Escaping the Valley of Death

Introduction:

This week, Shawn Busse tells Jay Goltz and Jennifer Kerhin that he’s realized that his business, too—like Jennifer’s—is stuck in the valley of death that we first discussed a couple of episodes ago. Shawn’s realization prompts a discussion of what it takes to cross the desert and get out of the valley. We also have a surprisingly entertaining and enlightening conversation about insurance that makes clear why you should occasionally review what policies you have and why you have them. “I have something called directors insurance,” says Jennifer, “and I don’t really even know what that is.” Shawn notes that he found a company that helped him reassess several of his insurance lines. “What I like about that,” he told us, “is that while insurance brokers are incentivized to oversell you, because they make commissions,” this company sells its expertise and not policies. Plus: we start the episode with Jay explaining why binge-watching HBO’s Succession brought back all of his worst nightmares about owning a family business.

— Loren Feldman

Guests:

Jay Goltz is CEO of The Goltz Group.

Shawn Busse is CEO of Kinesis.

Jennifer Kerhin is CEO of SB Expos and Events.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome, Shawn, Jay, and Jennifer. It’s great to have you here. Jay, over the last year or two, we’ve spent a good bit of time talking about your attempts to come up with a succession plan. What I didn’t know through all that, was that while we were talking about your succession, you were deliberately avoiding watching the extremely popular HBO show Succession. Why was that?

Jay Goltz:
Well, I ended up watching it, as you know.

Loren Feldman:
Why did you delay?

Jay Goltz:
It wasn’t that deliberate. I’m thinking it was a little subconscious. I deal with stuff all day long at work. And I didn’t need to spend another hour or two before going to sleep on it. But I did break down and watch it.

Loren Feldman:
Once it was all over, and the final episode had aired, you started binge-watching it, as we discussed. You were ripping through two episodes a night. I don’t want to talk about the plot twists, especially since Shawn and Jennifer haven’t watched it yet. And I don’t want to give away any spoilers. And obviously, The Goltz Group is not Waystar Royco. But apparently, you found the show pretty relatable. What did you relate to?

Jay Goltz:
Well, I don’t know that I’d say relatable—cringe-able, let’s say. Here are the four pieces, which won’t be giving away anything. Number one, just watching your kids go at each other. I’ve got three kids. It’s just painful to watch. I have a document printed that I gave everyone in case I drop dead or whatever. But my biggest nightmare is my kids go after each other, which I don’t believe is happening. They all get along nice. But watching the kids go after each other was extremely painful.

Number two, watching their relationship with the employees of the company was extremely painful. Just every one of them. Between Geri, Karl, and Frank, I mean, they just had to put up with all the nonsense, and it was just painful to watch how they just were so disrespectful to them. And then you’ve got the father—there are two aspects to that. His relationship with his kids, and it’s just messed up. And on top of which, then you get the biggest one, which is, when does dad get to the point that you start whispering in back, “Dad’s losing it. We’ve got to take control of the company”? So that might be happening now as we speak. I’m not sure. But all four of those things are cringeworthy.

And then, I’m really embarrassed by the fact that I not only don’t have two, I don’t have a helicopter. What kind of loser am I that I don’t have a helicopter? [Laughter]

Loren Feldman:
Jay, you have a forklift.

Jay Goltz:
Actually, I have two. So I do feel better about that. Not to brag. So no, I was looking forward to getting through it. And I would say, as the father—if this was a film study group—I don’t think he deliberately played the kids against each other. I think he was just flailing at who’s going to be in charge. And I think he really didn’t know what to do. And the whole thing was just a mess.

I don’t relate to that. My kids are all good kids. They’re not doing any of the stuff those people are doing there. And I haven’t gone crazy… yet. You can argue that. But it was painful, to some degree. And I was absolutely looking forward to finishing it, because the problem was, I was watching it at night. We always did two a night, because I had to get through it. And then I would go to sleep, and this stuff was in my subconscious, and I didn’t sleep well sometimes. I needed to get done with it. And I’m done with it.

So it really wasn’t about succession. It was really about family business. I mean, all businesses have succession issues, but this was really about family business. And the kids were such brats. And there were a couple of scenes that were just noteworthy. One of them was when—

Loren Feldman:
Be careful.

Jay Goltz:
Well, I don’t think it gives it away—where Ken says to his father, “Dad, you gave us everything, and you resent us for it.” I mean, that’s a family business thing. And then when the father was at the end of his rope, and he just looked at all three of them, and he just goes, “You’re not serious people.” I mean, I think that really was the summary of: They were all screwed up. I kept going from who’s the worst one of the day, and it shifted over time.

