This Is Where We Get Into Therapy
Introduction:
Once again this week, in episode 65, our business owners discuss things business owners don’t often talk about in public. Laura Zander says she feels guilty about taking vacations, about making more money than her employees, and about knowing that her husband is closer to their son than she is. Paul Downs says he recently reviewed 29 years of P&Ls and was reminded that he lost money in 18 of those years. He also explains why he routinely tells his employees (and us) precisely how much money he takes out of his business. Jay Goltz, meanwhile, says he’s now embarrassed to be called a CEO and acknowledges that he’s thought maybe he should have worked 20 percent less while building his business but isn’t sure if that would have resulted in 20 percent less revenue or perhaps 100 percent less revenue.
— Loren Feldman
Guests:
Laura Zander is co-founder and CEO of Jimmy Beans Wool.
Paul Downs is founder of Paul Downs Cabinetmakers.
Jay Goltz is founder and CEO of Artists Frame Service and Jayson Home.
Producer:
Jess Thoubboron is founder of Blank Word Productions.
Full Episode Transcript:
Loren Feldman:
Welcome Paul, Jay, and Laura. Great to have you here. Laura Zander, we haven’t seen you in a while. What’s been going on?
Laura Zander:
Yeah, I’m glad to be back. The last month or two has just been a series of travel. We took a vacation.
Loren Feldman:
Whoa.
Laura Zander:
Yes, so Huck, Doug, and I took off for a little over a week and went down to the Bahamas at the beginning of May. You guys probably know, when you take a vacation, it means that you work 50 percent more the week before and 50 percent more the week after you get back.
Loren Feldman:
And 25 percent less while you’re away?
Laura Zander:
Yes, exactly. Exactly. No, we completely unplugged. I’m in a spot right now—thank goodness, after this last year and a half of taking over the business in Texas—where we have a good team. I’ve got some people in positions who are really running things. We hired a production manager for Texas, and he started on Monday, just a couple of days ago. I spent a good month really trying to hire somebody, doing interviews, and pulling that all together.
So it’s been a couple weeks in Texas, and then I went on my own little vacation for nine days by myself. No Doug and Huck. I just got back a couple days ago. I went into the mountains of Southern California, where there was no cell service, and basically just hiked and ran and ate really well and tried to get my energy back. So now I’m home for a week. It’s Huck’s last week of school. I’m kind of working half-time, and then next week, I go back to Texas.
Loren Feldman:
Did that nine-day break work? Did you get your energy back?
Laura Zander:
You know, I did not realize that I have been holding my breath for the last year and a half and have had this anxiety, where I can barely kind of catch my—not barely, but I don’t know if anybody else has this where their anxiety kind of manifests through their breathing, and they feel like they’re constantly trying to get a breath.
Loren Feldman:
You’ve talked to us about this a little bit at a couple of points where things were tough in Texas.
Laura Zander:
Yeah, it’s just this kind of weird physical manifestation, like this cue of how I’m feeling. It’s not even necessarily uncomfortable. I just know that I’m stressed out when I’m having trouble—not having trouble—but when breathing is not quite as easy and fluid. Anyway, I’m two or three days into this adventure, and I realized I am breathing like I was meant to breathe. I did some training before this nine-day thing. The week before I actually worked about half-time.
I’ve been trying to get my fitness back, and I’m finally leaner and more fit than I’ve been in the last four years. Four years ago, it was the beginning of we lost money two years in a row, then we did a couple of acquisitions, blah, blah, blah. So it’s been this long, four-year slog of just trying to survive, and I think we’re kind of coming out of it. We’re definitely coming out of it. I’m trying to kind of get my body back, get my mind back, and now figure out how to transition from survival mode to growth and exciting mode.
Loren Feldman:
Wow, so you’ve taken two vacations since we last spoke to you. Jay, when was the last time you took a vacation?
Jay Goltz:
A what? Yeah, I honestly can’t even tell you. I don’t know. Three years ago? Two years ago? The last thing on my mind at this point.
Loren Feldman:
Paul, when was the last time you took a vacation?
Paul Downs:
An actual vacation? My wife and I went up to New York for a day a couple of weeks ago.
Loren Feldman:
I don’t think that counts. I’m sure it was a nice day.
Paul Downs:
No, last July, I drove across the country with my son, which was six days of driving through COVID-infested North Dakota and all those kinds of places.
Jay Goltz:
Are we calling that a vacation then?
Paul Downs:
It was a vacation.
Jay Goltz:
Okay.
Paul Downs:
That’s about as much as I ever take.
Loren Feldman:
Laura, how did it go while you were away? Both of your businesses, the one in Reno, the one in Texas, How did they manage without you?
Laura Zander:
Totally fine. Like, I don’t know that they really need me.
Loren Feldman:
You make it sound like that’s a bad thing, but that’s a good thing, right?
Laura Zander:
Yeah, it is a great thing. But it’s like, I’m starting to feel kind of guilty. The difference vacation-wise, for me, between the three of you guys is, I have a kid who just turned 12. I’ve got a sixth-grader, and what I’ve heard and read is that you’re supposed to spend time with your kids when they’re kids.
Jay Goltz:
Good thought.
Paul Downs:
It’s overrated. [Laughter]
Laura Zander:
So I’m making that a priority. This summer, the goal is to kind of work half-time and spend as much time as I can with my kid. Again, the last year and a half or two years I’ve been traveling so much. I’m trying to make up a little bit of that time.
