How to SAVE a Customer

Introduction:

This week, Jay Goltz, Jaci Russo, and Jennifer Kerhin discuss some of the systems they’ve created that have made their businesses successful. Jay established a process that helps employees diffuse conflicts with angry customers. Jaci has a process that tracks the performance of her agency’s lead-generation efforts and has helped her target clients more precisely. And Jennifer recently created a process to deal with change orders that makes it easier to walk the line between offending customers and forfeiting profits. Plus: We follow up on some issues we’ve discussed in previous episodes. Jay told us recently that he’s cutting back on his advertising spend. Is that the best response to a softening market? Jennifer told us when she first joined the podcast about her long march through what is often called the valley of death. Is she still in the valley of death? And Jaci told us at the beginning of the year that she had two big clients that were ready to sign on. Did they in fact sign on?

— Loren Feldman

Guests:

Jennifer Kerhin is CEO of SB Expos and Events.

Jaci Russo is CEO of BrandRusso.

Jay Goltz is CEO of The Goltz Group.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome Jay, Jennifer, and Jaci. It’s great to have you here. I want to talk today about something that’s come up a good bit of late on the podcast, and that’s the importance of having good processes. It’s come up here a few times in the context of how overdoing processes can be a problem. You can’t run every business like a widget factory or a McDonald’s, but I don’t think anyone doubts that, for any business to succeed, it has to figure out the best ways of doing whatever it does, and it has to figure out how to train people to do those things consistently. So with that in mind, I’d like to ask each of you to describe a process that it took you a while to figure out, but is now an important part of what has made your business successful.

Jay Goltz:
So in my case, one of the things I figured out years ago is that everyone that works for you is not going to figure things out like you did. That’s why you started the business and why you’re successful. You can easily train people. So one of the things I had to deal with, when I was growing fast especially, picture framing is kind of complicated. There’s lots of things that can go wrong, from, “Oh, that’s not the matte color I picked,” to, “Oh, there’s something under the glass,” or whatever.

And I figured out how to train people to deal with customers who are disappointed or angry. And I’ve gotta tell you, it works 99 percent of the time, and it works for any business. So I came up with how to save a customer—S, A, V, E. S is sympathy, saying, “Oh, I can understand why you’re upset.” Just think of any time you’ve been disappointed with anywhere. Wouldn’t that make you feel better if the person just said, “Oh, I can see that you’re right”? So you know that you don’t have to fight with them. So that’s one.

A is act: “You know what, let me call the supplier. Let me get my manager here. Let me do something about it.” Act. V is vindicate, which simply means you don’t want to present to the customer that, “Yeah, we screwed up, and this happens all the time,” because it probably doesn’t. So vindication would be something like, “You know what, I’m really embarrassed that happened. We usually catch things like that before they get out the door.” Wow. I mean, if I’m the customer, I feel great. I’m not having to teach them that this was bad. They get it. They’re embarrassed.

And lastly, if it really was a bad thing, eat something. “You know what, let me give you half off. Let me deliver it for free.” And I will tell you that I don’t have a lot of problems anymore, but it definitely diffuses customers. And this is a great tool that when we hire a new person, I can wander down there after a few weeks and go, “Hey, what’s SAVE stand for?” And I can tell whether they’ve been trained properly, whether they got it. And it has been extremely valuable. And as I say, as a customer, I wish that everybody did that. Because in my experience, when something goes wrong, it usually could be handled better.

Jennifer Kerhin:
I love the mnemonics. Isn’t that what it’s called? Doctors do this all the time when they’re in medical school. In order to remember things, they create a word with the initials. Isn’t it called mnemonics, right?

Loren Feldman:
I think you’re right.

Jay Goltz:
I thought it was an acronym.

Jennifer Kerhin:
It’s a way to remember. I love it. I love that it’s so easy. SAVE: That’s a great idea.

Jay Goltz:
I’ve been doing this for, boy, probably 25 years. And when I tell you 99 percent of the time it works? It’s more like 99.9 percent. I can’t think of the last time we had a customer where this didn’t just diffuse and fix the problem. Because at the end of the day, I don’t know that any company’s perfect. Occasionally something does go wrong, and you should be prepared. And certainly we should be preparing our employees as to how to deal with it.

