I’m a Freak About the Numbers

Introduction:

This week, Jay Goltz, Diana Lee, and Dana White talk about how they manage their financials—what reports they get, what KPIs they track, and how they make sure the sales team isn’t going rogue. We also learn of a new wrinkle in Dana’s growth plan. She’s concluded that—along with rolling out franchises and installing hair salons on military bases from Texas to Germany to Okinawa—she also needs to create her own software platform to manage her salons. “Cha-ching,” responds Jay. Plus: Diana explains how the new digital marketing privacy rules hamstring small businesses—and what they can do about it.

— Loren Feldman

Guests:

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

Diana Lee is co-founder and CEO of Constellation Agency.

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 Jay, Diana, and Dana. It’s great to have you here. Let’s start by catching up a little bit, especially with you, Dana. We haven’t seen you in a little while, and you’ve had a lot going on. Where do things stand?

Dana White:
I have been busy, and I crossed over to what I previously considered the dark side and got an assistant. I thought, you know…

Loren Feldman:
Wait, why was that the dark side?

Dana White:
It just implied a level of elitism. Now, mind you, this is not the first time I’ve had an assistant. When I was in my career, I had an assistant who I shared. This is the first time in my business world that I have enlisted the help of an assistant, and I should have done it a lot sooner. Because it just helped me out tremendously in the short time that we’ve been working together.

Loren Feldman:
Did you hire a virtual or remote assistant, or somebody who’s working right there with you?

Dana White:
I hired a virtual. So we’re gonna start virtually, and then I might transition to somebody else who’s local. She’s not local. She’s basically in charge of calendar management and email organization. And so she manages what I like to call the “important little details.” She manages my schedule, which is great. I’m not dropping the ball on things. She went through my email, and she said, “Okay, this is what I do for a living. I’ve never seen somebody who’s being pulled in so many different directions. When do you use the bathroom?” And I said, “On mute.” She said, “When do you eat?” And I said, “At the end of the day.”

Loren Feldman:
So, bigger picture, what’s going on at Paralee Boyd, in terms of your attempts at world domination?

Dana White:
Right? And I’m getting closer, Pinky—I don’t know if you watch “Pinky and the Brain,” but anyway…

Loren Feldman:
No.

Dana White:
So, here’s the thing. We are just handling it. I am so proud of my team at the salon. We brought in our stylist trainer, and we were there till midnight on Sunday, starting at like six or seven o’clock, and my team just trained on the methods we need to be more efficient. And they took the bull by the horns. Even as of yesterday, they have gotten people in and out in under an hour. And then, the reviews are amazing, and the people are loving their hair, and we’re just turning out a better product.

And so now we’re not needing to turn away people so much, because we are able to style them in the way in which Paralee Boyd styled when we first opened, back in 2012 to 2014. So that’s one thing. The military is firing on all cylinders. Between Sunday and the end of October, beginning of November, I will have traveled to Fairchild Air Force Base, Vandenberg Air Force Base—

Loren Feldman:
Tell us where these are.

Dana White:
Oh, yes. Spokane, Washington for Fairchild; Santa Barbara, California for Vandenberg Air Force Base; Fort Campbell, Kentucky; Fort Hood, Texas; Ramstein Air Force Base in Germany; Grafenwohr Air Force Base in Germany; and Aviano in Italy—all by the beginning of November.

Fort Bragg’s contract is almost done. I should have it to me by the end of next week. I’m putting that team together of people—very credible people—who have worked at the Pentagon, who have seen these contracts, who know what I can ask for to lower my cost because they’ve reviewed multiple contracts for several bases.

I’ve heard people put in perspective what it means to have the military come to you, versus you go to the military. And then, normally the military says, “Okay, we’ll do one base.” No, they literally want an international rollout as soon as possible. And so not only are we talking about what that rollout looks like, we’re also talking about the funding around that rollout.

Now investors want to come, but investor money is expensive money. And so I have a couple calls next week with some angel investors to see if that is an option. But right now, it’s looking like I will fund these through the SBA, and also be able to fund these through some of the military contracts that I’m being slated to bid on through my certification, or with a proxy for my certification until I get it. And then I’m franchising.

Loren Feldman:
Wow. A few months ago, when you were just focusing on franchising, you talked about having a feeling of FUD—fear, uncertainty, and doubt—plunging into the world of franchising. Are the feelings of FUD returning with the military thing as well?

Dana White:
Sure, but less. The FUD is there. You wonder, “Will people come? Is this what the people on base want?” I know this is what the brass want. In addition to that, the military is very excited about having an African American woman help change the face of their relations with women in the military. From what I’ve been told, I’m part of a multi-pronged attempt or effort to change that. And so there’s been discussion of me meeting with commanders and top brass and media relations at the Pentagon about: How do we kind of poster-child Dana, to say, “Hey, this is what we’re doing”?

