Why Would You Want to Own a Business?

Introduction:

This week, Shawn Busse, Jay Goltz, and Jennifer Kerhin respond to a somewhat depressing view of business ownership offered by an investor who buys businesses for a living. That view, essentially, is that for most owners, building a business is a daily knife fight of long hours, unexpected risks, slow growth, and meager returns. In this episode, I read most of the investor’s observations to Shawn, Jay, and Jennifer, and get their reactions, which hit upon a bunch of issues that are not widely understood—including how fast growth can destroy a business, how even a profitable company can go bust, and why a good metric to assess the health of a small business might be how many people have been crying in the bathroom this year. While Shawn, Jay, and Jennifer disagree vehemently with a few of the investor’s assertions—”Kiss my ass!” says Jay in response to one—they do acknowledge that he makes a lot of good points, which leads to an obvious question: Why would anyone do this? Why would anyone subject themselves to this kind of life? As you might expect, Shawn, Jennifer, and Jay have a response to that as well.

— Loren Feldman

Guests:

Shawn Busse is CEO of Kinesis.

Jay Goltz is CEO of the Goltz Group.

Jennifer Kerhin is CEO of SB Expos & 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. I think we’re gonna have some fun today. I recently quoted in the Morning Report from a post written by Brent Beshore. Brent’s a very smart guy who buys small businesses for a living. Technically, he has a private equity firm, but it’s a different kind of PE firm. He buys companies with no intention of flipping them or of ousting the founder. That’s why he calls his company Permanent Equity. He also introduced a big event last year called the Main Street Summit, which was really interesting for a lot of reasons maybe we’ll get to.

In his post, Brent wrote, “I’ve had the privilege of peeking behind the curtain at 10,000-plus businesses. Some observations.” And then he listed 12 or 13. I want to go through some of these observations and get your reactions. I can tell you, they paint a pretty bleak picture of life at a small business. And I’m wondering if it made sense to you guys. The first one was, “All businesses are loosely functioning disasters.” Shawn, you responded to the LinkedIn post with a little bit of a pushback, I would say. Do you want to take that one on first?

Shawn Busse:
Yeah, I mean, I read his list. And I thought about it a bit. And I was like, “Wow, this doesn’t sound like any of my clients.” And I realized, it really depends on who you’re looking at. If you think about the small business landscape, 90 percent of small businesses are under a million dollars. So you’re talking about a lot of organizations that don’t have a lot of structure: a lot of solopreneurs, a lot of really, really small organizations. So I think, yeah, if I reflect back to my business in its early days, if you were to look at it then, when it was under a million dollars, it probably was a disaster in a lot of ways, but it’s not today.

Loren Feldman:
Well, let me say this: Most of the companies that Brent looks at are probably not under a million dollars. He looks at bigger companies.

Shawn Busse:
Yeah, I mean, I’ve definitely seen some larger companies that are a disaster. But I don’t know, it just seemed pretty cynical to me. This hasn’t been my experience.

Jennifer Kerhin:
It reminds me of what people say about marriage, too. You know, “50 percent of marriages end in divorce. Why get married?” Well, that 50 percent is also people who are on their second, third, fourth marriages. And I feel like, that doesn’t mean if there’s one failure, or if you peek under or inside the house of someone who’s married at any given snapshot of a day, that marriage might look like a disaster. But overall, it’s functioning, it’s strong. It’s the marathon, not the sprint. And I don’t think that’s fair.

Shawn Busse:
Right. And I also thought about, like, who’s coming to Brent? Like, who’s giving Brent their financials? So this is somebody who probably wants to sell a business. I have seen, in many cases, the people who are really eager to sell their business, even urgent to sell a business, they’re often the ones that are not doing really well. If you’re running a really healthy business, you’re often in no hurry to sell it.

Jay Goltz:
Well, unless you’ve gotten old, which is the case with most of the people he’s probably dealing with at some point. But Loren, read the first few words: “All businesses”— what was the word he used?

Loren Feldman:
“All businesses are loosely functioning disasters.”

Jay Goltz:
Okay, that’s all we need. This is my line: “Everyone who speaks in absolutes is always wrong.” What a ridiculous comment, for God’s sake. “All businesses?” Really? There’s no businesses out there that aren’t? I mean, talk about hyperbole.

Loren Feldman:
Yes, it is hyperbole. I’m going to stop you there. People talk that way. You happen to be very precise with the language that you use, and that’s a good thing. He says at the end: It’s really not all businesses.

Jay Goltz:
Okay.

Loren Feldman:
Let’s focus on the substance.

Jay Goltz:
Okay, I got it. Let’s just say “many businesses.” Okay, fair enough.

Shawn Busse:
Many is probably true.