Loren Feldman:
Jay, you said that you use this when something goes wrong, when you’ve messed something up. What if the customer thinks you’ve messed something up, but you and the employee don’t think so?

Jay Goltz:
Um, I have a phrase, “The customer is not always right [pause]. But we’re going to pretend they are.” And I explain this to people: the worst training thing, I believe, is telling employees, “The customer is always right.” They know they’re not. It doesn’t make any sense. It’s frustrating. But I explain it to them: “The customer is not always right, but we’re going to pretend they are. And do you know why? Because what happens on Friday? You get paid. Yeah, it’s much better when we get their money, and we can pay you on Friday.”

And at the end of the day, most customers are not doing something on purpose where they’re just going to keep doing it. Like, if the customer thinks they’re right, it’s just not worth fighting with them. And when I say that in 46 years of business, I’ve stood the line twice with customers to where it was just: No. Twice in 40 years.

Now, I understand if you’re putting $30,000 heating and air conditioning systems into a house or a building, and there’s a problem. It’s not so easy to say, “Well, you’re right.” But if you’re in a business where it’s going to cost you a few hundred bucks, or 500, or whatever, it’s just not worth fighting with customers. Because if they think they’re right, perception is reality, and it’s just not worth it usually.

Jaci Russo:
I want to add to this real quick, Loren, because I think it’s an important thing—not just the way that Jay handles it, that he has a process for it, that he trains on it, that he tests for it. But isn’t this, as entrepreneurs, one of the biggest things people tell us about why our companies can’t be sold is because it’s so reliant on us? Jay’s found a series of ways to make it not so reliant on him, because everybody’s on the same page. I think that training is invaluable.

Jay Goltz:
Which means, to your point, how often is someone calling me or coming to my office? “Jay, what should we do about …?” Oh my God, I get that maybe once every two years. I mean, they got it. They don’t have to call and bother me or come up and go, “Oh, Jay, what should we do with this customer?” They’re trained. They can take care of it. It’s called empowering your people.

What’s more impressive than when you’re in a restaurant or anywhere and something goes wrong, and they can say, “You know what? let me take that off the bill,” instead of, “Let me get the manager.” I always say, like, “Really? Do I really need to talk to the manager? Really?” They can’t empower them.

Jennifer Kerhin:
Well, I think the cool part about your SAVE is that what you’ve done with that is help your employees remember something. But also, possibly even more important, is you showcase to them what they’re allowed to do and they’re empowered to do and what they’re not. And, I mean, I think that’s critical for a lot of employees to understand what’s okay from their boss. “Am I allowed to do this?”

Jay Goltz:
Think of how impressive that is. They can say to the customer, “You know what, Mrs. Jones, I don’t need to call the boss. He’s going to be very upset when he hears the problem. Trust me, he’s going to tell me that we should take care of it.” “Wow!”

Loren Feldman:
The reason more places don’t do that, obviously, is because they’re concerned that the employee is going to eat more than they would be comfortable having them eat. How often has that happened to you? How often has the employee given up more money or whatever than you would have wanted them to?

Jay Goltz:
Ne-ver! How about that as an answer? And I do mean never. And my answer to that would be: What can you afford more? To have someone give away 600 bucks worth of stuff that you would have said, “Well, I don’t know if I would have given the whole $600?” Or having them piss off 50 customers over a matter of three years?

Now, like I said, I understand there are some businesses that it would be difficult, because the stuff is thousands of dollars. And you’ll have to make an adjustment for that. I’m not saying this would work on every business to every level. But no, I have never had anybody who did something that I thought I would rather—this is what I told them, “Err on the side of the customer. Period.”

And keep in mind, I came up with this way before Yelp. This was before there was an online presence. Now? Oh my God, they go home, and they could just kill you online. And I’m not doing it for that reason. I was doing it way before that ever existed. But I would say it took this to the tenth power now that it’s just not worth pissing off customers. It just isn’t. And then, I know people are going to go, “Well, some customers aren’t worth doing business with.” You know what, in my experience, those customers go away on their own. We don’t need to push them out. They go away on their own.

Loren Feldman:
All right, Jaci, Jennifer, how about your businesses?

Jaci Russo:
I am trying to put in as many processes as possible. I don’t think I’m great—or as great as I want to be—on the onboarding and training in the beginning. But I feel like once we get them on board, we are really good, and we put as many processes in place to make sure everybody’s doing the same thing consistently. Because I don’t want it to all rely on me. I want them to be empowered, to Jay’s point, and I want this to go on past me. And so I’ve got to start thinking about how that’s going to work when it’s not me in charge anymore.

