The Toughest Conversation

Introduction:

This week, Paul Downs, Jay Goltz, and Laura Zander don’t hold back. Laura and Jay both say their sales are coming in well below expectations. Not surprisingly, Jay has a five-point checklist that he’s using to assess and address his shortfall. Laura’s situation involves a marketing team that she says has been feeling stressed and is coming apart, with lots of crying and arguing. “They’re just collapsing,” she tells us. Paul, meanwhile, says his sales aren’t bad, but he’s got one employee who’s been holding them back. The employee, who’s been with Paul for 10 years, has been spiraling of late, says Paul, who’s dreading what he calls “the toughest conversation,” a conversation he fears will leave the employee devastated. In such situations, Jay says, he’s found it helpful to rank himself from one to 10 on the hardass scale: If Mr. Rogers is a 1 and Jack Welch—the take-no-prisoners former CEO of GE—is a 10, where do you want to be? “If you pick four or five,” Jay says, “you’re probably gonna go out of business.”

— Loren Feldman

Guests:

Laura Zander is CEO of Jimmy Beans Wool.

Paul Downs is CEO of Paul Downs Cabinetmakers.

Jay Goltz is CEO of The Goltz Group.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome, Paul, Jay, Laura. It’s great to have you here. Let me start with you, Laura. Welcome back. I gather you’ve been on vacation in Alaska.

Laura Zander:
Yeah, we went to Alaska last week and went to a little remote island, just with us and a couple other people. Did a little bit of fishing, really got away, no cell service. It was amazing, super amazing. But coming back from vacation: not so amazing. It’s brutal, just super brutal.

Loren Feldman:
How so?

Laura Zander:
I mean, you leave for six days, and that’s just six days’ worth of work that piles up that you still have to figure out how to get through. So it’s not like the work goes away. You’re just postponing it. So you come back and you’ve got 600 emails in your inbox that you’ve got to go through, and billions of Slacks and all the messages that, “Well, I waited until you were here to talk to you about this urgent matter, and blah, blah, blah.” So you go from being relaxed and not having any responsibility to showing up and just having everything in front of you. So it’s just a culture shock. It’s always a little tough. I don’t know how you guys feel.

Jay Goltz:
Are you delegating enough? Because I’ve gotta tell you, I’m going away next week. But there’s no way I’m coming back to [that]. Okay, I’ll get a bunch of junk emails, but it’s not like people are asking me a lot of stuff. I’ve got other people doing it. So the question is: Are you delegating enough to other people? Why is it all going to you?

Laura Zander:
Because we’re in the middle of a transition, and we’re basically starting two new businesses within our business. So, that’s why. I’m working more now, probably over the last two months or three months, than I’ve worked in a long time. And so I worked nonstop for about four or five months. And then I was able to take four or five months and kind of work part-time. And now I’m back. We’re at another inflection point, and so I’m back to working nonstop for a little while. It won’t be forever.

Paul Downs:
I’m wondering whether a vacation without internet is a vacation. Because I travel, but I can just see my emails and see like, “Okay, is there anything really critical?” And that’s actually more relaxing, to feel like I can just keep tabs on things and know that I could act on it. I don’t think I’ve ever tried it—a vacation without internet.

Jay Goltz:
I have to tell you, I totally agree. I know that I can just clean up the stuff and it can take, whatever, half an hour, and I’m done. And it’s not that I’ve gotta do a lot on them, but you’ve still got the emails you gotta go through. And I do find it very relaxing to just put a little time in, clear the deck, and then go and pretend like you’re a normal person and do nothing.

Paul Downs:
Yeah, I’m actually about to take the first weekend ever without internet, and I’m a little worried about it. Because I just like to know what’s going on. I don’t need to do anything. It just makes me feel much happier if I have a sense of what’s happening in the company.

Laura Zander:
I don’t know. The first two days of the vacation, I’m still like 100 percent in it, and I’m still checking emails and everything. And then it’s like, I kind of totally check out for a few days. And that’s just kind of how it’s always been. I don’t know. I mean, that’s just my personality.

Jay Goltz:
She’s in a different situation, in that you’re traveling with your husband who also runs the business. So that’s different than someone like me who leaves. It’s just me gone. In your case, you’re both gone. So that does add a different level of absenteeism.

Laura Zander:
Yeah, and my personality, for better or worse, is I’m either all in or I’m all out. And when I’m all in, I’m all in. I don’t do moderation very well. So it’s hard for me, and it can be very stressful. I don’t know.

I mean, there are some times when I go on a trip, and I do check in every single day. And I do. I mean, I check in just a little bit to make sure there’s nothing that’s like a fire there that’s going on. But the little stuff that’s not super urgent, I don’t want to deal with. Sometimes I like to just check out.

Loren Feldman:
Laura, how did the business do while you were away?

Laura Zander:
Oh, it’s fine. I mean, these businesses run themselves. [Laughter] I mean, I’m not in the day-to-day. Like I said, we just launched our own brand. So we basically are creating a new business. And we launched that while I was gone.

Loren Feldman:
Have you told us about that? What is the new business?

Laura Zander:
We’re doing our own private label yarn brand, so working now with the mills that we work with to get our product for Texas. We’ve decided to just work on margin. I mean, at Jimmy Beans and our Reno location, our sales of other people’s products have continued to just slowly decline and decline and decline. So we decided to create another one of our own kinds of products. And so that’s what we just launched a couple of weeks ago. And sales are down.