Loren Feldman:
Did you learn anything from it?

Jay Goltz:
Absolutely not. I really didn’t. I knew all those issues. I can’t say I looked at it and thought, “Oh, wow, that could be me.” No, I really didn’t. I mean, it was an extremely well-written show, extremely well-written. But just as a business owner who’s got three adult children—one of them isn’t in the business. But it’s just… I was screaming at the TV sometimes. They were so rotten to the employees. It was just painful.

Loren Feldman:
I thought you said you weren’t crazy yet.

Jay Goltz:
Yeah, well does that make me crazy? I don’t know. There were a couple of scenes where it was just like… The way they treated Geri was just unbelievably horrible. And it was painful to watch.

Loren Feldman:
Shawn, Jennifer, is there any particular reason you haven’t watched it? I know you’re busy people. Are you avoiding it, or you just haven’t watched it?

Jennifer Kerhin:
I think I just haven’t watched it. But then, also, there’s a part of me that, when a lot of people are doing something, I tend culturally to run the other way. And I’m not sure why. I think that’s a character issue of mine.

Loren Feldman:
That’s a good instinct, I would say. How about you, Shawn?

Shawn Busse:
I watched maybe an episode when it first came out. And it was so painful that I just had to stop. I mean, we were coming off of the pandemic, and it was just a really shitty time in general. And I just didn’t need more crappy human beings in my life, so I just turned it off. And then, because I knew we were gonna talk about it, I watched like three episodes, and I still don’t regret turning it off.

Jay Goltz:
No, you can’t leave out the part that it’s clearly about Rupert Murdoch and his family. And we’re living it. So yeah, that added to the pain of it.

Shawn Busse:
I mean, I think what’s interesting about it—and you touched on this, Jay—we’ve worked with a lot of family-owned businesses over the years. And some of the dysfunction in that space… I really feel badly, and I mostly feel badly for the children. Because the common behavior I see is the parent wants to pass on the business to them, but then they actually can never really let go. And that’s a tough place to put a kid in. But then the kids in that show are just deplorable! So I don’t know.

Jay Goltz:
That’s what’s interesting. They’re deplorable, but all of them had something good in there. There were some good parts of each one of them. They weren’t all evil. All three of the kids, I wouldn’t call them evil. I’d call them screwed up. But each one of them had something going for them, and it was just painful to watch that get smushed by the negative side of it.

And I have to tell you, I feel good that I don’t have a dysfunctional—my kids bring up stuff to me all the time that I wasn’t thinking of, that maybe no one else would say to me. And it keeps me thinking about stuff that I should be thinking about. So it’s been a healthy, productive situation. So no, I don’t relate to it. But watching that stuff, it was just like everything you don’t want to do to run a company.

Shawn Busse:
I mean, I think I had to turn it off. There was that scene in the beginning where they’re playing the baseball game.

Jay Goltz:
Oh, yeah. Ugh.

Shawn Busse:
They offered to pay the kid a million dollars if he hits a home run, and then the guy tears the check up in front of the kid.

Jay Goltz:
That was probably one of the times I screamed at the TV.

Shawn Busse:
Yeah, it was so bad. Jennifer, I support your decision. You’re right, Jay: good writing. It’s Shakespearean in a lot of ways. But also, man, that energy is pretty negative.

Loren Feldman:
All right, let’s talk about something we can all relate to, and that’s the insurance business. Not necessarily quite as exciting a topic, but as you all know, there’s been a lot of bad climate news lately, including wildfire smoke and the hottest days ever recorded. And I believe a tornado in Chicago, Jay.

And it follows news that some insurance companies are simply refusing to write home and business policies in specific states, especially California and Florida. And in Florida, 10 insurers have gone belly up in the last two years. Are you guys at all concerned about this? Anybody?

Jay Goltz:
Not me. I can tell you why. You just answered it. 10 insurance companies are going broke. How many insurance companies are there? Probably a thousand.

Loren Feldman:
10 in Florida.

Jay Goltz:
I know. I’m just saying, this is typical, sensational news. My guess is, there are a thousand insurance companies. So it’s not like they’re all running out of state. And I believe in capitalism, that when they pull out, another insurer will step in and get more money, for sure.

And yes, the article I just read said that their insurance rates have gone up a couple thousand dollars. Okay, their insurance rates have gone up a couple thousand dollars. You know, they’re living in Florida. You know, taxes are lower there. It’s like, they’ll have to pay more insurance. But it’s not like half the insurance companies have gone away. Some insurance company’s gonna make a lot of money on this, because they’re gonna step in there and charge 20 percent more. And it’ll all be okay. Capitalism works.