Loren Feldman:
Is there a particular process that you could walk us through that it took you a while to figure out that has been important to the development of the company?

Jaci Russo:
Oh, sure. I think our sales process is a big one, because obviously that pipeline funnels the growth. And so we are always improving it, but it has a very solid core, in terms of what we do to to outwardly promote ourselves, what we do to drive inbound opportunities, how we utilize our technology, how we track our leads, how we do our retargeting ads. All of that is very process-driven. I think that it probably took the first 20 years, but the way that we handle projects internally has become—I mean, to a point, everybody’s on the same page of exactly how to start a new project for a client, how to communicate what is happening within the agency to every involved person, what they need to know to do that project, so that we can be as efficient as possible.

Because you can imagine, one project can bounce back and forth between the client and the agency a dozen, two dozen times. And then within the agency, it’s being touched by multiple people dozens of times. And then, we’ve really, I think, done a remarkable job, especially in the past probably 12 months, of integrating some AI efficiencies into that process. It’s a well-oiled machine now. I’m very impressed with it. And here’s the best part: I did not create those processes. I did not develop those steps. I have not been involved in improving it. They tell me, every once in a while, “Hey, we’re doing this new thing now. Look how great it is.” And I say, “Awesome! Keep going.”

Loren Feldman:
Could you give us a quick walk through the sales process? How does it work?

Jaci Russo:
Sure. We have a list of all of the entities that we use, or all the different avenues that we use to share our content, whether that’s our own blog, our podcast, LinkedIn, other social media channels, the way we use YouTube. Then we’ve got the more hands-on direct things like the workshops that I teach and the conferences where I speak and the podcasts where I’m being interviewed—present company included. And so there’s a pretty robust calendar of all this outward effort that we put forth, because that drives inbound opportunities.

Then we have a whole other set where we will do email campaigns or straight-up advertising, and so all of that is tracked. We put the effort out. It drives to a landing page. Then how do we automate the process of communicating with the people after they’ve downloaded something? That involves our ebooks, our webinars, all of those different tools. So each thing has a process so that we can monitor it to say: Is this working for us? Is it worth our time and effort and expense? And are we getting a good ROI, or do we need to adjust it?

Jay Goltz:
So here’s my question: Unlike a lot of businesses, whether it’s getting your house painted or having your car fixed, you’re selling an expected outcome. And my question is, even if you do everything right, aren’t there times where the customer is not happy with the results? Because you can’t guarantee exactly the results. So there are times, I assume, that the customer is not getting the results they want, and they say something to your person. Is that not true, that happens? And if so, what do they tell them?

Jaci Russo:
Absolutely, you know, we are going to start calling it SAVE. We have not named it before, but we are absolutely going to liberally borrow it from my good friend Jay, because I think it’s brilliant. But what I will say that I think we’ve done a very good job with, and especially with the team we have right now—we call them brand developers, because we don’t just service customers. So we don’t think of them as just account service. But our brand developer team, they’re all empowered.

And we are so focused on being proactive on every little thing that we measure throughout the month and the reporting that we do during that month that—I mean, knock on all the wood I can find in my office right now—we have very, very, very few complaints or challenges or issues. I’m going to say it’s been three or four years since a client said, “I’m not happy with something.”

Jay Goltz:
Wow, that’s impressive.

Jaci Russo:
Maybe five? It’s been a minute. And so we work really hard to be as proactive as possible, to diffuse anything before it becomes an issue, to keep everybody on the same page. And part of it is just the business model. So we don’t charge by the hour. I think a lot of agencies get into trouble because they charge by the hour, and clients are always angry about the invoice. But by having a fixed fee, you know what to expect. You know what it’s going to cost. So there are no questions.

Jennifer Kerhin:
One of our processes came out of that issue, Jaci, that you’re talking about, with fixed fees. We had a lot of confusion internally—because we do a fixed fee, too—when clients were asking to do work that was outside of scope. Either my staff would just do it, and I’d get angry. Or the staff would say, “No, that’s out of scope,” and the client got angry, because of just the way it was said.