Jay Goltz:
But why is that? Why have sales of other people’s products gone down? Do you know?

Laura Zander:
It’s a great question—a variety of reasons, as far as we can tell. So one is that a lot of other people’s products have gone out of business. Seven years ago, we probably did $2 million a year worth of brands that now don’t exist anymore.

Jay Goltz:
All right, that’s interesting.

Laura Zander:
Yeah, so they just go out. People age out. I mean, they tend to stick around for about seven to 10 years. And then they just get tired of it. And part of that probably is the nature of our industry. It’s a craft-based industry. A lot of people start their businesses and start their brands because they love the craft. And they think they want to be surrounded by the things that they love. And then, after five to 10 years, it gets exhausting. That’s when the honeymoon wears off.

Jay Goltz:
Wait, add to that: It’s exhausting. And they’re not making as much money as they thought they were going to.

Laura Zander:
Exactly, exactly. Yes.

Jay Goltz:
It’s where passion hits bad math.

Laura Zander:
Exactly.

Paul Downs:
Have you ever thought of putting together a business support group for your own vendors?

Laura Zander:
Totally. Absolutely.

Paul Downs:
Do you do that? Or have you just thought about it?

Laura Zander:
No, we’ve done it in various forms over the years. It’s funny you ask. So the business that we bought last October, we are distributing a yarn out of the Shetland Islands, in Scotland. And we’re going to do a retreat next July. And we’ve decided that the retreat is just going to be for business owners. It’s going to be for store owners. So we can all go to Scotland—there’ll be about 15 of us—and share best practices, share stories. I’ll talk about the financial side of things. So, yeah, we’ve had book groups for store owners, all kinds of stuff.

Paul Downs:
That’s a good idea.

Loren Feldman:
Laura, tell us about the brand that you’ve started. What are you calling it? And is it a high-end brand?

Laura Zander:
So the brand is called Yarn Citizen. And it’s a brand that’s based on us all being good citizens of the world, of the environment, of the yarn community, and remembering that we’re all part of this passion together.

The first wave of products that we have launched came from us being in Peru last year and the mill that we work with. It’s a Fairtrade mill. Their supply chain is just impeccable. They pay a lot of attention to making sure that everything, every step of the way, is sustainable and ethical. They process all of the sheep tops, all the wool tops, all the alpaca, all these different fibers from around the world, but a lot of it comes from Peru and South America.

They have all of these leftovers of these different fibers. So we had them upcycle all of these leftovers into a new product. Obviously, because it’s upcycled, we’ll never be able to recreate it exactly the way it is. I mean, we created a big batch of a few thousand kilos of some particular yarns, and we dyed them in particular colors, and blah, blah, blah. So we just launched an alpaca wool blend yarn, and then we launched a full wool blend yarn. And these yarns are sustainable—or at least, they’re environmentally conscious. It was stuff that would have been waste that had been processed into something.

And then we have really put a heavy focus on being price conscious. I just went to this event, right before we went to Alaska, in Colorado, and kind of did a little focus group and was showing people the yarn. And I’m like, “Look at the fiber. Look at the quality. What’s the hand?” In other words, how soft is it? And, “How much would you pay for it?” And everybody’s like, “Well, probably about $25 for one of these hanks of yarn.” It’s 100 grams, and we’re pricing it at $14. So we’re trying to make sure that people know that sustainable doesn’t need to mean that it’s ridiculously priced.

Jay Goltz:
Except you don’t know that. It’s a nice concept. But the fact of the matter is, maybe the $14 isn’t going to pay the bills, and you don’t know that yet. Correct me if I’m wrong. I mean, just the phrase “conscious”—what did you say, “consciously pricing”? I find that to be a funny term. It’s like, either you do it consciously, or you screw everybody.

Laura Zander:
Well, I’m just saying that in casual conversation.

Jay Goltz:
We’re on a podcast. This isn’t casual conversation.

Laura Zander:
Well, no, but we are being conscious.

Jay Goltz:
What does that mean, “conscious”? No one’s gonna pay too much? But what if that doesn’t pay the bills? I mean, that’s how the world works. There’s a lot of people who are—

Laura Zander:
It does pay the bills, because I’m pricing it.

Jay Goltz:
But you haven’t done it for long enough to know whether—

Laura Zander:
What do you mean?

Jay Goltz:
I’m saying, have you done this long enough?

Laura Zander:
Yes, I did a P&L.

Jay Goltz:
You did a P&L forecasting forward?

Laura Zander:
Yeah, I’ve been making handbags forever. Yeah, absolutely.

Jay Goltz:
Okay, so the reason you charge $14 is because you’re using scraps, so the cost of goods, the cost of materials, is minimal?

Laura Zander:
Yeah, I mean, we’re making great margin. In fact, we’ve priced this so that we can wholesale it so that shops can sell it as well. And so we’ve actually just put it in five different stores. And I’ve got tons of history through the handbag line that we’ve done, so I know what our manufacturing costs are. I know what duties are. I know what customs are. We’re sea shipping it, so, blah, blah, blah. So I know what the bottom line cost is per unit. I know what we can charge. I know if we’re going to pay sales reps. I know if there’s outbound shipping.