Jennifer Kerhin:
Yeah, and I also think businesses are made up of people, and people can be complicated. Human life can be messy. If you look at any given business, at the moment, could it be a little messy? I think “loosely functioning disaster”—I think Shawn, you said this—is a cynical view of it. I think if you look at it from outside, could it look messy? Could it look not super functional? But we’re people. We’re not robots. We’re not AI.

Jay Goltz:
My argument is, if they were that big of a disaster, they wouldn’t be in business. It couldn’t be that bad, or they wouldn’t be in business. So is there something to what he’s saying? Absolutely. I fully understand his point, because until I joined business groups, I thought I was the only one who had problems. And you know, it is eye-opening. You think you’re the only one that has problems with management. You think you’re the only one that has problems with cash. So his point is—I got it. I would agree with Shawn. It’s cynical, for sure.

Shawn Busse:
It’s like asking a divorce attorney about marriage, right? If you ask a divorce attorney about getting married, they will give you a certain point of view. So I think that’s the point.

Loren Feldman:
I know Brent a little bit. He’s not a cynical person. I think it’s a matter of choosing the right word.

Jay Goltz:
Yeah, sure. No, no, there’s truth in it. Spoiler alert: there’s not one of these that there isn’t some serious truth to. I just take exception, and I do react to the hyperbole that’s built in, that I don’t think was necessary. I think it would have been just as effective to say “many businesses.” But yeah, there’s something to what he’s saying.

Shawn Busse:
Actually, I think Jennifer’s got a really good point here. There are points in the trajectory of my business where if you looked at it, and you looked at the P&L, you’d be like, “Wow, Shawn has got his shit together. This business is so well-run. He’s making good margins, awesome growth, etc., etc.” But if you were to talk to me, I would be like, “This is frickin’ hard. I’m miserable.” I’d have people in my office crying, people super sad. You know, just lots of things that don’t show up on the P&L.

And then at other times, you look at the business, you’ll be like, “Wow, Kinesis isn’t doing so great. I don’t know. I wouldn’t buy that business.” And you talk to me, and I’d be like, “You know what? I’m really happy. This is a great place. People care for me. Things are going well.” I mean, that might be even a little bit of Jay’s arc. You know, Jay, you talk about super fast growth. But yet how unhappy you were in your earlier days.

Jay Goltz:
I was stressed. It was terrible stress. Terrible stress.

Shawn Busse:
So it’s like, I think Jennifer makes such a good point here, because there’s such a subjective perspective. And if you look at the P&L, it’s just through one lens you’re seeing it. And I think this is the trap businesses fall into when they go through a merger or an acquisition or they buy a business. They’re looking at it through one dimension. And I see this all the time: “Oh, this is going to be so great!” They buy a business. They shove these two businesses together, and it’s a disaster. And that’s because they’re not seeing it in its full picture.

Jay Goltz:
And you brought up a good point. Maybe one of the things that’s not in the financial statements: How many people have been crying in the bathroom this year? You know, that would be a good metric to keep track of. Because basically, what I’m saying is we’re all 100 percent right. And he’s got a lot of hyperbole. But there isn’t one of these things that there isn’t a point to it.

Loren Feldman:
All right, let’s try another one.

Jay Goltz:
Go ahead.

Shawn Busse:
Bring us another one.

Loren Feldman:
“Small businesses don’t stay small on purpose.”

Jay Goltz:
Agreed. I’ve got no problem with that one.

Loren Feldman:
Is that true?

Jay Goltz:
Yeah. I don’t think people consciously say, “Oh, I don’t want to get big.” I think they’re held back because they’re held back.

Loren Feldman:
Well, if you have a restaurant—I mean, it depends on what kind of business and what your goals are.

Jay Goltz:
That’s true. Sure.

Shawn Busse:
I mean, you know, Loren, we had that interview with Cameron a few weeks ago, talking about his co-op, switching his business to a co-op. I think he was very clear on his choice of growth. I mean, his trajectory is going to maintain him as a small business for the next, you know, 50 years. So, I think he’s made a choice for a certain level of stability. I know a lot of owners who are like, “Yeah, I like it, because I’m making a lot of money.” So they’ve made that choice. But I think there are a lot of folks where the business is out of their control.

Jay Goltz:
I’d largely agree. Again, I think if you put “most” on all these, it would make them better, but this one’s pretty true. I think that most small businesses would like to get bigger, but can’t.

Shawn Busse:
What about you, Jennifer? What do you think?

Jennifer Kerhin:
I’m not sure about this one. Sometimes they might want to stay small, but they can’t because of the forces around them: competitive pressure. You have to grow, or you’ll wither and die. Or you get an incredible offer. You have these small tech companies, they might want to form a certain niche, and then they get this ridiculous offer. It’s hard to say no to transformational wealth. To me, I took that as a negative. Maybe some people would like to; they just can’t for the purposes around them—the competitive market. So I don’t know about this one.

