It’s Like Planning Your Own Funeral

Introduction:

This week, Jay Goltz tells Shawn Busse about the latest stop on his journey to figuring out whether an employee stock ownership plan is right for his business. Jay’s latest adventure includes waking up at 4:30 in the morning in Minneapolis too anxious to sleep—“Oh my God, what am I getting myself into here?”—and deciding to leave the seminar and drive back to Chicago. But on that six-hour return trip, Jay says his anxiety turned into clarity. In fact, he thinks he’s pretty sure he knows now what he wants to do. Of course, he has said that before. And we continue to learn more about ESOPs, this week hitting upon an interesting issue: ESOP enthusiasts love to tout the benefits of turning employees into owners. But are they really owners? And is that the right message to send them? “If you bought 10 shares of General Motors stock,” Jay asks, “would you tell your neighbors that you’re an owner of General Motors?” Plus: We also talk about when business owners should ignore their accountants and whether Shawn and Jay expect their employees to come forward and tell them if they see another employee doing something they shouldn’t be doing.

— Loren Feldman

Guests:

Jay Goltz is CEO of The Goltz Group.

Shawn Busse is CEO of Kinesis.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome, Shawn and Jay. It’s great to have you here. Earlier this year, you guys attended an ESOP seminar in Portland. You had a miserable time and left early. But being the glutton for punishment that we know you are, Jay, you recently attended another ESOP seminar. How long did you last at this one?

Jay Goltz:
Actually, I got through the first night and the next day, but I did leave early the morning after, which is part of the story. But I only missed one class. And the only reason I keep going back is you keep goading me into it. [Laughter]

Loren Feldman:
That’s not true.

Jay Goltz:
No, seriously, I was turned off, but you’re not wrong. You’ve kept telling me, “Jay, don’t let the message from the salespeople turn you off to the concept.” So, as I said last time I was on, I was back to 50/50. But I really believe I have some clarity now.

Loren Feldman:
Well, tell us what you learned there.

Jay Goltz:
Okay, so, first, the agenda looked better than the last one. I go to the first class, and it’s for CEOs, which was a mistake. I sat in a room with 30 people. And I realized there were two entrepreneurs in the room. The rest were put into that job. So, like, they’re not entrepreneurs. Different perspectives.

I looked at all of them, and I said, “Can I just ask you something? I keep hearing about all these regulations and trustees and maybe lawsuits. Do any of you ever wake up and wish you weren’t in an ESOP?” And they looked at me like I was at a vegetarian convention, and I said, “Hey, does anybody ever have a taste for a hotdog?” I mean, nobody said a word. And I realized: These aren’t entrepreneurs. These are people that were put into the CEO jobs, and it’s not the same thing.

Loren Feldman:
What’s the difference?

Jay Goltz:
The difference is, I’m not used to having a boss. I’ve done everything I wanted to do for 45 years. I’ve never answered to anybody. These people that were in the room have always been employees. It’s different.

When I said, “Have you ever wished that you weren’t…” they didn’t even know what I was talking about. Because to them, “Oh my God, this is the greatest thing ever. Look at me. I’m an ESOP.” Whereas I own the business. So for me, it’s a possible downgrade. For them, it’s an upgrade. So you could just see the looks. I realized: I’m in the wrong room. So that was the first class.

The next class was for beginners. So I figured, “Okay, this is good.” They had three panelists, and the guy started by saying, “This is the first time we’ve done this. We really want to try to help people with their understanding, blah, blah, blah.” So he starts talking about the loan and the trust, and there’s an inside loan and an outside loan, and amortization schedules. And I said, “Stop, wait, wait, wait.” I go, “My head’s spinning. I don’t know what you’re talking about. And my guess is, I’m not the only one. Is anyone else confused?” So once again, I looked around the room—no entrepreneurs in there this time—nobody said a word. Like they really got what he was talking about, which I’m sure they didn’t.

So he went through it again. And he started to say, “Well, there’s some synthetic equity. It’s not really…” Okay, so I started to get what he was saying. And then afterward, he came up to me, he thanked me for stopping him. And he says, “You know, I’m trying to fine tune this.” And then he said to me—this is the key thing—“Listen, give me 10 minutes in front of a whiteboard. I’ll explain it to you. You’ll get it.” That’s all I needed to hear. And I am going to sit down with him, because he was a tremendous resource to find there. I actually made, like, six connections that were well worth going for. So, I got through the classes—

Loren Feldman:
Wait, can I ask you, if he could explain it easily in 10 minutes with a whiteboard, why didn’t he just do that there?