Jay Goltz:
Okay. So my whole point is, rather than “consciously” pricing, you’re value pricing it because you’ve got the cost down. So you’ve been able to give a good value for it. Okay, it’s value pricing.

Laura Zander:
It is value pricing, but when you say value pricing, that makes me think of Walmart.

Jay Goltz:
No, I know. But when you say consciously pricing—

Laura Zander:
So I’m not going to use that term.

Jay Goltz:
Those two words don’t go together. They just don’t.

Laura Zander:
Well, maybe not for you.

Paul Downs:
What about haze pricing, where you’re just kind of aware of what’s going on, but not really? [Laughter]

Laura Zander:
Yeah, exactly.

Jay Goltz:
Anyway, I buy the concept. Sounds good. You’re trying to be good to the environment, to the employees—all that all that works.

Laura Zander:
Can I say “sustainably priced”?

Jay Goltz:
Sure. Great. There, we’ve got a good compromise. Done.

Paul Downs:
Why not just say “fair price”?

Jay Goltz:
No, you can’t say fair. Because, again, there’s either fair or unfair pricing.

Paul Downs:
Yeah, fair enough.

Jay Goltz:
Wow. You’ve done it again, Paul.

Loren Feldman:
Laura, you’ve talked a lot about emphasizing your margins. It sounds like you could have gone for a higher margin here. Did you debate that? And if so, why did you decide against it?

Laura Zander:
Because this is a hole in the market. Because there’s an opportunity there, and there’s nobody who’s doing this. I mean, if we wanted a higher price, then we would just be right next to all these other different brands.

Jay Goltz:
I’ve gotta tell you, I don’t have a problem with the phrase “opportunity pricing.” I don’t have a problem with that. You found an opportunity. You got the stuff cheaper. You figured out how to get your cost out. I think that’s a lovely phrase, “opportunity pricing.”

Paul Downs:
Why don’t you just call it “pricing”? I mean, really, everybody who is pricing is just figuring out some scheme to do it. It’s all pricing. It doesn’t need an adjective. You’re just pricing. And you decided this is how you’re gonna think about it.

Loren Feldman:
So Laura, did you say there are two businesses that you’re introducing?

Laura Zander:
Yes, and then I’m building another team to work on our subscriptions. Long story short, we hired somebody a couple of months ago who has a ton of experience—30 years of experience—in the industry. It was an opportunity. We reached out to her. She had been thinking about… We found somebody, right? We got her from her other job. We weren’t looking for somebody, specifically. We didn’t have a job opening, but the opportunity presented itself.

Jay Goltz:
So opportunity hiring.

Laura Zander:
Yes.

Jay Goltz:
So we’ve got opportunity pricing and now we’ve got opportunity hiring.

Laura Zander:
Yes. So we brought her in, and we weren’t really sure exactly what we were going to bring her in to do. I mean, we knew kind of at some level. But over the last two months, we knew that it would just kind of shake out. She was okay with that, and we were okay with that. And, you know, she has a skill-set that nobody else has.

And it has caused some issues. You know, there’s some resentments. There are people who are feeling threatened. Our sales are really far down. I mean, we’re down almost half a million in sales. And some of our team is just kind of collapsing under the weight of that pressure and that stress, and so we bring somebody in to help.

Jay Goltz:
Wait, are you sure those things are related? You’ve made it sound like it’s because of this hire that all of this happened. Is that a clear cut direct line?

Laura Zander:
No, it’s actually the other way around. Our sales were down, so we found somebody who we thought might be able to help us. And we brought her on to help us increase sales through different mechanisms. And yeah, she’s remote, and everybody else is here in Reno, for the most part. And there’s some resistance to having somebody who’s remote and who has this experience.

So long story short, we’re going to build a team around her, and we’re gonna launch a couple of products around her and basically create a small business within a business. So I just hired somebody else two days ago. I’ve got another interview tomorrow for somebody who I think we’re gonna hire. Basically, we’re taking this team from a business that went out of business last year, and we’re pulling the best people from their team and hiring them. And we’re going to recreate the winning parts of the business that went out of business within our business, if that makes any sense.

Paul Downs:
Do you know why they went out of business?

Laura Zander:
I do. Because we thought about buying them. Yeah, I know. Great question, Paul.

Jay Goltz:
Okay, so, for people that don’t have a scorecard, let’s just review. You said you hired someone. Okay, the reality is: One, your sales are down. Two: You hired this person with great expectations. She was going to help fix this because of all her experience. Three: She’s remote. It didn’t gel well. There’s some problems there. Four: You’re going back to re-integrate this thing, because you still believe that’s going to be the way to fix all of this. Is that true?

Laura Zander:
Yes. Great job.

Jay Goltz:
Thank you. Okay, I’m with you.

Loren Feldman:
Laura, what sales exactly are you talking about? You have a number of different businesses that you’ve been describing. Are you talking about sales to yarn stores around the country?

Laura Zander:
Those sales are down, yes.

Loren Feldman:
Those are the sales that are down?

Laura Zander:
No, all of the sales are down—almost all of the sales are down.

Loren Feldman:
So that includes your ecommerce business that you sell yourself through your website.

Laura Zander:
Yes. But for this particular conversation, what I was talking about was the ecommerce sales.

