Episode 72: It’s a Pile of Money

Episode 72: It’s a Pile of Money

Introduction:

This week, Paul Downs makes two seemingly contradictory points: One is that his business is on track to have its best year ever. The other is that he expects to claim another big government subsidy, courtesy of the enhanced Employee Retention Tax Credit. As Paul says, if you don’t know about the ERTC or if you don’t know that its requirements have been relaxed, you probably should check it out. Meanwhile, Jay Goltz tells us what happened when three of his employees found out what the others were being paid, and Dana White feels a little deflated after talking to an investment banker. Plus: Paul shares his new strategy for coping with the labor shortage.

— Loren Feldman

Guests:

Paul Downs is CEO of Paul Downs Cabinetmakers.

Jay Goltz is founder and CEO of Artists Frame Service and Jayson Home.

Dana White is founder and CEO of Paralee Boyd hair salons.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Full Episode Transcript:

Loren Feldman:
Welcome Paul, Jay, and Dana. Great to have you all here. Let’s start with you, Paul. We haven’t seen you in a little while. How’s business?

Paul Downs:
Business is pretty good. We have suffered through a number of staff vacations, and one guy was out while his wife had a baby. And that turned into a couple of extra weeks, as there were some complications, which is all resolved. We’re back up and running full capacity, made a couple of hires, and things look good.

Loren Feldman:
That’s good to hear. You told me when we talked the other day that you have something cooking with the Employee Retention Tax Credit.

Paul Downs:
Yes, the Employee Retention Tax Credit was originally rolled out at the same time as the PPP, and was intended—as far as I can understand—to provide support for employers who did not lay off employees when times were hard or when they had been shut down by the government. It’s a credit against your 941 obligations: When you pay payroll, the employer’s portion of the payroll tax. It’s actually a pretty amazing subsidy, because they’ve expanded the eligibility well beyond last year, and now it’s available for every quarter of 2021. The summary is that if you have a business that was either shut down by government action or experienced a drop in revenue compared to 2019, for any of the quarters in 2021, you can claim a credit of up to $7,000 per employee for each quarter that you qualify.

It seems like a lot of people, including us, would qualify for this subsidy, and it’s just another big pile of cash from the government. So it looks like we’re going to qualify for two quarters this year, and it should amount to about another $300,000 in credit. Now, unlike the PPP loan, this is a credit against your tax obligation, so it would tend to increase your profits, and you would be taxed on the increased profits. But you’re not going to lose money by claiming this credit, if you qualify. And I would encourage anybody who thought that all the goodies had already been handed out to take a careful look at this and see whether your company qualifies, because it’s a pile of money.

Loren Feldman:
So you’re going to be able to take this for the first two quarters of this year?

Paul Downs:
It looks like we’re going to qualify for the second quarter and probably for the fourth quarter, based on our accrued revenues.

Loren Feldman:
You told us previously that you were on your way to your, I think you said, your “best year ever.” Why would you think that your fourth quarter would be below 2019’s fourth quarter?

Paul Downs:
Because our fourth quarter in 2019 was the best quarter we’ve ever had. So in order to have a 20-percent drop on that quarter-to-quarter comparison, we can still book a pretty reasonable amount of income and qualify for the credit.

Loren Feldman:
Interesting.

Paul Downs:
Yeah, it’s kind of amazing. And Uncle Sam, after my entire life of being very stingy to small business owners, suddenly unleashed these piles of cash and—

Loren Feldman:
Well, not out of nowhere. I mean, there was a pandemic.

Paul Downs:
There was a pandemic, but the qualification process is, mathematically, take a look at what your revenues were for each quarter of 2019 and compare them to each quarter of 2020. And depending on what happens, you may well qualify for this subsidy. I mean, for us, it’s gonna be about 300,000 bucks for the two quarters.

Dana White:
Where do you find more information about this?

Paul Downs:
There are various IRS publications that explain it in the IRS way, which is incomprehensible. I found a pretty succinct explanation, which I can email to Loren to put in the show notes. It’s called the Employee Retention Tax Credit. It’s a program that’s been changed twice since it was rolled out in March of 2020. And basically, in the last change, they expanded it so that it’s available for all four quarters of 2021, and that’s a real blessing for anybody who’s had revenue go down.