Jay Goltz:
Can I just add, at this point, because I think this is important. I wish somebody would have told me this. You know that old adage about, “There’s nobody lying on their deathbed wishing they had spent more time with their business.” That’s kind of a crock. Because at the end of the day, you’re gonna be dead in a few days. It’s the day you drop them off at college, hopefully, and they walk away from your car. And you want to vomit, because you think, “Oh my God! My kid’s childhood is over—and did I spend enough time?”
And the difference is, you hopefully have another 30 years to torture yourself about that, so it’s not about the deathbed thing. It’s about, you’ve got five years before your kid’s gonna be walking away from your car, going to his dorm room, and you want to feel good about that and say, “Okay, I pulled this off. I was home. I did what I’m supposed to.” So good for you that you’re thinking about it.
Paul Downs:
I’ll give you the opposite perspective, which is, I was home every night for dinner, spent a ton of time with my kids, have a great relationship with them, and I think it seriously affected my business success.
Laura Zander:
In a positive way?
Paul Downs:
No, extremely negative.
Laura Zander:
Oh, sure, yeah.
Paul Downs:
I just never put those hours in back at that time when it could have made a difference.
Jay Goltz:
And I’m not suggesting that it should be one or the other. I get it. I think one has to figure out what the balance of that is to put enough in to make sure you’re making a living and providing for a livelihood. I’m not saying it’s all or nothing. In my case, for instance, I have three sons, so it was all about the Little League and stuff. And I thought, “Okay, I’ve gotta be at every game.” And then I realized, “Nah, I’ll go to half the games,” and that was my compromise. And it worked, I think. I think going to one extreme or the other, you pay a price for it, and I think everybody has to find out what works for them.
Paul Downs:
Well, let me just throw in one more thing, which is that it’s not a sliding scale that you can necessarily choose where you want to be on it. In my case, with an autistic son, I had to be home.
Jay Goltz:
Yeah.
Paul Downs:
And so there are going to be plenty of business owners who are in a situation where there’s some kind of personal situation or distraction, which prevents them from putting everything into the business. But you get measured against all these people who are billionaires or whatever, and it’s very easy to fall into the trap of thinking you’re a failure because you could not achieve those things. And I’ve come to think, it’s just the way it happened. It’s just what happened to me, and there’s no right or wrong. I made that choice to not sacrifice my family for the business, and my circumstances made it easy to make that choice. But I don’t beat myself up anymore about how poorly the business did for so many years.
Jay Goltz:
That’s good, because I will tell you most of these quote-unquote successes that you read about, their personal lives are a mess. They’re financially successful, but I certainly wouldn’t call them successful in life. I had to deal with that also, and I’m perfectly happy with writing it up that it’s not the income, it’s the outcome, and my outcome worked out. These other people with the billions and their kids are suing each other, and the parents are suing each other, and the ex-parents are suing each other, and everybody’s suing each other. I don’t call that success.
Paul Downs:
Okay, but those are the people you hear about, because there are gonna be people who felt like they couldn’t put it all into the business, and then the business failed.
Jay Goltz:
Yeah.
Paul Downs:
And they’re not in a great position, sitting on their billions.
Jay Goltz:
No, I’m not saying any of this is easy. At least to be conscious about it. And you did what you needed to do, and good for you.
Laura Zander:
Well, isn’t it like anything else? I mean, if you’re a pro athlete, you just have to put the hours in. If you’re going to be elite in any field, whether it’s business or athletics or music, there are only so many hours in the day, and there’s only so much energy. I tell you, the sacrifice that I’ve had to make, which kind of flips the switch on the gender roles a little bit, is that Doug is actually much closer to Huck than I am, because I’m gone half the time. And that was the decision as a family that we made.
Loren Feldman:
You’re gone half the time because you spend half your time in Texas with the company you bought.
Laura Zander:
Yes, and I simply work more than Doug does. I enjoy it. Not as much anymore, but I used to get kind of frustrated that Doug didn’t want to work more. I’m like, “Why have you got to spend so much time with the kid? Like, can’t you just work more?”
Paul Downs:
How old is Huck?
Laura Zander:
He just turned 12 a couple weeks ago. Sixth grade.
Paul Downs:
Okay, well, in my experience, boys are going to start to pull away from mom over the next five or six years anyway. They just will.
Laura Zander:
That’s what I’ve heard, and then I’ve heard, when they do go to college, they come back a little bit and realize that they actually missed their moms. But the point is, Doug spends more time. Doug’s a better parent. And that was just a decision that we had to make, and that we chose to make. For us, especially with these recent acquisitions, this is our life’s savings. This is our net worth, the majority of it, and so we just can’t let it go away.
I’ll tell you one thing, Paul—and my situation is obviously different than yours—when I had Huck, the one thing that I really noticed that changed, as far as work was concerned, is no longer could I just brute force work 18 hours a day and do everything myself. I had to figure out how to let other people do stuff, and that was a really hard transition for me. Before I had a kid, I could just work and work. I worked seven days a week, all the time. Now all of a sudden, your hours shrink. I had to figure out how to be more efficient. I had to figure out how to hand things off, how to let things go. And our business actually grew as a result of me doing that, because I didn’t realize that I was kind of holding us back. I’m often the bottleneck, because I want to do things myself. And then I don’t have time to do it, and blah, blah, blah.