Jay Goltz:
But here’s a major question that we’re all dealing with, or many of us: Is it down compared to a year that was artificially high because of the pandemic and people being home? Is this just the hangover from the fact that we all got more business? Not all of us—some of us got more business because people were home and spending more money. Or do you think this is actually down from where it should have been, not factoring in that last year was just a flukey year because of the pandemic? Can you tell?

Laura Zander:
Yes, excellent question. And actually, I’m gonna look at something real quick while we’re talking—but really excellent question. And I should rephrase it. It’s not necessarily that our sales are down. It’s that we are not hitting the goals that we set at the beginning together as a team at the beginning of the year. We are missing the goals significantly.

Jay Goltz:
Me too. I thought I was being fairly conservative, but I’m not hitting the numbers I want. And when you’re ready, I’m just going to share: I have five things I’m looking at to fix this. And I think they apply to most businesses. So when you’re ready, I will unveil that.

Laura Zander:
Yeah. Go for it.

Paul Downs:
Let’s hear it. One of these Jay bullet-point lists? Awesome.

Jay Goltz:
You’re the perfect people to be on this with me because we all have similar kinds of businesses. We’re selling to consumers, and we’re selling products. We’re not selling services.

Paul Downs:
Wait a minute. What about me?

Jay Goltz:
You. I say you, too. We’re all the same.

Loren Feldman:
He’s not selling to consumers.

Jay Goltz:
No, but you’re selling products. You’re making products. We’re all in the product business. That’s the point. Okay, number one—and I’m doing this all myself—we should all be looking at our websites, because everyone you talk to, most people go: “Oh, I’m working on it.” Okay, well, maybe it’s time to fix it. I went to my own website and realized we were still using a phrase from the pandemic. In my new store that’s downtown for framing, it said, “We encourage you to make appointments. Walk-ins welcome.” And when I read that, it’s telling me, “Gee, we kind of can’t handle the business.” And I said, we should just say, “Feel free to make an appointment. Walk-ins welcome.” Just a little tweak like that. I don’t know how many people went to our website and were thinking, “Oh, they can’t handle the business.” Okay, so I’m looking at my website, for sure. That’s one.

Two, just take a break and look at your competition and think, “Are they getting some business from me somehow?” And in my case, I don’t think so. So it just couldn’t hurt any to just take a pause and look around at who else is out there. Three, if business is off and you’ve still got the same overheads—which most of us do—I don’t think you can ever look at this too much. When you look at your pricing models, like, “Gee, are we charging enough?” In my case, the real estate tax in Chicago has gone crazy. Even though I’m not in Florida or California, my insurance rates keep going up more than inflation. So my overheads have gone up, and I need to factor those in. So pricing is three.

Four—not necessarily in this order—do you have any people who just aren’t getting the job done, who you’ve talked to numerous times, who you’ve got to grow up, bite the bullet, and say, “Yeah, I think we need to make a change.” I did that last year, and I think I’m really clean now with that. But I’m paying a little price for last year, trying to fill in the voids there, but I took care of that one.

And then the last one is—I have the same thing as you—are there any trends going on that I need to pay attention to? Like, I’ve recognized that the good days of picture framing are over. The Baby Boomers pushed this whole business, and now the Baby Boomers are old and aren’t framing as many pictures. And it’s a more challenging environment in the custom picture frame business. I can make up for it in some of the other businesses, but I’ve had to acknowledge that I can no longer build in the natural growth that I used to build in because it’s a mature market. It’s not going away. I still feel great about the framing industry. But it’s not the market it was in 2000. And I put that into my projections. So, I believe by doing these five things, I will get to where I need to get to. And I think that this applies to most businesses.

Paul Downs:
Well, you left out one.

Jay Goltz:
Go ahead. That’s why we’re doing this.

Paul Downs:
Did you experience any particularly good or bad luck? Because things happen at random. I mean, COVID is a pretty good example. Nobody planned for that. It just happened, and then the government pumped in billions of dollars, right?

Laura Zander:
That’s a whole other conspiracy theory, Paul.

Jay Goltz:
No, for sure. Last year’s numbers, nobody can look at them and go, “This is normality.” It wasn’t normality. And we need to factor that into, “Okay, where are we getting back to some kind of normal flow of business?” And yeah, so when you do your budgets—

Laura Zander:
Well, it’s our forecasting skills.

Jay Goltz:
Yeah, yeah. I’m not that far off. But I’m off 6 percent here, and 9 percent there. Now, do I think I might be able to make it up in the last four months of the year? Yeah, but this is where I always say: Optimism is the gift of the entrepreneur, and also the exposure. Maybe I’m being optimistic, and I shouldn’t be. I don’t know. I’m still grappling with that.

Laura Zander:
I’m not even optimistic. I’m like, “This is going to happen. I know how to fix this. And this is what we’re doing.” And I don’t know, when things are down, like right now, it drives me to reinvest. So we’ve hired a number of people over the last six months who have great experience. So it’s just taking a little bit of time for them for the momentum to kick in, and for some of these new ideas.

And I mean, we’re at an inflection point. So we got the artificial bump from COVID. That was great. We worked really hard for it, but you know, we got those numbers, and it’s not just business as usual. So during those couple of years, where business was, quote-unquote, easy—or sales, I guess, were relatively easy—that masked a lot of things that. Like you said, the website. I mean, technology changes, customer behavior changes. Like, their expectations on how a website works changes over those years.