I think that’s great, but I also want to make sure that it’s to the advantage of Dana and the advantage of Paralee Boyd as well, because there’s another historic feat being taken on. They’ve never had an African American woman be sought after for a global expansion, not only in just her salons, but also in her product. And so we have to discuss what the messaging looks like. And then you know, again, keeping franchising separate. The FUD is still there, because there’s always questions, but quite honestly, I don’t have time to cry. I don’t have time to worry.

Loren Feldman:
I thought that’s why you got an assistant.

Dana White:
I got an assistant and—

Jay Goltz:
She cries for her on Thursdays between 10 and 11.

Dana White:
Right, Jay? I had my cry this morning. No, the FUD is there, but I don’t have time.

Jay Goltz:
I’ve gotta tell you the franchise thing—and you know I’ve said this before—I can think of six things to be concerned about. This one, I mean, this is so much simpler and easier, and these people need you and want you. I can’t even imagine what you need to worry about with this. I’m sure there’s something I can’t think of, but this is an incredible thing that’s solving problems that exist, versus with the franchise, you have to worry about finding the person to buy the franchise, and then training them, and making sure that they’re the right people, and getting to market. There are so many more moving parts to that that are unknown. This one just seems like a really solid thing that there’s not too much to worry about. Or at least ignorance is bliss, so don’t worry about it.

Dana White:
Ignorance is kind of bliss. I’m concerned about the reputation service providers that are not big box have with the people on base. So, you know, everybody knows Starbucks, everybody knows Quiznos, everybody knows these big box businesses that are on base. Nobody knows Paralee Boyd, so I have to go on base and buck not only the haircare traditions—which I think they’ll be open to—but when the military does something that’s not big box, they don’t do it great. It’s not, “Oh, I love this place.” It’s like, “Here, this is what we do, based on what we know. And we don’t really know about textured hair.” So with me coming on base, I want them to know: They may not know, but you’re working with a provider that really knows. So I want to make sure I can go on base and wow active duty service members and their families.

Jay Goltz:
You know, that’s interesting, because you’re right. If they go there, you’re saying they have no need to be marketers, because they’re bringing Starbucks on there. They don’t need to do anything. In your case, you’re gonna have to make sure the marketing is done, because they’re not used to having to do that. That makes sense.

Dana White:
And wow them.

Loren Feldman:
Have you thought about what that looks like? What are the differences between marketing on a military base versus marketing in the rest of the world?

Dana White:
That’s a great question. Marketing on a military base is very grassroots, boots on the ground. Setting up tables in the exchanges, going into the neighborhoods in the housing communities, putting up flyers, meeting with the wives and the groups. There are a lot of groups on military bases: the officers’ wives, the enlisted men’s wives, the friends of the kids. There’s like a ton of groups that you have to meet with.

Diana Lee:
Dana, did you ever think about doing it socially? Because you can actually target everybody in the military, and then you could put a radius on there, so everybody within that radius that’s on social, which would probably be about 70 percent, would actually get it on their feed digitally.

Dana White:
Yeah, I was just giving grassroots as one of the examples. But the military has gone ahead and given me all of the marketing functions that I’ll be able to tap into when I start marketing at Fort Bragg. So, of course, social, but they have their own social. Heightened security is huge, like they’re very big on security. The Facebook that I’ll be tapped into will be a little… I want to say it’s a little different, but it’s different than the Facebook that some of us go on.

So they’ve given me a list of everything I’ll be able to do. I’ve given that to my marketing team, and we’re going to be putting a plan together for six weeks before, four weeks after, then monthly, for marketing. Television stations are different, their radio stations are different, and I’ll be given access to all of that to market, in addition to the grassroots stuff.

Jay Goltz:
You’ve given a whole new meaning to the phrase “boots on the ground.”

Dana White:
Very much so. We have to have a table in the exchanges. We have to have a street team, meaning that those tables have to be manned with women who are in Paralee Boyd t-shirts. They have to be branded. Their hair is done. And we have to market to the people who walk by and say, “This is who we are. This is what we’re doing. And this is why you should come to us.”

Diana Lee:
So Dana, I mean, this is a unique and amazing opportunity that can blow you up in a hot second just by actually launching it to the military. How much capital is it taking to actually do all of these sites?

Dana White:
Well, that’s another great question. So because I’m working with a former Pentagon retiree, he used to review all of these contracts just so he understood at a grass-top level what was going on. He knows what they can give and what they can’t. For instance, what we’re talking about at Fort Bragg is them doing the build-out, and then me just plugging and playing, me coming in and making it mine. So we’re looking at significantly reduced cost for military locations, because they’re so willing. They already do a lot, but they’re willing to do so much more to get me in there.

Diana Lee:
That’s great.

