly basis, and I see certain product lines, I’ll take the percentage of margin per product line, because I can’t do it by line item, and I’ll just make sure that it’s somewhere between 40 and 60 percent. And so if it’s dropping a lot lower than that, I’m going to meet with my VP of accounts.
Jay Goltz:
Okay, that makes sense. So you’ve got a fixed number, but it’s really about discounting, which is a great answer, because you’re right. I’ve seen companies go broke, because they gave the sales manager, “Oh, we’ll give you 2 percent of sales.” Not a good idea. Because next thing you know, they’re selling things below cost. That person didn’t care. They’re making a zillion dollars. That’s interesting. So it’s about really keeping a handle on the discounting, and that makes sense because that is a problem.
Diana Lee:
Yeah, Jay, because as you get bigger, everybody else is doing the selling. And so you’re giving them the autonomy to do it. And it’s exactly what you said: Everybody wants it for themselves. They’re like me-generated. And those are the best salespeople, right? You make it about them, and they can make money for you.
Jay Goltz:
Well, I have a problem where all of a sudden, they had to get this job delivered and hung on the wall, for an artwork project—”It’s got to be the 30th!” And after a while, I figured out, “Well, what’s the emergency that this company needs it on Tuesday the 30th?” And then you figure out, “Oh wait, they want it on their sales report.” And they are unconscionable. You can run overtime. They’ll do whatever they have to do to get that in for the month. And I’ve learned that. We were very careful at the end of the month to watch what jobs were shoved in there because they wanted it on their sales report for the month versus somebody really needed it. So that’s like standard procedure for us now because it’s a common problem.
Diana Lee:
Yeah, and for me, Jay, receivables is exactly that. So I have salespeople selling, but if I don’t collect the money, I’m charging them back after 60 days. So that’s why I check the receivables to see which people didn’t pay. And if they didn’t pay—because you have over 1,000 clients, you have to check receivables—and you’ve got to charge back the salespeople, because you’ll go broke, if you just pay them on the accrual and you never collect the money.
Loren Feldman:
Diana, you described what sounds to me like a pretty sophisticated review system, and you called yourself “a freak about the numbers.” Were you always comfortable with numbers that way, or did you have to develop it?
Diana Lee:
No, I am not an accountant. I was a startup, and so I couldn’t even afford a billing team five years ago, so I was the biller. And this is the beautiful part: When you do the job yourself, you’re going to know everything about what you want to measure. And so when I handed off these pieces as we got bigger—my ops team was my billing team in the beginning, because I only had two people on the ops side. And so between ops and me, we did all of the QuickBooks invoices and sent them out, and kept getting bigger and bigger. And now we have five people on billing.
But now, because I went through that experience myself and did it myself, I know what reports to push, because I basically did it with my ops team. And so that was such a valuable lesson. I speak to entrepreneurs all the time. I have a family member, they have their own business. And when I talk to them, I’m like, “Well, don’t you check this stuff?” And they’re like, “No, I have a controller.”
And I will tell you, in the five and a half years that I’ve been in business, I have found hundreds of thousands of dollars of mistakes. Hundreds of thousands of dollars worth of mistakes. Invoices not being sent out—$30,000 invoices. Oops. Missed. Didn’t get sent out. Nobody cares about the business and the money as much as you do. I don’t care who you hire. And at the end of the day, if you don’t actually look, people make mistakes. And they don’t mean to, but they just do.
In Episode 81, “Holy Crap! This Is All My Dreams Come True,” Karen completes one of the more surprising narratives of our two years. When we started the podcast, she had just come off an extremely trying year of attempting to land an investor. She kept thinking she had a deal, only to see it slip away. As we started recording our weekly conversations, Karen told us that she would be taking a mental health sabbatical to get away from the business for a while. But she came back, and in October of this year, she told Jay and William that she and her co-founder had sold Blink—where she will remain CEO—for $94 million.
Jay Goltz:
So when you closed on a particular day, and that day, money shows up in your account, and all of your liabilities go away, I just want to know what goes through somebody’s head when they go to bed and they wake up the next morning, and they realize they’ve got a zillion dollars sitting in an account somewhere and they’re completely set. Can you just give us that emotion, when you opened your eyes in the morning, what you thought about?
Karen Clark Cole:
Yeah, I mean, it’s awesome. For me, Jay, I’m not interested in going and retiring. I’m not interested in leaving the company. And so for me, to have all of what you described, and now we get to go fast… I mean, I love to go fast, and I love to go big. And I’ve got big ideas.
That morning, I had to get up really early, because I had five meetings, all to do with: What are we doing now? And so I haven’t had, honestly, a lot of sleep in a long time, and it’s not coming anytime soon. Because now, we’ve got the New York time, and we’ve got some folks in India—some folks on the leadership team are in India—so our calls are late, and they’re early, and then they’re everything in between. So it’s been kind of non-stop, but I’m on fire. This is what I love. I love to be busy. I love to be doing big, exciting things. It’s less of a kind of relief feeling, and it’s more like, “Holy crap! This is all my dreams come true, all of them at once.” And my veins are tingling. It’s like that.