Jay Goltz:
Search engine optimization has changed dramatically.

Laura Zander:
That has changed. All of these things. So we’ve hired a new graphic designer to come in and just—you know, somebody with UX experience—to go through and clean up our site, clean up our newsletters, clean up our templates. We have half a million people in our database who we haven’t contacted in a couple of years. So now we’ve got a big project.

Jay Goltz:
There’s a gold mine.

Laura Zander:
Exactly, exactly. So we’re just back to mining. You want to use that—the gold was just flowing freely, and we didn’t have to work for it a ton. And the team has kind of gone into it thinking it was just operating the same way that we’ve been operating the last few years. And those methods just don’t work anymore.

Some of them do. I mean, I’m not saying that everything that we’re doing [doesn’t]. But we need to reimagine. So I’m building a couple new teams, investing in new people, pivoting in a couple of different areas, bringing on a new product line, and just shaking things up.

Loren Feldman:
Laura, you’re kind of addressing the big picture there. You did tell us before that you set these sales goals for the year with your sales team. They agreed to them. You’re not hitting them.

Laura Zander:
One hundred percent. Right.

Loren Feldman:
What are you saying to your sales team? How are you managing that?

Laura Zander:
So we’re just talking on the ecommerce side. On the ecommerce side, our general manager, she’s responsible for sales, and she manages that team. And quite frankly, the team has just collapsed under the pressure.

Loren Feldman:
What’s that mean, “collapsed”?

Laura Zander:
Crying all the time, arguing.

Jay Goltz:
There’s nothing wrong with crying. Crying means you care.

Laura Zander:
From being resistant in meetings to not being collaborative. It’s gotten messy, just messy. Good people who have done good work in the past are just not. They’re just collapsing. I mean, crying a lot, breaking down.

Jay Goltz:
Given that you’re in two locations out of state, which I don’t envy—it’s hard enough to do it when they’re all in the same building with you—are you sure that you’ve figured out what the core reason for this quote-unquote collapse is? I mean, are you sure that you’ve got a good read on that?

Laura Zander:
Well, these are humans. So are you ever really sure?

Jay Goltz:
Well, I guess I’d be more specific: Have you had sit-downs one-on-one with them? Maybe in the car, even going to lunch, to see what’s really on their mind? I mean, when someone’s crying, that’s like the switch breaker. Something’s really just gone overboard. Something’s pushing it. Did you figure out why they’re crying?

Laura Zander:
Yes, the answer is yes. That’s why I’m working so hard right now. It’s because I’m working to fix those problems. We’re working to take the workload off. I’m working to reset the goals, to reset the budgets, to take pressure off, and move some of our sales expectations into other areas. And even from the interpersonal side of things… You know, I’ve got two teams who are warring with each other. So how do we handle that? So, yes, we’re on it.

Loren Feldman:
What are they fighting over?

Jay Goltz:
Who Laura loves more.

Laura Zander:
Eh. Probably, I mean, there might be some of that. You know, just silly stuff.

Jay Goltz:
If you’re not there, which we’re not, it’s very difficult from the outside to really know. There are six different reasons why. Is it because they feel like they’re being treated unfairly?

Laura Zander:
Totally.

Jay Goltz:
Do they feel like someone’s not working as hard as them? Is it just pressure, that they know the numbers? Is it post-pandemic? There’s way more anxiety out there. There’s just way more anxiety.

Laura Zander:
Exactly. There’s a ton more anxiety, and it’s manifesting in many different ways. And we’ve had a lot of different events happen over the last year, like with personnel, as a result, probably of the pandemic. You know, people who have left. So we’ve had some turnover of high level people over the last 12 months.

Loren Feldman:
How are your sales doing Paul?

Paul Downs:
Oh, they’re okay. I mean, they’re on track to be our second best year ever. And last year was the outlier. And that was what I was talking about with luck. We just happened to have one client who decided to clear their whole backlog of projects that have been sitting around for years. This is a big defense contractor. And I think they were rubbing their hands together after the Ukraine war and realizing that they were about to be as busy as they wanted to be for the foreseeable future. So they just did all these capital projects, and that blew our numbers way past wherever we thought they would be. And now we’re kind of back to reality. So yeah, we’re okay.

Loren Feldman:
We’ve been tracking your new marketing campaign here: building a new website, going after a different kind of customer—architects who might be repeat customers, as opposed to the one-time purchasers that you’ve relied on. Has that had any effect on the way you look at sales? Are you gonna have to hire more people? A different approach for a different kind of customer?

Paul Downs:
Yeah, sort of. First of all, news on that: We sort of completed the creative phase of the project, and then I was presented with a proposal for the distribution phase of this new content. And my marketing agent was pushing a digital strategy where we do what they call programmatic advertising, which is basically the kind of ads that chase you around on your phone wherever you are, which I find very irritating. But marketers always swear to God that’s the best way to do things. And my feeling was that, for the target audience we’re going after, which is a small number of people who are probably not going to be really receptive to those kinds of ads, we want a face-to-face strategy.

