It's a Pathetic Budget, But We'll Hit It

Introduction:

This week, Shawn Busse, Jay Goltz, and Sarah Segal talk about why they’re not going to hit their numbers for 2024 and what they’re expecting from 2025, especially regarding tariffs, immigration, and regulation. Shawn says his business has been producing and closing fewer leads. “Clearly,” he says, “we’ve gotta change something.” Jay doesn’t think furniture sales will recover until mortgage rates come down, and he’s bracing for tariffs and deportations that he hopes won’t actually come: “I have to believe,” he tells us, “that somebody in government is going to figure out this isn’t a good thing.” Sarah, meanwhile, says her revenues are down, but she’s taking solace from the fact that she is ending the year with a stronger book of business than she ended with last year. Plus: the owners discuss what it means that a judge in Texas has blocked the new overtime law. And they offer guidance to a cafe owner who raised her prices only to get hit with another 25-percent price hike from her main supplier, leaving her to wonder whether she should raise prices again or “eat the loss and pray for a miracle.”

— Loren Feldman

Guests:

Shawn Busse is CEO of Kinesis.

Jay Goltz is CEO of The Goltz Group.

Sarah Segal is CEO of Segal Communications.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome Shawn, Jay, and Sarah. It’s great to have you here. I’m not sure how it happened, but somehow this is one of the last podcast episodes we will record this year. So, I’d like to start by asking what kind of year it’s been for you and your businesses. Specifically, are you hitting the numbers you wanted to hit? Shawn, maybe start with you?

Shawn Busse:
I was thinking about this question in advance, and I think the obvious answer to it is to look at revenue and profit. You know, how did you do, in terms of those two numbers? And we’ve been okay there. We’ve sort of held the line on both of those numbers. But I was sort of more interested in what drives those things, and I hadn’t looked in a while at our funnel, and we have a really great CRM. It’s a product that Zendesk bought a while ago, and it’s a really kind of basic CRM, but it’s really effective. And what it has in it is the ability to kind of look at: Where do deals come from? How many of them do you win? What’s your flow? And I was absolutely stunned.

What I realized—you know, we’ve had a tough year. We’ve had a tough year getting new customers. We’ve had a tough year closing them. So anecdotally, I was like, “Yeah, it’s been really hard.” I mean, the change from 2023—which was not by any stretch a good year, either—here’s just a couple of numbers to think about, right? So we categorize leads as A, B, and C. An A customer is somebody that is really engaging us almost like a member of their leadership team. They’re probably investing in the six-figure range on an annual basis. And in ‘23, we had about 31 businesses that raised their hand and said, “I’m interested in talking to you.” Now, that’s not qualified. So of those 31, usually about two thirds moved to an actual meeting, and we start discussing and presenting ideas.

So in ‘23 of those 31 deals, we won about 36 percent of them, which is a pretty good ratio, especially since we’re not doing a lot of qualification of those 31. I would say, before the pandemic, we were maybe as high as 40 or 50 percent. In 2024, our win rate for that same type of customer—didn’t change our sales process, didn’t change our offering, didn’t change our pricing—it was 12 percent.

Loren Feldman:
Wow.

Shawn Busse:
There’s another number in there that’s worth paying attention to, which is that our number of opportunities went from 31 in 2023 to 17 in 2024. So, fewer deals, fewer wins. And then, actually, the wins that we did get in 2024 were much, much smaller. Anecdotally, we’ve just felt it here. We felt like a ton of indecision, a ton of ghosting, like the behavior of, “Hey, we’re really interested in this. Oh, seems like a really good fit.” And then they just stop answering calls and emails, like, literally just evaporate.

And I’ve known ‘24 was not a good year, I think, for a lot of reasons. The election was paralyzing for people. But just to see it in numbers, it was just so enlightening for me. The election’s over, and ideally, some of that indecision goes away, but clearly we’ve gotta change something to drive more volume and to do higher conversion.

Loren Feldman:
Shawn, if I remember correctly, about this time last year you were talking about a new initiative that you were going to try where you were trying to send your people out into the community more and make contacts and build relationships that hopefully would drive more of those meetings you’re talking about. How do you look at that now?

Shawn Busse:
It’s a tough one, Loren, because you’re asking people to do a job that they’ve never really done before. And sales is very, very hard. I mean, just full stop. It’s probably one of the hardest disciplines for an owner to give up and to let other people do. So with that caveat, it’s been a bit of a mixed bag.

My president, Anja, just spoke at an EO event last night with our creative director, Jeff, and just in that room, people were raising their hands saying, “We want to talk to you,” or, “We’ve done business with Kinesis, and they’re great.” So it’s like, wow, that’s super effective. We’re in front of the right people. So that’s been good. Some of the other employees, I think, we’ve done a year of that experiment, and I think we’re gonna move on from that. So, it’s like anything: Some people have really risen to the challenge, and then others—it’s just not their core skill-set.

Loren Feldman:
That’s not the answer, clearly.

Shawn Busse:
I mean, it’s a yes, and. And it shows in the numbers, too. It’s like, “Oh, look”—I’ll just make up names—“Susie,” well, actually, I have an employee named Susie. [Laughter] “So, Mary has had, like, three conversations all year long. And, I don’t know, Regina has talked to 40 people.”

I’m learning who’s good at this, and who is not good at this. And it’s a tough job. But I just think what’s interesting is, we’ve switched this sales model. Is it that it’s not an effective model? Or is it a tough year, or is it both? Or is it that some people are good at this model and other people are not?

