Episode 39: Are You Ready to Sell Your Business?
Guests:
Paul Downs is founder of Paul Downs Cabinetmakers.
William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.
Jay Goltz is founder and CEO of Artists Frame Service and Jayson Home.
Producer:
Jess Thoubboron is founder of Blank Word Productions.
Episode Highlights:
Paul Downs: “I don’t think the trouble has really arrived yet. I think it could easily get much, much worse. I just have no idea where we’re gonna be six months from now.”
Jay Goltz: “This seems to be a well- accepted fact, that people who sell their business—85, 90 percent of them—regret it after they sell it. I don’t think I would do it.”
William Vanderbloemen: “If I were looking to sell, it would have been better to sell in January or February than today. But ask me again in 12 months, and it’ll be better than ever.”
Full Episode Transcript:
Loren Feldman:
We all know this has been a turbulent year with the pandemic, the economic crisis, the election. It’s been a lot of stress on you and on your businesses. I’d like to start today by asking: What impact you think all of this has had on the value of your businesses? How do you think your business valuation today would compare with your valuation in, say, January? Paul, do you wanna take a crack at it?
Paul Downs:
I think you could look at it two ways, one being just a very straight EBITDA calculation based on the profitability of the company this year as opposed to last year, and assuming for small manufacturing, the value’s going to be about three times the earnings, then it went down by about a million bucks.
Then there’s the longer-term question, which is: Doing what I do, is the market for the product going to be the same as it would have been without COVID? And I think it just remains to be seen. It’s too complex a set of equations about whether we outlast our competitors, as opposed to whether the demand for the product shifts in some way. I couldn’t tell you, so I won’t answer longer-term.
Loren Feldman:
When we first started talking to you in June, you were concerned about whether people were going to keep buying conference tables. You seem a little bit more confident now. Is that right?
Paul Downs:
Well, we’ve had about a million bucks in sales since that conversation, so some people are buying conference tables.
Loren Feldman:
Good to hear.
Paul Downs:
The ones who are, they seem to be as enthusiastic about the concept of meeting as they ever were. Now I have more information, but I don’t feel like I have enough to make a solid prediction as to what will happen next.
Loren Feldman:
Jay, how about you? Do you think this year’s had an impact on the value of your business?
Jay Goltz:
If I had some metric to do it, I would say, yeah. Just judging with my bank situation at the moment, they look at retailers like we’ve got leprosy or something. It’s just remarkable, and my business has been fine. I’m actually doing just fine now, but if I was to go stick it on the market, I just think that people read all these stories about retail debt and all that stuff, and it’s probably had an effect on things.
I’m confident I could get three different appraisals, and they’d all be different, because this is what I’ve been dealing with since the day I started my business. My framing business is 20 times the size of the average frame shop in America. There is no metric for that. The furniture store [is] a little unique, in that I do a lot of web stuff. I don’t think there would be any way of coming up with a convincing number that somebody could prove, “Oh, yeah, this is what it’s worth in the market,” because I’m not sure it’s worth anything in the market. I’ve also concluded I could have a going-out-of-business sale for six months and probably raise as much money as I would selling it. It’s convoluted, and I don’t care.
Loren Feldman:
William, how about you? Do you think this year’s had an impact on the value of your business?
William Vanderbloemen:
Yes and no. I think if I’m an investor looking at us… well, first of all, I’m less inclined to sell the business than ever, because I think that we sort of won the battle of the first-est, if that’s a battle, if that makes sense. Within our little vertical of a faith-based industry, we were the first executive search firm, and we won the battle of the first-est. I think that the pandemic—I don’t wish business closure on anybody, but it’s happening to the few other people who try and do what we do. And now we’re gonna—I’m hoping and believing—survive the battle of the last-est.
When this is all over, however long that takes, we’ll be the only one standing in the middle of a market that’s going to have more churn than ever. There’s going to be a giant musical chairs game across every industry once this is over, but particularly in our vertical. If I were inclined to sell right now, I would think I’m an investor who can get something cheaper than I need to pay for it, but it’s going to turn into a really good investment within 12 months. But as the guy who owns it, that’s just not not my place. That probably didn’t answer your question. I would say the raw value of the thing—if I were looking to sell, it would have been better to sell in January or February than today. But ask me again in 12 months, and it’ll be better than ever.
Loren Feldman:
So as a way of assessing the impact this crazy year has had on each of you, if someone were to offer you twice what your business is worth, in cash, would you take it? How about you, Paul?