So I just pulled the plug on the entire digital half of this thing. And we’re going all-in on a show where we get to meet certain people face to face. And then, my feeling is, afterwards, the follow-up is the critical part, that we start doing regular outreach and sending people physical objects. In other words, doing the thing you can’t do digitally, which is to put something in somebody’s hands. And it’s sort of that reciprocal gift-giving idea. But also, I think that our target market is going to respond a lot more to actually having a really interesting piece of wood in their hand, as opposed to just a picture of it on their phone.

And we’ve never really been very good at sustaining any kind of outreach before. So I was just having a discussion with one member of my sales team about, “Okay, I think I’m going to put this on your plate. And it’s going to be your job to try to maintain connections with these target clients. And if you can successfully do that, then I’m going to give you a much bigger commission on those jobs, because those are going to be big jobs.”

And then, simultaneously, we’re also experiencing that kind of watching an employee slowly fall apart. One of my sales guys is, I think, entering some kind of doom loop, or at least in a bad patch, where pressures on his personal life are leaking into what he does all day. And that’s causing him to not be as effective a salesperson. And as he doesn’t make sales, that increases the pressure on his personal life. You know, blah, blah, blah. So that’s what’s going on.

Jay Goltz:
I want to throw in to all of us who are bosses: that’s a thin line between being supportive and doing the right thing. And where does it get to where it’s just hurting the business, at some point?

Paul Downs:
I am right there. Because I just ran the numbers on this guy. We have two salespeople, and we basically distribute the jobs—for the most part, it’s just like car salesmen. One comes in, goes to this guy. The next one goes to the next guy up.

So, I just ran the numbers, and since the beginning of 2021 to 2023, one guy has gotten 366 leads, the other guy’s gotten 370 leads. And the guy who got 366 sold $3.7 million. And the guy who got 370 sold $6.5 million. So that’s a $2.7 million difference. Now, I know that in any sales team, it’s always going to be that the best one is usually not real close to the second and third, that there’s an uneven distribution. But this is starting to become serious money. And I’m like, “I’m not sure we can tolerate this much longer.”

Jay Goltz:
How long has he been with you?

Paul Downs:
Ten years.

Jay Goltz:
Yeah, no. Been there, done that.

Paul Downs:
You know, and now, here’s a guy who’s in his early 50s. I don’t know where he’s gonna go if I let him go, but…

Jay Goltz:
Well, here’s my question, which has been very helpful to me. We sat around years ago, and I said to everybody—for those who remember Jack Welch from GE, he was always driven, take no hostages, fire the bottom 10 percent. And there’s been a book written about him, how he helped destroy corporate America, because all of his lieutenants went out and screwed up the companies they went on to. So let’s just say that Jack Welch, may he rest in peace, is a 10, and Mr. Rogers is a one. So the question is: Where do we want to be as a company?

And my argument is, if you pick four or five, you’re probably gonna go out of business. So we all decided, we think we should be an eight. And when stuff like this happens, when we cut people some slack—and the reality is, I’m probably a 7, 7.5, whatever. But it was very helpful, because at some point, when you cut someone some slack, somebody once said to me, “Well, Jay, we’re doing that because we’re an eight. We’re not a 10.” Which is true.

So the question is: If you buy into that concept that to be a healthy, profitable company—but not necessarily the most profitable, and you don’t want to be just that driven that you’re gonna have no compassion for human beings. I don’t want to be a 10. That’s the point. So we all agree we want to be somewhere between seven and eight, the question is: here does the seven or eight go when a guy’s starting to cost over a million dollars worth of sales?

Paul Downs:
Yeah, in my heart, I’m probably like a four. And I have to really slap myself in the face to get up to about a six.

Laura Zander:
Jay can slap you.

Paul Downs:
But that is the toughest conversation, because there are two things: You have the conversation, and either he straightens up and starts going the other direction or you totally destroy him. And in my mind, the easy way out is just wait and see what happens.

Jay Goltz:
Which is okay, in a lot of cases. I certainly have done that. I’m not arguing with that, if it takes care of itself, to some degree.

Paul Downs:
It does, but every day, it’s costing me money, too. And it’s costing the company money. Like, if this guy was performing even as well as he did three years ago, we would be well past my goals for this year. And I mean, just today, he kind of poo-pooed a job. It’s not a 100-percent lock that it would be a sale. But it’s about 65-percent, and he just is having such a bad attitude toward things.

So I don’t know. I’m probably gonna have to do something soon. But the other piece of this is that, if I have a talk with him and he storms out and quits, then I’ve gotta do his job, because there’s nobody else who can do it. And I’m not dying to do that, although I could do it. And so I think the real solution is, I need to start hiring for this position, and just bite the bullet. And maybe have one discussion with him and say, “I’m about to do this.”

Jay Goltz:
I would tell you the word that I’ve used, which is, this is not sustainable. That is appropriate. This isn’t sustainable. And then when you say you’d destroy him, I would argue you’re not destroying him. He’s destroying himself.

Paul Downs:
No, no, my old partner used to always say that. You don’t do anything to employees. They do it to themselves. And yeah, I’m not a malevolent boss running an exploitative organization. So that is actually true, in my case, that the employees go off the rails for their own reasons.

Jay Goltz:
And our job is to help them if we can, but at some point, there’s only so much we can do. And we owe it to the company to take care of business.

Paul Downs:
That’s right. That’s right. You’re threatening the team, and then they’ve gotta go.

Loren Feldman:
In the past, Paul, I think you have tended to hire salespeople off your production floor, take woodworkers and make them salespeople.

