‘Being Civilized Ain’t Gonna Do It’
Introduction:
This week, Shawn Busse and Jay Goltz talk about the trendy job interview strategy of trying to get beyond canned responses by asking candidates unexpected questions along the lines of, “If you were a superhero, what powers would you have and why?” Or, “What animal best represents you as a person?” Not surprisingly, Jay isn’t a big fan of those questions, and he offers an alternative strategy that features four questions of his own design. Shawn does like to ask unexpected questions, but specifically those that help him figure out whether a candidate is likely to work well with others. Plus: Shawn talks about what it was like attending the recent going-out-of-business sale of a company he had declined to take on as a client three separate times. Also, Shawn and Jay respond to a Reddit post, where a business owner asks what he can do about a large commercial client who simply refuses to pay a $40,000 bill. “Did I just learn a $40,000 lesson?” the devastated owner asks. “What now?”
— Loren Feldman
Guests:
Shawn Busse is CEO of Kinesis.
Jay Goltz is CEO of The Goltz Group.
Producer:
Jess Thoubboron is founder of Blank Word.
Full Episode Transcript:
Loren Feldman:
Welcome Shawn and Jay, it’s great to have you here. I want to talk about job interviews today, specifically the kinds of questions you use to better assess a job candidate. I started thinking about this because of an article I read and highlighted in the Morning Report recently that offered a few suggestions. The article said that hiring managers have been having a harder time of late getting past the canned, overly prepared answers that some candidates give in job interviews. So first of all, I want to ask, do you guys buy that premise? Do you think it’s gotten harder to avoid the rehearsed response that some candidates give?
Jay Goltz:
I can tell you, we’re having horrible problems with: You call them, you set up a time, and they blow you off.
Loren Feldman:
That’s a different thing.
Jay Goltz:
I know. I’m just saying, that’s the problem. As far as canned things, I wish they were smart enough to do canned things. I haven’t seen that at all. That surprises me. Maybe in the tech world that’s what’s going on, but not in my world.
Loren Feldman:
Shawn, have you seen it?
Shawn Busse:
I mean, I haven’t done a lot of hiring in the last year or so, but I mean, it’s always been a problem. I kind of think that’s maybe a way to get a news headline. But it’s always been a problem that candidates rehearse their answers. Even when I was in my 20s and I was looking to apply for jobs, I was practicing different answers and told, “Oh, you’ll get asked the question: What’s your greatest weakness? And what’s your greatest strength?” And so you’d practice that. So I don’t know that that’s necessarily new. Maybe the access to what the potential questions are is higher because of social media.
Loren Feldman:
Well, also, I think it’s easier to get advice now.
Shawn Busse:
For sure.
Loren Feldman:
Whether ChatGPT or on websites, the coaching is out there now that I think does point people in that direction. Okay, so whether it’s gotten worse or not, assuming you do want to try to dig a little bit deeper and get to know a candidate a little better, here’s one of the questions the article suggests that you ask: “If you were a superhero, what powers would you have and why?” So first, Shawn, I don’t know what the last time was that you were in a job interview, but if you got asked that, if you can imagine, if you can remember what it was like to do that, how would you have answered that question?
Shawn Busse:
Yeah, I mean, what are they trying to get at, right? They’re trying to get at creative thinking and kind of underlying motivations. So, how would I answer that question? I don’t know. This is why I don’t make a good employee. I just think that the idea of asking unexpected questions is a good idea. Let’s just say that. I know I’m not answering your question.
Jay Goltz:
Let me answer it. I’m not criticizing anyone. If that works for them, great. I want nothing to do with this whole line of questioning. What animal would you want to be in the zoo or the jungle? I don’t want anything to do with those questions. I want to get down to real business stuff and talk to people about real stuff, and right or wrong, we just don’t do that stuff. And if it works for people, more power to you. But I have no interest in getting into these—what seems to me to be—silly questions. But like I said, maybe it works for people.
Loren Feldman:
I suspect I personally have been a job candidate in a job interview way more times than either of you put together. If somebody asked me that question, I think I would have just sputtered. I just wouldn’t have known where to go with it.
Shawn Busse:
I saw the article you were talking about. And actually, one of those questions is a question I ask in an interview. I think Jay and I are going to part ways on this, and I part ways with the article. I actually think the problem with some of these questions is it’s actually measuring somebody’s ability to think quickly and on their feet, and there are some jobs where that’s relevant.