Jay Goltz:
That’s a good question, isn’t it? First of all, he was with two other people. So he wasn’t in total control of the thing. They, in fact, didn’t have a whiteboard there, which they should have. And you know what, he’s a professional trustee. He’s worked for ESOPs. He’s bought companies. This is a really solid guy. And I’m sure the next time he does the class, it will be way better, and he recognized it.

But truly, first they make it sound like you can’t give anything extra to anybody. It has to be solely based upon their salary. And then the next minute, they’re saying, “Well, you’ve got this executive compensation.” And I said, “Whoa, whoa, whoa.” And it really was confusing.

Loren Feldman:
Just to make sure that’s clear, you’re saying that your understanding is you have to treat all your employees the same, whereas they were introducing this wrinkle where it sounded like you could possibly pay people who’ve been there longer, or who have higher positions.

Jay Goltz:
No question. This is the phrase: “synthetic.” That was the word he used. I think that means phantom stock, whatever.

Shawn Busse:
Like a bonus plan.

Jay Goltz:
Right. The point is, there’s an ESOP. But then also, you can do what you want internally. So there are two different things. I’ve gotta schedule with him next week. He’s gonna call me. They keep talking about how complicated this is. You know what? This isn’t rocket science. It’s really not that complicated. They just don’t know how to explain it.

So the end of the story is, that was the end of the first day. I wake up at 4:30 in the morning. I don’t usually get anxiety, ever. But this time, I woke up with this thing, like, “Oh my God, what am I getting myself into here?” It was 4:30 in the morning. Luckily, I drove from Chicago to Minneapolis. It’s a six-hour drive. And I thought, “You know what? I’m just going to drive back to my office. At 11 o’clock, I’ll be back in my safe zone.”

And on the way back, in the car, I finally started to realize, here’s my new phrase: These people create “ESOP anxiety.” They create it. I didn’t go there with it. I went there with an open mind, excited about it. By the time I got done hearing about the money, and the loans, and the amortization schedules, and maybe being underfunded. And then they talk about trustees and regulations and boards. And then they talk about all your employees: communicate, communicate, communicate. And I realized, none of these are really a problem. Really.

The math thing? That’s why you hire these companies. They’ll help you figure it out. The trustee and the board of directors? You know what, it’s good for me. I have to replace myself, basically. That’s what this whole idea is. It’s going to take more than one person. That’s a good thing. And even while I’m still coming to work every day, that’ll be a good thing. I’m going to choose them. I’ll get some smart people. All good things.

And then the people part? That’s the joy part of it. I mean, as I said before, I read one book. In four different places, he keeps talking about: hard work, really hard work, really hard work. At some point, it’s like, “God, am I really looking for really hard work?” And I would argue, sitting down with your employees, telling them that they’re going to get shares of stock? I wouldn’t call it hard work. I call that a joyous occasion. So I’m feeling good about the whole thing now. But I had to process it.

Loren Feldman:
Let me ask you, I think you called me on your way back. And I asked you why you woke up at 4:30 in the morning and what the anxiety was about. And I think you said that you felt like you were planning your own funeral.

Jay Goltz:
Yeah, I felt like, this whole thing is about transition and about making sure things go well when I’m not there anymore. And you can’t help but think about: If I wasn’t going to die one day, I wouldn’t have been there. I would argue that most people who do ESOPs, or many people who do ESOPs, are doing it because none of us are going to live forever. It’s not something you wake up and go, “Oh, I think this is great.” You do it because you’ve got a problem. You got old. I mean, it’s a problem.

You know, anxiety is subconscious. It was part that, and it was part all these potential problems. The woman who runs the Minneapolis chapter I had a nice talk with. She came up to me after one of my sessions when I spoke up, and she agreed with me. They need to do a class for just entrepreneurs. No employees, no second generation, no third generation, just entrepreneurs. Because we have a different angle on this. We’re taking our baby, and we’re giving it away. And that’s very different from some of the other perspectives. And out of the 900 people who were there, I don’t know that there were 50 entrepreneurs in the room. I really don’t. So, it’s difficult.

Loren Feldman:
Nine hundred people is a lot.