And so we recently did the process about changing the way we do change orders now. Because when you do fixed fee—like you, or like me—it’s hard, because the scope can never be completely black and white. And to make sure that neither the client’s unhappy, or make sure that I’m not unhappy, our staff is doing a bunch of work, right? We just implemented a new process I should have done years ago. It’s changed a lot. It’s made sure that clients aren’t unhappy, it’s very clear, and that I’m not unhappy about the profitability. Because we all understand what’s happening with the change order.

Jaci Russo:
I love that.

Loren Feldman:
How does the process work?

Jennifer Kerhin:
Well, the first thing is telling staff that, if they think something’s out of scope, they shouldn’t be telling the client, “I’m not doing this. It’s out of scope.” They should bring it to the project manager, who then brings it up on my one-on-one, and we discuss it, even if it’s only an extra 10 hours or an extra 100 hours. And then we’ll go back to them. We decide. I still do it, so myself and the project manager. The first step is deciding: Is this out of scope? And if it is, is it a few hours and we’re going to do it anyway? Or does this need a change order?

So, step one, decide if you need a change order. Step two, scoping it out. We have a written form now. It’s a contract that says: “This is an addendum to the contract. You want us to do X, Y, and Z. It’s going to cost you another 50 hours. Here’s the price. Here’s the payment terms.” So it’s a contract addendum. We then go back to the client, explain why this is out of scope. If they agree, they then sign that document. We then give it over to three different people: our accounting. It has to go into our CRM. It’s put in as a specific change order. It’s also put into our accounting standpoint. And then it’s given to the project manager who goes out to client operations.

What was happening before, like I said, we were making the clients angry or making us angry. But then we weren’t communicating effectively, so we would go forward and do it, and accounting didn’t know about it. Or it wasn’t in our Salesforce. That’s our pipeline, our software that we use. And our CFO couldn’t forecast because, let’s say another client just gave us a bunch of change orders. They had under-scoped the project, or a staff member left, and they wanted us to do the work. She was forecasting based on the old amount, not on the new amount. So it’s helped a lot to make sure that customers aren’t unhappy about scope, make sure I’m not unhappy about profitability, and make sure we’re communicating effectively. Because I think that’s the hardest part, is communication.

Jay Goltz:
I could see where just what you say to the customer, they go, “Oh, can you blah, blah, blah?” I could see where how that is handled is going to make the difference between really pissing someone off, and them going, “Oh, you know what? I didn’t realize that. You’re right.” Talk about an art form of being able to say to them, “You know what, Bob? I think that is a good idea. But our original proposal didn’t include that. If you’d like to do that, I can get you …” How that’s stated is very important.

And there’s a famous story, I think it might even be true. In Lake Michigan, there are a lot of boats. So there’s a big boat, and the big boat has a little boat behind it. The name on the little boat is called Original Contract, and the name on the big boat is called Change Orders. [Laughter]

Jennifer Kerhin:
I love that, Jay. You’re exactly right. Look, line managers sometimes don’t understand: Let’s not nickel-and-dime the client. To your earlier description of the $300 overnight cost, sometimes they don’t do it. But I want to err on caution. If they come to us and say, “Look this is out of scope. It’s going to take three extra hours. Please just do it. And don’t even tell the client,” right? Or, “Hey, this is going to take 10 extra hours, but let’s tell the client, “Hey, this is out of our scope, but we think it’s integral to the success of your meeting. We’re going to do it anyway.” Or then finally charging them. And I have not empowered those line managers to make that decision, because they’re just not strong enough to understand the difference. But I love the boat. I’m going to go look that up and see if that’s on there.

Loren Feldman:
Jaci, in the example that Jennifer gave, it was very obvious what led to the creation of that process: what the problems were, and what the need was. Can you remember what problems you ran into before you had a real sales process? What problems did that solve?

Jaci Russo:
Well, it solved a lot, in terms of a steady flow of prospects. It solved a lot in us understanding who our right prospects were. Because we’ve always had people trying to come in the door, calling us, emailing us, but they weren’t a good fit. And so it really became important for us to know who was a good fit, and then how many of them do we want to have, and then how we were going to get to know them and develop a relationship with them and then eventually sign them. And I think that was just a real game-changer to say: We get to be in charge of this. We shouldn’t have to just wait to see who walks in the door. We should create the kind of business we want to have and grow accordingly. So it was a game-changer for us, because it put us in charge.