But the questions that I like that are unconventional and unprepared are more about things that they may have actually thought about in the past that are unrelated to work. And so I like, for example, one of the questions was, “You win the lottery. What would you do with the proceeds?” A lot of people have thought about: What would they do if they came into a lot of money? And I actually like that question, because I think it tells you a lot about what their motivations are, how they think about other people.
Jay Goltz:
All right, I don’t hate that one as much as, “If you were an animal….” That one I don’t mind. I don’t mind that one.
Shawn Busse:
The others are terrible. They were terrible. You know, I started reading the article, and I was like, “Oh, I’m kind of down with this.” I mean, it’s a strategy I have used for years with great effect. And then I read the questions, and I was like, “These are terrible questions.” So it’s sort of like, the article is sort of half right, in terms of—
Loren Feldman:
I think it’s right on the premise that people do want to try to get a little bit deeper. You know, you hear the cliche all the time that you should hire for culture, for fit, and not for skills, because you can teach skills, but you can’t teach someone to be a good colleague. But how do you figure out if someone’s going to be a good colleague or not? I think that’s the goal.
Jay Goltz:
I have a different approach. Certainly the skills are worth something, but I want to see their mentality. And given that I’m largely in retail, I have a question that gets to the heart of that. So just tell me when you want me to—I have four questions I ask. Just tell me when. [Laughter]
Loren Feldman:
Go ahead, Jay.
Shawn Busse:
Wait, before Jay answers, it sounds like both of us hate at least three out of the four questions in the article. I like one of them. And I guess I would add that what is valuable about the article is the idea of getting to the values that the person has. At their heart of hearts, who are they as a human being? And there are a lot of ways to do that.
You can ask them situational questions that are relevant to your industry. I think an HR person would tell you that’s a better path, because there are less risks of all kinds of lawsuits and stuff. But I think fundamentally, there’s some problems with those. Like, what animal are you? I mean, come on, that’s just ridiculous—versus actually asking them something either relevant to the work or relevant to their life that they can reflect on.
Loren Feldman:
Right, if you’re hiring someone to do something involving animal behavior, it’s probably a very good question.
Shawn Busse:
Sure.
Jay Goltz:
I’ll give them the benefit. Maybe it works for Amazon. I’m not criticizing. Maybe it works for Amazon. I don’t know. All I know is I’d be embarrassed.
Loren Feldman:
Nobody has more turnover than Amazon, so maybe it doesn’t work for Amazon.
Jay Goltz:
RealIy? I’d be embarrassed to ask somebody that.
Loren Feldman:
Shawn, the question that you liked, about what would you do if you came into a lot of money, can you give us some examples of the kinds of responses you’ve gotten to that?
Shawn Busse:
Yeah, so the responses I’ve gotten that I really like are, the very first thing the person thinks about is somebody else. Like: Oh, you know, the first thing I would do? I would pay off my parents’ mortgage. First thing I would do is, I would set up an endowment for this, or I would make a big donation to my college because it was transformational in my life. They gave me a huge scholarship. I’m looking for: Do they think of others first? And that’s the leading indicator to me, in terms of, are they of a team-based mindset, or are they individualistic?
The answers I get that cause me to pause are ones that are like, “Oh, I’d take a big vacation and then I’d buy a big house for myself.” And those are all fine. It’s not that that’s wrong. You know, a lot of people have worked really hard, and they might like a big vacation. But if they don’t ever turn the conversation toward others, that can be a red flag for me in that kind of a conversation.
So really, I’m looking for their values. Are they team-oriented? Are they selfless? Do they think of the long term? That’s another thing I’ve had people say: “Oh, well, I would put it in this investment vehicle, because then the interest on it I could live off of, and then I could also pay for my parents’ house and my kids’ education.”
Loren Feldman:
And I wouldn’t have to work for you.
Shawn Busse:
That’s all right. I mean, I’m not looking for somebody who says they don’t ever want to work again. I’m just looking for somebody who cares about others [more than] themselves. And the other questions I ask tend to be oriented towards that. So I’ll often ask if they’ve played a sport in their life. And then, ideally, they’re familiar with a team sport, or if they haven’t played a sport, they follow a sport. And then I’ll ask them what their favorite position is and why they like that position.
I think the difference between my approach and the article is that I’m trying to get to things they’re familiar with. So I’m not putting them on the spot for some crazy thing that they have to come up with a thoughtful answer. But then I’m asking them something they’re not expecting in a job interview so that they don’t have the canned answer. So I think that’s the difference in my framework versus what the article is proposing.