Loren Feldman:
So, Shawn, when you started off by saying that you’d looked at your revenue and your profit number, you seemed somewhat positive about them. Given what you just said, did I misread that?

Shawn Busse:
Well, I’m an eternal optimist, because you have to be if you’re an entrepreneur—because it’s irrational what you’re doing. You know, I’m optimistic in that: Hey, we kind of held the line over the last two years, but we’re down from our high water mark in 2020 by probably 15 percent, maybe a little bit more than that. And there’s a couple factors there. The pandemic was really hard on us. A lot of our marketing was in person, and so that evaporated. And then, from a market perspective, Portland is absolutely terrible. It is just a terrible market to be in right now. And I saw an economic presentation the other day on it, and it was like, “Oregon is 46th in growth in the country.” 46th!

Loren Feldman:
Why is that?

Shawn Busse:
You know, I think there’s a number of reasons. This is complex, but it is not a business-friendly climate here, I’ll just say, full stop. And so when the pandemic hit, the priority was to shut down and to stay shut down way too long. And then we had all kinds of protests that got a ton of bad press. We implemented a whole bunch of bad tax policy that drove people and businesses out of the region. So, we have been really struggling as a region.

Loren Feldman:
Shawn, the last time you were on, you told us about an initiative that was on the ballot in the November election that would have implemented a gross revenues tax.

Shawn Busse:
Measure 118, yeah.

Loren Feldman:
That got voted down, right?

Shawn Busse:
Yeah, it failed spectacularly, which gives me hope. And I do think we’ve passed the bottom of the trough. I think there’s been a real pivot away from some of the kind of crazy ideas of 2020-2021, but we’re still climbing out of that. I saw an economic report the other day of the region, and the declines in industries… So we’ve grown only, like, 1 percent in Portland. The industries that have dramatically declined are all the industries we serve. Like, oh no! The growth industries are like, government, health care—areas we just don’t work in. It’s a tough, wicked confluence of challenges.

So it’s interesting. I have an employee in Maine, and she’s doing business development. And actually, that’s a real bright spot. She’s doing great. People are taking her calls. She’s having conversations, just the fundamental optimism is much higher.

Loren Feldman:
Are you getting clients in Maine?

Shawn Busse:
We’re working on it, yeah. I’ve got a meeting this afternoon to talk about a prep for a prospect in Maine. So, yeah, I think it really is geographically dependent. There are parts of the country that are just on fire and optimistic. And I think, like I said, we’re 46th in the country.

Portland was the darling leading up to the pandemic. I mean, everybody wanted to move here. Our growth rate was crazy. We could barely keep up. Everything I thought about was: How do I hire enough people? And we’ve had actually out-migration in the last two or three years. That trend has changed, but people were actually leaving the region in the pandemic and beyond. So, yeah, those are strong forces, man. Fighting that is tough, you know?

Loren Feldman:
I think Sarah has fought some of those forces in San Francisco as well. How are you doing with your numbers for this year?

Sarah Segal:
Moving into 2024, I was very focused on making sure that I was addressing new business. Because I was starting out really anemic, because of the blood bath in 2023. I was networking. I was looking for opportunities. I was redoing our new business strategy, updating our decks, doing everything possible, and also outsourcing some of my work. There were things that I had been doing that I really shouldn’t be doing anymore, so I could focus more on generating the business.

And so 2024 was really focused on that, and slowly but surely, I rebuilt from that disappointing time to a point where, if you look at the revenue from 2023 to 2024, it actually went down—but I don’t look at that. I don’t look at overall revenue. I look at where I’m starting in the first month of the year. Because I looked over the years: If I start out January in a healthy way, I can maintain and grow that health in general, based on my experience. So I know, to me, January is terrible because most people have either determined their budgets already and who they’re working with in January, or have not figured out their budgets and who they’re working with yet. So it’s this kind of quiet time for people looking for PR. And so I really want to make sure I’m doing everything possible to make sure my January is good.

So if I look at my January 2024 compared to my January 2025, I’m starting out with double the revenue—double the monthly revenue. And to me, that makes me happy, but I’m not satisfied. I’m like, “Ugh, I need more,” just because I have a staff now, and they have mortgages, and they have things and they depend on me. And so I put a lot of pressure on myself just to make sure —like, it’s just about A) making sure that I can keep the lights on and keep doing what I want. And then B), yeah, I’d like to grow next year. That’s the big plan. And so I’m sure that these guys have done a better job than I have, in terms of projections and all of that stuff. I don’t know that I’ve ever really done that well, in terms of projections. It’s not my strong suit. I just look at the numbers, and I look at the trend, and make a judgment call. But I would like to do a better job of that over time. But that’s kind of how I’m looking for 2025. I think it’s going to be a better year for us. Knock on wood.

Shawn Busse:
Your client engagements, are they recurring revenue over a certain period of time? Or is it just super unpredictable project work, you never know when it’s going to hit?

Sarah Segal:
So, here’s something interesting. Most of our work is retainer. So they sign on for the year, and we make sure that nothing ends December 31st, because that’s just shooting yourself in the foot. At the end of the year, everybody’s like, “Oh, we’re gonna start out January with nothing.” I do have a couple clients that come and go with projects, but they’ve been doing that since we started with them, so we’re kind of used to it.

I do have clients where they want a level of service from us that they can’t afford. And they’re like, “Well, we have to work within this particular budget.” And I’ll say, “Well, that’s about 20 percent off of what we normally would charge.” Here’s the deal: We will take that total budget and we will divide it by 12, and we will invoice you monthly, so I know how much I’m kind of getting in the bank and what’s coming in, so I have consistency there.