Jay Goltz:
Yeah, and they were mostly employees. I mean, you can’t have the same conversation with employees, with owners who took over their family business. There are different messages. And I’ll tell you, absolutely, the key people I met—whether it’s the nonprofit people or some of the advisers—everyone agreed that the messaging in the industry is horrible. Everyone agreed. Everyone knows it.

Loren Feldman:
The marketing messaging.

Jay Goltz:
Terrible.

Loren Feldman:
All right, Jay. I’m sticking to my position that you should not dismiss this because they’re bad marketers.

Jay Goltz:
Absolutely, no, I’m totally hot on it now. I think the ESOP thing is a lovely, great thing for the right people.

Loren Feldman:
You’re totally hot on it. And you mentioned the joy of being able to tell the employees that they have a stake in the business. I want to ask both of you about this. I feel like we’ve been peeling the onion of ESOPs for, really, a couple of years now, and just constantly learning more. And I felt like something hit me when I was at the Great Game conference a couple of weeks ago, which is that I keep hearing two distinct stories.

One of them is owners who’ve done an ESOP telling about the day that they called all of their employees together, and they said something along the lines of, “I want you to know, I’m announcing that I’ve decided to sell the business. And I want you to meet the new owners, and the new owners are: you.” And it can be a really emotional thing. People tear up. It’s inspiring, and it sounds great. But the other story that I keep hearing is from owners who’ve done an ESOP who say, “You know, the only problem is, the employees? They really don’t care. They’ve got 30 years to go before this pays off for them. And they don’t really feel like owners. Their lives haven’t changed in any measurable way.”

Jay Goltz:
I have the answer to that. Here’s the answer: I would never call them owners. I would say, “You’re getting some stock in the company.”

Loren Feldman:
Well, that’s my question: Are they owners or not? I think ESOPs are great. And I think Jay should consider it, and everybody in this kind of position should consider it. But I don’t think it should be oversold. And I think telling employees that they’re owners might be overselling it. What do you think, Shawn?

Shawn Busse:
Yeah, I mean, if you think about it, it’s hard for an employee to understand a worldview that they’ve never experienced, right? So, you know, it’d be like, plopping somebody on a foreign Island and saying, “Okay, now you’re part of this culture.” It’s like, “What is the culture? I don’t know, I’ve never been here before.” So I think a lot of education is probably necessary to help employees understand what the opportunity is for them on a personal level, and what the opportunity is for them on a business level.

And maybe that’s part of why the message you get, Jay, is: This is really hard. And it’s a lot of work, and it’s very complex. As much as it’s a technical challenge—you’ve got to fill out the right paperwork and sign the documents, blah, blah, blah, blah, blah—I think you and I have both come to the same conclusion, that it’s actually probably not as complex as it’s made out to be. Because you have a bunch of—I don’t know how to put this in a kind way—left-brain people doing the presentations and discussions, when what you really need are some right-brain people to help talk about what this means. And those are usually marketers or salespeople.

Jay Goltz:
No, I think you’re 100 percent right.

Shawn Busse:
A lot of ESOPs, too, I’ve noticed this: There’s sort of a bifurcation. There’s either the professional engineering or architecture firm that becomes an ESOP, and I think in those organizations, it’s easier to communicate and for the employees to figure out, “Oh, I see what being an owner means.” Because with engineers, that model is a partner model. So a lot of them have thought about, “What would it mean to be a partner and to have ownership?” But if you talk about a business that’s making stuff, and you have a lot of frontline employees who make minimum wage?

Jay Goltz:
Forget the minimum, even $25 an hour.

Shawn Busse:
Yeah, even $25 an hour. The gulf between their reality and being a business owner is incredible. So I think that’s the challenge.

Jay Goltz:
My answer is simple. If you bought 10 shares of General Motors stock, would you tell your neighbors that you’re an owner of General Motors? No. You would say, “I have stock.” I don’t think they should throw out the word owner. If you say they’re owners, their first question could be, “Oh, am I going to get a raise?” “Well, no.” “Oh, am I gonna get flextime? I’ve wanted…” No. “Oh, am I going to be able to figure out how we’re going to run the—?” “No.” “Oh, does that mean I’m never gonna be fired?” “No.” “Oh, can I have one of those doughnuts?” “Yes, have a doughnut.”

I mean, they think of owner, they think they can do whatever. Versus saying, “You’re gonna get a share.” You don’t have to backtrack from that. You don’t have to play defense. You just say, “We’re doing an ESOP. It’s stock ownership.”