Jay Goltz:
Next!

Loren Feldman:
I know people who are solopreneurs and have chosen to stay that way. They don’t want to hire employees. They’re happy with what they’re doing. I think there are certainly exceptions to that one. But again, I think his larger point is right. Next: “Most companies don’t make much money.”

Jennifer Kerhin:
I think that’s totally false.

Jay Goltz:
Oh, see. I have to tell you, I think that one could largely be true.

Shawn Busse:
Well, let’s get clear here. We’re talking about net income? Are we talking “make money,” meaning money you get to keep versus revenue?

Loren Feldman:
That’s the way I would read it.

Jay Goltz:
Yeah, and how many businesses make half a million dollars net? Not many. Three hundred thousand a year?

Shawn Busse:
The statistic is most businesses are under a million dollars in revenue—91 percent, something like that. So if they’re making 10 percent net income, they’re only making $100,000. That’s pre-tax. So after tax, what? They’re taking home $60,000?

Jay Goltz:
I think that one is largely true.

Jennifer Kerhin:
All right. That’s a good point. I was thinking more of: You don’t stay in business if you can’t figure out the money. But I didn’t think about how many small businesses are under a million. You’re right.

Jay Goltz:
No, Shawn’s 100 percent right, because I’ve looked into this. Most businesses are very small. I mean, that’s a fact. That’s a fact. Doing the ESOP stuff, I looked into that. And clearly 99 percent of businesses are too small to even consider an ESOP. So that one, I think, is statistically just true.

Jennifer Kerhin:
And Jay, I wonder if that is, to Loren’s discussion of consultants, they’re businesses in almost name only, because it’s really just a consultancy. And they have no intention of growing it past being a consultant. So they have no intention of having employees, and they can only take as much work as they can personally handle. To me, I know legally they’re businesses, but I think of consultants as very different from a business.

Jay Goltz:
Well, that clearly is part of the 99 percent. I mean, whether it’s 10 percent or 20. But a lot of them are hair salons. You know, there are plenty of service business, landscapers. You can make a long list of small businesses, and that isn’t an opinion. That’s a fact, that 99 percent are small. So that one’s pretty true.

Loren Feldman:
“What money they do make is almost always reinvested back into the business.”

Jay Goltz:
Probably true. Yeah, sure.

Shawn Busse:
That’s fairly true.

Jennifer Kerhin:
Yeah, I think that’s true.

Shawn Busse:
And I think that’s the thing a lot of employees don’t understand, especially if you don’t do open book management. Hat tip to your sponsor, Loren. I think the perception is often, “Oh, you own a business. You’re making big money.”

Jennifer Kerhin:
Yes. Yes.

Shawn Busse:
Employees and the general public just don’t understand how much you’re reinvesting back.

Jay Goltz:
Here’s an interesting point: I’ve spoken to several MBA classes—Northwestern, okay? These are the smart kids, quote-unquote. No one’s ever gotten my riddle right. It’s kind of surprising to me. I show them: If you’re growing at X percent, and you made X amount of money, and you need X amount of money to fund the business, how much is left? Nne of these smart kids has ever said, “Well, you’ve got to pay taxes on that money, even though you didn’t take it out.”

That’s the reality. And I’ve suffered from that terribly over the years. When you make money, even if you don’t take it out, you’ve got to pay the taxes on that money. This is what causes more cash-flow problems. So you’re paying the taxes, but you don’t actually have the money, because you put it into inventory. So I would say that one’s pretty true.

Shawn Busse:
Or, Jay, I don’t have inventory. You just put it in your bank account for a shitty day, and you still have to pay taxes on it.

Jay Goltz:
Or receivables, or hiring new people. There are lots of things you could put money into that are not a tax deduction, that you end up paying the taxes. Yeah, so I think that is largely true.

Jennifer Kerhin:
I also think that, unfortunately, a few very, very large businesses run by billionaires have done a disservice to the incredible work that small businesses do for this country. And so a lot of people have this view that we’re all like Dr. Evil, like we’re all this billionaire with this yacht—

Jay Goltz:
Or spaceship.

Jennifer Kerhin:
Yeah, we’re just trying to squeeze every penny out of it, instead of reinvesting into companies. And I think that’s an issue for capitalism in this country. Small businesses really help define communities. They’re the ones who are giving back to the local baseball group or the girls soccer group. They’re the ones doing it, not these giant billionaire-type companies. And I think it’s a shame that they set the mood.

Loren Feldman:
Every six months or so, Jay tells us he doesn’t want to be known as a CEO. I think for specifically that reason.