Paul Downs:
I think the answer is, for me, yeah. The reason would be that twice what my business is worth would be enough for me, at my age, which is 58, to sort of coast into retirement early. If I actually encountered someone who was willing to overpay for my business in cash, I think that’s sort of a miracle scenario, so I wouldn’t pass it up.
The flip side would be: Why wouldn’t you do that? And if the business wasn’t worth enough for me to comfortably walk away and try to find something new, then that would be a different answer. Or if I felt that the primary satisfaction of my life was coming to this particular business and these particular people every day, and being boss in my own little kingdom, and then the alternative to that is I sit alone in a room with my millions of dollars, then maybe I wouldn’t. But I’m pretty confident that I could find a way to be satisfied and to take my skills to some other situation and help a new group of people, so I probably would take that deal.
Loren Feldman:
Does that have anything to do with the stress of this past year?
Paul Downs:
No. I think the most surprising thing of 2020, to me, has been that, considering the arrival of disaster after disaster, I have not personally felt very stressed by it because it’s never reached a level that compares to other stressful moments in my business life. To put it very simply, I never came close to running out of cash. And that’s pretty much exactly my stress level: how much money I have in the bank.
Loren Feldman:
Jay, how about you? If somebody offered you twice what your business is worth…
Jay Goltz:
For me—and this all very much parallels what Paul just said on many levels—the first question is: Do I need the money? Would it change my life any? And the answer’s no. I wouldn’t have a nicer car. I wouldn’t have a nicer house. I wouldn’t travel more. It wouldn’t affect my life day-to-day, which gets to the second question of: Do I like going to work every day? Absolutely.
I have a few friends who are retired now, and when I go out to lunch or dinner with them, I want to poke pencils in my eyes when I hear about, “Oh, I went to the senior center.” And it’s like, “Oh, really, that’s great.” And then it usually rolls into their prostate. And I have no interest in hanging out with a bunch of guys playing cards or whatever—which I’m not criticizing. I have no interest in doing that. I like going to work every day.
The third thing is, I think my kids have interest in it… I think. I’m flushing that one out. I wouldn’t feel great about my employee situation. I’m not saying I wouldn’t do it for this reason. I would never criticize somebody for selling their business. But I’d be leaving my employees hanging, which I would rather not, if I could. And lastly, there could be a situation where you might have a business that you think, “Oh, I’m going to get swallowed up by Amazon or I can’t stay competitive.” I don’t feel that way at all. I still feel I can be competitive.
For all five of those reasons, I have absolutely no interest in selling out. Now, if someone came in and offered me some stupid number, like stupid number, like two, three times… With that, would I have to do some soul-searching? Yeah. I don’t know what I’d do, but boy, I’ve gone to seminars and stuff, and this seems to be a well-accepted fact, that people who sell their business—85, 90 percent of them—regret it after they sell it. I don’t think I would do it. But if somebody offered me a ton of money, that would be quite a dilemma. But that’s not going to happen, so I don’t lose any sleep over it.
Loren Feldman:
William, how about you?
William Vanderbloemen:
Probably not. First of all, you say “twice what it’s worth,” I mean, what’s it worth? You know, what is that number?
Loren Feldman:
Whatever you think it’s worth.
William Vanderbloemen:
Well, let’s make up giant numbers. For me, Loren, I’ve been a serial entrepreneur my whole life, all the way back to nine years old and being a paperboy who bought out the routes around me so I could redraw the districts. But there’s a part of me that says it would have to be the right buyer, too. It’s my name that’s attached to the thing, and the whole reason for doing this company is for a cause. That’s the primary driver, not a giant payday, so a lot of things would have to align.
But the flip side is, I’m 50, which I hope means I’ve got a lot of life left. I’m watching so many entrepreneurs fall prey to the idea of, “Hey, I caught lightning in a bottle once. I can do it again.” If the cause were right, and I believed in the people and I thought they could secure the work and take care of my staff, I would then also have to have a number that’s big enough that I’m not going to have to work again. Because I’m not going to fool myself into thinking I can just go start another thing, and it’ll be another great idea. I’ve seen too many people believe that and then end up, “Oh my gosh, what am I going to do for income for the rest of my life?”
Jay Goltz:
Twelve million dollars, William. Robert Half calls and says, “You know, we’re looking to expand. We already do this for a living—or some other firm that does what you do—and this is a great niche. We love what you’ve done. We treat our employees well. We want to give you $12 million.”