Jay Goltz:
Here’s what’s fun about this: Business is pretty predictable, like the same things happen over and over and over again. So when I speak to picture framers at the trade show, and I’ve got 50 in the room, I’ve said, “I’m about to teach you that when you hear this one word, it means you’re about to screw yourself.” And they all go, “Really?” And I write it on the board: “Just.” “Oh, could you just touch up the corner of this frame?” Or, “Oh, can you just hang this?” And they all laugh, because we’ve all been there 100 times where the customer wants to minimize something. “Oh, while you’re out, can you just hang up this picture?” That’s what people use when they’re trying to minimize something. And it’s true, and everyone in the room got it, because they’ve all been there.

So no matter what business you’re in, the same things are going to keep happening with customers, and with either of you two, they’d say, “Oh, could you just give me an audit of the blah, blah, blah?” And that’s when you’d say, “Well, that’s not as simple as it sounds. That’s actually going to require 10 hours of work. I’d be happy to get you a price for it.” That is a word that people use—and I’m not even saying they’re being deceptive. We’ve all done it. We’ve all asked the delivery guy, “Oh, could you just do this?” Am I onto something?

Jaci Russo:
No, very much so. And then I find they often say, “It’s a little” or, “It’s a small dot, dot, dot.” I’m like, “If it’s that little or small, you do it.” It’s not little or small.

Loren Feldman:
Jaci, what’s the key part of your process that helps you determine if a potential customer is, in fact, a good fit? How do you know?

Jaci Russo:
We evaluate it based on industry, revenue size, employee size, their marketing team, and then the state that they are in. Are they in a state of growth? Are they in a plateau? Are they in a freefall? We don’t work with the biggest in the industry, the one who has the biggest market segment. I want the middle: the company that’s sitting in the middle but has big plans and wants to grow. That’s a good fit for us—people who want to do things differently. If they want to do the same thing the same way, we’re out.

Jay Goltz:
Everything you just said—I’m the guy who started by myself and grew to a decent-sized business—is absolutely correct. If I had to make the list, it would have been everything you just said. Like, I think a company that’s doing a million dollars a year is simply not going to have enough money to go pay you what you need to do, that there is a critical mass there—whether it’s hiring a PR person, whether it’s hiring a lot of professions.

Unless you get bigger to where you got more cash flow, it’s just a bad business model to think you’re going to make money helping small companies do marketing, quote-unquote. There just simply isn’t enough money in their cash flow to afford it. So every single thing you said, I checked off, because I’ve been there and there was a point where I couldn’t afford any of that.

Jaci Russo:
Right. Thanks, Jay. That’s quite the compliment.

Jennifer Kerhin:
Jaci, I think—and you’re the branding expert—isn’t that the term, knowing your “client persona?” We use the term “attendee persona” a lot to figure out who’s the person that’s coming to the convention. Is that the same thing, client personas?

Jaci Russo:
It is. So we look at these, and we call them “target audience segments.” We start there before we get to persona, because segment is a real important word. A lot of people try to keep their persona or their target audiences too wide. And so by segmenting, you’re now taking a sliver of that and saying, “Oh, this particular group has a unique, specific challenge, problem, opportunity, thought process, pain point, and so the language to them is going to be a little different than this little segment.” And when you do that, and then you prioritize those segments, now you can be more focused, more targeted, and way more successful.

Loren Feldman:
Jaci, are those wannabe clients aware that you’re evaluating them?

Jaci Russo:
I mean, I think the nature of our questions make it real clear that we’re grading them far more than they’re grading us.

Jay Goltz:
You know, Sarah’s had the same conversation with us with PR. It’s the same thing. I can tell you, $10,000 as a proposal when you’re doing a million dollars a year, is very different than $10,000 when you’re doing $18 million a year. And I’ve been at both. So, it’s very, very different. And this is a matter of just saying to the customer, “I have to tell you, I don’t know that you’re going to be able to afford our services.” And, like, that’s not offensive. It is what it is.

Jennifer Kerhin:
As a small business person, you have to be strong to say no to the companies that aren’t a good fit. Jaci’s an established company, but somewhere along the line, she had to make the decision to say no to the people who wouldn’t fit. But I bet you, early on, you probably took a couple companies that made you get into that process, right? Did you take a company that wasn’t a right fit and you’re like, “Oh no, no.”