Dana White:
I think we’re looking at less than $100,000 for build-out. But I’m going to start putting my budget at $150,000 to $200,000 for each location, because I want to pay my staff to come down there and train, pay for travel, pay for marketing, all of that. And have plenty of cash and startup money for when we do it. And they said grand openings are going to be huge, so there’s nothing command likes more than a grand opening that’s going to solve a problem. So please expect a band, saluting, uniforms, red tape…

Loren Feldman:
A parade?

Dana White:
That’d be interesting. But she said, “No, it’s going to be big.” But I’m not going to have a party. I’m gonna cut the ribbon and we’re gonna start taking appointments. In addition, the technology that I’m working on, that’s another capital raise that I need, because that technology is extremely important. Again, perspective on this for you guys: Fort Bragg is bigger than the city of Detroit by like, over 100 square miles. I will be the only female salon on base.

Diana Lee:
Wow. Huge opportunity.

Dana White:
And that’s just Fort Bragg. We’re not even talking about Ramstein.

Loren Feldman:
Dana, you just mentioned you need to raise money for technology. Are you referring to the software you use to guide your customers through the salon?

Dana White:
Yes.

Loren Feldman:
Where does that stand? I know you’ve been using something. Do you have to create new software, or what’s involved at this point?

Dana White:
So we’ve already started talking with NewFoundry out of Ann Arbor, an amazing company who I know is more than capable of doing this. They’re looking for phase one of this to be done in 10 months. That’s why [I’m] getting the military contracts, that’s why having somebody next to me who understands what I can put into a contract to ask for. How much of this can be the technology development for this money? I may need to seek an investor for this part of that.

Loren Feldman:
Why do you need to do this? You’ve been using some technology up to this point. Why can’t you use that? And why didn’t this come up when you launched the franchising initiative?

Dana White:
It did come up. But it’s more urgent now, because Fort Bragg will be done before probably a franchise is ready to open. Our volume is expected to be huge, and this software will enable us to manage it and communicate with customers outside of the salon.

Jay Goltz:
It’s hard for me to imagine that there’s nothing that’s already in the world in the hair salon industry that’s, I don’t know, 75 percent there?

Dana White:
There is, but that extra 25 percent that’s missing is vital. Everything is appointment-based. And I’ve given them examples of things that just fall short of the mark. And they see that we need a family, a father on base. Like, I met a father on base with three little girls, and I told him that we might be here, and his eyes lit up: “Please let me be the first one. I’ll be the first one in line. My wife headed over to Afghanistan. I need this… Please.” He was like, “When are you coming?”

And so I need him to be able to go into our app, and let us know that he’s bringing his three girls, and then we let him know, “Great, be here in 30 minutes.” So then when he does come in, he just walks right in. We need this to be able to facilitate that volume more efficiently. And the reason why this is so important is, again, it’s not just for the bases around the world. It’s also for the franchises and my corporate locations. And for the military bases, they want me to own my software, again for security.

Loren Feldman:
Diana, you obviously have a lot of experience building a software platform. I believe you did it in-house. Do you have any thoughts about what it takes to do this, and what Dana should be thinking about in terms of hiring somebody to create a platform like this?

Diana Lee:
The first thing I would make sure of is that you don’t have foreign entities involved. And the reason is because a lot of people say, “I have developers in other countries,” but if the thing gets stolen, you can’t go after them in another country.

Dana White:
Yep. They’re all local, in Ann Arbor, Michigan.

Diana Lee:
Right. But you also have to make sure the developers that they’re using are also within the same country. And then the other thing is, it’s really important to have somebody of a development mindset on your team, because they speak a foreign language. Most developers do. And as much as I say that I could have tried to figure it out with them, it was never going to happen. So I had to hire a CTO who really led the project. I call him the developer whisperer, because he speaks a different language like they do. And then I am at ease in terms of where they’re actually going and the sprints that they’re coming out with and all of that. So it makes it a lot less complicated that you have somebody with that title on staff to actually lead those projects.

Dana White:
Yeah.

Jay Goltz:
Cha-ching! That’s not an expensive person.

Dana White:
Yeah. Like, add it to the list.

Diana Lee:
The only thing that I would tell you, Dana, and this part you have to remember: When you develop software, you always have to maintain it, and it’s a ton of money for maintenance. If you ever stop maintaining it, you will automatically have bugs in the system. So a lot of people think, “Oh, I just make the software and then never have to do anything after that.” No, you’re dumping money like you wouldn’t ever believe.

Jay Goltz:
Yeah, that is a difficult concept—and believe me, I fully agree, after years of watching this stuff. If you didn’t know that, it’s shocking. I would have thought, “Oh, you write the software, and it’s done.” And that is a foreign concept to people who aren’t in the technology business. And I still don’t fully understand why all of a sudden do bugs pop up if it was already…

Dana White:
We’ve had a conversation. It was on: What is the ongoing maintenance? Because you know me, I don’t sleep to dream. “Oh, software, yay!” But the work of it. And if I’m going to be spending this money, how is it going to increase my bottom line? And what are we doing? And so that’s huge. Yeah, understanding that maintenance standpoint.