But there will be two months a year where we go quiet and we don’t do anything proactive for you. We’ll do reactive—like if something comes up, we’re here for you. But we do not do proactive outreach and execution on your behalf for those two months. Usually it’s July and December. And that works for a lot of our clients, because those tend to be kind of slower times. And it makes me happier, because I know what checks are coming in.

Shawn Busse:
So how come you can’t forecast then? It seems like you’d be able to forecast pretty accurately.

Sarah Segal:
I don’t know how. I can do numbers and math, but like, I don’t have an MBA. Do you have an MBA?

Shawn Busse:
No, I have an MFA.

Jay Goltz:
Okay, you don’t need an MBA to do forecasts. But with that being said, maybe your business is difficult to forecast, because people are coming and going. Maybe it’s just difficult.

Sarah Segal:
I’ve never had anybody show me how. And I’m open to recommendations. If anybody listening to this podcast has a “How to forecast and project for dummies,” I’m all over that. But I do have a fractional CFO now.

Shawn Busse:
This should be like something they could do in their sleep.

Sarah Segal:
I know. He’s been doing a little bit of work on my books over the last couple of months, because we had some problems with the way things were recorded. But yes, he will help me with that. It’s just, there’s so many other things on his plate right now. I need to spread that out. But I want to hear about Jay. How are you doing this year?

Jay Goltz:
It hasn’t been a good November. And I did my forecast. Just because you did a good job doing a forecast doesn’t mean they’re going to turn out to be true. And the fact is, I believe the election’s had an effect on things. And now, there’s not only the election, but there’s the after election. When you look at some of the plans, I think there’s a lot of anxiety in the marketplace, and I think it’s showing up in sales. I went to an economic breakfast yesterday—for whatever it’s worth—and not rosy for next year. No one’s predicting a recession or something, but no one’s predicting a banner year.

The interest rates have taken a real hit on the furniture industry, because people aren’t moving. And when people don’t move, they don’t buy furniture. “Oh, rates are going down this year!” Really? They went down half a point. And now I just heard on the way—

Shawn Busse:
They went back up.

Jay Goltz:
Yeah, the mortgage rates went up. They don’t even know what the correlation is between the prime rate and mortgage rate—it’s like a big black box. No one even knows why. But the fact of the matter is, interest rates for mortgages have not, in fact, gone down. So that’s not going to be helpful. And I’m having a meeting as soon as we’re done here to discuss looking at our expenses and the people and making some adjustments.

Shawn Busse:
So you’re really tied to the housing market, basically?

Jay Goltz:
My furniture business is, and my furniture business is a substantial amount of my business. But listen, it’s not brain surgery. I’m guessing, but I think this is accurate: if 40 percent of the furniture sold in America is sold because you just bought a house, and half as many people are buying houses, that’s 20 percent. Well, that’s what I hear the industry is off. Everyone I talk to says the furniture industry is down about 20 percent.

Shawn Busse:
That makes so much sense.

Sarah Segal:
So would you diversify beyond furniture?

Jay Goltz:
I am. My framing business I wouldn’t call furniture. My art business.

Sarah Segal:
No, I mean, things that are like home decor, but they’re a little less of an investment than a couch.

Jay Goltz:
Jayson Home has very much got a lot of accessories. I mean, I have a whole website.

Sarah Segal:
But I don’t know what your percentage is. I love Jayson Home.

Jay Goltz:
Well, it’s not a traditional furniture store where we’re selling, you know, kitchen sets and bedroom furniture. It is an eclectic mix of accessories and home furnishing.

Sarah Segal:
So if I go to your website right now, am I going to see a couch? Or am I going to see a bouquet of flowers?

Jay Goltz:
No, no, we’re done with flowers.

Sarah Segal:
I’m just saying, am I saying the small things marketed or the big things?

Jay Goltz:
No, no, both. There’s lots of accessories on there.

Sarah Segal:
What I’m suggesting is that if the couches aren’t selling, you need to get people to enter and trust you by promoting the smaller things.

Jay Goltz:
Yes, that’s what the whole website is. It’s far less—we call them sofas—far less sofas. There’s a lot of accessories. Our business has lots of interesting accessories. So, I’ve just got to weather the storm, because until interest rates drop and people start moving again, there’s only so much I can do there.

Sarah Segal:
Yeah, I can tell you from experience, my living room—we have had a vacant space between our two couches for a coffee table for a year now. And the reason why is, furniture is really, really expensive, and it’s hard to commit to a large piece of furniture when everything else is so expensive. Our grocery bill, our utilities, everything has just gone up that we’re like, “Okay, well, we’d like to get a coffee table.” It would be nice and prevent my husband from dropping a glass of wine on my brand new rug that I got very cheaply last night, which made me very sad.

Jay Goltz:
You know what, I got a takeout dinner last night just for myself. I went to a new place for just a small pizza and a salad. It was $50. Yeah, it was $50, and I just was taken aback. I go, “How did a 12-inch pizza and a salad”—well, the salad was 16 bucks. And then the pizza was 20-something, and then I put mushrooms on it. God knows what that was. That was another $5 or something. So, yeah, everything’s more expensive. It is what it is.

Loren Feldman:
In some ways, I think this has been the theme of this year. It’s really been confounding, I think, to a lot of people. The macro numbers for the economy this year have largely been quite good. Unemployment is low, wages are up, consumer spending is up. The economy just looks strong in a lot of ways, but the conversations I have with business owners are much more along the lines of what I’m hearing from you guys, and it’s hard to square those things.