Jay Goltz:
Yeah, it’s true. CEO’s have a bad connotation. And in my case, I’m a little company. This occurred to me last year. I paid literally millions of dollars in taxes, between the real estate taxes, sales tax, payroll taxes. I pay millions of dollars in taxes—even if I don’t make money. That’s the key. Even if I don’t make a dollar, I still gotta pay the real estate taxes, still gotta pay the sales tax, still pay the payroll tax. So it’s the small businesses of America that are funding cities. There’s no question.

Shawn Busse:
Yeah, and I think you both make a really good point that I didn’t understand back when I was all about demonizing the business world. You know, I was like this idealistic artist. I was like, “I will never be in business.” And what a lot of folks don’t understand is that until you become super rich, you are going to pay actually a maximum tax bill. You’re going to pay crazy amounts of taxes. And when I mean super rich, I’m talking hundreds of millions of dollars. Then you can afford to do all these crazy schemes that allow you to pay, like, no taxes.

And this is why I think, to Jennifer’s point, we have this class of quote-unquote business owner, who the country kind of hates, rightly so, because they are not contributing to our society. And then at the same time, you’ve got this chunk of folks who make between, let’s say revenues of $500,000 to $100 million, who are paying huge sums in taxes. Like, huge sums. And there’s just no way around it. There’s no game to get out of paying those taxes, which is fine. But I think there’s a disconnect, because we get lumped in with that class of business owner who none of us really care for.

Jennifer Kerhin:
Well said, Shawn. You said it much better than I did.

Loren Feldman:
I’ll say it. You’re the good guys.

Jay Goltz:
That’s what I was looking for, Loren. Thank you.

Shawn Busse:
Well, we’re good, yeah.

Jennifer Kerhin:
I don’t want to say good guys or bad guys. No, I don’t want to say that.

Jay Goltz:
How about, “We’re not the bad guys”?

Jennifer Kerhin:
We’re not the bad guys.

Shawn Busse:
We’re contributing. We’re contributing. And I don’t think that’s well understood.

Loren Feldman:
I’ll say it: You guys are all good guys.

Loren Feldman:
Here’s one I found most interesting. “Most owners unknowingly tolerate a tremendous amount of risk.” True?

Jay Goltz:
Absolutely.

Jennifer Kerhin:
Absolutely.

Shawn Busse:
True. Yeah. One hundred percent.

Loren Feldman:
Well, tell me about the “unknowingly” part. What part did you not realize— [Laughter]

Shawn Busse:
Loren’s like, “Ooh, more!”

Jay Goltz:
Employee lawsuits, someone came into your business and slipped. Some company sues you because your website isn’t ADA-compliant. I’m not gonna say it’s endless, but there’s a long list of exposures that you have when you’re in business. Which is why when I talk to people who own picture-frame shops, and I say to them, “If you’re making $30,000 a year running your store, I have to ask you: Are you sure you wouldn’t be better off having a job somewhere making the same money? Because whether you know it or not, you’re taking a lot of risk owning a store.” And they don’t think about it, a lot of them. Owning any business, you absolutely are exposed to risk.

Jennifer Kerhin:
And I think people don’t always understand too that when you’re a small business, and you want to get a loan to help even out cash flow, that bank is going to require personal collateral. My house has been on bank loan statements. The bank can come take my house, and that never happens to an employee. And it’s hard. Understanding that cash flow is a critical component of being a small business owner, and it’s overlooked a lot. It’s certainly not talked about enough in any business class.

Jay Goltz:
If at all.

Jennifer Kerhin:
If at all. Right, Jay. And then, understanding, to help your cash flow, you might have to put up your house or your firstborn child to the bank. [Laughter]

Jay Goltz:
No, they don’t even want your firstborn child. They want the house.

Shawn Busse:
A number of years back, I got this threatening letter from this very large company, informing me that one of our clients had been using their photograph without paying for it.

Jay Goltz:
There’s one.

Shawn Busse:
So what had happened? I had an employee who was a shitty employee. He had taken this photo, put it in as a kind of a mock-up for the website. We’re talking 15 years ago. So he puts it on the website, shows it to the client, and the client’s like, “Great, let’s go.”

And what should have happened then is the client should have been billed for that photo or told, “Hey, if we want to buy this photo, this is what it costs.” That didn’t happen. It gets put on the website. It’s in the public domain. I spent months and months and months at great expense fighting this company. And essentially, I basically just had to write a huge check. That’s just one tiny example.

Jay Goltz:
I’ve gotta tell you, that surprises me. They wouldn’t let you just take it down. I’m surprised it wasn’t just a cease and desist order.

Shawn Busse:
Well, they’d built a whole litigious department, basically around extorting small businesses for doing this. Because a lot of business owners would do it and not know what was going on. For me, this was just, honestly, malpractice on our part. And so we had to cover our client, of course. But a lot of small business owners don’t know about copyright law, and they take advantage of that. And so there’s a whole predatory industry out there.