Loren Feldman:
Shawn, you’re not in California. But you’re close. Have you seen any impact on your insurance?

Shawn Busse:
Not yet. I mean, the risks in Oregon are earthquakes and wildfires. So a number of providers have eliminated the earthquake rider. Like, it’s really hard to get earthquake insurance for your home. And if we were to have the kind of earthquake that we’ve had historically here before, it would be on a scale you can’t even imagine—because very few folks actually have any kind of protection from that.

So that’s, I think, our number one risk in this region. And folks are just sort of turning a blind eye to it. And then wildfires are pretty real. We’re in an urban center. We get a lot of water here. So it’s a little bit less of a risk than California. But I think it’s a thing. It’s like what Jay said. It’s just going to increase the cost of doing business, and businesses will adjust to it and move on.

Jay Goltz:
I can think of 10 other things that are far more serious that are endangering small business than your insurance rates are going up. That’s just kind of my point. Okay, you’re gonna spend a couple thousand dollars more. Okay. The technology problems? I just deal with stuff on a daily basis that is far more expensive than $2,000, or $5,000, or whatever.

Shawn Busse:
I think it’s more relevant for homeowners, which then becomes relevant for employees, which then becomes relevant for your workforce and so forth and cost. I think it’s another compounding factor to the extreme cost of housing. I think that’s where I think the problem is going to be. It’s going to be more expensive for housing, which puts pressure on employees and makes it more difficult to have stability. I think that’s what I would worry about, if I were a business owner, more than the $2,000.

Jennifer Kerhin:
And Shawn, I really do believe, for all the difficulties, the remote workforce is only going to grow. Because housing prices are so expensive, as they go try to find where they fit and can afford the quality of life they want. They don’t have to leave the job behind, necessarily, anymore.

Jay Goltz:
I agree with what you’re saying, kind of. Meaning, you’re right, this is going to support the remote workforce thing. But I don’t think it’s going to necessarily grow. I think it’s going to shrink first and then shrink less because of this. But I don’t think it’s going to necessarily grow from where it’s at. I fully agree with you. It’s not going away, and this is going to reinforce it, for sure.

Jennifer Kerhin:
Oh, I disagree.

Jay Goltz:
You think it’s gonna go up from where it is right now?

Jennifer Kerhin:
Absolutely. You know what I see? We’ve all heard a lot of commercial buildings are now going to be office buildings retrofitted for apartments and condos. The housing market’s a much higher need, and the supply is very low. So that’s going to escalate that when there are less office buildings.

Jay Goltz:
And if I had a zillion dollars to invest, I would be buying office buildings at some tremendous discount. My guess is they’re overreacting to this. That’s my point. I think it’s absolutely not going away. It will be a substantial part. But my guess is they’re overreacting to this, because I don’t think half the world’s gonna go remote. I don’t think they can, for what they do.

Jennifer Kerhin:
I would buy it to convert to an apartment.

Shawn Busse:
Man, there’s a lot of stuff here. This will be an interesting episode to return to, Loren. I think we need to return to it in about a year to 24 months. I think the commercial market is going to become absolutely devastated in the near term. The cellphone records, which are showing: Are people actually going into the office? It’s really bad, especially in places like inner core San Francisco. Even Portland, it’s decimated. And what’s happening is these commercial markets, they’re just sort of pretending it’s not going to happen. But it’s going to collapse. It’s in for a rough ride.

Jay Goltz:
But if you look at history, with real estate, it always overreacts. So yeah, it’s absolutely gonna go down. But I’m suggesting there are gonna be some banks running for the hills just selling buildings for dirt cheap. I bought my factory building in 2008, and I got a super good deal on it, because in 2008 nobody was buying anything, and I bought. So I think there are gonna be some opportunities just because, like I said, I believe some banks are going to overreact and just want to get it off their books. And the conversion from office to residential is very, very, very expensive—just putting in bathrooms and kitchens. I mean, it’s easier said than done.

Loren Feldman:
Back to insurance for a moment, there are people who are referring to the price hikes as kind of a canary in the coal mine, with regard to big climate events. I’m wondering, how many of you have business-interruption insurance?

Jay Goltz:
I do. Because I was told 30 years ago that if you don’t have it, the insurance company’s not in a real big hurry to settle your claim. Whereas if they’re paying for your business interruption, they get in gear and get it fixed quicker. And that makes sense to me.

Loren Feldman:
Jennifer or Shawn?

Jennifer Kerhin:
I do. I have it. Could I tell you what it says and how much money I have? Absolutely not. That is yet another thing I have to put my eyes on. I have a lot of insurance. Somebody once told me I’m over-insured. And I really don’t know what my insurance does. I have something called directors insurance, and I don’t really even know what that is.