Sarah Segal:
Here’s my question: Are we on the lag? Or are we ahead of the curve? Are we experiencing something that consumers are going to experience next year? Or are we going to catch up to where consumers are, in terms of their spending?

Shawn Busse:
Consumer debt is heading way up, so that tells me that the consumer is running out of runway.

Jay Goltz:
Or is the money going to big companies, and we don’t hang out with big companies? So the people we talk to, like the [21 Hats] Slack thing, which has been very interesting. Somebody went on Slack yesterday and was saying that a lot of his clients are paying their bills late. And all of a sudden, his receivables are getting blown up. And I don’t believe it’s because, “Oh, they don’t like you.” I think they’re short on cash. And most business owners I talk to are not having a great time right now. But I’m not talking to the vice president of Target. I’m talking to Joe Schmo who owns a $5 million business.

Loren Feldman:
Target’s not doing well either. They just had a terrible earnings report. This is the other thing I wanted to talk about today, which is going into next year. It’s harder than ever to forecast, because we’re going to be playing by some new rules and—

Jay Goltz:
Or no rules. Maybe no rules. Maybe that’s the point. Do whatever you want.

Sarah Segal:
Honestly, I’m from like the liberalest place in the world, and I voted for Kamala. I am a Democrat. But honestly, as a business owner, I might be a little bit more optimistic about what Trump’s administration is going to do for me as a small business owner. That’s absolute truth.

Loren Feldman:
And what are you referring to? What do you think he’s going to do for you?

Sarah Segal:
Some of it is not national legislation and taxes and this and that, but that will help. I’m burdened by a lot of things that are California. You know, like this whole non-exempt vs. exempt employee, that thing that’s happening, they struck it down in Texas

Loren Feldman:
You’re talking about the overtime rule.

Sarah Segal:
Yeah, the overtime, so anybody making less than $68,000 and change—

Jay Goltz:
No, no, no. It was $58,000. I think it was 57-something. It was a huge increase. It went all the way from—what was it, 43?—to, yeah, 57. Like, could they have just gone to 50? Like, okay, but you’re right. I have a bunch of employees who fell into that area, and it’s a problem. And, like, it would have been better if it was stepped up over a few years, so at least when you hired someone, you could bring them in one way instead of having to go to an employee who’s been salaries and go, “Oh, you’re going to start punching in next week.” You know, that’s huge. Well, they struck it down. So, that’s helpful.

Sarah Segal:
No, no, no, they struck it down federal. California has its own law.

Jay Goltz:
Oh.

Sarah Segal:
So it goes in effect January 1 for $68,000.

Jay Goltz:
Wow!

Sarah Segal:
Right. So I have to go in and recategorize all these people who work for me, because I’m sorry. I am not paying somebody right out of college $68,000. It’s not competitive in my industry, and it’s not sustainable for my business.

Jay Goltz:
Well, let’s be clear what the issue there is, because I also am dealing with it. It’s not that you’re going to pay more. It’s that if you want to pay someone on salary $48,000, they’re kind of going to have to punch in and out now, because you’re going to keep track of their hours. I have people who worked for me for years. And all of a sudden, they’ve gone from a salaried employee to, “Oh, I’ve got to use a clock. I’ve gone back to when I was 16 years old, working in the pizza place.” It’s overreach. And $68,000? I understand the problem, and I fully accept there should be a line there. But that’s too much money—that number’s too high.

Sarah Segal:
And it’s not even reflective of the average salary in the United States.

Shawn Busse:
I mean, this is such a good example of a problem that is abuse within the corporate scheme, where Starbucks is putting a manager on salary, and they’re making them work 60-70 hours a week. This type of policy is a reaction to this, and what happens is, it sweeps into it all the small businesses.

So, the motivation behind it, I actually think is legitimate, because there’s a lot of abuse that goes on. But then there’s no consideration for small businesses and how they operate and how meaningful this is to us. And I think this is fundamentally the problem with our governance, is that neither party actually pays attention to small businesses. They will talk about it till they’re blue in the face, but they actually don’t really care about us.

Sarah Segal:
Part of what I’m doing over the next week—and I’ve been doing it all week—is I’m going through my expenses and my overhead for my business, and I am cutting costs before moving into the year. And I’m penny-pinching stuff. You know, “Do I really need the cleaning team to come to our office once a week? We’re a bunch of women. We’re not that dirty. Maybe they only come every other week.”

Jay Goltz:
Oh, versus guys. I just want to be clear. Versus, if you’re a bunch of piggy guys. Okay, point taken.

Sarah Segal:
Yes. You know, whatever service providers that we have—we have a lot of software tools where they’re like, “Oh yeah, it’s going to cost you $12,000.” We have a social media scheduling tool. I’m sure Shawn works with this as well. But they’re like, “Oh yeah, it’s gonna be $12,000 a year.” And then you go back to them and you say, “Well, I don’t have that. Can you do less?” And they’re like, “Okay, well, we can do a little.” They’re all negotiable. And so, I’m just trying to cut those kinds of costs, so I at least have a little bit more of a buffer zone.

Jay Goltz:
So as a manager, though, the salary situation, this is fairly simple. If you’re paying someone $50,000 a year, you say to them, in writing—and you make sure it’s in writing and they’ve all got it—“You are not allowed to work overtime. If you need to work overtime, it needs to be signed off by me.” That way, you’re kind of covered. They don’t have to punch in and out, but at least they know they shouldn’t be working overtime, and it solves a problem.