William Vanderbloemen:
No. That’s easy.
Jay Goltz:
Wow.
Paul Downs:
Twelve million. Really? I was thinking 2 million I’d be pretty happy.
Jay Goltz:
Wow. Okay.
Loren Feldman:
William, you said it would have to be enough money that you wouldn’t have to do anything else. If you didn’t have to do anything else, what would you do?
William Vanderbloemen:
Well, I’d probably start some kind of nonprofit work. I’d probably open some kind of coaching for the people I’ve placed over the last 12 years. I’m getting old enough now that I’ve made enough mistakes that I can tell people what not to do. A lot of the younger guys we’ve placed are looking for a higher level of executive coaching, and they trust me. I’d probably do something like that. I don’t know.
Jay Goltz:
What about start a podcast? Everybody wants to start a podcast. That seems to be the rage these days. Do you think about that?
William Vanderbloemen:
I’ve got a couple of those. I don’t know, Loren. It wouldn’t be sit still. I’d just want to know that my family—and that’s not just Adrienne and me. I’ve got seven kids. They’re gonna start having kids. I’m a believer that if you do really well, you should be able to help care for your children and their children. I want to be able to do that.
Jay Goltz:
And $12 million isn’t enough to do that?
William Vanderbloemen:
Well, it depends on what “care for” means. I give a lot of money away, Jay.
Jay Goltz:
Yeah. 50 million. 50 million. Fifty!
Loren Feldman:
It’s not an auction.
Jay Goltz:
Yes, it is. That’s kind of the point. It’s absolutely an auction. There is a number—
Loren Feldman:
Well, not right here.
William Vanderbloemen:
I’ll say this: What’s the line? “Not everything’s on sale, but everything’s for sale.” I mean, other than my wife and children, there is probably a number where it makes sense, and then I could go do great benevolent work and not charge anybody a nickel and have enough. Yeah, of course, there’s a number. And I know what that number is. My financial planner and I are pretty clear on it. But it’s probably not right now.
Loren Feldman:
Have any of you ever paid to have a valuation of your business?
Paul Downs:
I have.
Loren Feldman:
What prompted it? Why did you do it and how long ago was it?
Paul Downs:
It was two or three years ago. My business at the time had three stockholders: my father, my brother, and myself. I owned about half and then the other two split the other half. My father was reaching an age when he was starting to decline, and I was anticipating needing bank loans. I didn’t really want to have him involved in trying to negotiate lines of credit, or having to be a cosigner and doing any kind of paperwork, and so I bought his shares out. In order to do that, I needed to have some valuation of the business. As it happens, there’s a guy in my Vistage group whose business is producing small business valuations for SBA loans, and he had a whole process set up, and I was just like, “Well, I’ll pay you—” whatever it was, 600 bucks. And the process—
Jay Goltz:
Is that all it was: $600?
Paul Downs:
Yeah, because he’s got it very much down to a science. I was looking for a low number at that point, because I’m buying stock as opposed to selling. We put the numbers through his formulas, and it came up with a relatively low number, because the business wasn’t making any money. We’d lost a quarter million bucks in the preceding two years, so it wasn’t worth much.
Jay Goltz:
How did your brother feel about the whole thing?
Paul Downs:
Well, I will say that my father and my brother have been the ideal partners for the last 25 years, which is that they’re utterly unconcerned with how I run the business. If I feel like something is a good idea, they’re like, “Go for it,” mostly because neither of them have any reliance on my business to support themselves. And frankly, to them, the amounts of money are pretty much a drop in the bucket, so that’s easy. That’s not everybody’s situation, but that’s my situation.
Jay Goltz:
Just to be clear, from what I know, if you go hire an accounting firm or someone to do that, from what I understand, add a zero to that. I think an appraisal is like 5 or 10 grand. I don’t think $600 is the typical price.
Paul Downs:
Yeah, it may have been $900, but keeping in mind that this is a guy who does this for banks. It’s not automated, but it’s not intense discovery.
Loren Feldman:
I’ve read a lot of stories—I’ve probably edited a few stories—that suggest that business owners should periodically get a valuation, just the way you get a physical, that it’s a good idea to know what your business is worth, even if you have no intention of selling it, in part, because it may turn up some issues that you should deal with. It doesn’t sound like any of you necessarily have followed that advice. William, have you thought about it at all?