Jay Goltz:
Well, that means that anyone who works as a director, which you don’t have—I don’t even know why you would have that—if they get sued, they get covered. Or if you’re on a board, like if somebody sues 21 Hats, maybe you’re covered for giving bad advice.

Jennifer Kerhin:
Yeah, I’m gonna put that later next year. But I have to reevaluate what I have, and why I have it.

Shawn Busse:
Yeah, I found a service that I’m really bullish on last year, where you actually pay them for their expertise, and they help you evaluate your options in this arena.

Jay Goltz:
Wow.

Shawn Busse:
And what I like about that is that insurance brokers are incentivized to oversell you, because they make commissions. And so, basically, you’re paying them for their professional advice. They’re not actually selling you the policy. So I found that to be really valuable, because you’re exactly right, Jennifer. It’s hard to keep track of what you actually need. And I was underinsured in some areas very, very badly, and over-insured in some other areas.

Jay Goltz:
I will tell you, I had my cars years ago with State Farm, and I called the agent. I said, “I don’t think I have enough liability coverage.” He goes, “Well, you’ve got what’s average.” And that kind of says it all. I go, “I’m not the average client. I own a successful business, and if I get into an accident, they’re gonna go after me.”

And I changed insurance because of that, because he really didn’t get it. That was a bad answer. I shouldn’t have the average insurance. When you own a successful business, you need more insurance. And State Farm is not for someone who owns a business, usually.

Shawn Busse:
It’s a commodity.

Jay Goltz:
Yeah, right.

Jennifer Kerhin:
Well, add that to the hats that we have to wear, is understanding.

Jay Goltz:
Insurance is one of the hats, for sure.

Shawn Busse:
Yeah. Do you have an umbrella policy, Jay?

Jay Goltz:
Yeah, absolutely. And I tell everybody this. I just did a speech yesterday with a bunch of designers, and they were talking about insurance. They laughed when I said this, but it wasn’t meant as a joke. It’s legitimate: If you’ve got kids, the day that they get a driver’s license, you ought to get an umbrella policy, because your risk has gone up dramatically. When you’ve got teenage drivers driving your cars, it just makes sense.

And people laughed like it was a joke. It’s not a joke. If you’ve got more than one kid, then much more. I mean, before your kids are driving, you have a moderate amount of risk in your life. The second you stick the 16-year-old in your car, your risk goes up dramatically. So I’ve had an umbrella ever since then. And I can tell you what it costs, cause I know. I think it’s $350 a year for $2 or $3 million. It’s not expensive.

Shawn Busse:
Jay, what’s the name of the insurance you can get for when an employee sues you? Do you know the name of that?

Jay Goltz:
Yeah, there is a name for that. Here’s how you can get sued. You give health insurance to your employees, and whoever’s in charge of it forgets to sign somebody up or something happened. The person has a heart attack, goes to the hospital, rings up a $300,000 bill. And, “Oops, we didn’t have you signed up. Oh, yeah, you did tell me to sign you up. Oh, I was on vacation that week, and I forgot to do it.” I mean, that’s omissions. I think it’s called omissions.

Jennifer Kerhin:
Oh, I have that one too! [Laughter]

Jay Goltz:
There you go.

Jennifer Kerhin:
I just pulled up my list. Hey, Jay, you mentioned that you have people traveling the world as buyers, right?

Jay Goltz:
Yes.

Jennifer Kerhin:
Do you have special health insurance for health disasters?

Jay Goltz:
No.

Jennifer Kerhin:
So I bought some recently.

Jay Goltz:
There you go. It sounds like you’ve got everything.

Jennifer Kerhin:
Yeah. Well, it was super cheap. Honestly, it wasn’t that expensive.

Loren Feldman:
Jennifer, is this insurance specifically for people who have a health problem overseas?

Jennifer Kerhin:
Yes. It doesn’t mean you have a health problem. It just means if something happens overseas, I covered health expenses, and then emergency evacuation.

Shawn Busse:
Oh, wow.

Jay Goltz:
There’s only one thing I know for sure, Jennifer. You have the greatest insurance salesperson ever. [Laughter] That’s the only thing I know for sure.

Jennifer Kerhin:
Or I’m incredibly gullible.

Jay Goltz:
No, no. I think that that’s remarkable. You’ve got stuff I’ve never even heard of.

Jennifer Kerhin:
But Jay, honestly, that was a concern of mine.

Jay Goltz:
No, you’re right.

Jennifer Kerhin:
If I have an employee who’s in a foreign country, and something happens, it’s not very expensive to cover emergency evacuation and the expenses. Because you may or may not be in a country that has socialized medicine.