Jay Goltz:
So the answer is: Yes, there’s risk in business that most of us couldn’t even, if any of us—I couldn’t make a list of every single possible risk. There are risks that we’re not aware of. 100-percent right on that one. People are taking aspirin now listening to this.

Loren Feldman:
“Most owners work long, stressful, odd hours.” Is that true, Jennifer?

Jennifer Kerhin:
That is very, very, very true. And you know what it is? You don’t know what you don’t know. And business is not easily taught on the small business side. What they teach in college, I think, or graduate school, is big business. So you spend an exorbitant amount of time just learning what to do. I think I understand now why once you’ve understood the magic of how to run a business, why people run multiple businesses. And I think it’s because they figured it out. And it’s very hard to go through that process of figuring it out.

Jay Goltz:
You’re talking to that person. That’s exactly what happened to me. I spent 20 years getting ground down and stressed, and I finally—[after] 20 years—figured it out. And that’s when I started to start my other businesses. And it’s absolutely true, because I’m confident—not tech—but I could walk into many different businesses and run them. Because it’s largely the same.

Shawn Busse:
You know, you both bring up such great points here. And I was thinking about our conversation earlier about taxes. You know, what they teach you in business school is this really ill-serving concept, which is EBITDA. So think about this: In business school, they’re telling you what matters is the money you make before taxes and interest payments.

Jay Goltz:
Wait. And depreciation, which is huge.

Shawn Busse:
But you cannot get out of paying those things. This is the nonsense of how business school operates. That doesn’t work in the small business world.

Jay Goltz:
Just so you know, Warren Buffett 100 percent agrees with that. He says—and I like when I agree with Warren Buffett—he fully agrees that, for a running business, it doesn’t mean anything. Buying a business, that’s another story, because the depreciation isn’t a real cash item. So when you buy a business, EBITDA does have a purpose.

Shawn Busse:
Some value.

Jay Goltz:
Well, no, because the depreciation isn’t a real cost.

Shawn Busse:
What about interest? Interest is a real cost.

Jay Goltz:
Well, if a company buys you, though, and has the cash, they don’t have any interest expense. Like I said, if you sell a business or buy a business, that certainly has value. But if you’re just running your business day-to-day, you could absolutely con yourself into believing you’re doing well, when maybe you had to buy a $200,000 printing press, and that no longer shows up on your income statement, because that was depreciation. So it is nonsense for running your business.

Jennifer Kerhin:
I also think, though, with your title of 21 Hats, that’s the whole concept of a small business owner. They wear 21 hats because they have to do 21 different, separate types of activities. Business school, I think, trains you to do one. So you follow the finance model, and you learn how to do the finance of a big company. Or you follow the track from marketing and you learn how to do that. Or you follow sales. Or you follow HR. Or you follow all of those. You can’t do one thing, and you can’t do anything so badly that it topples your company.

So you have to be a generalist in 21 or more different things. And business school, I think, is training people to be specialists. I think if I use the medical school example, that the dearth of family physicians versus specialists, and that’s us. We are the family physician, and we’re taking care of babies and older people. We are doing everything. And we have to be good enough to move to the next level on everything.

Jay Goltz:
That is an indictment of business schools, which they deserve. The fact is, the 21 hats that we’re talking about, they could teach it in school.

Jennifer Kerhin:
They absolutely could. And they could do it in a way that’s not driven by the concept of a tech entrepreneur. If you’re a small business person in the tech world who’s hoping to get purchased in three to five years, that’s a very different world than the rest of us.

Shawn Busse:
I mean, you’re absolutely right, Jennifer, 100 percent. And that’s why I jokingly say, “Go to Stanford.” That whole program is—I mean, maybe I’m being a little cynical—it’s designed about getting tech entrepreneurs to be rich. But they’re not teaching you how to run a profitable small business. They’re teaching you how to go get investors.

Jay Goltz:
No, they invented the term “burn rate.” When you’re in business, like, “What? I’m supposed to be burning through money? Where’s that money?”

Shawn Busse:
Right. It’s other people’s money, OPM.

Jay Goltz:
Right, yeah. All right, next!

Loren Feldman:
Okay, I’m gonna try to go quickly through these, because we’ve got some good ones coming up. “Neither number of employees nor revenue is a good proxy for the success of a business.

Jay Goltz:
Done. Absolutely.

Shawn Busse:
I agree.

Jennifer Kerhin:
I agree. Totally agree.

Jay Goltz:
Next!

Loren Feldman:
Which is a real problem for journalists, I would point out, because sometimes it’s hard to even get those numbers out of businesses. And it’s very hard to write about a privately-owned company where you can’t go to Yahoo Finance and look up everything you could possibly want to know about a business. It’s very challenging.

Shawn Busse:
Well, the awards are for things that are associated with that. How many employees do you have? Awards around how much revenue you’ve grown.