Loren Feldman:
So having taken these two vacations, and being away for two stretches of time, and having things go well at the business with you unplugged, does that change your mindset at all? Are you going to do anything differently as a result of having that experience?
Laura Zander:
What it tells me is that we’re in a good spot. I’ve been doing so much in the business: setting up the software systems, working on the metrics, building the foundation. And so what it tells me is the foundation’s pretty built, and now I can take a step back, and I can start to think long-term again. My favorite thing to do is to read and to think, and then to do math. I’m still kind of holding on, and I’m wondering if I should start to let go, but I’m still managing all the finances, so I’m like our CFO. I’m doing projections and pricing and all that kind of stuff.
If I can do what I love to do, which is that financial piece, plus starting to keep up again with what’s happening in the world, and where I see our brand going, and where I see our business going in the next couple years, then that’s amazing. I don’t need to be in the office to do that. I mean, I can get on the trail and just think.
I remember in the days when we had massive growth, that’s where I was at, and that’s what I would do. I would come up with all these crazy outlandish ideas, and I just needed the time and the downtime to be able to let my brain percolate and think about these things. Hopefully, we’re in that spot again.
Loren Feldman:
I thought the part of the business that you enjoyed the most was the crazy idea, the marketing part, not the CFO part. Are you doing both of those?
Laura Zander:
Yeah, but I love the CFO part, because I love the data. There are very few things in the world that make me lose time, and looking at a spreadsheet, I will lose time and I’ll lose myself manipulating numbers and figuring out reports and stuff like that. It’s the combination of those two things: It’s the creative side and then having the numbers kind of to support it and coming up with cool formulas. I haven’t been able to think of the crazy ideas because there’s been too much housekeeping, which is just what I had to do.
Loren Feldman:
Paul, if you wanted to, could you take a week and be completely away from the business?
Paul Downs:
Oh, yeah, sure.
Loren Feldman:
So what’s stopping you?
Paul Downs:
I like coming to work. The thing that stops me from going nine days without internet is not work. It’s my personal situation and always needing to reserve bandwidth in case something is going on with my son. I’ll give you an example. Last time, a couple years ago, my wife and I took a vacation, and we hadn’t taken one in 30 years. But we signed up to fly to Finland, and stay in Helsinki for a week. I set it up so that my autistic son was at camp that week, and so we dropped him off at camp, then we got on the plane, fly to Finland. We didn’t just choose Helsinki out of nowhere. My other son was working there for the summer. We’re having a lovely time, and my wife and I are walking through the art gallery in Helsinki, and my cell phone rings. Pick it up. And someone says, “Are you Henry Downs’ father?” And I said, “Yes, what’s going on?” And she said, “Well, they just came and dropped him off in the emergency room here, and there’s nobody else with him, and we don’t know what to do. He can’t speak.” And like, “Well, I’m afraid I can’t help you. I’m in Helsinki.”
And it turned out that he had had a seizure while at camp and fallen on his face in the gravel street. The camp staff were actually great, but they had put him in an ambulance, and the ambulance got to the hospital faster than a private car. They wouldn’t allow anybody from the camp to get in the ambulance, for some reason. So the ambulance shows up, and there’s Henry, and the car is following because it just can’t get there as fast as the ambulance. I don’t know how they knew to call me, but they called me. But that’s like, okay, there’s a certain piece of me which always needs to be ready to get that phone call. And having sat through that feeling of helplessness while I’m in Helsinki and my kid’s in an emergency room and can’t explain himself, I’m loath to take a long vacation. That’s just me. But there you go.
Loren Feldman:
Well, that’s understandable.
Jay Goltz:
I have to say, it should remind everybody that some people have much bigger struggles than other people, and you should be thankful if you don’t. This is part of why I put so much energy into helping my guy with Autism Workforce. Because I know having someone on the spectrum can be either very difficult or a little difficult. I’m glad to help out anybody that’s got that situation, because it’s—and this is the word a woman told me—it’s exhausting. Hats off to you for doing what you gotta do.
Paul Downs:
Yeah, honestly, I set up my business so that it doesn’t require 100-percent attention from me every day, and then I just coasted. I try to do strategic things that are going to grow the business, and we have a number of efforts, like trying to get a GSA contract and we’re just engaging a new marketing firm. I’m doing a bunch of stuff, but I delegate everything I can.
Laura, you talked about having your child and realizing you couldn’t work. Well, in 1994 when I had my children, when the first ones arrived, culturally, it would have been fine if I had just said to my wife, “Here, take the kids,” and I had just continued to work a lot. But we had twins, and one of them very quickly turned out to have special needs, and it just wasn’t an option. I got my head around that same thing of needing to learn to delegate, and ever since then, I’ve really become like, “Well, why wouldn’t you delegate?” I make a lot more money and work a lot less hard by delegating everything in sight. Now I can come in and do a podcast in the middle of the day or take a nap if I feel like it. And no, I’m not gonna be the next Bill Gates. I’m not pushing hard enough to do that, but my business isn’t really one that’s that simple to scale anyways. So I’m pretty satisfied with where I am.
Jay Goltz:
The fact is, you are a tremendous success, given everything. You’re a tremendous success, and you should feel good about that, because you’ve managed to balance it all, and good for you. I take my hats off to you far more than I do to these people who are billionaires and have got messed up lives. So good for you.