Paul Downs:
Well, I have an N-of-1 on that. So, once. And with one, it worked great. And the other one, it worked pretty well for a while, and now he’s starting to burn out. So I can’t say that that’s necessarily a great, repeatable process.

Loren Feldman:
So what’s your plan if you have to hire salespeople now?

Paul Downs:
I think I’m gonna try just advertising for it right now. Listen, the person we need to hire is actually a young architect who knows how to design and is interested in talking to people. And the problem is that we’re kind of a backwater, in terms of career progression. Like, if you went to an architecture school, and you were working in firms, and all of a sudden, you went and started working for me, it would be difficult to get back into—or maybe it wouldn’t, but I think it would be difficult to get back into the regular career track. I mean, I’m probably just making up head trash, now that I think about it.

Jay Goltz:
Like in most things, half the people that go into that end up not actually being architects, is my guess. That’s what it is in most professions, except for being a doctor, maybe. Or maybe even a lawyer. I think plenty of people who go into architecture probably end up not being architects. There just aren’t enough architect jobs around, I would think.

Paul Downs:
Yeah, being an architect is often not all that sexy either, when you start. But the tricky thing is the way we have our sales process organized now, the people who are actually doing the selling need to be both technically adept, to be able to manipulate software at a high level, and be able to just sell. In other words, get on a phone with someone, talk them into it, reassure them. And the number of people who are in the center of that Venn diagram is pretty small, because you can get part of it, but not all of it. So I may have to consider breaking out these roles and having somebody who can just draw and design and someone who can talk and sell.

Jay Goltz:
That’s where it gets interesting, though. Because no one goes to college and says, “Oh, I think when I graduate, I want to go into selling really high end beautiful conference tables.” But they go into architecture. No one goes, “Oh, I think I’m gonna go to school and come out and run a picture-framing factory.” I mean, many of us get employees where there’s no degree for that. And you find people who have some of the skill-sets from the degree but end up saying, “Oh, you know what? I’m really good at sales.” Because they don’t tell you in college, “There’s no grade for salesmanship.”

So, most of the things that make people successful in the world, or many of them, they don’t test in school: creativity, drive, tenacity, sales ability, personality. So, there are those people. I call diamonds in the rough. I think you can find someone. You’ll find that diamond in the rough who will do a good job, but you certainly will have to put some time into it.

Paul Downs:
Yeah.

Laura Zander:
Paul, what do you do when you start to look, and your existing salesman finds out that you’re looking?

Paul Downs:
I don’t know.

Loren Feldman:
Good question.

Paul Downs:
Nothing good, I presume.

Jay Goltz:
You tell him in an honest conversation, “This isn’t sustainable. I’m gonna have to be looking for someone.”

Paul Downs:
I’ve already had that conversation with him in my head, like 5,000 or 6,000 times.

Laura Zander:
Is he commission-based, 100 percent?

Paul Downs:
No. Keep in mind, when I say these numbers about what the proportion of base to commission is, that these guys were literally woodworkers, and they had a real suspicion about being sales guys. So he’s getting paid a base of $60,000 plus 4-percent commission on whatever he sells. So of two salesmen, the lead salesman sold, whatever, three and a half million last year. So he ended up making about 175,000 bucks. And then with the other guy—

Jay Goltz:
Which isn’t bad, as a percentage of what he sold.

Paul Downs:
No, and he’s working 40 hours a week, and he doesn’t have to wear shoes. You know, there are all kinds of easy things about doing this. The other guy sold a lot less than that and made about $100,000.

Jay Goltz:
But look at your cost of sales on that. It’s a lot higher, obviously.

Paul Downs:
Yeah, I know what my cost of sales is. None of this is attractive as a business owner. So it’s a problem, and I’ve been very wimpy about dealing with it. Because I do fear that I’m going to have a conversation that’s going to end up with somebody devastated. And I just hate doing that.

I’ve done it a few times in my career, where you have a conversation with someone, and you just see you just drove a stake through their heart. And it’s not like it didn’t need to be said, but it’s just such an ugly thing to watch. So it’s really hard for me to pull myself to it. And I haven’t quite gotten to the moment where it’s absolutely unavoidable yet. And that’s probably what it’s gonna take.

Jay Goltz:
Well, as always, I have a movie that will help you with this: Saving Private Ryan, where Tom Hanks was a soldier. And then everyone convinced him he needed to be more of a human being, and he started talking about his family and stuff. And then he let the sniper go, and the sniper killed him at the end. So we are soldiers, and that’s the way it is. And sometimes you’ve gotta do stuff where you just have to take care of business. And trust me, it’s not like it’s easy. I’m not suggesting it’s easy.

Paul Downs:
Yeah, I’ve been through it. I’ve done it. And the thing that’s most daunting about this is, in other cases when I had to get rid of somebody like that, I didn’t have to immediately jump in and do their job afterwards. And so that’s daunting, because I’ve done a lot of selling. You know, talk about PTSD. Just put me in front of a client, I’m great. But inside, I’m screaming. I’m like that picture The Scream. That’s what’s going on. Because I’ve just done so much selling, I don’t know what capacity I have for it.

Loren Feldman:
You don’t do any selling at all now, Paul?

Paul Downs:
I try not to. I jump into certain situations, but it’s my choice.