Shawn Busse:
I found it: employment practices liability. Everybody listening to this show needs to get that, if they have employees. It’s like, I went for years not having it.

Loren Feldman:
Jennifer, do you have it?

Jennifer Kerhin:
Yup. [Laughter]

Jay Goltz:
Of course she has it.

Jennifer Kerhin:
I have quite a bit of insurance.

Jay Goltz:
I’ve got this picture of her insurance salesperson with a jacket. When you open up the jacket, there’s just the files in there on both sides. “Which one would you like?”

Jennifer Kerhin:
You might be right, Jay.

Shawn Busse:
To be fair, she’s working with larger organizations on complex situations all over the place. Her exposure is massive.

Jay Goltz:
Let’s tone it down, Shawn. We don’t want her to get more anxiety about her exposure. [Laughter]

Jennifer Kerhin:
I’ll be buying more insurance tonight.

Loren Feldman:
Shawn, I’m not familiar with the service that you described. How did you find the company that evaluated your policies?

Shawn Busse:
Yeah, it’s called Zuna. They’re a Portland-based company. And essentially, they realized that all these providers for small businesses were being either consolidated, purchased by private equity, or going out of business. And so the reliability of our third-party vendors—think health care, insurance, even outsourced IT, bookkeeping—was declining rapidly, in some cases. And so what they realized is that the incentives are all wrong.

Like, in an insurance case, the insurance broker is incentivized to sell you more than you need, because their commission goes up. And you need kind of a Consumer Reports for all these different service providers that are helping you. And it was very true for me. I had great service providers; the pandemic totally upended that. You know, I had some that went out of business. I had some that just totally flailed. And I needed to get new ones.

Jay Goltz:
I have to tell you, everything you’re saying, I fully agree with. My insurance guy, he’s my age. He sold out to the big roll-up place. Another guy I knew for years, he sold out. They’re all getting sold out. And I think, to your point, they have an incentive. That doesn’t mean we’re all getting screwed, but probably 25 percent of us are getting screwed. And we don’t know which one that is.

And I can tell you from 30 years ago, I went to change insurance companies and my father-in-law, may he rest in peace, said “Oh, here’s my guy.” And I called him. He was twice the price it should have been. And you know, my father-in-law was a loyal guy who liked the guy, but like, who knows what these guys are doing? And I had to tell my father-in-law, “Dad, sorry to tell you, the guy’s twice what he should be,” and you just don’t know. And they all smile, and they all take you to lunch. And maybe they take you to a Bulls game or a hockey game or something once in a while. Who knows? It’s just keeping it in check. And I don’t think that’s a bad idea.

Shawn Busse:
Yeah. It was the best, I don’t know, $4,000, or whatever I spent.

Loren Feldman:
Is that what it cost? Do they charge you by the hour or…?

Shawn Busse:
No, it’s a fixed fee. And it was across lots of different areas of my business. It was IT, which was a major win. We found a fantastic provider with them. It was health care. It was insurance lines.

Jay Goltz:
So you made back the money? You’re confident you made back the money?

Shawn Busse:
Oh, many times over. Not to mention, half of it’s price, half of it’s like: I don’t want to overpay. But the other half is service, and we were getting such garbage service from our IT provider, which ended up costing me a bunch of money in other ways that I could talk about later in the show. But yeah, getting a better service provider who delights the team, who ends up actually saving me money in lots of ways, I would spend twice as much in a heartbeat. It was crazy.

Jennifer Kerhin:
I’m sorry, Shawn, not only did they recommend and consult with you, they then provided the insurance? They’re a broker?

Shawn Busse:
No, they’re not a broker. That’s the idea. They would say, “Hey, you should go work with Fournier Group to do this insurance. And these are the types of insurance you should get, Shawn,” which was great, because then I don’t even get the Jennifer problem of like everything under the sun.

Jennifer Kerhin:
Did they refer you to the person who would help you?

Shawn Busse:
Yes.

Jay Goltz:
Okay, let’s be clear. We don’t know that Jennifer has a problem. Let’s be clear. We’re not sure. I suspect, but okay. [Laughter]

Jennifer Kerhin:
I have more insurance. I just pulled up my list. I have even more.

Loren Feldman:
Forgive me, Jennifer, I’ve gotta ask: Do you have cyber insurance?

Jennifer Kerhin:
I do. Do you know how expensive that is? Do you know how painful that is?

Loren Feldman:
No, I don’t. How expensive is it?

Jennifer Kerhin:
It’s about $7,000 a year.

Jay Goltz:
Wow.