Laura Zander:
Yeah, and what if we measured success not in the number of dollars but the amount of flexibility and free time? I hate to say it’s the balance stuff, because it’s not that, but it’s the freedom. So now all of a sudden, it’s a tradeoff: Sure, we could probably make more money as well, if we pushed harder and harder and harder and harder. But I just… I don’t wanna. I want to hang out with my kid.
Loren Feldman:
One of the tricky things, I think, is that you can say to yourself, “I’m going to work 20 percent less,” or 50 percent less, or whatever you choose, but you really can’t control what the ramifications of that are. You don’t know that working 20 percent less just means 20 percent less revenue.
Jay Goltz:
You are reliving a conversation you and I had five years ago, when I said to you, “Loren, I bought all this real estate along the way, I’m more successful than I thought I was going to be, and I could have worked 20 percent less, and I still would have been good.” And you said that to me. You said, “You don’t know whether that 20 percent less would have meant complete failure or not.” That was true then, and it’s true now. You’re right. It’s not a linear relationship. 20 percent less work doesn’t necessarily mean 20 percent less success. Maybe it means you didn’t have the critical mass to succeed at all. Who knows?
Laura Zander:
I work as hard as I need to work, and the only way that you know how hard you need to work is to look at the metrics and to look at the numbers and to try to identify trends. Maybe we’re having a bad day today, a low-revenue day today: Is that indicative that the next three months are going to be low? And that’s why I think the numbers are so important.
Loren Feldman:
Paul, you’ve been very open and public about the ups and downs of your business throughout its history, and there have been multiple causes for that that you’ve talked about before, but were there ever times when you worried that the need to spend time with your family could actually cost you the business?
Paul Downs:
Sure, absolutely.
Loren Feldman:
How did you deal with that?
Paul Downs:
I don’t know. I just went in every morning and worked the business, and it never quite failed. That’s the only answer I can give you. I mean, there were moments when it should have, and I was fortunate that I could call somebody and get some help. Family money on a couple of occasions was critical. My brother, who is a shareholder, his accountant asked whether my brother had enough basis to take a loss on his taxes last year, because the company lost a lot of money. He got his K-1 and the accountant comes back and says, “Can you actually deduct this?” So I had to go back and do a basis calculation, and I don’t know if you’ve ever had that fun.
Loren Feldman:
What exactly does that mean?
Paul Downs:
Basis is… oof, boy.
Jay Goltz:
Well, let me answer that. It’s how much money do you have invested in the business. You can’t write off more than your basis. You can’t write off more than you put in the business. Even at my stage, I’ve had issues with that, with how much basis is left in the company if you took some money out. You can’t deduct more than you had in it. So the accountant is asking your brother, “Did you lose more money than you put in the business?” basically.
Paul Downs:
Right, good explanation. He’s been a partner since 1992, so the basis gets recalculated every year, based on the profit and loss of the company. I had to go back and try to reconstruct whatever that is from 1992: 29 years of P&Ls. And a lot of times, it’s just hard to get my hands on the records, but I dug through the back room and went through every K-1. We had lost money in 18 out of those years, and we’re still theoretically in the hole just on a P&L basis. Now, there were loans to the company that affect basis, there were stock purchases that affect his basis, so I don’t really know what the answer is for him.
But I’ve gotta say, it was sobering to look at that. And just looking at, say, the company results from 2003 or something, it brought me right back to those moments. And just thinking, “Oh my God, what a year that was.” Honestly, I don’t know. I can’t give you an actual answer, like, “I did this, and it meant that we survived.” Or, “I did that, and it meant that we had less revenue.” There’s just no answer in a way, going back and trying to reconstruct, because you don’t even know. You don’t even know. What caused this person to call me at a critical moment when I needed business? What caused some other person to not call me when I could have used the business? There’s such a swirl of possible reasons that things happen that I don’t think there’s much value in trying to really pin it down and say, “I did this.” Or, “Here’s three rules for success.”
Jay Goltz:
You know what, I can tell you that 30 years ago, I was completely out of control. I was over my head. I was taking care of customers and always did what I think was decent marketing, and the business was growing like crazy. But I was always two or three years behind. As soon as I got comfortable managing 10 people, I had 20 people. As soon as I figured out what managing 20 people is, I had 40 people. And I was all day long putting fires out. I once had a customer say to me—I had some problem—and he looks at me. He was older than me by 20 years. He goes, “Jay, the bigger you get, the harder it gets.” And I thought to myself, “Oh my God, please don’t tell me that.” And the fact is, he was absolutely wrong.
It took a while. But I finally figured it out. I got things under control. Once you slowly but surely learn what you’re doing hiring, firing, management, it does get easier. And then the other thing I’d like to just say is, there’s such a thing as having enough money. I didn’t think that was possible. But there is a point where you have enough money that you can buy what you want, and you really don’t need to be worth $200 million, and it’s okay. So it does get easier. I’ve told Laura that numerous times. It gets easier. It’s not like an athlete that’s got natural talent, worked really hard, and at 22, they’re at their peak. No, no, no, that’s not how business works. It takes years to get the skill-set to run a business.
Loren Feldman:
It sounds like Laura might be reaching that point where it gets easier.
Jay Goltz:
Yeah, sounds like it.
Laura Zander:
Yeah, well, because of Jay, because of the great mentoring and because of this podcast, Paul’s advice, and—
Loren Feldman:
Mostly because of the podcast, right?
Laura Zander:
Yeah.
Jay Goltz:
But thank you for saying that.