Shawn Busse:
Yeah, I think the message really should not be: You’re now owners. I think the message should be: We have created something. If we run it right, it will benefit all of us a lot more, and especially as you move into the later years of your life.

Loren Feldman:
I think that’s the key: with the later years of your life. And that’s the thing: A lot of these people who you’re describing, they have a mortgage due at the end of the month. That’s what they’re focused on.

Jay Goltz:
Or I’ll tell you the other problem: They’re gonna think, “What? You think I’m gonna be here in 20 years? You’re crazy.” I mean, I started to downplay when we interview people now that we’ve got people here 30 years, because some of these 23-year-olds don’t want to hear that. “Are you serious? Do you think I’m going to be here for 30 years?”

I mean, I think the answer is: First of all, I was told that you really don’t start to accumulate any decent money for like four, five, six, seven years. This isn’t a quick-rich scheme. That’s exactly the phrase one of them used. But my point is, if you don’t oversell this, and you just say, “You’re gonna have stock in the company. And what that means is that…” Okay, great. But you certainly shouldn’t go tell everybody they’re owners, because you’re just asking for, “Oh, I thought I was an owner. What do you mean, I can’t take off Fridays?” I mean, you’re just asking for it.

Loren Feldman:
I’ve never heard of a situation that does it the way you’re describing it, Jay. Because that’s part of the mystique of this, I think, part of the aura. You want your people to feel engaged. They have a stake in the outcome. They’re employee-owners now.

Jay Goltz:
Okay, you can say employee-owners, but you could just make sure they understand that they’re getting stock, blah, blah, blah. And like I said, you don’t oversell, so you have to start undoing it when they go, ”Well, no, that doesn’t mean you can do whatever you want.” You don’t have to leave yourself open for that.

And here’s the thing: There are plenty of smart advisors out there. I’m sure they’ve been through this a hundred times. I’m sure they can help navigate this. That’s kind of what I figured out after digesting this all. You’re not out there on your own. These companies are very good at doing this. There is no reason to have anxiety. There really isn’t.

Now, is this right for everybody? No. If you don’t have the right employees, if you don’t have a big enough company, if you think that you could sell for a much bigger multiple to somebody that is a strategic buyer that maybe you want to take the cash on the table, if you really aren’t concerned about your employees’ retirement… There are lots of reasons why this doesn’t fit everybody. And I have no argument with any of that. But for someone like me, I’ve got to tell you, it fits really well. Which is why it was frustrating to me, that for someone it fits so well, they manage to get my head turned around like, “Oh my god. What am I getting into?”

Loren Feldman:
What are you referring to when you say it fits you so well? What fits?

Jay Goltz:
It fits this way. Here’s why, for me personally, it fits extremely well. I have a very strong management team, one. Two, I don’t want to retire. If I sold it, then what? You go to work for the company? I’ve seen lots of people do that. And it was the longest two years of their life. I have no interest in doing that. Three, I do care about my employees and their welfare, and I am concerned about their retirement. Four, I don’t believe there is some strategic buyer that’s going to give me twice as much money. I’ve got a weird business. It’s not a plug-in. And I don’t need to squeeze every last dollar out of it.

So this fits me extremely well, and here’s the point: Nothing else does. You can say, “Well, what are your other options?” Well, my other options are: Do nothing and leave a complete shit show when I’m gone, which happens all the time, which is why most companies just crumble at the end. Over the last 45 years, I’ve been to three or four auctions of places that framed pictures, and I always think, “Wow, is this gonna be me one day? There goes you’re racking. There goes your two-wheel truck.”

Frequently, more than not, this is what people do: They do nothing, and the whole thing just blows up. That’s why most companies don’t survive. So that’s one option: Do nothing. That’s an irresponsible option, as far as I’m concerned. And the other option is to sell it. That doesn’t work for me. I want to go to work. I want to take care of the employees.

So, this isn’t a compromise. This is an elegant solution. This accomplishes all of my goals. And I do not see a problem with it, at this point, after thinking about it. As you said to me the other day, Loren: I should stop going to these seminars. Good point. I probably should. [Laughter]

Shawn Busse:
Jay, I love you, man. But I see one potential problem, and I’m curious if you’ve thought about this. So, you just recognized, as is my theory, too: There’s not a strategic buyer out there. And probably the reason for that is that it’s a declining industry. You’ve talked about how many frame shops have gone out of business in your lifetime, and how they continue to go out of business and how fewer and fewer people are framing. How do you set the next generation up for success in a business that is declining?