Loren Feldman:
So have you hired a bunch of point guards?
Shawn Busse:
You know, I very rarely have gotten somebody who comes in with basketball. I’ve gotten a lot of folks who know soccer. I usually hire nerds—often they aren’t that familiar with sports. So that can be a challenge. [Laughter]
Jay Goltz:
And I’m hiring many people who have art degrees, so I just don’t think—
Shawn Busse:
They don’t know sports either.
Jay Goltz:
Well, some. I just don’t—
Loren Feldman:
So, what are your questions, Jay?
Jay Goltz:
Thank you for asking. You’ve got to recognize, when you’re hiring, a third of the people out there, approximately, are really bad employees, which is why they’re looking for a job. I mean, this is not, like, just a third of people are bad employees. No, a third of people looking for jobs are bad employees. Like, how many alcoholics are there in a bar? Far more than there would be walking down the street. So you have to recognize: We need to avoid the bad employees who got fired.
So I want to know, are they still working? And I tell them: You’re going to get extra credit for being brutally honest. I believe that people leave jobs for a reason, and I’d like to understand why you’re leaving this job. So, tell me. And I know people probably told you, “Don’t say anything bad about your last job.” That makes no sense. You’re looking for a job, so I’m presuming there’s something that you don’t love about your existing job. And I frequently get an honest answer out of them.
Here was one that was years ago, a graphic designer. She goes, “It’s too corporate.” I said, “What does that mean?” “Well, you have to have a key to get into the bathroom.” “Really? You’re looking for a job because you…”—I mean, it made no sense. And she didn’t tell me the truth. This is the key. I want someone who will speak the truth to me, because I’m not good at reading minds. And I want to hire an employee who’s going to walk into my office and just lay it on me and tell me the truth. And my guess was, she was working for a big real estate firm. She did graphic design. She had seven different people giving her stuff to do, and I’m sure they were all saying, “Oh no, this is more important. Forget about that”—and I would have respected if she said, “Frankly, I’ve got seven bosses, and it’s making me nuts.” Great! She wouldn’t break, she wouldn’t break. Told me it was because it’s too corporate.
So I didn’t hire her because I don’t want to have to figure out whether someone’s upset about something. I want them to say what’s on their mind. And then I want to say to them, “Did you talk to someone about this at work?” And if they say, “Ah, they never listen to anybody,” I want to hear someone say, “Actually, I did. I’ve talked to three different people, and frankly, it’s not changing, and it’s not going to change.” I want to hear an honest answer. That gets them a lot of points on the board.
The next one, being in retail: ”Tell me about a difficult customer situation you had?” The right person is either going to be proud as could be that they fixed it, and they turned it around and they’re a hero. Or the pain comes back and they grimace, and they’re still licking their wounds from it. And I want to hear an honest answer, how they handled it. Now, let me tell you the answer we just got a couple of months ago from someone. Tell us about if you’ve had any problems with customers. “Oh, you know, sometimes when we have nothing to do, we go on Yelp, and we laugh at what people put on there.” [Laughter] Great. When can you start? I mean, how dumb is that to go tell a prospective employer? This person was working in the company. People were really upset with them. And they thought it was funny.
Three is, obviously, figuring out skills, blah, blah, blah. But here’s the one that people are going to be surprised by, I believe. I know that the common notion out there now is people don’t stay at jobs, blah, blah blah. Okay, I fully recognize that people probably hang around at their jobs less than they used to. But I just want to give you some statistics I looked up. I’ve got about 120 people working here. 52 of them have been here more than 10 years, 44 have been here 20 years, and eight of them have been here 30 years.
So, I’m in a little bit of a complicated business. It’s much better for me if I hire someone and they hang around for 10 or 20 years. So, I try to suss out of them, like, “Tell me why you’re here? What do you find appealing about this job?” I’m looking for people who are enthusiastic about what they do and who give me a reason why they’re applying for the job. You certainly can’t guarantee someone’s going to be here a long time, but why not try? Why not try? So one of my goals is to try to figure out: Could this person be here a long time?
Shawn Busse:
Are these positions you’re hiring for, Jay, generally entry-level, and you’re growing them up? Or is it a mix of like, we could be hiring a CFO, and we’ll ask him or her the same question.
Jay Goltz:
Most of my managers were homegrown. I had the 22-year-old kid who’s now 49 running the whole place. So most of them were homegrown. I did hire someone to be the controller/CFO, and it was a disaster. And I didn’t get involved with the interview. All on me. I should have been involved. I should have asked better questions, and I’m paying the price for it.