Loren Feldman:
That’s like a whole other business that you’re creating.

Diana Lee:
It is.

Loren Feldman:
All right, well, I have a feeling we’re only scratching the surface with all that you have going on, Dana. We’re going to take a quick break for our sponsor, Work Better Now, which connects entrepreneurs like you guys with virtual assistants. And Dana, by the way, if you had gone through Work Better Now, you would have gotten a 21 Hats discount, just as many of our listeners can.

Dana White:
Oh, I didn’t know…

[Message from our sponsor]

Loren Feldman:
And we’re back. I do want to move on to another topic today, which is, I’d love to talk about how all three of you track your financials. I’m curious what kind of reports you get, how often you look at them, what your KPIs—your key performance indicators—are. Diana, how about you?

Diana Lee:
Yeah, I have a report for everything. And the bigger, I think, that you scale, the less time that you have as a CEO. So instead of me trying to pull all these reports myself, I make it mandatory that my teams all send me a report on Friday. And so, of course, my PR report comes in, that shows all the lead generation and what they actually have. I have a sales report that shows a 30-60-90, in terms of conversion, percentage of conversion, based on everything that’s on a pipeline. On a financial perspective, I always look at receivables once a week, because people always think, “Oh, I generate the revenue.” But if you don’t actually collect, you’re going to go under. I look at the balance sheets on a monthly basis just to see where my assets and liabilities are. I look at an accrual report, which basically shows me how much revenue accrual that I’m doing on a daily basis. And that report is always coming from the finance department that shows me how much generated accrual there is.

I look at a P&L that’s accrual and cash, so that on the cash side, I always know cash flow where I am. Cash is always a lag indicator, so it’s usually 60 days behind the accrual if you collect everything. But the accrual is the beginning indicator that says that you sign that contract, and that’s actually coming. In 60 days, you should get payment on it. I also look at margins, because you always have to look at if margins are going up or down, based on all of your product lines.

I’m a freak about the numbers. And it’s because the numbers will never lie to you. They will always tell you a story. It doesn’t matter what your sales team says. The numbers tell the story, period. And obviously, you want to see an upward trend for every department that you have, so I do really track everything.

Jay Goltz:
Let me ask you a question. I get everything you said, it makes perfect sense. So one piece of the puzzle that I’m wondering about is: When you said your margins, it’s not like you’re buying a shirt for $12 and selling it for $19. How do you so accurately figure out what your true incremental cost of something is so that your margin, quote-unquote, is accurate? Because I don’t know what it is you’re selling. I know what you’re selling, but like your costs that go along with it. Do you feel like that’s always accurate? Or is that a moving target?

Diana Lee:
That’s such a great question, and I could tell you’re a true entrepreneur, because you’re asking that. So what I find is that I have a lot of product lines. I have A package, B package, C package—all over the place. And each package is a different one for every manufacturer that I deal with. So we have invented our own billing calculator, because it was so damn complicated, in terms of what we came up with. But what I realized with the sales department and the account teams: They just want to make a deal. And so you could see that the longer I’m in business, many of them have the autonomy to make their deal. And so because at certain times they’re trying to meet the quota, they’re going to go down on margin. And this is important to me, because when I track it on a monthly basis, and I see certain product lines, I’ll take the percentage of margin per product line, because I can’t do it by line item, and I’ll just make sure that it’s somewhere between 40 and 60 percent. And so if it’s dropping a lot lower than that, I’m going to meet with my VP of accounts.

Jay Goltz:
Okay, that makes sense. So you’ve got a fixed number, but it’s really about discounting, which is a great answer, because you’re right. I’ve seen companies go broke, because they gave the sales manager, “Oh, we’ll give you 2 percent of sales.” Not a good idea. Because next thing you know, they’re selling things below cost. That person didn’t care. They’re making a zillion dollars. That’s interesting. So it’s about really keeping a handle on the discounting, and that makes sense because that is a problem.

Diana Lee:
Yeah, Jay, because as you get bigger, everybody else is doing the selling. And so you’re giving them the autonomy to do it. And it’s exactly what you said: Everybody wants it for themselves. They’re like me-generated. And those are the best salespeople, right? You make it about them, and they can make money for you.

Jay Goltz:
Well, I have a problem where all of a sudden, they had to get this job delivered and hung on the wall, for an artwork project—”It’s got to be the 30th!” And after a while, I figured out, “Well, what’s the emergency that this company needs it on Tuesday the 30th?” And then you figure out, “Oh wait, they want it on their sales report.” And they are unconscionable. You can run overtime. They’ll do whatever they have to do to get that in for the month. And I’ve learned that. We were very careful at the end of the month to watch what jobs were shoved in there because they wanted it on their sales report for the month versus somebody really needed it. So that’s like standard procedure for us now because it’s a common problem.