Loren Feldman:
Publications do that because that’s the only information they can possibly hope to get. Nobody’s going to give them their true profit numbers.

Jennifer Kerhin:
Joining a business group is a great way to understand that. Because when you are in some other business group, you will learn all the different businesses and how they define success. And you’ll compare it to yours, and you’re like, “Wait, they have a lot less employees,” or, “Wait, they have a lot more revenue.” It’s freeing up your mind when you see other small businesses. So, join a business group.

Jay Goltz:
Yeah, absolutely.

Shawn Busse:
Okay, next!

Loren Feldman:
“Fast growth is counter intuitively more perilous than declining revenue, and can quickly destroy a company.”

Jay Goltz:
Ridiculous. That’s just ridiculous.

Jennifer Kerhin:
Ridiculous, I agree.

Jay Goltz:
That could be true. But declining revenue is a problem. Could fast growth put you out of business? There’s some truth to that. But just some.

Jennifer Kerhin:
But you can stop fast growth. You can stop it. It’s harder to stop declining revenue. So, you have more control over fast growth.

Jay Goltz:
Yeah, you raise your prices.

Jennifer Kerhin:
And you just don’t take the business. You have more control over it than the other one.

Jay Goltz:
But as I said before, there’s some truth to that.

Loren Feldman:
I think it would have been more interesting if he had said, “Fast growth can be more perilous than slow growth.”

Jay Goltz:
Add the word “can.” Every single one of these can be fixed with one word: “most,” “can,” “some.” That’s all. One word would have fixed every one of these.

Shawn Busse:
Well, I think the point he’s trying to make is that fast growth can catch you unexpectedly. It can crush you, because nobody talks about the impacts of it. It’s celebrated, right? Again, to the awards, it’s celebrated. But nobody talks about the cash-flow consequence of fast growth. That’s just not discussed.

Jay Goltz:
Or just the personal stress.

Shawn Busse:
Or the personal stress, or all the other stuff. He makes a good point. I remember seeing a finance guy map out how to go bankrupt by growing fast. And I was like, “Whoa, that’s crazy.” I had no understanding. Again, this is 15 years ago. But I think most business owners don’t understand that either. They don’t teach cash flow. That’s not a thing.

Jay Goltz:
The other problem these days is people talk about cash flow. They use it like, “Oh, I’ve got bad cash flow.” No, you’re not profitable. That’s not the same thing. The truest sense of you have a cash-flow problem is you’re profitable, but the money’s getting tied up in receivables, inventory. If you’re losing money, you have a profit problem and a cash-flow problem. They use that now. It’s almost less embarrassing to say, “I have a cash-flow problem,” than saying, “I’m losing money.” But they throw it all into the same bucket, and it’s really not the same thing. Next!

Loren Feldman:
“Culture is nothing more than what you reward and punish, not what you put in your mission, vision, values statements.”

Jay Goltz:
Completely ridiculous. [Laughter] I don’t even know what he’s talking about.

Loren Feldman:
I’ll tell you what he’s talking about.

Jennifer Kerhin:
This one, I’m not so sure about, Jay.

Jay Goltz:
Well, let me give you my opinion on this. When you say culture, he says in there, basically: It’s all about what you punish and reward. That’s your corporate culture. That’s just absurd. Your corporate culture is how far do you go for customers, how do you treat each other, what are the values of your company? How many hours are you expected to work?

Loren Feldman:
I think you’re saying the same thing, Jay.

Jay Goltz:
He’s just saying rewarding and punishing.

Jennifer Kerhin:
I think he says it in a way to spark drama. But I think the concept is accountability. So, if you have written words in your mission and vision and value statements, but you don’t hold employees accountable to that—

Shawn Busse:
Or yourself.

Jennifer Kerhin:
Yes.

Jay Goltz:
This one’s the furthest one. This can’t be fixed with one word, unfortunately. But yes, I understand his meaning of, “Stop with the corporate culture and the vision statements,” but I have a problem with the punish and reward part.

Jennifer Kerhin:
I think it’s accountability. That’s where he’s going with it.

Loren Feldman:
I don’t think he’s saying stop with them. I think he’s saying they don’t mean anything unless you act upon them. And it’s what you say and what you do that matters.

Jay Goltz:
Okay, well, to Jennifer’s point, replace “punish” and “reward” with accountable. No problem, done. So it took two words to fix that one.

Shawn Busse:
Yeah, he’s addressing the motivational poster. I mean, that’s really what he’s talking about.

Jay Goltz:
Which I made a lot of money framing, I have to add, 25 years ago. [Laughter] Accessories was a Chicago company. Thirty years ago, I framed hundreds of thousands of dollars of those motivational posters.