Loren Feldman:
Jay, do you have cyber insurance?

Jay Goltz:
Sure.

Loren Feldman:
Do you? Really?

Jay Goltz:
No, I have it. But I don’t know what the details of it are. I think there are really two issues here. One is, to Shawn’s point, they’re incentivized to sell more insurance. Okay, I’d hate to think people are crooks, but some are. Okay. But the bigger one is, you don’t know how competent your insurance person is. You don’t know how much time they’re putting into it. This always goes down to the bell curve. It’s like the old joke: What do you call someone in medical school who graduates last in their class? Doctor. I mean, the fact of the matter is, half of everything in the world is below average. Maybe your insurance person’s below average. Half of them are.

Shawn Busse:
That was my problem. It wasn’t that they were taking advantage of me. It was actually they just didn’t give a shit. And to the point of your Allstate guy, I had the equivalent of that in business insurance. We just had terrible coverage. And it took this employment practices situation for me to realize, “Oh my God. I’m so exposed here. And how could my broker have not told me about this?”

Jay Goltz:
And the way the insurance world—I assume you get the same thing where you’re at—every day on TV: Liberty Mutual, Progressive. Like, constant ads. That doesn’t make them the best insurance company; it means they spend a ton of money on advertising. I love my insurance company. I’ve used them for claims. You wouldn’t even know the name. They’re in Wisconsin. You wouldn’t know what their name is. But they’re a huge mutual company.

But people just go to work. Oh, they drove by the Allstate office or the State Farm office, or they call Progressive. They just go to the name that’s familiar, and that’s not the best way to buy insurance. Because, I believe—correct me if I’m wrong—some of the best companies out there for businesses, you wouldn’t know the name. They don’t spend money on advertising like that.

Shawn Busse:
Often. I mean, we coined this term a long time ago: best kept secret. Often, some of the best companies suck at marketing.

Jay Goltz:
Or just don’t spend the money on it, because they don’t need to. Because the brokers bring them the business, because they know they’re the best company for that. Did you hear the thing about GEICO? I find this fascinating. Geico sales are way off. Why? Everybody raised their rates, and GEICO figured out they have no relationship with the customers. They don’t have Bob, your insurance guy, for the last 20 years. You just call up and sign up for insurance. So when it goes up, you think nothing of canceling, right? There’s no loyalty there.

Loren Feldman:
Shawn, clearly more people should do what you did and have somebody assess the insurance that you hold. I’m curious, what prompted you to do that? Did you know you had a problem? Or did you just discover that company and decide to give it a shot?

Shawn Busse:
A little bit of both, kind of a confluence. So I had met and known the company for a while. I liked them. They seemed like really great people. But before the pandemic, my systems worked really well. Like, I had this well-oiled machine. And honestly, the pandemic broke so many systems, I just can’t even tell you. And then, the added piece, I thought about it the other day, and I thought about our show, the Valley of Death. And I was like, “Oh yeah, I’m kind of in the valley of death, too.”

You know, I’m here. I crossed the $2 million threshold, and things that used to work aren’t working anymore. So I got the combination of: Jennifer and I are in the valley of death, and also the pandemic really screwed up a lot of vendors. In my case, the IT company I had before was wonderful. They were great. And then in the pandemic, the owner got sick, and he sold to private equity. And guess what happens? We all know what happens when you sell to private equity—the service provider becomes garbage. And they did. They became total garbage overnight.

Jay Goltz:
Oooh, I got a new phrase I just coined with Loren last week. I can use it now. I call that private inequity. They come in, and it becomes inequitable for the employees, for the customers, for everybody. And I’ve seen more wrecks with that.

And I will tell you, to your point, I’ve been using the same insurance company for 40 years. All of a sudden, the woman working there only works four days a week. “Oh, you’ve got to call me between 11 and four.” And I called up my guy who’s still working. I go, “What’s going on? I can’t find anybody.” This is what he just told me: “Well, we’re not hiring anyone now because we’re going public and we’ve got to watch expenses now.”

And this is what I’m talking about. It’s no longer about the customer. It’s all about their equity. And this is what happens all the time. These private equity companies, generally, from what I’ve seen, they’ve got two tricks in their bag, just two: raise prices and squeeze the employees for everything they’ve got in them. And that’s how they make money. And then they go to the Hamptons and spend the summer there and make a gazillion dollars. I’ve seen that movie half a dozen times. And I’m sure it doesn’t always go that way, but it frequently does. So you and I end up with trusted, great vendors who all of a sudden are a shadow of what they used to be.

Shawn Busse:
Amen.