Diana Lee:
Yeah, and for me, Jay, receivables is exactly that. So I have salespeople selling, but if I don’t collect the money, I’m charging them back after 60 days. So that’s why I check the receivables to see which people didn’t pay. And if they didn’t pay—because you have over 1,000 clients, you have to check receivables—and you’ve got to charge back the salespeople, because you’ll go broke, if you just pay them on the accrual and you never collect the money.

Loren Feldman:
Diana, you described what sounds to me like a pretty sophisticated review system, and you called yourself “a freak about the numbers.” Were you always comfortable with numbers that way, or did you have to develop it?

Diana Lee:
No, I am not an accountant. I was a startup, and so I couldn’t even afford a billing team five years ago, so I was the biller. And this is the beautiful part: When you do the job yourself, you’re going to know everything about what you want to measure. And so when I handed off these pieces as we got bigger—my ops team was my billing team in the beginning, because I only had two people on the ops side. And so between ops and me, we did all of the QuickBooks invoices and sent them out, and kept getting bigger and bigger. And now we have five people on billing.

But now, because I went through that experience myself and did it myself, I know what reports to push, because I basically did it with my ops team. And so that was such a valuable lesson. I speak to entrepreneurs all the time. I have a family member, they have their own business. And when I talk to them, I’m like, “Well, don’t you check this stuff?” And they’re like, “No, I have a controller.”

And I will tell you, in the five and a half years that I’ve been in business, I have found hundreds of thousands of dollars of mistakes. Hundreds of thousands of dollars worth of mistakes. Invoices not being sent out—$30,000 invoices. Oops. Missed. Didn’t get sent out. Nobody cares about the business and the money as much as you do. I don’t care who you hire. And at the end of the day, if you don’t actually look, people make mistakes. And they don’t mean to, but they just do.

Loren Feldman:
Do you have a CFO?

Diana Lee:
No, so I have a controller. I am going to get a CFO very soon. I’m looking. But yeah, I genuinely believe that it tells it all. I was a consultant for 15 years. I saw fraud happening to a lot of the businesses out there because they didn’t look at the numbers. One guy said—he made the most important, profound statement to me, and to this day, I really believe it—he says, “You have to look at everything coming in, and everything going out. If you can look at everything coming in and everything going out, you’ll always be fine. But if you stop looking at what’s coming in and stop looking at what’s going out, you can go under.”

Jay Goltz:
It is a natural, growing curve. In the beginning, you’re just looking for sales. The last thing you’re worried about is: Are you going to get paid? And the fact is, this is a rookie mistake in business. This is absolutely a fact: Receivables that aren’t managed will get out of control. No question about it. There’s not a question about it.

I mean, many people will pay on time, but there will be people who if you don’t manage it and stay on it, they’re not going to pay their bill. That’s just how it works. They don’t teach that in business school. Until you get burned a couple times, that’s what makes you figure it out. But that’s a rookie mistake, thinking that everyone’s just gonna pay you because they’re nice.

Diana Lee:
And Jay, the thing also—I’m sure you’ve experienced the same thing—the longer you go out on receivables, the less you’re going to collect that money.

Jay Goltz:
No question.

Diana Lee:
So the minute they hit 90 days, it’s game over. You’re not collecting anymore. You can’t let it get to 90 days. You’ve got to collect it between 30 and 60, because after it hits that point, every day that goes by, it’s less likely that you’re going to actually recoup that money.

Jay Goltz:
Because if you’re calling them to collect that money, there’s 50 other people calling. And the old expression, “The squeaky wheel gets the oil.” The other rookie mistake people make is they have the salespeople do it. By nature, the salesperson is not going to have the personality to call up and say, “Look, this needs to get paid.” You need to have someone who’s good at it. It’s an art and a science to get people to pay on time.

Loren Feldman:
Diana, do you think you waited too long to hire a CFO who could be tracking all of this and watching for those mistakes instead of you doing it?

Diana Lee:
I think so. Absolutely, Loren. It’s one of these things that, as you grow a company, you originally think that your team members can do it, or you can do it. And then it keeps going, and you realize, “Oh my gosh, I can’t do it anymore, because it’s consuming too much of my time.” And by then, it’s already too late. You’re drowning.

So that’s how I feel most days, that I don’t have, currently, a COO or CFO. We are missing some people in the C suite area. That’s where we’re planning to actually fill those positions, but they’re the most important positions. So you’ve got to take your time, I think, in interviewing, making sure everybody buys in with these people.

Jay Goltz:
I just went through the CFO hiring process for the first time in 22 years, and I can tell you, there are people who own it, who live and die on wanting to do a good job. If you find the right person, they will take that off your shoulders, and you will sleep at night. They will, in fact, care about it as much as you do, because their entire essence is about doing a good job. I know that those people exist. I mean, they’re not all like that, obviously, but they do exist. So you will find somebody.

Loren Feldman:
How about you, Jay? What do you track?