Laura Zander:
And your other sales guy doesn’t have the bandwidth to take on 50 percent more?

Paul Downs:
No, no. I’m not going to do that to him, because—

Laura Zander:
Could you ask him though? I mean, what if he wanted to? What if he wanted to make 250k per year?

Paul Downs:
I could ask him if he wanted to. I don’t think he does want to, but I could ask him. That’s a good question. I haven’t asked him, “Hey, do you want to do two jobs?”

Jay Goltz:
I don’t think you’re necessarily making a mistake. You don’t want to do that job. If he’s there, it’s costing you a little more than you want.

Paul Downs:
Well, neither of those things are actually a solution either. Because the long-term solution is: Figure out how to hire for this position and start doing it. And I’ve ridden an unsatisfactory configuration for a long time and sort of survived it. But that’s not what needs to happen next.

Laura Zander:
You mentioned, from a business standpoint, that paying them combined $275,000 isn’t necessarily the best financial approach for the business. So could you use this as an opportunity to create a new model? I mean, maybe this is a great opportunity to take 100 grand out of your costs. And what if you could figure out how to make that only cost you 50 grand more? So, maybe your main sales guy gets an assistant.

Paul Downs:
That’s not a bad question, and that’s certainly a possibility. But then that means that I’m even more vulnerable if something happens to the other guy. And I don’t feel like that’s a good move.

Laura Zander:
But how many wives do you have? I mean, you have one wife, right? Like, aren’t you pretty vulnerable to if something happens to her?

Paul Downs:
Boy, you’re making some assumptions. [Laughter]

Jay Goltz:
Wow.

Laura Zander:
Well, I’m just saying, yes.

Paul Downs:
No, no, I have one wife. I’m not sure how that’s relevant, because I don’t need to scale my family, at this point. And what I’m thinking is, I’ve let this situation develop for a long time, because it worked reasonably well. The cost of those guys is not unsustainable. A lot of whether we make money or not has to do with what happens downstream of them. And so I think that this is one that I’ve pretty much built in redundancy for every other operational position we have by making sure people are cross-trained and hired, and I just haven’t done it here. And I just need to do it.

Laura Zander:
Yeah but you’re the redundancy.

Paul Downs:
Yeah, but I don’t want to be the redundancy.

Jay Goltz:
You know what, I don’t think you’re doing anything wrong. I think you’re not a 10. You’re a seven or eight. And you’re giving him some time to see if he can get back to where he needs to be. I think you’re playing it out. It’s extremely difficult. I certainly have been there. And I certainly have spent more than a year or two with letting it go. And do I, in hindsight, regret it? Not really. Because when someone has been there a long time, you want—

Laura Zander:
Can you sleep at night, is the question? You want to be able to sleep.

Paul Downs:
Yeah, I’ve had longtime employees who sort of started drifting over the line and came back. So what I haven’t done, which is what needs to happen next, is warn him that he’s very close to the line. Like specifically say to him, “What you did this morning, that’s not okay. And that’s a symptom of a bigger problem.”

Laura Zander:
I’ve had successful conversations with people, especially if their personal life is infringing on or affecting their work, that say, “Do you need to scale back? Do we need to kind of reassess your position? Because until things calm down for you…” Because maybe this is just too much stress for him as well. I mean, could you come up with, I don’t know, just different expectations? If you’re not happy, he’s not happy either.

Paul Downs:
I had that conversation with him a couple of months ago. And I sit down with every single one of my employees at least three times a year to uncover these situations, and he said, “Yeah, you know, my mom is a problem.” And he’s got a difficult daughter, and there’s stuff, just like everybody. And I’m extremely sympathetic to this because I have a difficult situation that causes me to jump out every now and then. So it’s like, I can’t necessarily tell people that they can’t deal with their personal life when I deal with my personal life all the time.

Laura Zander:
Of course.

Paul Downs:
But yeah, it’s tough. We already are supporting him, in that I’m jumping in more often and taking some jobs that he doesn’t want to do that I think have potential. And yeah, the rest of the team is aware, but I think that It’s starting to become, as I said, close to where it just has to be dealt with.

Jay Goltz:
When I was about 30, I was in a business group, and all the other people were older than me. And I went there one day. I had a key guy from the beginning who was starting to fall apart. So I tell everyone at the table about it, and I’m expecting them to go, “Grow up. Be the boss. You gotta get rid of him.” And every last one of them sat around the table shrugging, going, “Yeah, I’ve got one of those.” So you’re not alone. We’re all dealing with, if not today, we will. This is what being in business is. I don’t know how you could be in business and not have this.

Laura Zander:
No, it’s the worst.

Paul Downs:
Jeez. I feel different.

Jay Goltz:
Do you want a cigarette?

Paul Downs:
I think I want a drink, is what I want. [Laughter]

Jay Goltz:
I feel your pain, and I think you’re handling things responsibly—

Laura Zander:
Yeah.

Paul Downs:
Well, thank you.

Jay Goltz:
—for both the business and the person.

Laura Zander:
It is what it is.

Jay Goltz:
And you’ll figure it out. And whatever you do will be the right thing, meaning it won’t be unfair. Because at some point, you have to take care of the business.

Loren Feldman:
My thanks to Paul Downs, Jay Goltz, and Laura Zander, 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. And really, thanks, guys. I appreciate the way you share here.