Shawn Busse:
Do you feel like your approach and question set, if you had delivered it, would have worked on that senior position?
Jay Goltz:
Not necessarily, no. It’s much trickier. You know, you can’t ask anybody now what they made at their last job. That is really a handicap, because there’s controllers making 100 grand a year, and there’s controllers making 200 grand a year. If you could find out what they made, at least to see what someone else thought they were worth, it would be helpful. And I think I was paying her way more than she made at her last job. And when I said to her, near the end of the time she was here, I said, “Did you have any idea what you’re getting into?” She goes, “No way, shape, or form.” And when I fired her, she said, “I understand. You’re right.” Great. But I screwed that one up big time.
Loren Feldman:
Shawn, do you feel that not being able to ask about salary history is as big a hindrance as Jay does?
Shawn Busse:
No, I don’t think it’s handicapped me. I think there are plenty of other ways you can get to a person’s success in prior jobs—one of which you’ve talked about on several shows, which is the radical importance of calling references. And I would even say, unknown references are a really good strategy for me. So if you’re blessed like I am, and you have a big network in a regional community, almost anybody who’s in this community, I can connect to them somehow. I can go onto LinkedIn, and I can find somebody who knows this person.
And it’s amazing what you can learn by calling somebody and saying, “Hey, I see you’re connected to so and so.” That candidate has no idea you’re looking into them within this channel, and you just leave it open-ended. “Hey, what do you think about them? What would make them successful in this job? What do you think? Are there challenges? What am I going to have to coach them to do?” And I’ve had it go both ways. I’ve had those reference checks go really well, where the person says, “Oh my gosh, you’ve got to hire this person right now.” And then I’ve also had it go where, “Holy cow, you need to stay away from them, like radioactive nuclear material.”
Jay Goltz:
Right, and the misconception out there is when I ask people, “Oh, do you check references.” “No, I don’t bother. They just give you their friends.” Bullshit. I’ve had people tell me stuff you think to yourself: Do you not have a lawyer? Have you ever heard of an employee lawsuit? I mean, they say stuff that you’re taken aback. And my belief is: People don’t want to lie for people. They just don’t.
Loren Feldman:
The issue of calling up people who have not been listed as a reference, I think, is kind of interesting. You are running the risk that you’re spreading the word that this person is out looking for a job. That puts the job candidate at some risk. Are you concerned about that?
Shawn Busse:
I think you’ve got to treat it very carefully. So, I’m not just calling anybody willy-nilly. I’m also making sure that that conversation wouldn’t come back to them in some way and harm them in some way.
Jay Goltz:
But how can you do that? To Loren’s point, how can you guarantee they’re not going to call up their last boss and go, “Hey, I hear Bob’s looking for a job.” How do you know they’re not going to do that?
Shawn Busse:
I mean, there’s just a lot of ways I can handle it. It just depends on the situation. You know, if the person, for example, isn’t employed, then that’s easy. You can just have that conversation. You can ask the person, the candidate, and be like, “Oh, hey, I see you and I both know Marcella. Would you mind if I reached out to her and just talked to her about kind of your relationship with each other?”
Loren Feldman:
That solves it.
Shawn Busse:
It solves it. So you have to treat it like a very specific—all of these things do not work as an, “Oh, this is a scalable thing you can deploy within an enterprise and just do over and over and over again.” You’re already seeing, everything is very, very custom. So that is our advantage as small business owners, right? We can do things that large corporations cannot do, whether because they’re afraid legally or because once you start deploying them at scale, people screw them up.
Jay Goltz:
How about the ones—you ever get the notices, or you get an email or a thing in the mail: “Here, fill this out about the employee”? Why bother?
Shawn Busse:
Oh gosh.
Jay Goltz:
Yeah, they have reference-checking companies they hire, and they ask nothing. And you say to yourself, “Seriously? Why would you fill out a form and put it in print?” It’s silly. And it’s an easy way out for people to do reference checking, but I gotta believe it’s extremely ineffective.
Shawn Busse:
I want to circle back to what I heard when Jay was talking about the questions he asked. You know, Jay’s questions are quite a bit different than mine. And if I’m reading between the lines, what I hear, Jay, you’re looking for is somebody who is upfront and honest and candid.
Jay Goltz:
Yes, that’s one thing.
Shawn Busse:
And willing to have a truthful, even hard conversation, if need be.