Jay Goltz:
Every Tuesday, I get a flash report. It’s got sales, it’s got receivables, it’s got payables. What it doesn’t have—which is the big hole for me—is inventory. And if my number comes out that I’m short of cash, I know where it’s at. It’s in inventory, and I don’t have a daily report on inventory, because I’m not selling stereo systems. I’m selling picture frame molding and there’s an amount of footage used. It’s not an exact… I don’t have a really great computer system at the moment. I’m working on it, so I can get a feel for it.

But if you have inventory, that’s the second thing. If you don’t manage, your receivables will get out of control. And if you don’t manage your inventory, it will get out of control. Because this is what happens. You run an ice cream store, and you run out of chocolate ice cream, and people scream, “Oh my god, what’s wrong with you? You can’t run out of chocolate ice cream.” So what happens? Your buyer makes sure they order five times more chocolate ice cream than necessary, because they never want to get yelled at again by the boss.

Well, whatever business you’re in, there’s something there that you probably are sitting on too much of, because somebody doesn’t want to run out of it. And there is a point of no return. And it’s very, very easy for your inventory to grow to 50 percent more than it should be, because somebody doesn’t want to run out of a product for a customer. You really have to sit down and figure out what the metrics are for how much you should carry, because the idea that we can never run out of stock of something is a very expensive proposition. So you have to balance this out, and they actually do teach this in accounting. I had a class on it: What is the cost of running out of your merchandise? I mean, if you’re a hospital, you can’t afford to run out of plasma, so there’s a tremendous expense. But if you’re a picture framer and you run out of the gold leaf molding that’s two and a half inches wide, no one’s gonna die. So you know, you have to balance that out.

Loren Feldman:
It sounds like you may have hired your first CFO about 20 years ago. What prompted you to do that?

Jay Goltz:
Well, as Diana said, it was probably a year or two too late. There’s stuff that gets done that, if your controller doesn’t do it, the owner’s doing it, and at some point, either the owner has too much to do or the owner is out of their depth. And even though I have an accounting degree, I’ve never practiced as an accountant for one day. So there’s stuff that I wasn’t keeping track of enough. I’m pretty sure that most people, when they hire their first CFO, it was probably a year or two later than they should have. But as with most things in business, you don’t do anything until there’s a problem. It’s not like you get a memo saying, “Oh, now’s about the time you should hire a CFO now.”

Now, an HR person? That one’s a little easier, because the standard rule out there—that I think is fairly accurate—is when you hit about 100 people, you should have an HR person. That doesn’t mean that when you’ve got 90, you’re not gonna have some problems, though, not having an HR person. So that’s another category of a hole out there that: Who’s doing the HR stuff when you’ve got 50 people? It’s a problem.

So yeah, it’s all a moving target. And this time, 22 years later, hiring a CFO, I’ve got a much better feel for what I need to hire. And I’m much better at the interview process than I was 22 years ago, because I didn’t know anything about it. So I’m hoping… She’s starting next Monday. I feel very good about it. I think I found the right person.

Diana Lee:
Jay, do you think that working with people and managing people is the hardest thing out of everything that you do?

Jay Goltz:
That’s a tough question. It is and it isn’t. It used to be, but I’m here to say that, since I found the right people—and they’ve been here for 20 years—at the moment, it isn’t at all. It’s pretty easy because—

Loren Feldman:
But it took you a while to get to that point.

Jay Goltz:
Oh my God, it took me 25 years, or 30 years. I mean, it took a long time. But there are those people out there that will take the load off. If you figure out how to hire the right people, and you figure out how to train them, and you figure out how to keep them, life gets easier. There’s no question about it, which is why I always tell people, “Just keep fine-tuning what you’re doing. It will get easier.”

Diana, at the stage you’re in, it would be virtually impossible for you not to be having some of these problems, unless you already got to run a company your size. So you will figure it out. You are figuring it out. But when you finally have a competent CFO, and a competent HR person, and in your case, a competent chief technology officer, yeah, life’s gonna get easier. It just does, because they’re going to take some of that responsibility off of you.

Diana Lee:
I want to work with Jay. That’s what I want to do.

Jay Goltz:
I’m telling you, you’re gonna figure it out. The fact that you’re the size you are, and you don’t have a CFO, I can imagine you’ve got a lot on your plate.

Loren Feldman:
Dana, how about you? What are you tracking to stay on top of your financials?

Dana White:
Again, I’m smaller, so every month, my bookkeeper/accountant, she sends me a snapshot. The numbers I really look at are our payroll numbers. That’s my largest expense. And a lot of my other expenses are fixed, or close to fixed within a short range. And when the volume goes up, our need for supplies goes up, but not by a lot. So I don’t really have any huge fluctuations in our numbers. What goes out is pretty standard. What comes in varies. A lot of it is seasonality, and a lot of it is, “Okay, we’re doing marketing. We’re increasing our engagement.” So we’re seeing the timing on that: You do this this week, and three weeks later, you’re seeing a big uptick.