Jay Goltz:
Oh, I have an easy answer for that: I don’t know that it’s declining. It’s mature. It’s not growing like it used to, but it’s definitely not—

Shawn Busse:
You don’t think it’s declining?

Jay Goltz:
Maybe a little bit, but it’s pretty stabilized. More importantly, in my particular case, my wholesale side, where I sell to other frame shops around the country, is doing very well because we have a much cooler line than everyone else. And it was picked by people who actually use it. And so that’s got lots of growth. And my home store has got lots of growth. So I do have some growth vehicles still.

Here’s the other thing: I’m not looking to grow at 10-15 percent here anymore. I gotta tell you: If I grow at 6 percent, I’m just perfectly good. It’s big enough. So yeah, I absolutely thought about that. If it was just the retail frame business by itself? I’m confident the framing industry is not going out of business. It’s just the Baby Boomers are retiring, they’re doing less framing, their pictures are on the wall. But it’s stabilized. The framing industry is not going away. It’s kind of getting right-sized, but I do have those growth things.

So I really can’t think of a thing that I’m going to wake up one day and go, “Oh my God, what did I get myself into?” I think this is going to stabilize the company. It’ll give stability to the employees long-term, and it will help their retirement. And there’ll be just a little lift—just a little—a little more engagement from people. Just a little, like, I’m not talking 10 percent. Like 2 percent, whatever. And then maybe some good PR. So I think there’s lots of upsides to it.

Loren Feldman:
The good PR will come because you tell everybody that your employees are owners, right?

Jay Goltz:
Yeah, I believe so.

Loren Feldman:
I think that’s part of the reason why all these businesses we’ve been talking about do, in fact, tell their employees that they’re now owners. They want the bragging rights.

Jay Goltz:
I think you can get your cake and eat it, too, on that one. I think you can message it right without people thinking, “Oh, wait, we’re all getting raises tomorrow.” I do think there are ways of doing that. I’m going to tell you what might be the most interesting part, which is why the industry has been, if you talk to anyone in it, not happy with the amount of ESOPs in the country. It’s been flat for years. There are only 6,500 ESOPs out of a million businesses. Now, granted, 90 percent of them are too small to do it. But still.

Loren Feldman:
Wait, there are more than a million businesses.

Jay Goltz:
Okay, whatever the number is, there’s only 6,500 or 7,000 ESOPs in the country. You have to think to yourself, “Wait, how is that in 50 years?” I’m going to tell you one of the problems. What’s the first thing people do when they even hear about an ESOP?

I’m gonna tell you my experience. I come back from the thing. I talk to my accountant—been my accountant for 25 years, smart guy. I tell him, “I really figured it out, I think this is a great solution for me.” “Well, a lot of fees, there’s a lot of fees, and you know, they’re a pain in the ass.”

And I said, “Okay, but whatever pain there is, it’s gonna be worth it.” And he goes, “Well, you should look into that. But then you should also see what the company’s worth in the open market.” And I had to say, “You just don’t listen. I have told you 20 times, I’m not selling the company.” I actually wrote out an entire sheet that I shared with him at lunch a couple years ago with my emergency drop-dead sheet for my wife and kids, to give them instructions with some insight. And in there, I put his name. I said, “So-and-so is going to tell you to sell the company. Ignore him!”

This is the problem. People think, “Oh, well, the accountants don’t understand.” Okay, maybe he does. Maybe he doesn’t. I don’t know. There’s two parts. The first part is, some of the accountants don’t understand them. And the second part is, they just know the numbers. They don’t appreciate the other part of business. Because in my mind, at this point, an ESOP is about love. It’s about loving your business, about loving your employees, loving your family, loving your customers.

If you had a problem with love, would you call up your accountant and ask him for advice, or her? I don’t think you would. They don’t get it. All they know is the numbers on the paper: “Oh, well, you could get more money.” Even though I’ve told him 20 times, “I don’t want to retire, I want to go to work every day,” it doesn’t register. All he knows is, “Well, maybe I could get more money from someone else.” And no matter how many times I told him this, he won’t get off of it.

And this is why a lot of people don’t even look into ESOPs. They talk to their lawyer or their accountant, and they’re completely dismissed immediately: “Oh, yeah, they’re a pain in the ass. Hey, where do you want to go for lunch?” And that’s the end of the conversation. I’m confident of that. I haven’t met one accountant or lawyer—I’m sure there are some out there that get it—but the few people I’ve talked to, my friends? The lawyer says, “Oh, I don’t think you’ll get the valuation you want.” And the accountants, the two different people I’ve talked to, “Oh, they’re a pain in the ass.” That’s what I always hear.