Jay Goltz:
Absolutely.
Shawn Busse:
And that makes sense. I’ve known you a while now, and it’s like you are a straight shooter, right? You’re never not going to say what you believe. You’re not going to couch it in soft terms and try to protect my feelings. And I suspect you’ve tried to build that as a culture in your company. Is that fair?
Jay Goltz:
Yeah, I just think the phrase, “Oh, I have an open-door policy” is laughable. People aren’t going to come up to you most of the time. I totally respect and appreciate if someone says, “You know, Jay, that thing you sent out last week? I gotta tell you…” I totally appreciate someone giving me honest feedback, whether it’s me or somebody else. So yes, that’s absolutely an important part of the program.
Shawn Busse:
And so, if you look at the kind of questions I’m asking, Loren, what are they about? They’re about teamwork. We haven’t gotten into great depth, but I’m looking for things like teamwork, deep introspection, creative thinking. I’m not pushing hard on the stuff Jay really cares about. And I guess I say this to say that every business has the things that really matter to the organization. And getting to the questions that drive towards those things—let’s call them values—that is the trick.
And that’s why you can’t just apply the—you know, that article, “Here’s four questions that you could apply to your hiring process.” Maybe, you know, maybe. But you’ve got to really figure out: How do the questions relate to the values and the culture you’re trying to build? My guess is, Jay’s culture is far more Chicago than Shawn’s culture, which is far more Oregon. And that’s fine. We’re growing different cultures. Jay’s got a tremendous 10-year track record with his employees, and so do I.
Loren Feldman:
But you’re also hiring different kinds of employees, too.
Jay Goltz:
Yes, for sure.
Shawn Busse:
We are hiring different—but see, that just further makes my case. You have to build your own system in a way that makes sense for your company, and part of that is having clarity on your values and what kind of culture you’re trying to build so that you ask the right questions. And that’s why these articles that are like, “one size fits all, here’s 10 things you can do”—it kind of makes me chuckle, because it’s sort of like saying, “Well, if you want a really well tailored suit, just start sewing.” You know, it’s like, “Well, okay”?
Jay Goltz:
Well, in my case, the key is, I’m not going to change someone’s mentality. I want someone who enjoys and wants to take good care of customers and gets personal satisfaction out of it. That’s what I need. Either they get it or they don’t. I can’t train them into that. And in the framing industry, part of the reason I grew so fast was that I totally respect and appreciate customers.
And a lot of the people who used to be in the framing industry came from the art side. And when you think about it, being an artist is not being customer-driven. You do your art, and if someone doesn’t like it, they don’t like it. Versus, what does the customer want? So I’ve managed to bring the two things together to be both art-driven, and respect art, but also respect the customers. And that sounds simple, but I gotta tell you—
Loren Feldman:
But that’s not going to help you when it comes to hiring a CFO.
Jay Goltz:
No, absolutely. And I didn’t get involved enough, and, yeah, I majorly screwed that up.
Loren Feldman:
I want to get to a couple other topics before we finish today. Shawn, I gather you recently attended a going out of business sale that had something of an impact on you. Can you tell us about that?
Shawn Busse:
Yeah, a friend of mine who’s an engineer forwarded me an auction for machine parts, and I have a hobby making things. I have a small machine shop in my studio and do woodworking as well. And it was like, “Whoa, that’s just down the street from us.” And then I realized: Oh wow, this is a company that had interviewed us, to hire us—I think three times, maybe just twice, but I think it was three times. The business had been around over 60 years, had been family-owned and -founded, and then, like, just overnight, poof, they were gone. And it was a weird experience. The street they were on was named after the company. Going into the facility, they had a big banner on the wall that said: Chosen by the Oregonian as the best place to work in 2022. That was weird to see. I just thought about, you know, there were probably 75-100 people who had been working there, and it just kind of overnight had shut down.
Jay Goltz:
Success takes years. Failure takes 90 days. You could do enough bad stuff in 90 days to pretty much put yourself out of business.
Loren Feldman:
Do you know what happened, Shawn?
Shawn Busse:
I don’t know for sure. I can surmise, though, and we actually turned them down as a client all three times.
Loren Feldman:
Why?
Shawn Busse:
There were a couple factors. One was vibe. When I met with the CEO, I really didn’t trust him. My gut was just telling me that this person is just not somebody who’s trustworthy.
Jay Goltz:
Was he the son of the founder?