Loren Feldman:
Paul, I think there was initially a rule that said you can’t do this and the PPP loan simultaneously for the same employees in the same period. I think that was later changed. Do you know what I’m talking about?

Paul Downs:
I do know what you’re talking about, and my understanding is that maybe you can’t claim forgiveness for the PPP loan if you’re also claiming the credit for the same time period. So you’ve got to kind of think about which one you want. I would suggest that anybody who’s interested in looking into this: Talk to your accountant about it, or your payroll company. They would certainly know something about it. There’s more to it than what I described. As always, there are things that need to be thought about carefully, but the basic idea being that: Here’s another pile of money. You may as well see whether you qualify.

Loren Feldman:
Jay, have you looked into this?

Jay Goltz:
You just gave me a headache. I believe we’ve got the credit.

Paul Downs:
The biggest change that happened relatively recently was that the eligibility was opened up for the third and fourth quarters of this year. So you’ve got quarters that haven’t arrived yet, and you can actually ask for the credit in advance for a quarter when you anticipate being down in revenues and get a check from the government. You apply for the upcoming quarter, and they’ll send you money. I know somebody who did this and got 2.6 million bucks for his payroll, because they’re in the construction industry, and the material problems have really delayed all their projects, and they’re going to suffer poor revenues because of that. Here’s the thing: they don’t ask you why your revenues are down. It’s just: Are they down? And if they are, then there you go. You may as well take a look at it.

Loren Feldman:
And you get an actual check for the money as opposed to waiting till you pay the taxes?

Paul Downs:
There are two different ways you can get it. You can wait and pay the taxes, take a credit, or you can apply for the credit in advance and get a check. That’s my understanding.

Jay Goltz:
All right, do not try this at home. This is not to be perceived as legal accounting advice. Please speak to your accounting professional.

Paul Downs:
Yes, I think speaking to the accountants and the payroll guys is critical. But it exists. It’s real, and I do know people who’ve received substantial amounts of money.

Loren Feldman:
Paul, one thing, if I can try to clarify: I wasn’t sure what you were saying in response to the point about whether you can claim both the PPP and the credit for the same period with the same employees. My understanding was that initially you couldn’t but it was changed, so that you could.

Paul Downs:
I believe that you’re right, that it is now possible to get both. I was just looking at this link that I was gonna send you for the language about it. This is gonna be the kind of thing that your accountant needs to answer. And I don’t really want to say yes or no, but I think you’re right that they removed some of the restrictions on claiming both of them. And it’s now easier to do that.

Loren Feldman:
The larger point is, it’s gotten easier to claim, and yet very few people know about this.

Paul Downs:
Right, and it’s a substantial amount of money. It could make a real difference, in terms of a business that’s undercapitalized or struggling because of loss of revenue.

Loren Feldman:
And so people understand how much money could possibly be at stake here, how do you get to 300,000?

Paul Downs:
The basic calculation—and there are complexities that might change these numbers—they’re giving you a 70 percent credit on the first $10,000 of payroll per eligible employee per quarter. So that if you qualified for all four quarters and all of your employees, it would be $28,000 per employee as a refundable credit.

Loren Feldman:
All right, let’s make the rest of this conversation an accounting- and IRS-free conversation. But, Paul, thank you for raising that. Jay, are you going to look into it?

Jay Goltz:
Yeah, I’m on it. I’ve already put it on my to-do list.

Dana White:
Yep, I’ve already Googled it, emailed the information link to my accountant, bookkeeper, financial manager. So we’ll talk about it in our meeting on Monday.

Loren Feldman:
Excellent. Dana, how are you doing?

Dana White:
Oh, hanging in there. I’m excited to be headed to Texas and North Carolina this week.

Loren Feldman:
Wow.

Dana White:
I’m going there to go do some site visits.

Loren Feldman:
That’s exciting.