Jennifer Kerhin:
I’ve been thinking about, as you guys were talking, what is it with my insurance? And I realized something. But in a good way. It’s sort of, I’m like, “Oh, okay, that’s what happened.” My husband has had a business since we were married, and I’ve been married a really, really long time. And when I started my company, I used his service providers. And slowly and surely, I’ve outgrown his providers, right?

They were legacy providers where he sort of handed over that relationship, and this insurance broker is the last remaining service provider. And I was like, “Ah, that’s it.” What worked for his type of company, which is much smaller, and now mine—it hasn’t been broken, so I haven’t looked at it. But it hasn’t been broken because I’m paying a lot of money. But it’s a legacy provider from my husband.

Jay Goltz:
Wait, walk us through, because I’m curious. When you say legacy, does he go to lunch with them regularly? Do they golf together?

Jennifer Kerhin:
No.

Jay Goltz:
So is there any personal relationship there for you?

Jennifer Kerhin:
There’s a personal relationship, yes, but it hasn’t been super active, I would say.

Jay Goltz:
No sports games?

Jennifer Kerhin:
No, no.

Jay Goltz:
Because that’s what—I don’t do it anymore—when I used to go to the Bulls game or whatever, you look around, and you see all the bankers are there. And this is what they did. And this is how people bought insurance. They bought it from their golf buddy, or from their brother-in-law’s neighbor, or something. And we all did that, probably. It’s not like we went out and interviewed four insurance companies. And it’s just, we knew somebody.

Jennifer Kerhin:
I think it was that way, Jay. I mean, it hasn’t been that way, I would say, in the last eight years. But now I realize: my IT? Different provider. My CPA? Different provider. The insurance is the one leftover.

Loren Feldman:
Shawn, you said that you realize that you, too, are in the valley of death. Have you had a chance to think about how you’re going to get out of it?

Shawn Busse:
I mean, I’m going to keep listening to 21 Hats, clearly.

Loren Feldman:
Well, that goes without saying.

Jennifer Kerhin:
I listened to the podcast, and I was talking to my friend that listened to it. And Shawn, you said something about, when you go through the desert, you have to fill your backpack before you start walking, because the worst thing that could happen is that you get halfway through the desert, and you’ve run out of supplies, right? Because then you’re stuck. Because going back doesn’t help you. You’re gonna go forward, but you don’t have any supplies.

What I’m trying to make sure—and maybe you’ve thought about this, too—is I need to load up that backpack. And it’s been pushing me. It’s like, you know when you see people who have gone into the army, and they have to carry that 150-pound pack? We’re carrying, I don’t know, 500 pounds, and hopefully each step forward, we’re lightening the load, either pulling it or other people holding it or something, lightening the load so we get across the desert.

Jay Goltz:
I don’t think that you can do that. I don’t think that’s an apt metaphor, in that you can’t possibly load it up that’s going to avoid these problems. My thing to this is, simply: You just keep forging on and dealing with it. And you get your way through it. And you do what you’ve got to do. And you navigate and you make adjustments, and you figure this out. And you just keep forging on until you get through it. But I don’t know that you could, quote-unquote, prepare yourself so that, “Oh, that was easy. I had it all figured out before I went on my trip.” I think we just adapt.

Jennifer Kerhin:
Isn’t there something that you’re like, “Man, if I had just looked at that six months earlier, I would have been in a better position”?

Jay Goltz:
For sure. But you figure that out.

Shawn Busse:
I think you’re both kind of right. But Jay, I’ve heard your story enough to know that you would tell your younger self, for example, “Raise your prices.” To me, that’s loading up your backpack.

Jay Goltz:
Okay, good point. Good point. Okay. Check all your systems. Okay, while we’re on the subject, here it is then. Okay, that’s an excellent point. I would be checking your pricing to make sure: Are you really charging the appropriate price? Forget about these words that you hear all time: “I don’t want to rip anyone off.” “I don’t want to be greedy.” “I want to be fair.” Those words don’t mean anything. Appropriate price. What is the appropriate price? The price that you can charge that you’ll be making money, taking care of customers.

Shawn Busse:
Paying your people enough.

Jay Goltz:
Absolutely. So the appropriate price is huge. That might be half of it. Two, continue to try to get bank lines. Try to have enough credit available, if you need it. Three, this one sneaks up on you: Continue to be honest with yourself about your staff. Have you outgrown anybody? Because that will kill you. And I’ve been through that half a dozen times, and it took me too long to figure it out. And it was very expensive. But continue to say to yourself, “Okay, this employee was great when I had six employees. Now that there’s 15, it’s not working anymore.” So that would be three.