Shawn Busse:
The problem there, Jay, is that you have a values misalignment. You have vendors who are serving you who don’t share your same values, right?

Jay Goltz:
Or don’t get them. Or just don’t get them or appreciate them.

Shawn Busse:
Yeah, right. It’s like, why do people go into accounting? Do they go into accounting because they love people and can’t wait to see their teams flourish? Very rarely. So you’ve got an entire industry, both on the CPA side, but also on the legal side, where the motivations are just very different than yours. And so, if you’ve got these industries that you need to pass through in order to do an ESOP, I bet it’s 80-20. Or maybe 99-1.

Jay Goltz:
Yeah, I think you’re right.

Shawn Busse:
They just don’t see things through the same lens. I think that’s changing, because I just think you’re seeing a cultural shift in our country away from, “Business is designed to just extract maximum wealth, and forget everything else.” So I think there’s a shift there. But if you look at your guy, you say you’ve been working with him for 25 years, right? He’s probably a Baby Boomer. I don’t think he’s a Gen Xer. Baby Boomers were told their entire life, “The purpose of business is to maximize value for the shareholder.” They were never told, “The purpose of business is to create a place where people can thrive, a community gets to benefit from the business being in it.”

Jay Goltz:
No, no, forget about that whole socialism part, or whatever. [Laughter] No, how about just, “You want to be happy?” No, how about, forget about the sharing. How about the owner wanting to be happy? It’s not the income. It’s the outcome. How about making yourself happy? It would make me happy to know my employees are taken care of. That’s what I’m saying. Just about for my own personal needs.

Loren Feldman:
You’re such a socialist, Jay.

Jay Goltz:
I’m just saying, the socialist thing is fine. But the fact is, I’m not going to start preaching, “Oh, you should share the wealth with the rest of the community.” Because if you want to, you should do that. But if you don’t want to, okay.

Loren Feldman:
I don’t think Shawn was talking about sharing the wealth with the rest of the community.

Jay Goltz:
Well, that is what you’re talking about, isn’t it?

Shawn Busse:
No.

Jay Goltz:
He’s from Oregon. Come on, Loren. He’s from Oregon. You know what he’s talking about.

Shawn Busse:
No, it is recognizing that there are other stakeholders in a business, and employees are stakeholders. Your neighbors are stakeholders. Your vendors are stakeholders. These are people who have a stake in the business being successful, and caring about them. Like, is that such a crazy fucking idea?

Jay Goltz:
No, no, but that is an opinion. No, that is an opinion. Because I do know people who say, “Hey, I paid him. They don’t deserve it.” That is an opinion. So, that’s why I’m saying it.

Shawn Busse:
Look, I guess I would say this. We’ve had 40 years of doing it this other way, where it’s all about the money. And you see intense dissatisfaction with business, in that regard.

Jay Goltz:
For sure.

Shawn Busse:
So, like, maybe there’s a better way. And you talk about happiness. Like, I’m way happier running my business in a way that actually recognizes the contribution the employees are making to it. And that recognition is both in terms of the power and control I give them, but also the financial compensation. I take home way less money than I would if I were to look at it through purely a financial lens. But at the same time, I have very little turnover. I have tremendous engagement. So I think, ultimately, I win.

Jay Goltz:
No, you win, like I win, because you’re happy. You look at your thriving employees, and it makes you happy. It’s not just money. But that’s our opinion. There are people who say, “Oh, it’s just the money.” I know someone who sold his company for a zillion dollars. He couldn’t care less about all the employees, whether they have retirement. It’s not his problem. And like, okay, I don’t feel that way, but I’m not going to trash capitalism is kind of my point. I think it’s all dependent on what your view is.

Shawn Busse:
Look at the rates, look at the data, in terms of business owners’ divorce rates, suicide rates, mental well-being. You look at those folks, people who run businesses, they are not happy. Because mostly, they’ve subscribed to this ideology that business is here, basically, to extract wealth, which creates tremendous downside in lots of other arenas. And I just look at the people who are happy running their business, and they generally think about the whole picture, and how to recognize the contribution of other stakeholders.