Dana White:
It is. I’m looking forward to it. They’re looking forward to having me. It’s a great opportunity.

Loren Feldman:
These are site visits on military bases, as you’ve been telling us about the last few weeks, right?

Dana White:
Yes, site visits on military bases. I’m excited. I took Diana’s advice and went ahead and set up some calls with some investment bankers. And I had my first one yesterday. It was quite jarring.

Loren Feldman:
How so?

Dana White:
Well, it’s part of the reason why I haven’t submerged myself in this world. They’re very numbers-driven, and they’re not completely wrong. But they’re very numbers-driven, and so their numbers are a lot higher than where we are or where some brick-and-mortar businesses will be. They’re in the startup world, and they’re in the rounds of funding and the seed world. And when you’ve got people making it to billion-dollar companies in five years, or $500 million companies in three years, or even $50 million companies in five years, that’s where they’re used to playing.

I got off the phone yesterday, and I was a little off-balance. It’s not because he told me anything wrong. It’s just that he had his lane of looking and what he was looking at. And in short, it was a matter of, “Listen, you only have one location. Yes, you were right to close your first one, but until you have five, six, seven, eight, nine locations, maybe franchising shouldn’t have been what you chose.” That’s in short. And so I asked him—he’s a franchisee of a location, and he knows friends that are about to be franchisors—”How did they get to five, six, seven, eight, nine locations?” And he said, “Oh, friends and family.” And so at $300,000 per location, that is not something that I could go to friends and family with. And he said, “Well, it’s not friends and family, really. It’s people-you-know’s friends and family.” And that’s just not my community. And so that’s why I chose to franchise, because waiting until you found the friends-and-family’s dollar to build out five locations would have taken me years. It took me eight years to get to this point. So, that was it. I’ve got some other calls coming up.

Loren Feldman:
Was he not interested in the conversation about the potential contract from the military?

Dana White:
He said, “That’s your best bet. But it’s a fishbowl, and that’s not going to necessarily be reflective as to what would happen in the private sector.” And again, I don’t disagree with him. I just was a little discouraged getting off the phone as to the viability of the franchise option. Because he was saying that it’s not a viable franchise, similar to what Diana’s husband was saying, which was, “Why would somebody invest in that?” I just think that there’s a privilege and there is a perspective that is limited by people who have the money to make these decisions.

Because there’s a lot they don’t know. And it’s hard when you’re saying, “You don’t know,” and they’re like, “What do you mean, you don’t know? You’re not a billion-dollar company. What do you mean? You’re not a $50 million company.” Of course I know. “Because if you were viable, you’d be at these numbers.” And it’s like, “Okay.” You just say, “Okay.”

Loren Feldman:
It sounds like he brought your FUD back.

Dana White:
Um, no… No! Actually, he gave me a very healthy perspective. I wasn’t like, “Oh, this is bad.” It’s just, what’s done is done. Again, it is what it is. Deal with it. I know I made the best decision for me at the time I made it and… fuck you! I mean, I didn’t even say that to him. And, he wasn’t a bad guy.

Jay Goltz:
To be fair to him, he’s giving you honest input. You know, good for him. He’s being honest with you. He’s telling you what he thinks. Good for him.

Dana White:
Good for him. I appreciated it. It wasn’t, “Oh, no, I shouldn’t have done it.” But you know, he’s not here, and he doesn’t know. And he even admitted to that: “There may be some things I don’t know.” But I think when we’re talking in the investment banking world, they look at things a certain way. And unless I’m coming with numbers of high single-digit millions or high double-digit millions, I’m not really going to be of any interest.

Paul Downs:
Can I make a comment here? In my Vistage group, we’ve had a number of business owners who went through a process of talking to investment bankers to look at capital infusions. And the takeaway we took as a group was that the world of investment bankers is specialized. So when you say, “I called an investment banker,” you called one investment banker. There are capital sources that specialize in the launch phase, sort of like where you are. And there are capital sources that specialize in the $10 million to $15 million, another one in the $ 50 million to $150 million.