Four, the marketing world has changed dramatically. I used to advertise on the radio. And you say, what’s the radio? I mean, just because it used to work for me 10-15 years ago, the world changes. So you’ve got to continue to look at the marketing piece. I’d say, if you did those four things, that covers marketing, management. I think that would be loading your backpack.

Shawn Busse:
Okay, let me add a few more. So one, Jay, you’ve talked about how earlier in your career, you had massive turnover. You cycled through people like crazy.

Jay Goltz:
Yes, absolutely.

Shawn Busse:
Do you outgrow people? The flip side of that coin is: Are you churning through people?

Jay Goltz:
In my case, it wasn’t the churning. It was bad hiring that caused the churning. So, yes.

Shawn Busse:
However you want to look at that—the hiring process, the onboarding, the cultivation. That is huge. Because if you’re cycling through employees like crazy, you’re in trouble.

Jay Goltz:
Well, there’s something wrong. No, there’s something wrong. Yeah, absolutely.

Shawn Busse:
And then I would also say customer churn. You know, if you’re about to cross that desert, you want customers who really love you and are delighted by you—not constant cycling through customers. And then the third one I’d add is a clarity of vision. Where are we going? Because if people don’t know where you’re headed, you’re going to wander around the desert and eventually burn through people, customers, your own well-being.

Jay Goltz:
Yeah, excellent point. So those are seven gauges that we just came up with.

Jennifer Kerhin:
And I think the point is, at least the way I think of this metaphor is, I’m loading up this backpack. I’m setting the systems to go. So when I cross that desert, for example, we’ve all talked about my investment I’m doing in marketing. And so when I cross it, I’m going to have a marketing team. I’m going to have a leader who has a system and process in place to do our marketing. I’m not going to be doing it day-to-day. I’m going to make strategic decisions. But right now, I’m doing it. I’m the one who’s working with the ad agency to develop the website. I get through this, we have the systems in place from business, develop the marketing, that someone else is doing this. And I’m coaching and training them instead of me.

Jay Goltz:
Yes.

Shawn Busse:
I love that attitude.

Jay Goltz:
Those are eight gauges we just came up with, a dial to look at. And you just described is delegation. So it’s about hiring. Do you have the right people? Do you have the wrong people? Have you delegated properly? Yeah, I would say those are eight dials, gauges, that when you’re growing through it, you’re not thinking about it enough. And I have violated every single one of those cases. I can look back and realize, “Yeah, I screwed that up.” Hence the phrase 21 hats.

Jennifer Kerhin:
Jay, you say this all the time—at least, I remember from the conference—now you have really strong, competent professionals who handle a lot of these details. That’s where I want to get to. That is, the concept of 21 hats. I’m wearing every single one of them. And I want to get to the part where I cross the desert, and some people are wearing some other hats that I can help direct.

Jay Goltz:
And that’s a function of money, to some degree, which means you have to get big enough. You want a manager of the marketing. I’m arguing the difference between a leader and a manager is about 50 grand, and you don’t need a $150,000 person.

Jennifer Kerhin:
Right, totally fair point. But that’s the desert. The desert is maybe the desert before a professional management class.

Jay Goltz:
Yeah. And keep in mind, the key people I have, they’ve been with me for literally 20, 25, 30 years. I’m not suggesting you have to groom for 20 years, but it doesn’t happen overnight. I mean, in my case—and I’m not suggesting this is the way to do it—I’ve got people making, well, solid six-figure incomes who started here at 15 bucks an hour. I mean, that’s one out of 20. But I grew them myself.

Now, if I was smarter, maybe I would have brought somebody in from somewhere who was already doing it. But I’m just saying this takes some time to figure out, and there are plenty of smart people out there. There are absolutely diamonds in the rough.

Jennifer Kerhin:
Yeah, and that’s why I’m also investing heavily in the development of my managers. I have some incredible people who, operationally, are really strong. And so I have a consultant working with all of us as a team, and then individually, to develop their managerial skills to get to the next level. Because I can invest in people, process, and systems. I can do the systems. I can do the process. I need someone to help—assuming I’ve hired the right people—to develop their skills.

Jay Goltz:
And I can tell you, there’s nothing greater—maybe money’s up there, for sure—than knowing that you took people from here and got them to there. And you’re all working together. It’s just a beautiful thing. Which is another reason why watching Succession is so painful—because they didn’t have that. I mean, it was just pain.

Loren Feldman:
All right, we’ve come full circle. My thanks to Sean Busse, Jay Goltz, and Jennifer Kerhin—and to our sponsor, the Great Game of Business, which helps businesses use an open-book management system to build healthier companies. You can learn more at Greatgame.com. Thanks, everybody.