Jay Goltz:
Wow, that’s a good answer. That’s a good answer. So, did you buy some new shoes?
Karen Clark Cole:
I bought a new purse.
Jay Goltz:
Okay, there you go.
Karen Clark Cole:
It’s really nice.
Jay Goltz:
Okay, I also want to know, the day you made the announcement to the employees, what was that like? Do you think everyone knew?
Karen Clark Cole:
No, there were a couple of dozen people. Blink has 28 shareholders—had 28 shareholders—and that means that the money that the company received—and there’s a big earn-out portion—the money that we received upfront gets split, pro rata, across those 28 shareholders. So it was not all to me or Kelly. We were majority shareholders, but then we have 26 other folks who participated in this sale, and they all had to agree to all of this. They had to review and sign six different documents, times 28 people, over the course of three days. It was really intense. We were DocuSigning, like documents flying back and forth.
My CFO, he was an absolute rockstar, because we had to route them one at a time through all these people. And so meanwhile, I’m communicating with all of the shareholders to have everybody on standby, “These documents are coming.” And they had to be last minute, because we were literally negotiating up until half an hour before we had the closing call. Before, it was going all through the lawyers, and then the investment bankers, and then to us, and then the reverse. That was sort of the pattern, with 100 calls in between, with various different due diligence folks, with different workstreams.
But then at the end, it was just me on the phone: all weekend, early in the morning, late at night, seven days a week, negotiating directly with Mphasis with their head of legal and business. And then in the end, in the sort of final hours, it was by text. While he was on the call with somebody else, something just came up, [he’s] texting me because he can’t call me because he’s on the phone, and it was like that. And then we had the closing call, which was a Zoom call with all the bankers, all the lawyers, all the business owners. There were 30 of us on the call. Everyone just sort of went around their boxes saying, like, “Check, check, check.” Just like a flight taking off.
After months and months of this—I get goosebumps just thinking about that moment—everybody went around, and I was just waiting for one more thing, because it was like that. Like, one more text, one more item that we have to clear. And everyone went around, “Check, check, check.” And then the head lawyer on their side said, “All right, we’re good. I’m going to initiate the funds transfer.” And at that moment, I just started shaking. I’m like, “This is it!” Because everything was already signed. And I was like, “Oh. My. God.”
Often, the highs and lows of entrepreneurship come at you in waves. In Episode 84, “I Can Do It. I Promise You, I Can Do It,” Dana explains what it’s like to experience a high and a low simultaneously. That week, she returned from a triumphant trip to Germany where she toured potential sites for her hair salons on multiple military bases. But when she got back to Detroit, she was greeted by resignation letters from two of her key employees.
Loren Feldman:
Welcome, Dana White. We haven’t spoken in a while, Dana, in part because you’ve been traveling the world. How are you?
Dana White:
I’m okay.
Loren Feldman:
Okay, what’s going on?
Dana White:
I have no idea what’s going on.
Loren Feldman:
Okay, what do you mean?
Dana White:
I have… I have no… I don’t know what’s going on.
Loren Feldman:
Well, you’ve just been traveling. Where were you?
Dana White:
I was in Germany.
Loren Feldman:
And you were there looking at a military base?
Dana White:
I was looking at like five or six or seven.
Loren Feldman:
Wow. And how long were you there?
Dana White:
Six days.
Loren Feldman:
So is that what you’re not sure about? Did that go well? What can you tell us about that?
Dana White:
So, there are great things happening, and there are some not so great things happening. And it’s because of both of these things that I don’t know what’s going on.
Loren Feldman:
I see.
Dana White:
Like, what is going on right now? How is it that you win them over in Germany—I mean, win them over. Like, when I tell you, they are like, “How many does she want? Oh, by the way, Fort Hood can be ready. Fort Bragg is a go. Oh, and by the way, don’t forget, we want all of these.” I mean, they are beyond impressed with me, and they’re not bringing me on base to bid on these contracts as if I’m a contractor. They’re bringing me in like I’m Starbucks.
So that’s what I had to learn, was the difference. There are salons on bases that they put the contract out, and you bid on them. And you just keep bidding every time your contract is up. Starbucks doesn’t have a contract and neither will Paralee Boyd. That’s how interested they are in having me. I’ve surpassed that process, and that’s huge. The people who were working with me that know this company, AAFES—the Army and Air Force Exchange Service—they don’t do anything with deliberate speed except work with Paralee Boyd. And they’re moving quickly. So that’s one thing.
Loren Feldman:
That sounds pretty great.