Shawn Busse:
He was not. He was a quote-unquote, professional CEO, who was brought in from the outside. Honestly—and this relates to hiring, too—my gut has served me really well over the years. Whenever I get a vibe about somebody who’s an employee that we’re going to hire—both ways, good or bad—I really need to listen to that. And it usually is right. The things he was saying, they were things like, “Oh yeah, we’ve got this figured out. We just need to do a little bit of marketing to really make it work.”
And I looked around, and I was like: Wow, the equipment is all old. The lighting in here is dingy and dark. People are working in a crappy environment. The machinery that they were using was a commodity, meaning that anybody could buy that machine and start up a shop and compete with them. And then he kind of fundamentally just kind of diminished the size of the challenge. I’m like, “Man, you’ve got a business-model challenge. You have a marketing challenge. You don’t know how to get new customers.” And the amount of investment he wanted to make was just almost inconsequential. So he truly didn’t value the size of the problem.
Jay Goltz:
I think trying to hire someone to take over a family business is very, very challenging. I mean, what was his background? I mean, there’s a reason why most businesses don’t get to the second generation. There it is.
Shawn Busse:
Yeah, I think it’s really telling. There’s a lot of lessons here. One is what Jay talks about, which is the challenge of legacy and transitioning from an owner-founder to somebody else. And I’ve seen that fail so many times, Loren. It’s just a really hard move to make. I’ve seen it work, but I’ve also seen it fail probably more than I’ve seen it work.
And then the other piece, too, about business-model change. They were first to market when they had founded the business, right? They were doing work that was really innovative and new 60 years ago. And what they were doing, when I looked at them, was not innovative and new and easy to be copied by lots of other people, including the entire country of China.
So, those are all good lessons. Like, just because you were innovative once doesn’t mean you’re innovative forever. They had a ton of marketing debt. They had not spent any money on marketing. Like ever. And so—
Loren Feldman:
What do you mean by marketing debt?
Shawn Busse:
Marketing debt’s a term I use when I come into a company—let’s say this is a ten-million-dollar company, and their marketing budget historically has been zero. Like, literally zero, because they’ve essentially just been order takers. They’ve had legacy customers. They have the 800-pound gorilla problem, meaning they have a big client. My guess is, they had a big client that sent them a lot of work for many, many years. My guess is that it was probably Boeing, because they are in the machining business. So we’ve seen what’s happened to Boeing over the last five years or so. It’s a total disaster.
So my guess is that when Boeing kind of fell apart, they didn’t have another customer that they could fall back on in any meaningful way, and then they didn’t have any marketing. So they had debt from not doing marketing for years and years and years and years and years, and so then when they finally realized that, “Oh, we better do some marketing,” they’re only willing to spend a tiny little fraction of what’s necessary versus a company that’s been doing marketing their whole existence.
There’s just so much debt there. It’s like deferred maintenance on a house. You know, if you don’t paint your house every five or 10 years, now you’ve got to replace all the siding. And, oh, also, the boards underneath are rotten. So, a company with big marketing debt often underestimates how much cost there is to catch up.
Jay Goltz:
Listen, it gets back to the 21 hats. You can’t ignore any of the hats, and certainly not the marketing hat. You need to be somewhat of a marketer, even to a small degree. But to your point, to just ignore it because you got one big customer? You can’t make it up in a year.
Shawn Busse:
No, no. And then, I think they had innovation debt, too. So they hadn’t bought new equipment. They hadn’t figured out how to do things that the market needed that was new. So you’ve got marketing debt, you’ve got innovation debt, you’ve got business-model problems. And I walk in the door, and he’s like, “Yeah, I’ve got maybe $100,000 to do all this stuff.” And I just look at him and go, like, “I can’t take your money in good conscience, because this is not a $100,000 problem. This is a half-a-million-dollar problem.”
Jay Goltz:
See, here’s what I find a little interesting. Do I think if I had nothing to do, I could have gone in there and saved that company? Maybe, because I’m an entrepreneur. This guy’s a CEO. It ain’t the same thing. And that’s the problem. I always say, “Oh, you’re going to hire someone who’s going to be you? Do you know what they call those people? Entrepreneurs. They don’t need you.” So the question is, what kind of pool of candidates is out there who is going to walk into a situation like that, who’s going to have the skill set to turn something like that around? That’s a tough hire.
Shawn Busse:
Well, and it’s not just the hire. The structure is problematic, because my suspicion is the CEO is compensated based on EBITDA, or net and operating income. So he gets bonuses if the company makes more money. So how do you make more money? Well, you don’t buy new machines. You don’t innovate. You don’t pay for marketing. You don’t invest in the company.