When I look at my financials, I’m looking at my people. Why did payroll go up? Because my numbers, as far as payroll, are directly correlated to not only volume, but efficiency. That’s why this training this past week was so important, because the stylists weren’t confident and what would normally take them 15 minutes to do was taking them 30-35 minutes. You add that up, and we’re seeing less numbers, because we’re not gonna be able to get to everybody in a day. And we’re seeing a need for more people to be staffed, because these two stylists are styling at this amount of time. So my numbers are payroll. I don’t carry inventory, and I don’t have receivables. I don’t invoice anybody. When they come in, they get serviced and pay. Or when they come in and pay, then they get serviced. All the money I have, I have by the end of business that day.”

Jay Goltz:
In your case, some of the most critical things you’re doing aren’t going to show up on a financial, which is: What kind of bench do you have for people to call in if you get busier? Or how many people are on the edge? You might have someone who’s eight months pregnant and is going to be out of the job in a month, and that doesn’t show up in your financials. So in your case, I would think, one of the critical things is just managing the manpower.

Dana White:
Our staff training tracking, and that color-coding of who’s styled and able to train, who’s just styled, who just started and training—and again, that’s that predictive aspect of the technology we’re developing. So we know, “Hey, Saturday, we’re going to be very busy. You don’t want to put two girls who were just hired and who are still going through onboarding. We need to put the people who’ve gone through the training process with our styling trainer.” So the numbers are one thing, but what directly affects my numbers is the efficiency of my team.

Diana Lee:
Okay, so do you also track, then, your recurring revenues by customer as well? Can you do that as a walk-in?

Dana White:
So, as a walk-in only salon, we’re data-driven. So we are able to look at this date last year and say, “Between the hours of 9 a.m. and 9:15, you can expect this many people.” And we’re doing it all by hand right now, and we can’t do that anymore with the volume that we’re expecting at Fort Bragg or on these military bases or franchises. It’s just going to be too much, so we need the technology. So on Sunday, when we opened our doors, there were 10 women waiting out front, and that’s about normal. So now we know, “On Sunday, we’re gonna have about 10 women waiting. This is how we need to staff, and here’s the service level that we need to staff in order to get those women in and out, based on our KPIs.”

Loren Feldman:
All right, we’re running out of time. Before we wrap up, I want to hit one more thing. I just read a really interesting story in the Wall Street Journal about Facebook and how Facebook is acknowledging that its own tools are suggesting that its ad campaigns aren’t as effective as Facebook thinks they are. And they’re blaming Apple for this, because of Apple’s change in its privacy settings. I’m wondering if you can help me understand how this will affect the typical business that advertises on Facebook. Diana, this is very much your world. What should we know about this?

Diana Lee:
So currently, there’s a fight between Apple and pretty much every app provider. So if you’re on an Apple device, you’re going to now get, with the new updates of iOS 14, a little message box that says, “Do you want to be tracked?” The question is a yes or no, and that’s the question. 96 percent of the users, as of last week, have now answered, “No.” What that basically means is that from now on, you can’t get personalized ads that are about you.

Now, what makes me angry about this entire thing, Loren, is they’re not asking the question, “Do you want advertising?” Because you’re gonna get advertising. But at the end of the day, if you mark, “No,” you’re not going to get personalized advertising. So what does that mean? That means, Dana and I may get advertising on neckties. And Loren and Jay may get advertising on tampons. Because they’re not asking whether they want advertising. They’re asking, “Do you want to be tracked?” So everybody thinks, “Oh, no, I don’t want to be tracked. I don’t trust anybody.” And at the end of the day, they’re marking, “No.”

Now, what’s making it super interesting is like a few days ago, Ad Age prints an article that says, “What the Apple iPhone update means for the ad industry.” And what the idea and speculation pretty much in there is that the big giant technology companies are only getting bigger: Google’s getting bigger, Apple’s getting bigger, Facebook’s getting bigger, Amazon’s getting bigger. Why? Because they’re not going to share the data anymore. Because they’re basically saying, “Oh, we’re going to protect the consumers.” That’s bullshit. They’re not protecting anybody but their pocket. At the end of the day, if Apple is going to come out and now start selling ad data, or something comparable to that, because now they have all the data—and now it’s their first-party data, it’s not third-party, so now they can sell it as their first-party data or use it as their first-party data—now, they may say, “Oh, on an Apple device, if you want to go out to our consumers, you have to do marketing through me.”

This is basically a monopoly that’s going to get bigger. And the only people who it actually hurts are small businesses. Because at the end of the day, we will never be able to catch up if basically that data source is only for the big giants, and they get to keep it all. So by blocking Facebook and asking these questions, Facebook’s saying, “I’m an app provider.”