Laura Zander:
But you know, there’s some truth to that. I’m saying it in jest, but—
Jay Goltz:
Oh, there you go. I just want to say, several people have sent me emails saying that you do elder abuse on me. I just want you to know that.
Laura Zander:
Maybe you deserve it.
Jay Goltz:
Yeah, okay. All right.
Laura Zander:
I was just gonna say, part of it getting easier also is having more friends and mentors. It took forever to find somebody like Jay who I can text and send messages to and say, “Okay, have you ever experienced this? Have you ever experienced that?” But that takes some time.
Jay Goltz:
Are we still in the jest mode now? Or Is that real? I’m confused.
Laura Zander:
It’s real. It’s really real.
Loren Feldman:
I want to move on to another topic: The topic is Amazon. We’ve had a number of items in the Morning Report this week based on an investigative report in The New York Times looking at the way they handle their employees. A couple of key points: they apparently have an employee turnover rate of 150 percent, and executives there have serious conversations about whether they will run out of Americans that they could hire as the company continues to grow. Apparently, a lot of this stems from a basic belief that Jeff Bezos has expressed, that most people are lazy, and that they actually want turnover there because people come in and they work hard for a while and then they slack off.
They compared Amazon to some other very large employers. For example, Walmart promotes managers of its stores from within, whereas Amazon, at its warehouses and distribution centers, that’s a very hard thing. They basically give somebody a job to do and that’s the job. They do it 10 hours a day, and there’s no real track for advancement. What do you guys think of that? What do you make of it, when you read that stuff?
Jay Goltz:
I find the whole thing extremely disheartening and embarrassing. I’ve said this before: I don’t want to be called a CEO anymore, if that’s what a CEO is. It’s embarrassing that a CEO could say that and think that. Walmart never got an award for Employer of the Year, but now the fact that they look good compared to Amazon gives you an idea of what’s going on in the world. I mean, it’s really just disappointing, disheartening, and troubling.
It begs the question: Where’s the government? I don’t know. Is the government supposed to do something about monopolies? They broke up Standard Oil 100-and-some years ago. We’re in the age of the robber barons again, where people are just taking advantage of people and becoming multi-hundred billionaires. I don’t have an answer. I’m not that smart. But it’s really just depressing to read that stuff.
Paul Downs:
When these jobs involve walking 10 to 15 miles a day on concrete, like, why wouldn’t there be 150 percent turnover? That sounds low. I invite Jeff Bezos to work in his warehouse for a couple of weeks. He’ll figure it out. But to a certain extent, should the government be involved? Because Amazon has the power to fix this thing tomorrow if they feel like it. And they probably will.
Jay Goltz:
Well, the government got involved in the 1920’s with factories that were working people to the bone. I mean, this isn’t a new phenomenon.
Paul Downs:
Well, at the point where they’ve hired all Americans and given them a go, and still can’t staff their warehouses, they’ll probably figure it out. But the other thing, though, is I think that the framing of the story is one that kind of bothers me, which is a problem has arisen sometime in the last year or two. And there needs to be an instant solution, or we’re gonna throw government at it. I don’t think government is capable of—
Loren Feldman:
Why do you think the problem has only arisen in the last year? Don’t you think this has been a problem for some time?
Paul Downs:
Possibly, but possibly not. COVID brought this tremendous expansion of these warehouses. There’s one going up just down the road from me, that six months ago, was a functioning pharmaceutical factory. It got leveled, and now they’re putting up an Amazon warehouse. I would say that there’s been a big shift in the economy, and this is part of that story, which is that an adjustment is going to need to be made. But you sometimes just need to be patient to see how the adjustment plays out.
Jay Goltz:
That’s easy for you to say, but did you read the story about the guy that got COVID? He’s now in a vegetative state. He can’t talk. And they keep sending an email saying, “Hey, when are you coming back to work?” I mean, that’s just one guy out of the thousands. This needs some serious, serious consequences. This isn’t about people getting tired and quitting. This is about serious employment abuse.
Paul Downs:
You could find a story like that in any organization of any size.
Jay Goltz:
Oh my God, I couldn’t disagree more. I think there are actually some corporations out there that still have a conscience and treat people properly. I don’t believe that everybody has that level of Amazon. I’d have a hard time finding another CEO who would go and tell someone that “People are inherently lazy, and I don’t want him hanging around too long. I want to keep churning people.”
Paul Downs:
You’ve never heard that remark from any business owner? Oh my God.
Jay Goltz:
I haven’t. Maybe you have.
Paul Downs:
Oh my God. Sure. I’ve heard that remark so many hundreds of times.
Jay Goltz:
Let’s say that’s true. Is that right? Is that a good thing?
Paul Downs:
Some people are inherently lazy.
Jay Goltz:
Clearly, I’m not arguing that.
Loren Feldman:
All right, next topic. In a business like the businesses you guys run, there are always certain people who know more about what’s going on than others. You, as the owner, have to trust certain people with information—whether it’s your accountant, your assistant—that you may not necessarily want to share with everyone in the business or certainly everyone publicly. Is that uncomfortable?
Paul Downs:
Not for me. I just tell everybody anything they want to ask.
Jay Goltz:
Really? Somebody says, “Hey, Paul, how much money did you make this year?” You tell them?
Paul Downs:
It’s on the wall right now.
Jay Goltz:
Really?
Paul Downs:
With my salary highlighted.