William Vanderbloemen:
I have a golf buddy who does this for a living. Back when we first looked at buying a couple of other search firms—and we did buy one—we went through the exercise and he just kind of said, “Hey, let me just do this for you.” I think Jay’s right on the cost, but we got the friends-and-family discount and didn’t have to deal with it.
But the valuation—Jay’s right. It is with EBITDA. Sometimes it’s top line, and maybe it’s top line times two. But I think in our industry, it’s EBITDA times a multiple. And what changes is: What is that multiple? I mean, there were some pretty crazy multiples right before the pandemic going on in the search world. You know, 7X, 8X, 9X, and that’s not there anymore, but it’s a very cyclical thing.
Jay Goltz:
I’ve been to enough seminars to know—and I’m ADD, I can barely sit through an hour long—I have to tell you, I went to one and I paid attention for the whole hour, because it was interesting. And one of the things that they all say is, “The bigger your business, the better the multiple.” You get to a $10 million, $15 million, $20 million business, your multiple on the EBITDA is going to be greater because there’s more potential there. There is a science to it.
William Vanderbloemen:
And Jay, what I understand—and again, I’m a recovering preacher. I have a religion and philosophy degree and a master of divinity, so what do I know, right? But I also hear it’s not just the size of the company, but it’s a couple things. One: How much is the company driven by the personalities that are there?
Jay Goltz:
Yeah.
William Vanderbloemen:
And two: How much is the revenue of the company driven by repeatable technology? Technology multiples go up into the 20s and 30s. I mean, it’s ridiculous. And then if it’s personality-driven—we’ve got to have these four partners here, or it doesn’t work—well, those valuations go way down fast.
Jay Goltz:
And then there’s also: Do you have two big customers that make up 50 percent of your business that all you have to do is lose the one customer and the thing goes in the toilet?
William Vanderbloemen:
Our biggest customer is a little less than 1 percent of our annual revenue.
Paul Downs:
I would guess that William’s business is actually quite well-poised for a good multiple, because not only do you have a diverse group of customers, but you also have that very strong plan for how to operate the business when you go—that succession plan. I think that people who are looking to buy a business are going to be looking for systems in place so that it will run without the founder.
William Vanderbloemen:
I will say, I have a pretty good friend who does quite a bit of merger and acquisition here in Houston. I talked to him about this a number of years ago, because he was encouraging me—I said, “I don’t want to sell. I don’t want to sell.” He said, “Well, you just need to be ready to sell.” I said, “What do you mean?” He said, “You’d be shocked. The overwhelming majority of companies that think they’re ready to sell don’t have their accounting and their books in order. Make sure you’re keeping”—and he showed me the standards—”keep your accounting and books in really good shape, because that’s where, if you ever get to where you have to sell because of health or you want to sell or something comes along, you’re gonna make yourself much more attractive by having your financials in very, very good shape.
Jay Goltz:
You know, that’s interesting, because let me tell you, from the front line here, I’ve been paying to get a review from my accounting firm. My 30-year-old kid has started to get a little involved with the finances, and he goes, “Dad, do you realize that you’re paying $25,000 for a review?” No, I didn’t realize that. So I looked into it, and I got the bank to back off of that. They don’t need it. So I say to my accountant—my accountant of 22 years—”Why am I paying $25,000 a year for a review?” “Well, it’s good if you want to sell your company.” “Well, I’m not selling my company.” It’s certainly good for him though: $25,000 a year.
Loren Feldman:
That was a review but not an evaluation?
Jay Goltz:
Right. Just the review. They’ve sent two guys to sit in the office for four days doing whatever, and they’ve never found anything. Keep in mind, part of this is, I have a CFO. He’s a CPA. They’ve never found anything that needed to be adjusted, but they don’t mind charging $25,000 a year extra, and you know what—
Loren Feldman:
What were they telling you in that review? Were they just telling you, “Everything’s okay”?
Jay Goltz:
Yeah, “Looks good. Looks good.” Great. Twenty-five thousand dollars. You do that for 10 years, you just bought yourself a condo wherever you want it. That’s a lot of money. So I guess part of my point is, it’s really good for the professionals who run around telling everyone, “Oh, it’s a good idea to do this. Oh, yeah, do this over here.” I have a phrase: “commerce over conscience.” Sometimes the quote-unquote professionals don’t mind selling you a couple of extra bells and whistles that maybe you just don’t need, so it’s food for thought.
Paul Downs:
But Jay. don’t you feel good that you bought your accountant a condo wherever he wants?