Shawn Busse:
Oh my gosh, did you roll your eyes every time? Or were you like, “This is great. I’ll make some money on this.”

Jay Goltz:
No, it was a good run. Yeah, it was a good run while it lasted. That didn’t last either.

Jennifer Kerhin:
These days, TikTok is littered with young adults where companies are not using their mission, vision, and value statements to deal with employees. I mean, young employees will go to TikTok so quick to call out companies on the disparity between what they say and what they do. And I think I don’t like the way he said it, but I think, in essence, it’s true.

Jay Goltz:
There’s no question. We all can interpret it. We got his point. That one wasn’t that articulate. But there’s certainly the point of: You can’t just say we’ve got a good corporate culture. At the end of the day, it’s: Are you taking care of customers, making money, holding people accountable?

Loren Feldman:
Jay, I think you need to frame that one and see if it sells. [Laughter]

Jay Goltz:
That’s what I’ll do. I’ll run it up the flagpole and see if anyone salutes. Okay, next.

Loren Feldman:
“Most employees couldn’t tell you why they do what they do, or how it contributes to the success of the business.”

Shawn Busse:
This is total horse shit! [Laughter] Sorry, I mean, I don’t know who he’s talking to. But like that is just…

Jay Goltz:
Can we call that one cynical?

Shawn Busse:
Do some have a narrow perspective? Sure. Do new and entry-level employees have very little clue? For sure. Do some roles have less vantage than others? Yes. But I mean, come on. Not knowing what they do?

Jay Goltz:
I’m with you on that one.

Shawn Busse:
This one drove me crazy, hearing that.

Loren Feldman:
Really?

Shawn Busse:
Is that true for corporate America? One hundred percent. Is that true within the small business ecosystem? I don’t think so.

Jennifer Kerhin:
This reminds me. Does anybody remember TPS reports from that movie? That’s what this reminds me of.

Shawn Busse:
That’s an Office Space comment.

Jennifer Kerhin:
Yeah, so Shawn, it’s that corporate environment where somebody’s doing TPS reports and has seven supervisors. I don’t think it’s applicable to small businesses.

Jay Goltz:
I misspoke before. I said they all have it. This one, no, I don’t think has any. This one I would reject. The rest of them, so far, okay, there was something. This one, I don’t think there’s anything here.

Shawn Busse:
Reread it, Loren. Please, re-read it. Because there’s two parts to it. Like, he’s making two really extreme claims in this.

Loren Feldman:
“Most employees couldn’t tell you why they do what they do, or how it contributes to the success of the business.” Let me just say, Shawn, I think what he’s addressing here is the reason you decided to open your books. It’s so that your employees have a better understanding of what drives the success of the business.

Shawn Busse:
Right, that’s the latter part of that question.

Loren Feldman:
I don’t think this is that far off.

Shawn Busse:
But that most employees don’t know why they do what they do? The first part? I mean, that’s just crazy.

Loren Feldman:
No, I think he’s saying the same thing there. He’s not saying that they’re all walking around in circles and confused about what their roles are. It’s that they don’t have the broader picture and don’t understand what their activities do to contribute to the success of the business.

Jay Goltz:
Okay, now you’re putting words in his mouth, putting “broader picture.” Okay, there’s some truth to that, but that’s not what he said.

Jennifer Kerhin:
All right, you know what? I’m going to do a poll of my employees. I’ve decided I’m gonna go ask them if they can do it. And hopefully this Brent is not right. Hopefully, my employees—

Shawn Busse:
I mean, okay, look, to our earlier discussion, who is Brent talking to? People who want to sell their business. And I think Jay brought up a good point. A lot of people who want to sell their business are old people. So we’re talking about Baby Boomers who ran their businesses in a very different way than the current generation—with Jay being an exception.

Loren Feldman:
Command and control.

Shawn Busse:
For sure. But so, again, there’s a selection bias, right? It’s like, that is not my experience with the clients I work with. That is not my experience even within, like, when I was in EO. That was not my experience with more contemporary businesses and business owners.

Jay Goltz:
I would say of all of the one’s so far, this one’s the one that all three of us think is the least—and in my case, I don’t think there’s anything to it. The rest of them, there was something to; this one, not so much. Let’s get a new fresh one.

Loren Feldman:
Next: “The most dangerous time for a business is when the owner first experiences some financial success, or significant notoriety. Few survive it.”

Jay Goltz:
Oh, for God’s sake. Kiss my ass! [Laughter] That’s what I want to say to that one. Really? Oh, they all just go crazy? And they go out, and start going on with the lectures—give me a break. I mean, that’s just ridiculous.

Shawn Busse:
I mean, I could pick like three or four things that are more dangerous than that for sure. Like, partner conflict. The most dangerous time is when you have one client who’s responsible for more than 30 percent of your revenue, and they go away.

Jay Goltz:
Got a big credit line and used it all.