They’re all specialized, and if you happen to call a guy who is not doing what you’re doing, don’t necessarily take his dismissal of your project as dismissal of the project. He’s really saying, “This is not what we do.” And there are people who are looking for those early opportunities, and you just haven’t found them yet. So I think that the move is to continue to ask around. And it may be that you need an angel-type investor at this point, rather than a real investment banking shop. Because you are at this takeoff point, and the right person may understand it, and a lot of people won’t understand it.

Jay Goltz:
She paid the consulting firm that does franchises, and the question is: How much can you trust their judgment, if they told her, “You can do this,” they took her money, they put the stuff together, and they gave her a budget for, “Okay, here’s what it’s gonna cost to market this, to go find your customers,” and the question is: Are they right? You left the part out that I think is critical: He did qualify it. Didn’t he say to you, “Listen, I might just be a dumb white guy.” He said that, right?

Dana White:
He said, “There may be some things I don’t know.”

Jay Goltz:
But he doesn’t understand Black hair care, and the Black hair care lifestyle, and the whole thing. I don’t know that he spent that much time thinking about it. I’ve been on this podcast with you so many times, I have a very thorough understanding of that opportunity. So just the fact that your numbers don’t blow off the page, like, “Oh my God, this is unbelievable,” you have to understand what this market is, and I don’t know that he put that much energy into thinking about it.

Dana White:
To Paul’s point, that’s who Goldman Sachs is putting me in touch with: early stage investors. I’m fairly competent on the stages of funding, and I’ve read up on having your data room, and just this whole entire process. So the people that they’re putting me in touch with are people who not only are funding early-stage businesses, but are funding minority women businesses that cater to minority women. But here’s the thing: They’re products. And so that is also different, because you’re looking for someone who’s in Target. I don’t have products. I’m a service.

So it’s just being in this space where you’re the first to do things. Maybe it would be easier if I had a burger joint. Maybe not. Maybe it’d be easier if I had a Wingstop or something that was more familiar so people are more like, “Oh, I know how this goes.” But yesterday’s conversation just allowed me to have a different perspective, and I will continue to bounce his feedback off of other people to hear what they say. I have already, and several people disagree with him. They’re like, “Oh, he just doesn’t know.” And I said, “Oh, okay.” Yeah, he feels that I’d have a stronger position franchising. He was very skeptical about me only having one, maybe two, locations. He felt like I should have a lot more.

Jay Goltz:
Listen, there’s no question you’d be better off if you had five locations going. But to your point, that would take you quite a while to pull off. And I said to you on the first day, “I won’t be surprised if you become a zillionaire from this. Or I won’t be surprised if, in two years, you think, ‘Oh my god, what did I get myself into?’” And I don’t think this is a black-and-white decision. It’s a case of, it’s nuanced. There’s an opportunity there. You don’t have a lot of locations. So I don’t think anyone can definitively sit there and say, “Oh, this is absolutely the greatest idea ever,” or, “This is a terrible idea.” That’s what you’re figuring out.

Loren Feldman:
The decision’s been made. I mean, you’ve chosen to go down that path. I’m curious, Dana, you’re kind of operating on two tracks now: One with franchising; the other, company-owned stores potentially on military bases. Are you concerned at all about your energy and time being divided between those two tracks?

Dana White:
No. If there were a lot of missing pieces, if there were a lot of things left to be done, I would be like, “Oh man, I can’t. I still have to develop in this area.” I think both of the opportunities will allow me time to—how should I say it—they’ll allow me time to grow in them. So if I were scrambling to put our processes together, forever scrambling on the business stuff, yes, it would be a lot. But a lot of this is going to be plug-and-play. I know there is a technological component that we’re going to be developing that I’ll have to get acquainted with. But that’s not going to take long because I’m a part of the development process.

Jay Goltz:
Well, to be clear, though, you’ve got all the paperwork done and all the structure put together for the franchise. You could put that on hold for six months while you do this other thing. It’s not like it’s already going, and you’ve got a trade show set up, and you’ve already got people looking at you. Correct me if I’m wrong: You could just say, “All right, I’m putting the franchise thing on hold until I get this military base thing figured out.” Isn’t that true?