Sarah Segal:
No, I totally get that. But like, for example, we have a client, Fan Expo, and they are a big Comic Con event. They do an event in lots of cities around the country. We do their San Francisco event. Part of that event is also staffing their press booth during the three days they’re in San Francisco, which are the Friday after Thanksgiving, the Saturday, and the Sunday. They are holidays, and they are weekends. Right now, my staff, they’ll be like, “Oh yeah, so I’ll cover this half a shift on Friday, no problem.” And then the other one will do the other half. And they’ll just take half a comp day to exchange it.

Now, I’m limited as to who can do that, because all of a sudden, I can’t just have them do it and take a comp day. I have to pay them overtime, or I have to say, “You can’t work and do your regular work on Monday, because I need you to go and do this on a holiday,” which is, what, time and a half on Friday?

So it gets messy and it’s frustrating, because my business, while we are a nine-to-five business, or nine-to-six, we have a new client opening a new store next Saturday. So I will be at that, along with my other colleague, who’s running the operation for it. She does not get overtime for it. How do I staff those kinds of things? We’re not just Monday through Friday.

Jay Goltz:
I mean, the issue is, they’ve got to keep track. If you were to say, “All right, I’ll pay the overtime.” So how do you do that? They’re going to punch in and out on a time clock? They’re going to do it on their phone? They’re going to go to the computer? I mean, it’s just a lot of—

Sarah Segal:
No, but now do I go back to my clients and say, “Well, when you signed the contract, I wasn’t having to pay people overtime to staff your event, but now I have to pay people overtime to staff your event”? It’s a domino effect. That’s all I’m saying.

Loren Feldman:
Let’s talk about another issue: tariffs. Shawn, I don’t think you import anything, so you’re probably not directly subject to any coming tariff payments, but maybe you have clients who do. Do you see this having any impact on you?

Shawn Busse:
Absolutely. I mean, we lost a client as a result of Trump 1.0 tariffs. They imported aluminum kegs. They were a great client. We were doing great work for them. They were making great money, and the tariffs just absolutely eviscerated them. So yeah, we felt it. It’s hard to say what other clients we have right now that would feel it directly if it were to happen again. And it’s also highly dependent on what the tariffs look like. There’s no specificity there.

Loren Feldman:
Those kegs were coming from China, I assume.

Shawn Busse:
They were coming from China, yeah, absolutely.

Loren Feldman:
This time, the tariffs could be everywhere, 10 or 20 percent.

Shawn Busse:
Yeah, I mean, I have a client that manufactures here in the States, and they compete with Chinese-made goods. But I don’t know that they’re excited about it, the possibility of it, because a lot of their materials they get from China. I think it’s under-appreciated how deeply manufacturing is global and interwoven with other countries, and how dramatic an effect you can have if you throw a tariff on even just a small thing. I mean, the first round of tariffs were conservative.

Loren Feldman:
What happened to that keg manufacturer?

Shawn Busse:
You know, massive cuts, just totally shrunk workforce, cut costs—of which we were part of them. They’re still in business, but they really flat-lined. I don’t know where they’re at today, but it was tough. And to be fair, it was a one-two punch, because they got the tariffs—I think that was 2018, maybe? And they were fighting a good fight.

But one of the things people don’t appreciate about tariffs is there’s also a risk, from a legal perspective, that your competitors can sue you or file complaints about your processes. So this was another problem they had. They had competitors who were either making things domestically or getting their aluminum from other countries, basically filing complaints against this client, which they then had to defend and go to court. And so there’s lots of bureaucracy that happens with the tariffs that people fail to appreciate.

Loren Feldman:
The goal of those, allegedly, is to help domestic manufacturers. Do you have any sense, in that case, whether it did help those domestic competitors you were referring to?

Shawn Busse:
It’s really hard to say. I mean, I think some of these competitors were actually not manufacturing domestically. They were just manufacturing in different countries. So they were having them made in Italy or wherever.

Jay Goltz:
There’s lots of products, including picture-frame molding, that there’s just not much made in America anymore. And it comes from Europe, and some comes from China. And the fact is, anyone naive enough to think that someone’s gonna go, “Oh, let’s open up a picture frame molding manufacturer in America,” that’ll take a year or two, and by the time they get it up and running, Trump will be out of office, and maybe the tariffs will be gone. Who’s going to start a factory these days when, in four years, this whole thing could be going back to the way it was? Are they going to start manufacturing shoes in America?

Shawn Busse:
A great example of this: Remember masks? Our textile-manufacturing base has just been eviscerated here in the country, right? But locally, a company I know started making masks, and because China wouldn’t ship them to us, like, “Oh, here we go. We’ve got masks. They’re being made. We’re making masks. We’re making protective gear.” Well, once the pandemic ended and China started shipping to America again, where did the consumers go? They went back to China.

So, to your point, Jay, this company built up all this infrastructure to meet the demand. And then, basically, including the federal government, would buy from China. And so, you’re right. If Trump does this thing, and then all these manufacturers start to meet that demand, and then a different administration comes in, or a different policy is implemented, they can be hung out to dry. And I saw that happen.

Jay Goltz:
I think Reagan said the most dangerous words on Earth are, “I’m from the government, and I’m here to help.” Wasn’t that Reagan? I thought it was Reagan. [Laughter] I understand the intentions behind it, but it’s far more complicated than it looks.