Jay Goltz:
Wow.
Paul Downs:
It has “Paul’s share” right on it.
Jay Goltz:
Wow.
Paul Downs:
It eliminates all questions about it. I don’t make an outlandish amount of money, like a quarter million bucks last year. And none of my people have ever expressed any problem with that.
Loren Feldman:
That’s gonna surprise a lot of listeners, Paul. Have you ever sensed any resentment?
Paul Downs:
Not at all. Because I think that they all assumed that I was making a lot more than that. And then I pay my people well, too.
Laura Zander:
That’s so much money. Oh my God!
Paul Downs:
Why is that so much money? I mean, there are a couple of guys in my Vistage group who have companies that have the same gross revenue that make five times as much as I do. Some businesses are very, very profitable. Mine is, when run correctly, kind of profitable. That’s like 8 percent. It’s not huge.
Jay Goltz:
Let’s just remind everybody: That’s not just a salary. That’s return on investments included in that. He’s put many, many years and many dollars and took many risks along the way. This is a return on investment. It’s not just like he’s an employee somewhere making $250k. Buried in that is all the investment that he put in place over these years. That’s the profit, basically. Right? There’s no profit after that, right?
Paul Downs:
I pay myself a salary usually somewhere… it sort of dials up and down. Like last year, I dialed it down a little bit, paid myself a salary of about $175,000. And last year was sort of a weird year because of the COVID situation, and the PPP rules kind of led me to do some spending in December that I wouldn’t otherwise have done. But let’s say it would have been a break-even year. I would have probably taken home about 200,000 bucks on revenues of 3.6 million. The year before that, I took home $275,000 on revenues of 4.1 million. And this year, probably about the same.
Jay Goltz:
So here’s the question: What if you tweak your computer thing, and you got more business, and next thing you know, you’re doing $6 million a year, and now you can pull out $650,000 a year? Are you putting it on the wall?
Paul Downs:
Yeah, I would.
Jay Goltz:
Okay.
Paul Downs:
That’s me, and I run my company in a way [where] it’s me and my company’s culture. If I were running an ice cream stand with minimum-wage teenagers in a cash business, and I was taking out a million bucks a year? No, I would not tell them about it, because they would start stealing from me. [Laughter] In my business, with my employees, they’re all well-compensated—better than they get anywhere else. It’s a nice place to work. And I’ve told them for years, “Okay, I’m the owner. I should make some money.” I don’t think it’s an outlandish amount. I don’t think $600,000 would be an outlandish amount.
Jay Goltz:
What is an outlandish amount?
Paul Downs:
I would say that taking home 30 percent of the revenue is starting to get to be like, “Wow.” But I know guys who take home 25 percent of the revenues. My target is usually 8 percent, and I generally can make it in a good year. If I bumped it up to 10 percent, I don’t think anybody would be really upset, because I wouldn’t have done it out of their backs. We get that money from our customers, not from my employees. Everybody gets the money from somebody outside this building, and we’ve made that clear to people.
Loren Feldman:
Laura, let me ask you, given your surprise: Your business, I think, might be two or three times the size of Paul’s, in terms of revenue. What do you think is a reasonable amount for a CEO/ owner to take out in salary?
Laura Zander:
That’s a great question. I don’t know, I guess—
Jay Goltz:
Loren, I question the whole basis of “reasonable.” I don’t think there’s such a word. She owns the business. What she makes, she makes. What is unreasonable?
Loren Feldman:
I’m reacting to Laura’s reaction to the amount of money Paul is taking.
Jay Goltz:
Yeah, yeah.
Laura Zander:
I guess I think about it in terms of: What’s my replacement cost? So if I had to hire somebody to do what I do, what would we have to pay them? And I just don’t know that we need to pay somebody… I don’t think I’m worth 200 grand.
Jay Goltz:
This isn’t a public company. It’s your company. If you can make $3 million a year, that’s not unreasonable. And you can lose $3 million dollars.
Paul Downs:
You’re a $10 million a year business?
Laura Zander:
Yes. More, but yeah.
Paul Downs:
And you don’t think that you’d need to pay someone 200,000 bucks to run that? That surprises me.
Laura Zander:
I don’t think so…
Jay Goltz:
Oh, for sure.
Paul Downs:
Maybe something is very different in Reno. Is housing free or something? On the East Coast, that wouldn’t get you much.
Laura Zander:
No, and that’s true. I mean, it is less expensive out here. But you know, I haven’t looked for somebody. Now, Doug’s job, I think,we would have to pay somebody hundreds to do what he’s doing. Probably 300 to 500.
Jay Goltz:
We’re conflating two different subjects: One is what it would cost to replace yourself, and the other one is what’s unreasonable. You don’t have any investors. If you had an investor, you’d have a responsibility not to, quote-unquote, pull too much out of the business before the profits are split up. But you own the company. So my argument is: This whole thing’s a moot conversation. Because if you can make $1.6 million on your business, more power to you. It’s not unreasonable. There’s no such thing as unreasonable if you own the business yourself, and you don’t have investors. And Paul, your friend who’s making 25 percent? If he or she built a business that could have that kind of—hey, more power to you. Again, not unreasonable. Not taken from anybody. He’s built a business that was profitable.