So in the short term, you make more money as the CEO and the owners are happy because you’re throwing off money. But without those investments, what happens to your company over time? And I think that’s the difference between an entrepreneur and sometimes the professionals. Like, really good professional CEOs get this, and they tell the owners, “You have to invest.”
Jay Goltz:
Here’s the problem, though. Think about it. You said they were doing $10 million. They can’t afford to hire the person and pay them what they need to pay. That’s the problem. If this was a $50 million company, they could have brought somebody in who’s super smart, who had a great record, and paid them $600,000 a year or something. But you can’t pay that kind of money on a ten-million-dollar business. So that’s a problem.
Shawn Busse:
That’s a good point. You know, I do think there are certain sizes of business where they’re kind of in a no man’s land or the Death Valley that we’ve talked about. And then the owners had exited the business some years ago. So if you think about what their motivation is, they love this business just throwing off cash to them.
Loren Feldman:
The owners had exited managing the business or owning the business?
Shawn Busse:
Managing the business. So they were shareholders, essentially taking home a check, from what I understand. Just to be clear, I don’t know all the dynamics, but it was clear that the CEO was not a founder, was not part of the family. And by looking around, I could see there had not been any investments made in the company.
And here’s something really fascinating to me: I bought a couple of tool chests on auction. I got them for so cheap, it was crazy. When I get to pick them up, I open the door drawers, and they are full of tools—tools that have never been used. And I started looking online. There’s this thing called a floating tap holder, if any nerds are listening to the show. It was a $1,500 tool, brand new, sitting in this cabinet with no inventory management on it. I don’t know what I’m going to do with it, but every drawer was filled. I started looking up these, like it’s called a floating reamer. It’s a $700 tool. I did the quick math. That one cabinet was filled with probably $20,000 to $30,000 in tooling, if it were purchased new.
And now, to be fair, the company needs that stuff to run the machines. But what was obvious to me was like, operationally, nobody was really minding the store. Things were just being ordered. They were being put in drawers, whatever, whatever, whatever. And so you had top-to-bottom problems.
Loren Feldman:
All right, I want to hit one more thing before we go. This comes from the small business subreddit, a situation that I’d like to run by you. A small business owner writes, “I have a larger commercial client that has decided that they aren’t going to pay for the services they received even though my invoices were approved by their team and even rated positive for my small business. This has been devastating, as they owe me $40,000. I’ve been combating this for months, call after call, email after email, and I’m essentially being told to shove it. I attempted to get legal help for this, and was told it’s too much for small claims and not worthwhile for a lawyer to pursue. And I’d end up with virtually nothing anyway after the case wins. To add to the horror, I did a deep dive on this company. They have a history of non-payment with employees and vendors alike. Even their Google reviews are filled with angry vendors and employees that work for the restaurants they own and have not been paid, and this is going back like six years. Ugh, did I just learn a $40,000 lesson? What now?”
Jay Goltz:
Well, guerilla warfare. He could go set up in front of one of the restaurants with a big sign and—[Laughter] You laugh. I’ve had three collection cases where I’ve actually showed up at the place. There was a law firm, a class-action law firm. They had someone embezzling from them, and they were pissed about it. They bought a bunch of art for the offices. It was on the walls, but—this was back when faxes were the way—they sent a fax saying she wasn’t authorized to buy this. “If you’d like to pick up the art, feel free to.”
Okay, so I put a little blue suit on. I show up. I go to the front desk. And I say—I knew her name—”I’m here about the Wilson situation.” And the two managing partners came out because they thought I was with the FBI or something. So they whisked me into the office, and I said, “You probably didn’t recognize my name. I own blah, blah, blah. I sold you this artwork.” And I said, “What are you doing?”—and I shamed them into paying me. So there is stuff you can do other than just sit back.
A restaurant stuck me one time. I walked in there Friday night at six and said, “You can either get me a check, or do you see that artwork hanging over those people? I’m gonna go in there and take it off the wall. And feel free to call the police, because I don’t care. I own my own business. I could use the publicity.” Got a check. So, you know, there is some stuff you can do—being civilized ain’t gonna do it, though.
That’s a terrible story, and I think I would make them really uncomfortable, because I can tell you all the civilized people are just throwing in the towel and going on Yelp. I think you show up at the front of the restaurant and make a game out of it and say, “I’m not leaving until I get something.”