Dana White:
Right? Exactly. That’s amazing. You come back, and you have a 7 a.m. debrief call about how you did such a great job and made such a great impression on that trip. Okay, great. So then you’re franchising, and yes, that process has slowed down—not because of the work I’m doing, the military stuff. That stuff is easy. It’s just looking and talking. That’s it. But it slows down because your Midtown location is doing decent numbers—better numbers than they’ve ever done—because now you’re down to one location. But your team is falling apart. I get back on Thursday, and I get a resignation letter from Ashley. And I get a—
Loren Feldman:
Wait, that’s your operations manager, your key person.
Dana White:
Yep, my operations manager. And on Saturday, I got a resignation letter from my manager. And it was emotional. It was an emotional resignation. It wasn’t, “This is a bad company.” It was, “Dana, we don’t think you like us.” From the manager. “The team’s morale is low. They just want you to love them. Where’s Dana?” And so, I get on a conference call with my manager and operations manager. And my question was, as the owner, “Well, if my team does not feel appreciated, one, why am I hearing this after the resignation letter’s been given? And two, why wasn’t I told before?”
In our last regular episode of the year, Episode 88, “The Vomit List,” William told Jay about an interesting strategy he’s adopted to try to hang on to his most valuable employees in the very tight labor market that he predicted a year ago.
I’ve done a couple retention bonuses early in the pandemic: “So Loren, you’re a key player here. We’re about to go through a really tough year and a half,” or let’s call it a year. “And you know, we don’t really do bonuses, but I’m going to bonus you a year from now. I’m going to give you an extra $10,000, or whatever the number is.”
Loren Feldman:
If I stay.
William Vanderbloemen:
“By the way, it’s a bonus you’re going to get in a year, but actually, I’m just gonna go and give it to you now. Okay, now, I want you to think about this before you say yes, because I’m also going to have you sign a piece of paper that says, ‘I’m accepting this bonus in advance. And if I leave the company for an unfirable offense between now and a year from now, I’ll pay this back with interest.’”
Loren Feldman:
Do people sign that?
William Vanderbloemen:
I had one not and two did.
Jay Goltz:
Wait, did you give this to everybody?
William Vanderbloemen:
No.
Jay Goltz:
How did that work?
William Vanderbloemen:
Well, I probably shouldn’t say it on a podcast if my whole office listens to it. “Well, I wasn’t on the list.”
Jay Goltz:
That’s what I’m thinking.
William Vanderbloemen:
So I had a friend who used to say, “You need to keep a vomit list.” So what’s a vomit list? He said, “It’s a very short list. It’s probably no more than three people who, if they walked into your office at the end of the day and said, ‘Can I have a minute?’ before you even let them sit down, you’re looking for a trash can because you’re gonna throw up.”
Jay Goltz:
Yeah.
William Vanderbloemen:
And if you frame it that way, I’ve yet to meet a team leader who can’t immediately name the two or three people. And it’s not always the two or three best paid people. It’s like, I have a church that’s going through a building campaign. For them, their finance director for the next eight months is a very important role. They don’t want to have to train somebody new, and so it’s that. Or sometimes it’s an admin person that, I mean, “You can leave in a year, but for right now, through this tough season, I’ve got to have you around. And I’ll pay you a bonus in advance.” And of course, you need to give them time. I give them a week. “You think about it. If you don’t want to sign it, no harm, no foul. I get it. Life changes. You might have something else going on, but it’s yours if you want it.”
Jay Goltz:
All I can say is wow. I just don’t know. Yeah, wow. And now I’m…
Loren Feldman:
Well, if those really are employees who are that crucial to you, I would think if other employees found out about it, that’s a defensible situation.
Jay Goltz:
Oh my God. Seriously, Loren? You think the average person is going to feel okay about that?
William Vanderbloemen:
Well, this is what I said. I assume that no meeting is actually private. Word’s going to leak out. How are you not going to tell a friend or a co-worker or whatever? So I just said, “Listen, I like you. You’re great for the team. You do good work. I like working with you. But this bonus has more to do with protecting the company while we’re in a very vulnerable season. Your role during this next year is super critical to the whole team. And for the good of the team and everyone that works here, I’m making this offer to you.” And I don’t even tell them if I do it with anybody else.
Jay Goltz:
So you really can’t be sure whether anyone else heard about it, and they’re pissed about it.
William Vanderbloemen:
No, you can’t.
Loren Feldman:
William, what happened with the person who refused to sign? Did you give the bonus anyway?
William Vanderbloemen:
No, and they had a job offer within three months and left. And they’re in a great situation. It really stunk to lose them, and they weren’t our highest paid person, but—
Loren Feldman:
Did you know that day they were on the way out?
William Vanderbloemen:
I think they probably knew, yeah.
Loren Feldman:
No, did you know?
William Vanderbloemen:
No, but I did after they didn’t sign it.