Paul Downs:
Yeah, I’m pretty sure his employees have a fairly good idea of what he makes, because he’s a very open guy, too. Maybe not as much as me. But yeah, it’s like, if all of a sudden my employees were at my door—villagers with the torches or something, like “You’re making too much money,”—I’d be like, “Oh, fuck off. Go start your own woodworking business. See how it goes. 36 years later, see how you feel.” And that’s what I’d say to them. I don’t think there’s any shame in what I’m doing.
Laura Zander:
No, and I think Doug feels the same way. I think maybe it’s a female-male thing. I think, for me, it’s just the guilt. I feel really guilty making more than somebody who’s there every day, 40 hours a week.
Paul Downs:
But who did you take it from? Your customers gave you the money for providing them with wool that they valued at the selling price. There’s the money. You didn’t take it.
Laura Zander:
Yeah, but my employees are the ones who are doing the work to make the money come in.
Paul Downs:
Are they well-paid? Are you making them walk 12 miles on concrete every day?
Laura Zander:
No, they’re well-paid, but their house is not as nice as mine, and that bothers me.
Jay Goltz:
Oh my God. Laura, you need to get over this.
Laura Zander:
I know!
Paul Downs:
Yeah, really.
Jay Goltz:
Does it bother you when you can’t sleep all night because you just lost money, and you had two bad years in a row? Do you feel guilty about that, that they’re not sharing the pain and misery of it? You really need to get over that, because that’s the nature of owning a business.
Laura Zander:
I know.
Paul Downs:
Here’s the thing: You gave them money, but you never asked for money back. And that’s the dividing line between an owner and a non-owner. There have been moments when I had to reach into my personal checking account and put significant money into this business so that they could be paid.
Laura Zander:
You’re totally right, absolutely. And we’ve had to do the same thing. I mean, we’re still paying ourselves back. So we are in debt to ourselves right now.
Jay Goltz:
All right, so you’re over the guilt now. Did we do it?
Laura Zander:
No!
Paul Downs:
Yeah, hopefully.
Loren Feldman:
Jay, how many people in your business know how much money you take out?
Jay Goltz:
Just a couple. The CFO and the person that runs payroll.
Loren Feldman:
Are you at all uncomfortable at all that they know?
Jay Goltz:
There are times where I have to do something with finances that I frankly wish that I didn’t have to go and tell the person that, but it’s the nature of the beast. If I decide that I’ve got to pull out X amount of dollars because I’ve got to pay down a loan or whatever, I just can’t do everything myself. They know, and that’s the way it goes. It is what it is. What am I gonna do? Run the payroll myself?
Paul Downs:
Loren, do you remember when I first proposed writing a column in The Times that said how much money I make?
Loren Feldman:
Sure.
Paul Downs:
And you were like, “Are you sure you want to do that?” And then my wife was like, “Are you gonna do that?” And then I did it. And guess what? Nobody cared. It was no problem whatsoever. My employees didn’t care, because there wasn’t anything outlandish about it.
Jay Goltz:
You keep using that word. You’re right, the amount of money you’re pulling out, nobody could argue that you deserve that. But my question is, what if—
Loren Feldman:
Nobody could argue that he doesn’t deserve it.
Jay Goltz:
No, no, he clearly deserves that. I’m not surprised no one gave you a hard time, because it’s not that much more than they’re making. But my point is, what if you could have pulled out $800,000? Does that mean that’s outlandish? No, it just means you’re more profitable.
Paul Downs:
No, but when business owners don’t fess up and don’t talk about this, then everybody’s left with the wrong impression. Because as I said, when I told people, most of them were surprised how little it was—my employees.
Loren Feldman:
That’s a great point. That’s one that Jack Stack, the inventor of open-book management, has discussed frequently. He always tells people who are considering opening their books that, “Whatever fears you have, your employees probably assume you’re making a lot more money than you’re actually making. So you might as well tell them what it really is.”
Paul Downs:
Exactly, and then it becomes a conversation, which is freighted with shame, and, “Oh my God.” And you know, Jay, you’re claiming that everybody should be proud of the amount of money they make, which is fine. I don’t disagree. But unless there’s some cultural understanding that a business owner taking home 10 to 20 percent—that’s just what it is. And then it would be so much easier to have 10 million conversations that would be useful to have. When we wrap this thing in mystery, and everybody skulks around like, “Oh my god, I can’t possibly tell you how much money I make from owning a business,” well, people start businesses with bad expectations. People work for businesses with just fiction bouncing around in their head. “Oh, we did $4 million in sales last year. That means the boss made $3.8 million.” Believe me, that is happening. When you don’t provide real stories, real facts to people, they just make stuff up. And then you’re really in a crazy world.
Jay Goltz:
Generally, I don’t argue with that. Generally. But, again, if somebody happens to figure out how to get a better bottom line, and they’re making 800 grand, I don’t know what the point of telling everybody that is.
Loren Feldman:
Laura, I’m curious with you, given your feelings of guilt, are you uncomfortable with the idea that there are certain people at your company that know how much money you’re taking?
Laura Zander:
Sure, yeah. My salary is low. My payroll salary is low. I mean, not low, but I’m not the highest paid person at the business, and neither is Doug. So that doesn’t bother me.
Jay Goltz:
Wait, wait, wait, what? You have employees making more money than you’re making?
Laura Zander:
From a salary standpoint, yes.
Jay Goltz:
Okay.
Laura Zander:
But then we take distributions.
Jay Goltz:
Right.