Jay Goltz:
That’s kind of the point. No, I really don’t. That’s kind of my point. When he takes me out to the country club once a year for their big event, and it’s all you can eat, and it’s like, I don’t need that nonsense. And let me tell you, the interesting part of this, for me at least, is having my kid come into the business to look at this. You know what? Good for him. He just saved me $25,000 a year, and he’s the one that goes, “Dad, do you really need to go to the country club?”
That whole old school thinking, and when I hear about golfing buddies—William, to your point—golfing buddies, country clubs, going to the basketball game, this whole world of the professionals taking you out and wining and dining you: What’s it costing you? I don’t really need to be friends with my accountant. I really don’t. I don’t need to be friends with my insurance guy. I want to get a good price. I want to be serviced properly. That whole world of getting wined and dined so that you no longer shop around for services is really good for them, frankly.
Paul Downs:
Well, I’m not a member of a country club.
Jay Goltz:
Not you, but is your accountant or your lawyer a member of a country club?
Paul Downs:
No, you’d like my accountant. She comes in and talks at me at about 350 words a minute for 20 minutes.
Jay Goltz:
Great. Is she a New Yorker?
Paul Downs:
Philadelphia. But it costs me 2,500 bucks a year. I have a bookkeeper who does the basic things, and it’s very no nonsense. I don’t think she’s a member of a country club either.
Loren Feldman:
Do you feel you have enough eyes on your finances, keeping track of where you stand?
Paul Downs:
I mean, I have both my eyes on my finances pretty much all hours of all days. I still sign every check, and I know where every penny is, and I project out payments and cash flow and all that. Yeah, I’m not worried about it.
Loren Feldman:
William, do you have a CFO?
William Vanderbloemen:
Ummm… no.
Loren Feldman:
[Laughter] You had to think about it for a second.
Jay Goltz:
What’s the title of your head accounting person, a controller?
William Vanderbloemen:
Director of finance.
Jay Goltz:
Okay, which begs the question: What’s the difference between a director of finance and a CFO? I don’t know. I mean, I have an accounting degree, but they don’t teach any of that stuff.
William Vanderbloemen:
I think the thing that I missed for a long time that we’ve gotten out, our titles aside, is the ability to forecast cash. And that’s not just a statement of cash or read the P&L, but we have a pretty lumpy business. We sell a rather large widget and we’re not selling a bajillion of anything that’s $10. How do you predict lumpiness? Software has helped a lot and our director of finance is outstanding.
Jay Goltz:
Does your director of finance have an accounting background?
William Vanderbloemen:
Yes.
Jay Goltz:
CPA?
William Vanderbloemen:
Yes.
Jay Goltz:
Okay, so—and that I’m not baiting you, I really don’t know this—in your mind, do you have a difference between a director of finance and a CFO? Because I don’t.
William Vanderbloemen:
This is just my perception, but my perception would be a CFO is over an actual finance department, which has many people in it, and we don’t have that. I’m learning Jay—I learned this the hard way—when we started the company—this is so funny—and they’re just four of us, we just start handing out titles like, “Well, I’ll be the CEO, and you be the COO, and you be the CFO.” You know, that sounds all fun. But then people, the business outgrows their ability, and you’ve got a problem. And the other thing that my COO has done a good job of bringing to pass at our company in the last two years, is: Don’t just hand out high titles. Give people a path of progression so they’ll stick around.
Jay Goltz:
Yeah, because when you do the COO and CEO and CFO, you end up with an uh-oh, and we’ve all had the uh-ohs.
William Vanderbloemen:
Well, it’s not just that, Jay, but if you’re a director, well, maybe one day, you could be EVP, and then maybe after that you could move to a C suite. There’s a path of career progression in front of our people, not just, “I get the biggest title,” because what’s the difference?
Jay Goltz:
So here’s the dilemma of the week: Inflation, cost-of-living increases now come out at about 1.4 percent, depending on who you look at. But nobody’s at two and no one’s at one. Let’s just say it’s 1.4. You’re doing a plan for next year. You’re trying to figure out your salaries. Are you giving all your salaried employees a one-and-a-half percent increase? Or are you thinking, “Oh, it’s been a brutal year. I think I’m gonna go 2 percent.” Or, “Oh, it’s been a brutal year, I think I’m gonna go 1 percent.” I mean, what are anyone’s thoughts on it?