Dana White:
Sure thing. Yup, that’s true.

Jay Goltz:
Yeah, so you’re in a good place. You’ve got it worked out, and you can just go put your focus into that for a little while.

Dana White:
I could develop it and then wait to market it.

Loren Feldman:
You are going to learn a lot more in a very short period of time, and we’ll continue this conversation.

Dana White:
Yep.

Loren Feldman:
What’s going on with you, Jay?

Jay Goltz:
Well, I’m interviewing another CFO candidate today who sounds promising. I’m very confident I will find someone who fits well. My CFO has given me plenty of time. He’s not leaving until the end of the year. So that’s what I’m spending my time on, and the COVID thing is back to being challenging, like overnight. Everybody’s wearing masks again.

Loren Feldman:
I assume you’re referring to your employees.

Jay Goltz:
Oh, no. Everybody. The city of Chicago said you’ve got to wear masks indoors, so it went from nothing to all of a sudden overnight. So we’re doing it, and I can’t take off the table that it’s possible there’s gonna come a day that I might have to make the extremely difficult decision: Do I tell people, “You have to get a shot”? Which I’m extremely uncomfortable with, and I’ve got some really solid long-term employees that work for me, and there’s no win in this. There’s no good answer to this.

Loren Feldman:
You have some solid long-term employees whom you know have not been vaccinated?

Jay Goltz:
Oh, yeah. And I’m really uncomfortable grilling them. I asked one of them, “Any chance you’re going to get the vaccine?” He goes, “No.” And you know, that was that. The other one I haven’t talked to yet. I’m not going to start getting into a debate with them. I was hoping this was going away fairly quickly and I wouldn’t have to deal with it. But I don’t know what’s coming now. I mean, if you watch the news, it’s not encouraging. I’m thinking of not watching the news. That’s one solution.

Loren Feldman:
Did you see people are trying to use incentives? Vanguard Group is paying everybody who gets vaccinated—whether they’ve already done it or they’re about to do it—$1,000.

Jay Goltz:
I philosophically have a huge problem with that. For God’s sake, we’re supposed to go pay people to do something to help themselves? In my case, I have 130 employees. I’m going to go write a check for $130,000 so they can go do what they should do to take care of their own health? I just philosophically find that to be… I don’t even have a word for it. It doesn’t seem right to me. Like, be grown-ups. If it’s a good idea, go do it.

Loren Feldman:
Yeah, but that still leaves you with a difficult situation.

Jay Goltz:
I know. That’s why I say there’s no good solution to this.

Loren Feldman:
How are you thinking about it, Paul?

Paul Downs:
Oh my God. Well, we settled on: If you are vaccinated, you don’t have to wear a mask in the shop, and if you aren’t, you do. And that’s the policy I’m sticking with. Now, we’re not public-facing, so that makes it considerably simpler. I have two employees who told me they weren’t going to get vaccinated, and they’re wearing their masks. In our area, the masks have started to pop up again when you go out in public, but it’s not anywhere near the level of compliance that we saw last year, so I think that people are sick of it. And there’s going to be a diminishing respect for whatever new rules come out of the government. People are just going to start ignoring it. I mean, how many people drive 55 miles an hour?

Jay Goltz:
Well, I think the combination of sick of it and they have had the shot. So they feel a little protected. So it’s different.

Paul Downs:
I traveled from Philadelphia to Nashville and back last week, and I’ve got to say, in the South, nobody’s wearing masks. And if you do, they laugh at you. So I don’t know how effective all this is gonna be.

Jay Goltz:
The tragedy for this is the hospital workers who are putting their lives at risk for people who didn’t get shots, and now they’re putting their lives at risk taking care of these people. That’s the tragedy.

Paul Downs:
It’s a tragedy, but the people who I encountered in various places—various rest stops and gas stations and restaurants in Nashville—they don’t care. I think that that’s pretty much how America is gonna go. We’re gonna learn to live with it, even if it’s painful.

Loren Feldman:
Dana, is this an issue for you?