Loren Feldman:
Shawn, have you ever been stiffed on a big bill?
Shawn Busse:
I have been stiffed twice in my career. Once was in the Great Recession. I had a client who went bankrupt, and I remember him calling me, and I was a baby business owner at the time. And he’s like, “Yeah, sorry. You know, we just can’t pay it.” And then I kind of learned how bankruptcy works. And you do kind of get screwed, but I don’t know. It was just interesting. I probably would have handled that differently today.
Jay Goltz:
I don’t know that you can call that being stiffed. I mean, you gave credit. And trust me, I used to have a different view of it. Like, people do go bankrupt. I mean, it’s the nature of the beast. But in this case, for the person who wrote into you, Loren, it doesn’t sound like they’re going bankrupt. They just decided they’re just not going to pay him, and that’s a whole different animal.
Loren Feldman:
Well, there is another lesson here. The guy did some research after this all happened and found out that there was a reputation there. He probably should have done that research before. Correct?
Shawn Busse:
I mean, especially if this is a new customer that he’s not done business with before. I think there’s a good lesson there of smaller invoices, more frequently, figuring out: Is this a reputable person? Are they going to pay me that $5,000 invoice at the beginning of the relationship? And if they don’t, then the past is usually an indicator of the future.
Loren Feldman:
Do you guys do that kind of research into a new customer or client?
Jay Goltz:
Oh, I made an edict years ago that if anybody’s to get credit, they have to fill out the credit form. It’s got to be checked. And if it’s some big company, I said, “Then get me to sign it.” But never again am I going to ship out an order without having a signed—and it’s never happened since. So I haven’t had a lot of problems with that.
I would say the person needs to decide. I just don’t like getting taken advantage of. I’m telling you what I’d do. I’d go in front of that restaurant on a Friday night, and I’d get a card-table chair, and I’d sit out there and explain to every person coming in what lowlifes they are. And then they’re going to say, “We’re going to call the police.” “Go ahead, call the police. Looking forward to it.” Like, that’s bullshit. That is just bullshit.
Shawn Busse:
It does seem that the traditional avenues are dead ends.
Jay Goltz:
Clearly. The lawyer thing ain’t gonna work.
Shawn Busse:
The lawyer’s not gonna work. The small claims court one is interesting, because I wonder if you could take a portion of it to small claims court just to create the part of Jay’s bad PR strategy, right? Like, “Hey, you know what, we’re gonna file three small claims for this, $40,000 in total. And then we’re going to call the local news media and talk to them about this case and how unjust it is that a big company’s taking advantage of it.”
So I do think like you either have to decide you’re going to be creative and go guerilla, or you just have to call it a lesson. For me, my non-payment was a lesson, and I switched my whole business model, and now—
Jay Goltz:
Except yours is very different. They legitimately went bankrupt.
Shawn Busse:
Well, you don’t know the full situation, Jay.
Jay Goltz:
But they did go bankrupt.
Shawn Busse:
They did, but it was a choice. They kept their really nice house in the nice neighborhood. They could have kept the business running, and if they had weathered through, they would have been fine. But it was easier for them to go bankrupt. This is a very specific situation where, whatever, I just know the situation better than you do because I was involved in it.
Jay Goltz:
No, no. I’m not saying you could have done things differently. I’m just saying, they did in fact go bankrupt, though. So it wasn’t just thumbing their nose at you and saying, “Yeah, I’m just not going to pay you.”
Shawn Busse:
True. And there’s a gray zone of when bankruptcy is necessary. And then there are those who say, “You know what, I’m going to work really hard. I’m going to make this business work. And I’m going to struggle, but I can do it.” And they chose not to struggle, and that’s fine. That’s their choice.
But it did change my attitude about how I run my business. And it was a good lesson, because what I did is I absolutely changed how I got paid, and I also no longer paid for people’s material. Part of the problem was I had bought a bunch of printed stuff for them. And I was left holding the bag on that. And so I realized, “Oh, from here on out, clients are going to pay vendors directly. No more pass-through stuff.” And so all that was really good.
Loren Feldman:
Is that the change you’re referring to, or did you also start insisting on being paid up front, or something like that?
Shawn Busse:
Yeah, we get paid when we start a relationship, not after we’ve done the work. So that takes a degree of trust from the client, of course, but we have a really good reputation now. Nobody ever really balks at that anymore.
Loren Feldman:
All right. My thanks to Shawn Busse and Jay Goltz. Great conversation, guys. Thanks for sharing.