Loren Feldman:
Jay, are you saying there aren’t domestic manufacturers of frame molding?

Jay Goltz:
I’m old enough to be able to tell you, I’ve been in this business for 46 years. I started when I was 22. 46 years ago, there was a major molding manufacturer in Georgia: Piedmont Moulding. They were the big guys. And I could name 10 other companies that I used to buy from, and nine of them are gone. And the molding is made in Italy and Spain, some in China, which I don’t really buy from. Yeah, for whatever reasons, it’s changed.

And I don’t see that anyone’s gonna say, “Oh, wow, there’s tariffs. I’m going to go open”—because the machines that make picture-frame molding are half a million dollars, whatever. I just don’t see people being put into business or helping American business. All it’s going to do is raise costs. And I, for one—or maybe I, for everybody—am sick of the government saying, “Oh, small business is the engine of growth in America. Small business employees!” And what are they doing for small business other than, I have to credit SBA loans? Great. Other than the SBA loan program, I’d like to know, what are they doing for small business? It’s frustrating, because this isn’t helping any.

Shawn Busse:
Here’s the thing, what Trump got right—and clearly, I’m no fan—is China has been waging war against the United States for decades. And we had this naive idea they would eventually become a democracy if we did business with them. They juice up their economy. They subsidize industries to the detriment of American industry. So, he is right. They are, in many ways, an enemy to us. But the tariff is a really blunt instrument that has dramatic effects. And so that’s where my concern is, is that this is not a sophisticated approach. And you could swing the economy drastically.

Loren Feldman:
What is the impact going to be on you, Jay? If you’re importing most of your frame molding, if that tariff is 10 percent or 20 percent on everything coming into the country, what does that mean for you?

Shawn Busse:
Yeah, what do you do?

Jay Goltz:
First of all, I absolutely understand where, in some cases, if China’s subsidizing industries, okay. I’m sure there are some places for tariffs that it makes sense. In my case, I hope they don’t put tariffs on stuff coming from Europe. And if they do, I am confident it’s not going to help American manufacturers, because there aren’t that many of them. I can’t even name five—

Loren Feldman:
But what does it mean for you?

Jay Goltz:
It raises my costs. And then I’ve got to raise my prices. And everyone complains picture framing is expensive. Well, it’s going to be more expensive. I don’t see where this is going to help. And I also would like to believe—just so I can sleep at night—that they’re not going to do this for stuff coming from Italy and Spain. I’d like to believe that, but I don’t know that that’s the case.

So, don’t know, don’t know. All I know is, unlike some industries where it’s unfair competition, I couldn’t name you five companies in America making picture frame molding, and I used to buy from them. I’m sure there are some, but the sophisticated, nicer finishes? They don’t do that here.

Loren Feldman:
Where do you get furniture, Jay?

Jay Goltz:
All over the place. I literally buy furniture from all around the globe, and that’s another issue. I don’t know what would happen with that.

Loren Feldman:
What they’re saying is going to happen is 10 percent or 20 percent. I mean, that seems to be the plan.

Shawn Busse:
Yeah, they also had a plan for building a wall across Mexico, and Mexico was going to pay for it. This is the problem with this administration. Well, what is their policy? It’s just sound bites, so it’s hard to know. And I mean, I think that’s a risk, because it’s volatile.

Jay Goltz:
I want to believe that someone there is going to recognize that this would hurt the economy dramatically and raise prices dramatically. Because, here, a coffee table: Okay, so you buy a coffee table, and they stick a 10- or 20-percent tariff on it. Is that going to make the coffee tables—we should have Paul on here—is Paul going to start making coffee tables now, because the margins are better? No, Paul’s not going to start making coffee tables. And if somebody did, they’re still going to be 10- or 20-percent more. So it’s going to cause horrible inflation on coffee tables and everything else that they put the tariff on. Maybe they’ll shift some production to America, but they’re still going to be 10- or 20-percent more. So how is that going to help anybody?

Shawn Busse:
Well, I mean, last weekend, I put together a shelving unit, and I bought it from Costco. It’s a great product. I had put together that same shelving unit maybe eight months ago, and I looked on the box, and I was like, “Whoa, this is made in Thailand.” And the prior shelving unit—same company, although I could tell they repackaged it—was made in China. And so, what will happen is, these Chinese companies will set up subsidiaries in other Asian countries. So then, instead of having a 60-percent tariff, it’ll be a 10-percent tariff or whatever. But that kind of gamesmanship is already happening.

But I want to talk about one other thing, because I really care about housing, and this whole thing about migrants and deporting people and all this sort of thing. So first of all, you’ve got the inflationary impact of tariffs. And so, are mortgage rates actually going to go down? If you start deporting legions of migrant workers, I have yet to see a drywall crew that is not Hispanic. Like, they do not exist. There are no drywall crews made up of white people. So you are going to see such an increase in cost, in terms of home building, if this kind of stuff happens. So you were asking about policy? That’s the thing I’m thinking about, is housing costs and the migrant communities.

Loren Feldman:
Is that a business concern of yours?

Shawn Busse:
For sure! I mean, I want my employees to be able to afford to live in our community. Portland-area workers: 49 percent of their wages go to housing. Half of their income is going to housing in Portland. In San Francisco, it’s like 60-70 percent. It’s crazy! L.A.: 70 percent.

Jay Goltz:
Not in Chicago.

Shawn Busse:
Is it cheap housing? Should I move there?