Dana White:
No. Most of, if not all, of my staff are vaccinated, and they’re wearing masks. We’ve asked them to wear masks regardless, because we don’t know if our customers are vaccinated or not. We’re not going to ask—that’s their personal private business. They asked me how I felt about it as an owner, and I said, “I believe vaccination is your personal choice. I understand, but I don’t agree if you don’t want to get vaccinated. But if you don’t, wear your mask. And it’s just required.” Everybody’s on the floor wearing masks for themselves and for our customers.

Loren Feldman:
Jay, you had an interesting experience recently with some salaries in your shop being inadvertently disclosed.

Jay Goltz:
Someone sent out a report with cost of goods sold on it and labor costs, and inadvertently on there were three people’s salaries. There’s disparity between the three salaries, which I feel comfortable about personally. I try to pay people the right amount. It kind of blew up, and people are upset. And it brings up the whole issue of, “Oh, should you just post everybody’s salary on the wall?” I don’t believe so.

You find yourself having conversations with people [about] what they think somebody else should make. And, “Well, if they’re making that, why aren’t I making that?” And it’s just unfortunate. I believe I’ve got it all calmed down, but it puts the boss in a funny position. It puts the employee in a funny position. The argument of, “I should make more money because I just found out Loren makes more money than me,” if it were the exact same job, fair enough. But it’s not the exact same job. And I’ve never had it at this level because it just never happened.

But I remember I was at a seminar years ago, where this consultant did a speech—this is 30 years ago—and she said, “You should be able to post everybody’s salary on the wall and it wouldn’t be a problem.” And I said, “Are you serious? I’ve got factory workers making X dollars an hour, and then I’ve got sales people making 50 percent more.” “Well, maybe that’ll encourage the factory workers to go to college and become salespeople.” I thought, “They’re trying to put food on their table,” and I was just blown away.

And then my wife told me later—she happened to be there with me with me—he goes, “Oh, I saw that woman out in the hallway. She was crying.” I made her cry. And like, oops. I’m so disgusted at people who don’t own businesses. If you own a business, and you’ve done that, and it’s worked out great, more power to you. Go out there and tell everybody how well that works. But don’t give me this theoretical concept that, in many cases, does not work. I’m sure in some cases, it works very well. But it doesn’t work in some cases, at all.

Dana White:
I was a labor organizer in my past life, and that’s the example of when it works, when you get less guff from staff. Because it’s very clear from day one, “Here are the salary ranges for framer A. Here are the salary ranges for framer B. Here are the salary ranges of framer C—all of which are based on the following: time in, experience, education, and the like.” When we were negotiating contracts, that’s where we would say, “Now that we’ve got this salary structure in place, let’s put it out there so we’re not having any questions about, ‘Well, why does this person make more than me?’” Because it’s not a secret.

Jay Goltz:
Well, how big is that range? Okay, but you just said salary ranges. Just walk me through how big is that range?

Dana White:
It depends on the company. It could be $10,000. So let’s say, hypothetically, in Company A, framer position A is your entry-level framer. Well, everybody who’s a framer A knows that they’re going to make anywhere between $50,000 and $60,000. It depends on how you structure it or put it out. But they know.

Jay Goltz:
Okay, so let’s walk through this. So framer A is making 50, and they look on this chart they found that’s up on the wall, and it says someone else is making 60. They go, “Wait a second, I framed more pictures last week than they did. Why is she making $10,000 more than me? That’s ridiculous.”

Dana White:
Because you’ve communicated that it’s not about your output. It could be output. It could be performance-based. It could be, but we’ve recommended: Make it on things that are tangible: years in, education.

Jay Goltz:
Okay, and in the real world that I’m living in, when you tell the person, “Well, so and so’s making more because they’re really gifted. They write great ad copy, and they’re in charge of the advertising for this.” And then the person goes, “Oh, well, I do too. I’m good at that, too.”

Dana White:
Okay, and so I’ve dealt with this in my labor background. “You are? Well, we’ll reevaluate it when you’re given the opportunity to write great ad copy for us. We’ll keep you in mind.”