Now, anybody basically that does direct-to-consumer advertising on my platform, I can’t do personalized ads for, because they now check, “No.” I can’t even retarget. So when you go on Amazon, you leave. You look for a hammer and that hammer follows you around all over the place. But also the other advertisers come in. I say, “I could sell that hammer cheaper than Amazon now.” That used to happen instantaneously. That is what’s getting blocked. So you’re not going to get that information, and people don’t realize how much we lean on efficiencies right now, based on all of the data following us around and making these suggestions that we don’t realize that this is how consumers buy products. And it’s frustrating for me to watch it.

Jay Goltz:
I want to know about the four percent who want to be followed. Are they lonely? Do they need some intervention?

Loren Feldman:
That’s Diana and her friends.

Diana Lee:
But you know what? My partner is 32 years old. He got that question when it first launched, he answered, “No.” He’s in our industry! But this is what I’m saying. He’s like, “If I got it wrong, everybody’s gonna get it wrong. Period.”

Jay Goltz:
I’m going to tell you what I figured out as a retailer, because we do some of it. It’s like, in the olden days you had a store, and if a 60-year-old walked in, or a 23-year-old, they both had the same experience, the same products, the same lighting, the same salesperson. Now, people who are 23 shop very differently than someone who’s 60. Like the 23-year-old might think, “Oh, everyone buys things on Instagram.” And that’s clearly not the case. And the 60-year-old would think, “What’s Instagram?” So it’s really changed the dynamics of marketing to consumers, because they’re extremely different now, as to how they think about buying things.

Loren Feldman:
Yeah, you made that case very well, Diana. Do you have a suggestion? What do we do in this brave new world?

Diana Lee:
I mean, this is what sucks for small businesses. Because as a marketer, I know I can download first-party data—which is your customer base—into Facebook and now target them with Facebook information. But a lot of small business owners don’t know how to do that. But that is available to you. You can take your CRM data, download it into Facebook, build a look-alike audience of those people, and basically go directly to them. And so that is doable right now.

Loren Feldman:
Why are you able to do that? Why is that still workable, despite the privacy setting changes?

Diana Lee:
So think about it. Right now, we’re talking just about websites and cookieless futures, right? Website relevancy is no longer going to matter, so this is my frustration. People don’t realize this is all connected: iOS 14, all the changes on apps, as well as a cookie-less future where everybody’s announcing the browsers are no longer going to capture the data that you’re interested in that product.

So Dana has a website. I go on Paralee Boyd. I look at what she’s actually doing. I leave and now I can get retargeted her ads: basically discounts and offers that she has. That goes away. As of next year, I can’t get that data off a phone on Apple, and I can’t get that data off a website anymore. So as a marketer, if the website has no relevance on data, why do you have a website? That’s what I’m asking.

Loren Feldman:
But how does the look-alike audience still work without being able to track that private data?

Diana Lee:
Because Facebook has a function in it that could actually build people’s look-alike audience, and they could basically make it anonymized, so you don’t know who those people are. But Facebook’s basically saying: For Facebook, Instagram, and all the properties that Facebook owns—Messenger—they can actually match audiences that look like your customers.

What you also can do is buy data, and we’re not talking website data. Because to be honest, website data doesn’t convert the best. And people think they do, but they don’t. It doesn’t mean that they’re going to purchase the item just because they went to your website. So what’s more powerful than website data is Oracle data or third-party data, which is purchased data. If people purchased that product before, that data is the most powerful data, because now I could say, “Jay owns a frame store. I know everybody who purchased frames in the last 60-90 days and give them an offer about those frames that’s low and cost-effective based on the types of frames that they like.” That’s what we’re able to use to do—personalize that experience, based on the products that they’ve purchased before. That is still accessible. And so IHS, Oracle, they all sell that third-party data that’s super important to have and download it into Facebook.

And then the third thing is to have immersive motion ad units. Because if you have a still ad, literally you can’t have a thumb-stopping experience. There’s no data that Facebook can collect.

Loren Feldman:
What’s a thumb-stopping experience?

Diana Lee:
You thumb-stop, and you can go into an ad unit now where you press in, and now you can actually have products within the ad units. And you can make selections within product, price, all of that within the ad unit without ever going to a website. And the reason that this is so powerful is if you’re in the app—like Dana is coming out with an app—if you do anything on her app, she owns that data. She knows what you did. She knows what you press, and she could retarget you based on what you did. It’s anonymized, but she knows that she could retarget the customers based on what happened on that app, because it’s trackable for Facebook. And so if you make those changes, and you can make the ad units immersive, move, and they can go into the unit and they can make selections. That data, without leaving Facebook—Facebook has that data—and now you can retarget people with anybody who went and interacted with those ad units. So that’s all available.

Loren Feldman:
You got that, Jay?

Jay Goltz:
Yeah…

Loren Feldman:
All right, my thanks to Jay Goltz, Diana Lee, and Dana White. As always, thanks for sharing, guys.