Shawn Busse:
Yeah, I could just think of a lot more dangerous things. I mean, I won this very prestigious growth award for five years in a row. And that was pretty good. Like, it was not dangerous. I was growing. I was making good revenue.

Jennifer Kerhin:
When I read this, I was thinking—Shawn, to what you said—I feel like sometimes the most dangerous time is like the first year and a half of a business. But then the second part, I would say, is when a successful family business transitions generations.

Shawn Busse:
Oh, yes.

Jay Goltz:
For sure. Absolutely. My point is, I was on the front cover of Inc. magazine. I was featured in Small Giants. I’ve won awards. Like, really? It goes to your head and you just become a coke addict or something? What a ridiculous, what a ridiculous—that one’s just completely ridiculous.

Shawn Busse:
Jay, we’re gonna have an intervention. We wanted to talk to you about your coke problem on this episode.

Jay Goltz:
Yeah.

Jennifer Kerhin:
I was surprised he didn’t talk about family businesses in any of these. To me, that transition—because I’ve seen it in some of my Vistage groups. Jay, you’ve talked about that struggle.

Jay Goltz:
Absolutely.

Jennifer Kerhin:
There are a lot of family businesses out there in the U.S. where people are retiring. And do the children want to take it over? And that’s a critical time period. And I’m surprised he didn’t talk about that at all.

Jay Goltz:
Well, no, this is why. Those companies are going to him instead of transitioning to the family. So he probably doesn’t have any of them. Because why would they be talking to him?

Jennifer Kerhin:
Yeah, cause they’re gonna sell. Yep.

Jay Goltz:
Right. Or their kids are taking over. They have no interest. They have no reason to talk to him. So, I can understand that one. Is there some truth that it could cause a problem? Sure. But to suggest—what were the last words? “Few survived?” Is that how it finished? “Few survive it?” Is that what it said?

Jennifer Kerhin:
Yes.

Jay Goltz:
Okay, that’s just preposterous.

Shawn Busse:
I will say this: There is a point here, in that I did an analysis once of this fastest growing award thing, which I was talking about earlier. And I did notice a trend where a lot of folks who are on that list were also on another list like two or three years later, which was the businesses closing list.

Jay Goltz:
I don’t think there’s any argument. I think they would admit that if you cornered them. I’ve heard 50 percent of those businesses are out of business. And I think that’s believable.

Shawn Busse:
Yeah, there’s some truth there.

Loren Feldman:
Last one: “Occasionally, we see a business that breaks most of the above, and it blows my mind how profitable it is, how happy their employees and customers are, and how well they serve their community.”

Jay Goltz:
Okay, once again, one word. Take out the word “occasionally.” How about just saying, “Sometimes we see …” Like, seriously? It’s just occasionally? Like, one out of 50 companies are successful and happy? Give me a break. Occasionally? Seriously? That’s just ridiculous.

Shawn Busse:
Well, statistically, he’s probably right. Like I said, it’s a huge marketplace. And there’s a lot of dysfunction in it. Again, you know, 91 percent don’t get above a million, right?

Jay Goltz:
I know, but that doesn’t mean they’re not making six-figure incomes and happy.

Shawn Busse:
True, true, true, true.

Jay Goltz:
So I would like to finish with: If you read this, you’d think, “Why would anyone want to be in business for themselves after reading this list?” And the answer is: Because being in business for yourself is a joyous, rewarding luxury gift. You can make customers happy. You can make a nice living for yourself or family. You can provide career paths for your employees: give them confidence, give them security, give them meaning. Owning a business is a lovely, beautiful thing. That’s why.

Jennifer Kerhin:
Well said, Jay. I agree. I mean, I get incredible joy from doing what we do for our customers. I love my customer base. I’ve kept it very niche. I love it. I absolutely adore it when I’ve been able to train up younger employees and see, over the past 10 years, them become leaders and successful. One of them just bought a house because she’s had this fantastic job. That inspires me, personally, and I think, Jay, that there are difficulties and stress, but there’s incredible personal satisfaction that we can give back to our employees, our customers, and our community.

Jay Goltz:
You brought up exactly what I was gonna say. I’ve helped 10 people buy houses over the last 40 years. Ten people have bought houses, raised families. There’s no greater satisfaction in the world. So I would say, my number one would have been: Business is like nature. It goes everywhere from beautiful sunsets and lovely, warm summer days to hurricanes. That’s what business is. But it’s both. If you read his list, it sounds like it’s a constant hurricane. And that’s simply not the case. If it was, you’d be out of business, at some point.

Loren Feldman:
Unfortunately, we are out of time, but I want to thank all three of you. You guys did exactly what I knew you would, which is to talk realistically about what it takes to build a business. My thanks to Shawn Busse, Jay Goltz, 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.