Jaci Russo:
For 15 years. Over and over again. [Laughter] I kept wondering why it wasn’t working out and couldn’t understand what I was doing wrong—until I realized, “Oh, hey, it’s not me, it’s them. They are not a good fit for me.”

And so, what I realized, though—to your point and to Jay’s point—I didn’t feel bad about it. I didn’t walk around carrying guilt, but I felt like I wasn’t on mission. Because if my mission truly is to help businesses, and I’m telling most of the companies—80 percent—no, then, how am I on mission? How am I—and I don’t wanna sound all hokey about it, but—how am I sharing my gifts? You know, I have a talent at this, and now only so many people can get that talent. That’s not right.

And so that’s when I started teaching workshops. And during the teens, they were all in person, and then in 2020, they became all online. But the idea was: Okay, you’re not going to get the custom bespoke work of the talented craftsmen inside this building, but you still need something. So I’ll teach you how to do it so you don’t have to do it on your own. You’ll have some professional guidance and help, but you can’t suck the resources of my agency.

And that felt like a fair middle ground to me, and that has been a game-changer. Because now, I don’t have to say no to anybody. I say, “Yes, you come to the agency and you can have all this super affordable help that you need for $79 a month, or $1,900 for this one thing, or whatever it is you need.”

Jay Goltz:
I wouldn’t call it fair, either, because it’s not fair or not fair. It’s really just about being accommodating and being nice to people. Like, “You know what, you really can’t afford to use us, but let me show you some of the things you can use to do it yourself.” That’s nice. You’re helping people, and not only that, but you have in fact got a farm team now. Some of those people end up being clients down the road, as they grow, perhaps—

Jaci Russo:
Jay, they do. It’s the greatest thing. They do. I love it.

Jennifer Kerhin:
I would think for really small companies, that the way that they can grow the fastest is to do what Jaci said and create a segment of a client, a segment of the industry that they want, and to develop their business system around it. When you try to do everything to everyone, you can never scale up. Take a lesson from Jaci: Find your market segment and just crush it in that one segment.

Jay Goltz:
I think it comes back to the word business model, that you can’t afford to have the right people working for you. To pay them X dollars, you need to charge Y in order to do that, and it’s just the business model. You can’t afford to be taking deals where you’ll bill out $1,000 a month. The math simply doesn’t work. That’s all.

Jaci Russo:
Correct.

Loren Feldman:
All right, in the time we have left, I’d love to follow up on a couple of things with each of you. Let me start with you, Jay. The last time you were on, we were talking about employee retreats, and you made a little joke about how your retreat is you’ve cut back on your advertising spending. And we really didn’t have time to follow up on that, but I wanted to ask you, how did you come to the decision to do that? And is that typically what you’ve done in the past?

Jay Goltz:
With interest rates so high, the people moving, it’s probably down by 50 percent, so they’re buying less furniture. So the entire furniture industry is off. That’s for sure. And I can’t keep spending the same amount of money for advertising, so I cut back on advertising, because I don’t have the cash flow to do it, and there’s less customers out there. So I cut back for a little while.

And every time things get tight, that’s one of the things—I can’t do anything about my real estate taxes. I’m not going to go laying people off. I can’t do anything about my electric bill, but I can certainly cut back on advertising some. The interest rates, hopefully, are about to drop, and the business will get back to more normal. But like I said, the entire furniture industry is feeling the hit of having high interest rates.

Loren Feldman:
So Jaci, I’m sure from time to time, you have clients come to you for whatever reason and say, “You know, I need to cut back on my advertising or my marketing spend.” What do you usually say to them?

Jaci Russo:
Well, actually, the conversation usually starts with me going to them and saying, “You’re spending X dollars in this medium: billboards. You’re spending X dollars over here: boosted Facebook posts. That’s all trash. Stop it right now.” Not billboards in general, but for this client, in this particular scenario that I’m thinking of in my mind, it was an awful idea. And they’re spending $180,000 a year on something that had absolutely no practical application for them.

So we start with that, like, “Please stop doing that. We need to save this money. You can allocate it somewhere else. We need 20 percent of this money you were spending to do this thing over here and we’re going to reach three times more people. So let’s go do that.” Because we aren’t incentivized for them to spend more or spend less. We’re incentivized for them to grow their sales and revenue, and so I want them to do that smartly, not wastefully. I don’t make more money just because they spend more money.