Paul Downs:
Why are you assuming you’re giving anybody an increase at all?
Jay Goltz:
Because I believe you need to with cost of living.
Paul Downs:
I don’t do it that way. I try to give money when we have money, and the state of the business is independent of the cost-of-living increase that the government defines. How real is that, anyway?
Jay Goltz:
It’s probably fairly close, meaning if you paid someone 50 grand last year, they’re taking a one and a half percent hit this year, just by doing nothing, just because things cost a little bit more. I mean, things do go up with inflation.
Paul Downs:
Well, just out of curiosity, if you’re buying health insurance for your people, and it goes up 12 percent for you next year, what do you do with that?
Jay Goltz:
That’s an excellent point. That’s why this podcast is so valuable, because you’re a real-life business owner. That is an excellent point, which I’m dealing with, and as a result, I’m probably going to go to 2 percent, because I’m going to eat a little bit of it, but they’re going to eat a lot of it. And a lot of my employees are at the point [where] most of them aren’t rolling in dough. They’re making their 44 grand a year, and they’re gonna have a hard time paying their bills. So the health insurance thing is an issue. I’m gonna give them a little more raise, and I’m probably gonna raise my prices a little bit, because the health insurance thing’s out of control.
Paul Downs:
To me, a lot of times, we end up eating costs that prevent us from just handing out more cash to the employees. The critical thing is making sure they understand how the business spends money, what it spends money on, what we can control, what we can’t, and how that relates to their success. I spend a ton of time keeping everybody up to date on all of the spending we do, so when something like that happens, I could say, “Okay, well, that’s going to be another 25,000 bucks next year that we’ve got to cover somehow. I’m not sure we’re gonna get the sales, so what are we going to do about it?” And that puts the question of, “Oh, am I guaranteed a raise?” that is a partial answer to that. If we got nothing better to do with the money, sure, I’m happy to give it to people. But if we’re required to spend it on something that’s out of everybody’s control, then no, it’s just not there. You’re not guaranteed a raise. If you want to be guaranteed a raise, go work for Jay.
Loren Feldman:
William, have you thought about raises for next year?
William Vanderbloemen:
We’re in the middle of doing [our] budget right now.
Loren Feldman:
And?
Jay Goltz:
So what side of this are you on? My side? Or Paul’s side? Does everyone get a raise—at least a bare minimum cost-of-living raise?
William Vanderbloemen:
I don’t know what the cost of living in Houston looks like, because it is geo-specific. It’s not just any one spot. Arguably Houston’s a more palatable place to live than Chicagoland economically. You guys have had some issues that drive costs up—at least in the salaries that we’ve been doing for our comp studies. So I don’t know. I’ll see what my COO brings, and we’ll—
Jay Goltz:
But have you traditionally given a cost-of-living increase every year?
William Vanderbloemen:
When there’s a cost-of-living increase.
Jay Goltz:
So you’re thinking that’s a possibility that Houston did not have a cost of living increase?
William Vanderbloemen:
We haven’t had one in years. We went down last year.
Jay Goltz:
Wow. Wow. That’s shocking.
William Vanderbloemen:
We watch this stuff like hawks. One of our verticals is compensation studies. So we have real algorithms, real stuff that we use to determine that sort of thing. The cost of living in Houston just has not gone up. I don’t know what next year’s indicators are, and I’ll review it sometime in the next couple weeks, and we’ll make a decision. But yeah, if people are incurring more costs, just because life costs more, I try and help with that. But I kind of agree with both of you. If I don’t have the revenue, then I don’t have the revenue.
Jay Goltz:
Loren, what kind of cost-of-living increase are you giving yourself this year? [Laughter]
Paul Downs:
Welcome to the real world, Loren.
Jay Goltz:
Because I think I speak for all three of us when I say, we really think you deserve a raise.
Loren Feldman:
Yeah, I’m doubling my salary.
Jay Goltz:
Excellent. That’s what we want to hear.
Paul Downs:
You could triple it, probably.
Loren Feldman:
Yeah, I could.
Loren Feldman:
The main thing I wanted to assess today by asking these questions was, to what extent, if any, the three of you were feeling burned out, and happily, none of you are looking for the exit door. After the year we’ve had, that’s a happy thing.
Jay Goltz:
Well, you know, whatever doesn’t kill you will make you stronger. There is a certain amount of energy—at least for me, and I think I’m speaking for all three of us—you survive something like this, you feel good about it. Like, I look around at my people—we’re all in it together, and we’ve stuck together, and we’re getting the job done. The customers are happy. And like, I’m kind of emboldened.