Jay Goltz:
Just telling you. Chicago’s housing is very reasonable. Yeah, you should. Whatever they say the undocumented worker percentage is—what’s the number out there now, 5-10 percent of the population? Okay, here’s the problem. Any economist would tell you that if 5 percent of the population—I don’t care what population, anybody, anybody with a name that starts with an L or an M, it doesn’t matter—if 5 percent of the population left the country, we’d be in a terrible recession, because the people who are here are buying food, renting apartments, buying cars, buying gas. Do I think there’s probably some cases where it’s appropriate? Yeah, but if they really follow through on that? There’s already a terrible labor shortage in this country. So like I said, I went to this economic thing yesterday—

Shawn Busse:
There’s 4 percent unemployment.

Jay Goltz:
It’s documented. There’s a labor shortage in America. How do they think that that’s not going to throw us into a terrible—so, yeah, lots of reasons to be concerned. But to Shawn’s point, are they really going to take it to the extent that they say? I don’t think so.

Sarah Segal:
In California, it’s farms. You’re paying migrant workers to run the fields and run those operations, and so if you can’t do that anymore, A) they’re not gonna be able to find people to do it. And B) if they do find people, they’re probably going to be more expensive, but that’s going to roll into your costs of your food. So there will be an immediate impact, in terms of your grocery bill, 100 percent.

Loren Feldman:
So Jay, you’re looking at the possibility of tariffs, the possibility of more expensive labor. If that happens and there’s inflation, interest rates are not going to come down so that people start buying more houses. How are you preparing?

Jay Goltz:
Thanks for summarizing this so nicely, Loren. I have lots of reasons for concern, except I condition myself over all these years: “I’ll wait until the problem comes.” Because, as I had to explain to one of my sons who finds things to worry about, I said, “If I wanted to worry about things, I could make a long list, and I could spend my entire day going from concern to concern and not get anything done.” So yeah, are those some exposures that could be a problem? Yeah, absolutely. What am I going to do? There’s nothing. It’s out of my control. I have to believe that somebody in government is going to figure out this isn’t a good thing.

Loren Feldman:
There’s lots of people in government who know that. It’s a question of somebody in leadership, in the administration, deciding that they’re concerned about that.

Jay Goltz:
Well, here’s a fun fact: Do you think it’s possible that the Trump hotels don’t have undocumented workers working there? [Laughter]

Loren Feldman:
I think that’s been documented.

Jay Goltz:
Yeah, right. So that’s kind of: really? it’s not possible. The point is, I think they were some good sound bites to get elected, and it worked, obviously. Are they really going to follow through to the extent? There’s a big difference between deporting someone who’s been here for six months and deporting someone who’s been here for 25 years, pays taxes, has a family, owns a mortgage, a house. That’s not the same thing. So, I’m not sure they’re going to take it to the extent they say they’re going to take it.

Loren Feldman:
I want to go back to something Shawn said before. We were talking about projecting, and you told Sarah that her part-time CFO could handle projections for next year in his or her sleep. Given the conversation we just had about all of the—

Shawn Busse:
I didn’t say accurate projections. [Laughter] He could build you a model.

Loren Feldman:
What kind of projection can you do, looking into next year, with all the things, all the variables hanging out there that we just discussed?

Jay Goltz:
Well, to your point, it might be an accurate projection, meaning, knowing what we know today, took good numbers and did some math, and it was an accurate projection. That doesn’t mean it’s going to work, though. Because God knows what’s going to happen to the economy next year. At least, you can keep your eye on things and know whether, “Okay, if we hit this number, we’re fine. If we hit less, we better cut some expenses.” It is a good idea.

I’m still laughing about, years ago in Crain’s Chicago Business, Saks Fifth Avenue opened up a store in Highland Park, which is an affluent suburb, but it’s not big enough to support a Saks Fifth Avenue. So the person speaking for Saks said, “Yeah, we’re really way off our projections, but we changed the budget, and now we’re doing much better.” So all they did is, they lowered the budget. “We’re doing fine now!” Nothing’s changed.

Loren Feldman:
Same amount of business, but they’re hitting their numbers, because they have lower expectations?

Jay Goltz:
Right, because their numbers suck, because they just lowered it from, whatever, 10 to seven. “Oh, now we’re hitting our budget. Great!”

Loren Feldman:
Have you ever tried that, Jay?

Jay Goltz:
I have had budgets, which I’m probably gonna have one for next year. It’s not a great budget. It’s not going to show a great bottom line. It’s going to be a pathetic budget, but we’ll hit it. Because I know that next year, until interest rates drop, I’m going to have a problem, and it’s not going to go away. And I can’t cut my expenses away to solve the problem. The real estate taxes aren’t going to go away. There’s only so much I can do. There is a certain amount of business a business needs to do to be able to—if you own a landscaping company, okay, maybe you just have two less landscapers. But when you have fixed expenses—rent, utilities—there’s a certain amount of business you need to do to make a profit.

Sarah Segal:
How do you budget? Do you budget really very, like particular things, like shipping? “We’re going to have this monthly budget. Our salaries, it’s going to be this”—

Jay Goltz:
Yeah, the easy part is the fixed expenses, the rent, the insurance, utility. Okay, that one you put in there. It is what it is. Labor-wise, you figure out how many people is it going to take to run this business? And you put that number in there. And you take your sales, and you try to figure out what your sales are going to be, based upon where you were the year before, and what you think. And the shipping is a percentage of what you’re buying. And you put together what I would call a model income statement. “Okay, if we hit all these numbers, we’ll have an X percent bottom line.”