Loren Feldman:
Jay, let me ask you a question about your situation. I completely understand. I mean, when there’s less money coming in, you need to cut somewhere. But do you worry that in doing that, you’re going to make a bad situation even worse—that if sales are already soft, and you stop advertising, they’re going to get even softer?

Jay Goltz:
First of all, I don’t use the word worry, because I’m not worrying about anything. So no, I don’t worry. Do I consider, “Oh, is that going to make it worse?” That’s where I said in the beginning, it’s cash flow. It’s to the point that, really, it would be irresponsible to be putting the same amount of cash out. So no, I don’t worry about it at all, because I know it’s the right decision.

And advertising is not as simple. I had an advertising agency, very small, I don’t know, a long time ago. She says to me, “Oh, we’re doing work with another furniture store. We did a big ad campaign for them, and they took in $300,000 over one weekend.” So I said, “Well, how much money do they normally take in over the weekend?” She had no idea. Okay. I said, “Well, if this works so well, why don’t you just take that money and then put it back in again and do that a few times, just like doubling a penny?” I said, “After a few months, they’ll be billionaires.” And she said—I swear, I’m not making this up. Word for word. She goes, “Well, everybody decides how big they want their business to be.”

Jaci Russo:
What?!

Jay Goltz:
Yes, yes. That was the last conversation I ever had with her. Advertising is an investment in the future. And like, you’re lucky if you can break even on it in the short run. But it’s pretty difficult, if not impossible, to go spend—now there are probably some direct mail people who do it. Fair enough. But I’m just going, generally, it’s a long-term investment. So in this case, I know that the money I’m putting into the advertising is not going to come back and pay for itself in the short run. It’s not. Am I wrong? Jaci, am I wrong?

Jaci Russo:
No, you’re not wrong at all. The fact that she didn’t know what they normally do on a weekend, and was claiming all of the sales being from her promotion is—

Jay Goltz:
Sad, for lack of another word.

Jaci Russo:
Jay, this is back to my point of why the industry needs licensing and certifications and continuing education, because that’s almost criminal!

Loren Feldman:
I want to go to my next update. Jennifer, when you first joined we talked about your being stuck in the valley of death a good bit: working 12 hour days, six days a week, not sure how you were going to get out of that. More recently, you’ve taken a nice two-week vacation. You took your company on a retreat. And I’d just like to tie this up: Do you feel like you’re still in the valley of death?

Jennifer Kerhin:
I think I’m coming to the end of it. I’m certainly not working 12-hour days six days a week. I’m still working six days a week, but more like eight to nine hours a day. But I’m definitely towards the end. Absolutely. We’ve made a huge change in the past year. Maybe not even a change, but we’ve moved forward. If I think of the valley of death kind of like a desert, I’m more than halfway through. I realize I have enough water and supplies to get me to the end, but I still have a couple more systems that are needed to finally get out of it—but absolutely on the right track.

Loren Feldman:
Do you feel you know exactly what you need to do?

Jennifer Kerhin:
I do. One of my biggest items I’m working on now is management training. There is a fine line as you grow between wanting to promote from within and train them and hire from without, with skills. And so finding that correct balance on management and leadership, and then training the people who are fantastic. They’ve been with you for a while. They really have strong core skills, but they need management training.

And so that’s my goal this year, is to focus a lot on management training. And then what’s missing, in the same way as Jaci had mentioned, a business development system. We have really good business development, but it’s not a system. So those two are my final two things that need to be finished before I can say I am out of the valley of death.

Jay Goltz:
You know, I just figured this out lately. And this, I think, applies very well to where you’re at. I now tell my managers: We have two jobs. One is to make everybody as good as they can be, and the second one is to know when you hit the ceiling. So instead of using the word balance, like you did, it’s a question of: There’s some people that work for you who you could very well turn into key managers. And there are some people who just are not going to get there, for whatever reason. They’re valuable employees, but they just have hit the ceiling, and you’ve tried to coach them out of it, and it’s not working. And our job is to figure out when that day is, because otherwise, you just keep spending a lot of time trying to get—as they say in the South, “This dog won’t hunt.”