Loren Feldman:
Does Jay speak for all of you?
Paul Downs:
No, I don’t think the trouble has really arrived yet. I think it could easily get much, much worse. As long as I’m not actually under duress, I don’t torture myself and pretend that I am. We’re just not, but we could be. I just have no idea where we’re gonna be six months from now.
Jay Goltz:
I’m still in delusion, so I’m going to stay there for the moment.
Paul Downs:
Yeah, you are.
Jay Goltz:
Ignorance is bliss, and I want to be blissed for a few moments.
Loren Feldman:
It’s worked so far this year.
Jay Goltz:
It has worked.
Loren Feldman:
You guys may think you’re off the hook, and I’m about to let you go. But I’ve got one more thing for you, which is, I’ve prepared a Morning Report News Quiz to see if you’re paying attention to what’s going on out there, outside your own businesses.
First question: This company kind of beat Amazon to e-commerce. Its website went up in 1996 when Amazon was just a bookstore. By 2000, it had $80 million in revenue. What was the company?
Paul Downs:
SkyMall?
Loren Feldman:
That’s right, Paul. Question number 2: A recent study found that the 99 cent pricing trick, where you try to make something seem cheaper by ending the price in 99 cents—it’s also known as “left digit bias,” which I’d never heard before—this study indicated that it works in one particular situation, but not in another. Anybody know what those two situations are?
Jay Goltz:
It doesn’t work when you’re golfing. You can’t scream three-ninety-nine. You still have to scream four. Am I right?
Loren Feldman:
No, you’re not. That’s good, though. Nobody?
Paul Downs:
I’m just trying to remember. I think it works when you’re shopping. It doesn’t work when you’re not shopping.
Loren Feldman:
Well, that’s sort of it. It works when you are looking at prices side by side. If you’re looking at a price independently, without comparison to any other similar products, it doesn’t have an impact.
Jay Goltz:
I would argue it’s a sophistication thing. When you look at Ralph Lauren’s pants, you expect them to be $90, not at $89.99. And when you go to Walmart for toothpaste, you expect it to be $2.97. I think it depends on whether you’re a discount-y kind of product.
Loren Feldman:
Question number 3: According to a recent study, if a restaurant can improve its Yelp review by one star, it will boost its revenue. But by what percent?
Jay Goltz:
Eighteen percent.
Loren Feldman:
Anybody else?
Paul Downs:
I don’t know.
William Vanderbloemen:
No idea.
Loren Feldman:
That’s aggressive, Jay. The right answer is between five and 9 percent, which is significant anyway.
Jay Goltz:
Well, let me tell you. I thought about it after I blurted it out. I was wrong. That’s because some people simply don’t look at Yelp. My guess is that it would help people who looked at Yelp a lot more, but the fact is, a lot of people just don’t look at Yelp. It’s not going to have any effect on them. That’s why my number is twice as high.
Loren Feldman:
Question number 4: This week we highlighted a story about finding a final resting place for Inspiration, Imagination, and Fantasy. What was the story referring to?
Jay Goltz:
Entrepreneurship?
Paul Downs:
I don’t know.
Loren Feldman:
William, you’re awful quiet. You haven’t been reading the Morning Report, have you?
William Vanderbloemen:
I read it. But I’m not recalling that.
Loren Feldman:
Inspiration, Imagination, and Fantasy are all Carnival Cruise ships, and they are being stripped down off the coast of Turkey to be sold for scraps.
William Vanderbloemen:
I was waiting on someone to mention the election somehow with that combination.
Paul Downs:
I thought we agreed to not talk about elections.
Loren Feldman:
Question number 5 is about the election, but not the presidential election. Lost perhaps in the Election Day confusion was one bit of news that should be of particular interest to business owners. One city managed to pass the nation’s first CEO tax.
William Vanderbloemen:
San Francisco.
Jay Goltz:
Yeah, I got that one.
Loren Feldman:
That’s the right answer—which will tax companies that pay their CEOs more than 100 times what their median employees are paid. The question was what city, and you got it. It’s San Francisco. Any thoughts on that one, guys?
Paul Downs:
Yeah, it’s also known as the Get the Hell Out of My Town Act.
Loren Feldman:
Once again, my thanks to Paul Downs, Jay Goltz, and William Vanderbloemen. Appreciate your time.