Loren Feldman:
We’re running short on time, and I want to get Paul into this. Paul, you’ve told us that you put your own salary up on the wall. Do your employees know what the other employees are making?

Paul Downs:
Not because I’ve told them. I think it’s a minefield, and I’ve never wanted to drag the company into it, personally. I would not be surprised if some of the staff have talked to each other about what they’re making. But I think part of it is that, a lot of times, there’s a disparity in the hourly pay for some of my employees that is evened out by the cost of the benefits. So if someone wants to have a conversation with me about compensation, I’m happy to do it. And when I tell them how much their health insurance costs the company, they’re often quite surprised. And it can be a number of dollars per hour. In one case, it’s almost $10 per hour for this worker. And so that affects their hourly wage, because we’re providing the compensation in a different way. Now, health insurance is like the worst possible way to get compensation, because everybody hates having to pay for it and you hope to God you never use it, but I’ve still got to pay for it.

We do have a couple of positions where the basics of the salary are known. The two salespeople are pretty clear on what the other one is making because they can see it. Part of the system of monitoring the commissions is that they can see the income. But the short answer is, no, I would not announce what everybody is getting paid.

Jay Goltz:
“Minefield” is a good phrase. And salespeople? Pretty simple. If you’ve got a base plus a commission, okay, everyone knows if you sell more, you make more. That’s one of the easier ones. It’s the other jobs that are softer. One person is always helpful and is giving you some great insight, and is a pleasure to work with. And the other person, not so much. I mean, it’s just…

Dana White:
But that’s very personal, and that’s why staff get upset. Because, like you said, “This person is a pleasant person.” Whether they’re pleasant or not shouldn’t [determine] how they’re compensated.

Jay Goltz:
Really? Maybe in your world. But in my world…

Dana White:
But no, the other thing is, we’re not saying, “To the letter put up what people make.” I said it’s a range, and so they understand. But I think the minefield is paying people based on whether you like them or not.

Jay Goltz:
That’s hardly what I’m saying. I’m suggesting there are 10 criteria as to why someone makes what they’re making. If someone’s less pleasant, and one person’s easier to work with? Yes, I’d just as soon make sure that person hangs around.

Dana White:
Who determines that?

Jay Goltz:
Their manager. That’s how it works in the real world—their manager.

Dana White:
But that’s part of the problem. If you’re saying the manager finds this person pleasant to work with, that shouldn’t be a criteria for pay, because that’s what determines whether I like you or not. It doesn’t matter. If I’m doing my job—

Jay Goltz:
Being pleasant to work with is a job criteria. It makes it easier to manage them and requires less time to manage them. That is absolutely—not the whole—that is a criterion. I’m not suggesting everyone gets paid [based] on whether they’re pleasant or not. I’m saying there are 10 different issues. Some people need a lot of management, and some people don’t need any management, so the person who doesn’t need any management is probably going to make more because they’re worth more, because I don’t want to spend any resources to manage that person. Other people who require a lot of management? That takes up resources. They’re going to make less money, and it works out. Because if someone’s going to quit, I just as soon [hope] they be the one to quit than the one who was great.

Dana White:
But you just made a very important difference. Management level of involvement in your job is very different than “pleasant to work with.” Pleasant to work with is, “I like you. We get along. It’s easy to work with you.”

Jay Goltz:
Okay, we could argue what “pleasant” means all day long. Like I said, there are 10 different criteria: Do they take initiative? Are they the one that comes in early to get the job done? Are they the one who always stays late? Are they the one who picks up the slack? Are they the one who comes up with some good ideas? Are they the one that customers call you once in a while and go, “I just have to tell you, Dana is the greatest person that I’ve ever done business with”? There are 10 different reasons as to why somebody could be worth more money to a company, and it’s just not as black and white as putting it on the wall and going, “Okay, all of you who do this, you’re gonna make that. And all you who do that are gonna make that.” It’s just not that simple.

Loren Feldman:
Jay, let me ask you this: In the situation described with the three workers whose salaries were disclosed and it caused some—

Jay Goltz:
Consternation.