Jennifer Kerhin:
Totally agree, Jay. That’s what I’m going through, is one of my strongest abilities but also—it’s a double-edged sword—one of my weakest abilities is loyalty. And when you’re a small business owner, there are some people who have been incredible to help you grow, and you want to give them every chance possible to grow with you. And maybe they’re growing, but maybe, like you said, they’ve reached their limit. And finding out where that limit is can be difficult—not just on a skill-set, but on an emotional level.

Jay Goltz:
Oh, it’s horrible. We’ve all been through it.

Jennifer Kerhin:
It’s tough, yeah.

Jay Goltz:
If you are good enough to grow your business and to keep expanding it, you obviously are talented at something, and you’re good at it. That doesn’t mean that the person who started with you in the beginning had that ability to do it. And it’s a horrible, painful thing, but I now recognize that old thing about, “Oh, these people have been with me since the beginning.” I absolutely have some people with me from the beginning—a few. Literally, a few. But the fact of the matter is, the nature of business is, if you keep growing, you are going to outgrow some people. Period. And if you don’t believe that, you are still living in the land of naivete. It’s just the way it is.

Jennifer Kerhin:
Jay, I believe it, but how long do you give somebody? How long did you give somebody to try it?

Jay Goltz:
Well, I’m embarrassed to say, in some cases, years. But now, what would I do? I don’t know. Forgetting about how long, I would say, how many heart-to-heart conversations where you’d say, “You know what, you can’t think like this. You need to do this—you’re in charge. You’re the boss.” How many of those conversations would I have? I’d say on the third or fourth one, you’re running out of steam. I mean, on one hand, it certainly is painful, and it’s certainly stressful. But it doesn’t have to be too ugly. Here’s my line. I tell them, at some point, “I’m starting to get really concerned that this isn’t the right position for you. This is now the third time I’m telling you the same thing, and I’m getting really concerned about it.”

At least if it gets down to where they either have to go or whatever you’ve told them, and maybe they’ll go look for another job, but that’s a good line: “I’m getting concerned you’re not right for this job. This is the third time I’ve told you. You can’t look the other way when the employee keeps coming in late. It’s your job to say to them, ‘If you can’t get to work on time, you probably should work—not probably—you need to work somewhere else, because we need to open the door at 10 o’clock.’” So if they can’t do that, and they can’t handle the confrontation—some people were not meant to be managers, period. It’s just the way it is.

Loren Feldman:
I’ve got just enough time for one more update here. I want to get to Jaci. Jaci, earlier this year, you told us you were excited because you had two big clients ready to sign on. I think I asked about it a few months after that, and they hadn’t quite signed on yet. Has that happened?

Jaci Russo:
You know, it’s interesting, as we’ve evolved into bigger and bigger clients, I’ve had to reset my expectations for longer and slower timelines. And so, no. But now there’s 10—literally 10—and each of them would be the biggest client we’ve had.

Loren Feldman:
Could you handle all 10?

Jaci Russo:
Yeah, yeah. I’ve put our capacity in place for exactly that reason, because as they come on board, we’re able to just continue to expand our capacity in house, because we’ve got people in house, so that we don’t have that issue with growing too fast. That’s something we learned in the first couple of years.

Jay Goltz:
Which is such a thing, for sure. Growing too fast is a thing.

Loren Feldman:
So how many of those 10 do you think you will ultimately get?

Jaci Russo:
I mean, based on our typical closing percentages, six.

Loren Feldman:
Has this been a problem for you this year? Do you have people sitting around?

Jaci Russo:
Oh no, no, no, no, we’re busy. Because if you have a spare minute, you’re working on something that’s agency-focused, and so there’s always something to do. You know, I’ve started a whole new company this year, Trainyard Advisors, where we go in and do organizational assessments. And I have a team that helps companies get through the hybrid hangover or changes to culture, especially with mergers and acquisitions and those kinds of things. So we’ve got plenty to work on.

Loren Feldman:
But not all that would be working for clients.

Jaci Russo:
Correct.

Loren Feldman:
Utilization rate is the term of art there. Is that a concern?

Jaci Russo:
No, not at all. Because of the fact that if they’re working on Brand State U or Trainyard Advisors, they’re still working on something that propels our growth, and we’re still getting paid.

Loren Feldman:
All right. My thanks to Jay Goltz, Jennifer Kerhin and Jaci Russo—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/21hats. Thanks, everybody.