And it’s important to do that, because if you’re not hitting the numbers, you have to take some corrective action. Maybe you have to lay off a salary person. In my case, there’s a certain critical mass amount of people you have to have to run the business, and it’s a problem. I mean, you can’t have a business drop 30 percent in sales, 40 percent—which I’d hope nobody’s down that much—and probably have a model that’s going to work.

Loren Feldman:
I want to run a case study by you. This is a question that a business owner posted on the small business subreddit. It comes from a business owner who wrote, “You cannot make this up. Today, I updated my cafe menu prices to keep up with rising costs, and just a few hours later, my supplier hits me with a 25-percent price increase on most items. Like, what is even happening? It feels like as soon as I get one thing under control, something else explodes. Now I’m stuck debating whether to raise prices again so soon, or just eat the loss and hope for a miracle. Either way, it’s customers or my margins taking the hit.” Any thoughts?

Jay Goltz:
I have an answer, absolutely. Taking the hit yourself? Not a good option. So, the first thing I’d do is check some other suppliers. That seems like a huge increase. Is it necessary? Okay, let’s assume that for whatever reason, it’s legitimate, and there’s nothing you can do about the increase.

Loren Feldman:
Coffee prices have gone way up. Maybe it is.

Jay Goltz:
Okay, fair enough. So here’s the key though, in doing your business model or your budget. The key is, let’s say your cost of food is 33 percent, which I think is probably close. Okay, if your prices went up, let’s say 20 percent, you don’t have to raise your retail prices 20 percent. You could raise it 7-8 percent, and that’ll cover the increase. You have to go back to your business model and say, “Okay, our food costs are now going to be running 38 percent.” That doesn’t mean you have to raise the prices by that same percentage. You could raise them enough to cover the increase, and just for your going forward budget, know that, “Okay, my food costs are now going to be running 40 percent, not 33,” and you charge more.

But the point is, you don’t have to charge 25 percent more. You could charge 10 percent more, and that would cover it. So you do have to look at your business model. And I can tell you, as a retailer, this has been going on for 50 years. People used to work on a keystone, it was called—a double markup. Well, that’s long gone. The reality is, most retailers today, compared to 50 years ago, their cost of goods sold is less, but they’ve allocated more for rent and for everything else. So you have to continually look at your business model and come up with one where you make money.

Sarah Segal:
I’d like to go back to the person that posted that. They said that, basically, once they get one thing under control, it feels like they get hit with something else. I think that’s the nature of being a business owner, and it’s very similar to being a parent. I make fun of my kids all the time. I swear they high-five in the hallway. One is like the troublemaker causing me headaches, and then finally, I get that person under control, and life’s doing well, and they high-five in the hallway, and then the other one comes at me with another problem. I think the nature of running a small business, or even a large business is you’re always going to be facing those things, and you have to be comfortable with that as someone who does that for your job. And if you’re not, then you need to think about doing something else.

Shawn Busse:
We’re just in an era of volatility. And I think a lot of folks are hoping for it to go back to the era of stability and predictability. I just don’t see that happening. I just think between technology, communication, and globalization, change is exponential now. It was a no-brainer to buy a building. You would always win if you bought a commercial building. That is not the case anymore. If you own a commercial building in Portland, Oregon, you are miserable.

Jay Goltz:
Or houses. Our generation, people who bought houses—whoever heard of someone buying a house and finding out, three years later, it’s worth 20 percent less? I mean, we went through that. So, yeah, things have changed.

Sarah Segal:
And Loren, I don’t think you asked me this question, but it was somebody really smart. They asked me if I wanted to do what I was doing again. Like, if you didn’t have a job and you didn’t have a career, would you start your same business that you have right now, in today’s economy? Would you do it again? And I just think that that’s a good question, because it’s a tough one.

Shawn Busse:
Well, some businesses are being made impossible to operate. I mean, some businesses just cannot exist anymore in the current environment. And so, I think for owners, the thing you have to do is be able to be adaptable in big adaptations, not little, tiny changes.

Loren Feldman:
Getting back to the cafe owner, I think you’ve all made good points. The one thing you haven’t addressed is, what does he do right now? He’s just raised his prices, and then he got the 25-percent increase. Does he raise his prices again right away?

Shawn Busse:
The thing that struck me is, he says “my supplier.” Maybe you need a different supplier.

Loren Feldman:
Let’s say he can’t find a better deal.

Jay Goltz:
I think maybe wait 60 days or something. But not raising prices and taking the hit is just a disaster. It’s a formula for disaster. And I have a story. This is a real life story to just illustrate. Chicago’s big with pizza. The best pizza place, everyone I know who went there loved it, their rent was going up. So he decided that he needed to own his own building. So what does he do? He buys a building about two miles away. Well, if you’re in the country, two miles is no big deal. But in the city, two miles is a pretty far distance. So he opens up, and I still pick up from him, because I love this pizza. He goes broke. He closes the business.

So he’s now a real estate agent. And I ran into him, and I said, “Can you explain to me what happened?” And he explained to me that the rent went up a lot, and he wanted to buy a building. I said, “You know, if you would have just raised your prices $1 a pizza, it would have covered the rent increase.” And he said, “Oh, Jay, you don’t understand. If I raised my price a quarter, people complained.” He put himself out of business needlessly. He should have raised his prices. The point is: Get over people complaining about your prices. He literally put himself out of business because he didn’t understand that.

Loren Feldman:
All right, my thanks to Shawn Busse, Jay Goltz, and Sarah Segal. As always, I really appreciate you guys sharing.