Loren Feldman:
How did it end up? In the end, with them knowing what each other was paid, and you explaining to them why, are you in a better place or a worse place?

Jay Goltz:
I would say that we’re in a good place, because at the end of the day, these are three very important employees who have been with me a long time, who I have a very deep relationship with, and we got to a good place. I had little to do with this because I’m not their direct manager. One of them took the time, when I went in the area, pulled me to the side and said, “I just want you to know we’re okay.” How lovely is that? That’s about as lovely as you can get. We’re good. We figured it out. But it just was something I would have rather have avoided. It wasn’t a great thing. But everybody’s good and we’re forging on because it’s about building a relationship. And if you have a good relationship, you can withstand some bumps along the road.

Loren Feldman:
All right, I just want to do one more thing, which is, I got a really interesting email from a listener the other day, who reacted to something you said, Jay, a couple of weeks ago. This listener, Jacob Kelly from American Gunsmith, heard you talking about how you had so many people making appointments for job interviews and then blowing them off, not showing up. And he wrote to say that he’d had a similar experience: “We’ve noticed a dramatic percentage increase in no-shows for all positions we are attempting to hire for.” And he came to the conclusion that it may be a number of factors, but one is the unemployment payments—that because states are requiring people to look for jobs again, people are making these appointments to prove that they’re looking, but not necessarily showing up.

Jay Goltz:
I think he’s right. That makes sense, because there’s something going on. Literally—I’m not exaggerating—20 appointments, five people show up. That’s how bad it is. And we’ve never had that. I think he’s onto something.

Paul Downs:
I think that there may be something else at work too, which is that people apply for a lot of jobs, and then they get offered one. And then they take it, and then they’re just too lazy to cancel the other appointment.

Jay Goltz:
Interesting, okay.

Paul Downs:
Because I’ve noticed that when we interview people now, we really need to be ready to lock them down right that second. Make a decision, take them out of the job search, or they’re gone. Like the idea that we could spend time thinking about it and dragging our feet…

Jay Goltz:
I’m sure you’re absolutely right that that’s part of it. For sure.

Paul Downs:
Someone else will hire them. I mean, it’s just a different market now. We’re not in 2009 anymore. Employers are gonna have to make adjustments, and that’s one of them. You see someone you want, what I do is I hire them and try to get them in here, and then we’ll take our time to make a decision about it. But then we’ve removed them from the job market, and we have the chance to make the decision, as opposed to them making the decision. And that costs money. Basically, the way you do that is by, if they’re asking for $17, you say, “I’ll tell you what. I want to hire you right now, and I’ll give you $18. And you can start whenever you can, and then if it works out, it’ll be great. And if not, I’ll fire you.”

But at least they respect the honesty, and they understand what’s going on, and they’ve got to make a decision. They’ve been identified as someone who’s worth more than they think they are, and then I’ve got a chance to do whatever I want with them. And I have had people who we let go fairly quickly after hiring them because they didn’t turn out to be a good fit. But then there are others who were even better, and I was glad that I didn’t let them walk out the door at that interview and go get hired somewhere else, because someone else would hire them.

Loren Feldman:
But do you actually say to them, “If it doesn’t work out, I’ll fire you?”

Paul Downs:
Yeah, a lot of people actually appreciate a company that is clear about its standards. Now, I have a whole list of what we call the “new employee guidelines” to say, “Okay, here’s what you’re expected to achieve. Do you show up on time? Here’s a whole bunch of things. If you can answer yes to all these questions after three weeks, great. And if you can’t, then don’t take this job, because these are the rules of the game you’re playing. It’s not that hard to succeed. Do a good job and show up and be a good teammate, and you’re in.”

Jay Goltz:
Do they need to be pleasant?

Paul Downs:
Yeah, absolutely. One of our criteria is: Do you get along with the rest of the team? If you’re an awful person, no, we don’t want you.

Loren Feldman:
All right. Let me just say, we had some technical difficulties today on my end, and you guys were all incredibly patient and pleasant with me, and I appreciate that. My thanks to Paul Downs, Jay Goltz, and Dana White. You guys are great. Thanks for sharing.

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