Laura Zander:
Right now, we’re just paying back the loan that we made to ourselves. Certainly there are things that I get uncomfortable with, like our office manager, our accountant sent our taxes to her the other day, and I’m like, “No! I don’t want her to see all of it.”
Paul Downs:
Plus your Social Security number.
Laura Zander:
Oh, I don’t care.
Paul Downs:
You say that until it happens. Then you’re gonna find out.
Laura Zander:
Yeah, sure. So yes, it does bother me, because I feel guilt. I feel bad, but I’m learning a lot just from listening to you guys.
Jay Goltz:
I’m surprised, after all of the difficult times you’ve had—because I certainly used to feel like you did—that after all of the difficult, stressful times you’ve had, you haven’t finally figured out, “This is why I make money.” Because I did. And maybe just because I’m older than you, finally at some point I realized, “This is why I deserve,”—versus guilt, replacing guilt with deserve—“This is why if I happen to do well because of what I did, and the business is really profitable, I no longer have any guilt.” I certainly used to.
Laura Zander:
But it’s the deserve thing. Even taking this last week off, I feel so much guilt, because everybody else is working and I’m not.
Jay Goltz:
Don’t they get vacations, your employees?
Laura Zander:
They do.
Jay Goltz:
Okay, so what’s the problem with that?
Laura Zander:
I mean, we’re gonna get into therapy.
Jay Goltz:
I think we’re already in it. So just finish it out.
Laura Zander:
It boils down to the deserve thing. You don’t deserve it. You know, because I haven’t worked hard enough. I’ve made too many mistakes.
Loren Feldman:
You haven’t worked hard enough?
Laura Zander:
I could have worked harder.
Paul Downs:
You should go read the book—what is it? The Jungle.
Laura Zander:
Upton Sinclair?
Paul Downs:
Where the guy’s in the meatpacking industry, and every time he gets utterly screwed by everybody in sight. And then his reaction is, “Oh, I should work harder.” No, you’re getting reamed by the politics, the business, the government. Everybody’s on him. And you’re just seeing it. I don’t know who taught you to do that. You should go slap them, because you… I’m done.
Jay Goltz:
Laura, is this a surprise to you? Because it was a surprise to me when someone pointed it out to me 20 years ago. Would it be a surprise to you if I said that you’re obsessive? Do you know that about yourself?
Laura Zander:
Oh, absolutely.
Jay Goltz:
Okay, well, this is part of being obsessive. You don’t think you’re working hard enough. It’s all part of being obsessive. I was talking to my friend one day, and I said, “Boy, the guy in the article”—I think it was Bo Burlingham, actually—”he called me obsessive.” And I was telling my friend this, who’s known me since I was 10 years old. And he goes, “Jay, you are obsessive. You didn’t know that? You used to time yourself when you cut the lawn at home.” And I go, ”What do you mean, I used to time myself? So yeah, I’m obsessive. And now I recognize it, and I made some adjustments.
Laura Zander:
Yeah, no, you’re absolutely right. Yeah, of course. Do you mean you don’t time yourself to see how fast you can get the mail?
Loren Feldman:
You are competitive.
Laura Zander:
Oh, God, yeah.
Jay Goltz:
With herself, which is a problem.
Laura Zander:
Yes, it’s with myself. And I think there’s probably some, maybe it’s not narcissism, but it’s that I feel like I’m the center of the world. And so, everybody’s sitting there watching what I’m doing and paying attention to whether or not I’m working. I realize that that’s not rational and not accurate. But anyway, I’m fighting it.
Loren Feldman:
Well, let me just say, thank you for sharing that. Because I know for a fact that there are a lot of business owners who feel the same way you do, and I think will probably benefit from this conversation.
Laura Zander:
I think one thing that has helped me a little bit—and Jay and Paul, you just talked about this—is the return on investment. So if I can switch my thinking, and reframe it as, “Okay, here are either the hours that I’ve invested and/or the capital that we’ve invested over the last 20 years. Now, I’m getting a return on investment of 7 percent,” or whatever that number is. Then that kind of helps me step outside of it as if I’m an investor in the business. My job as the CEO is a paid job, and it’s different, but then I also have a role as an investor.
Jay Goltz:
Just to put some numbers on that, since you brought it up, the return on investment in a business should be in the twenties, at least, because if it isn’t, you’d be better off just putting the money into real estate or the stock market. So you should be able to have a metric that you should be able to figure out, “Here’s how much money I’ve got invested in the business.” And you should be able to get a 20-some percent or more return. Paul, your friend who’s pulling out the big money might have a 300-percent. But you shouldn’t have an 8-percent return on investment running a business. There’s too much brain damage to get 8 percent. You could use an index fund to make that.
Paul Downs:
I would say that that’s a metric, but it’s not the only metric. Because part of it will be how much you enjoy the business.
Jay Goltz:
Sure, absolutely.
Paul Downs:
Because there’s a big part of my life today, which is, my business allows me to have a place where, when I walk in the door, everybody kind of pays attention to me. And if I didn’t have that…
Jay Goltz:
Or you like what you’re doing. Absolutely.
Paul Downs:
I like it. I like the power, and I like the influence, and it doesn’t show up on an ROI calculation. So, if the money was in the stock market, what would I be doing all day? Just sitting at home reading The New York Times? God bless it. But it’s not nearly as nice as having a business.
Loren Feldman:
My thanks to Paul Downs, Jay Goltz, and Laura Zander. As always guys, thanks for sharing. I really appreciate it.