Jay Goltz:
And I think one of the key elements, why they’re not happy, is they can never have enough. They can never have enough. And I’m way past that. I don’t know that I would have said that 30 years ago. I’m way past that. There is such a thing as enough. And I’m not preaching to anybody, though. I’m not gonna go tell another business owner—if another business owner just wants to sell his company or her company and go put the money in the bank, hey, you know, it’s their business, literally and figuratively. It’s their business.

Loren Feldman:
When we’ve had these conversations in the past, you’ve told us that one of the reasons for your uncertainty is that you haven’t been sure what your two kids in the business want to do. Where’s your thinking with that, at this point?

Jay Goltz:
I’ve completely come to understand, it’s better for them. There’ll be an infrastructure in place. And the reality is—

Loren Feldman:
It’s better for them if you do an ESOP?

Jay Goltz:
Yeah, because it puts some infrastructure in place, that the pressure is off of them a little bit. And the reality is, if I’m lucky—and my father lived to 84—if I’m working in 15 years, which is possible, I would hope, my kids are going to be pushing 50. Like, they might be done with the whole thing. So this puts a nice infrastructure in place that shouldn’t be a problem for anybody. There’s no downside to it, and it’s only 30 percent. And then I get some cash out. It all works. It really just works.

Loren Feldman:
Hearing you talk about it, Jay, it seems to me that, should you do this, when you pitch it to your employees, the better way to pitch it—rather than saying, “You’re all owners now”—is talking about the stability, the idea that the people who are running the business now will continue to run it, and it’s not going to be sold to private equity or some other owner—

Jay Goltz:
Or a bigger asshole than me. [Laughter]

Shawn Busse:
Is that possible?

Jay Goltz:
I think. I’ve been told. Somebody told me once. No, I’m telling you, they certainly recognize, I’m 67 now. No one’s gonna walk up to me—well, somebody did, actually. But most people aren’t going to come and go, “Hey, Jay, you’re looking a little old. You know, I’m only 35. I’ve put a lot of time into this place. What’s going to happen?” And I’ve gotten ahead of that. I’m not gonna wait for them to ask. I told them, “Trust me, I want to make sure this company is going long enough that—I’m gonna give it my best shot—you can retire from here.” So I’ve already started talking to people about, “I’m putting this in place.” You hit the right word, stability, because you go sell it? As we all know, it frequently gets messed up.

Shawn Busse:
And what’s interesting is, thinking about the question of, how do you pitch it to employees? I think there are two issues. One is that there’s the frog-in-the-boiling-water problem, which is that, you know, okay, Jay, you’re 65.

Jay Goltz:
I’m 67.

Shawn Busse:
67. Let’s say you work another 15 years. To an employee, they’re not thinking about it every day that Jay is getting older, and one day, this business might not be here. The boiling-water piece is like, “Oh my gosh, one day, the owner has a heart attack.” I’m not saying you, but like, nobody sees it coming, as an employee. I think owners think about this tremendously, but I don’t think employees are thinking about it. So when you suddenly say, “Hey, you’re an owner,” you’re solving a problem that they weren’t even aware of. They didn’t know they were in this pot of boiling water until it happens.

Jay Goltz:
And what a lovely message—not that you’re an owner as much. But what a lovely message: I want to do everything I can to make sure this company survives me for everyone’s sake. What a lovely message to everybody.

Shawn Busse:
So, here’s the thing. Here’s the second problem. I don’t think employees, until they’ve gone through it, know how shitty it is when a business gets transferred. Okay, so 20 percent of the time, it’s great. Eighty percent of the time, it’s not. And then, and then 20 percent of that 80 percent is terrible—like, everybody losing their jobs kind of thing.

Jay Goltz:
Or they go broke. They go broke all the time.

Shawn Busse:
Right. So I think it’s a problem that is not well-communicated in the marketplace. Because we celebrate the sale of businesses. We’re not honest with ourselves about what actually happens to employees through these transactions. Yeah, sure, sometimes it’s great. But a lot of times, it’s not. And those articles are rarely written. So I don’t think employees actually recognize, without a lot of education, that what you’re thinking about is actually important.

Loren Feldman:
I want to hear a little bit more about your accountant. Is this a rare instance of the two of you not being fully aligned? Or has this been an issue, in terms of how you run the business most of those 25 years?

Jay Goltz:
He doesn’t get much involved with day-to-day stuff, though I had another thing with him 10 years ago. I looked into buying a universal life insurance policy. And I was surprised to see that if you buy a universal policy—this particular one I bought—if I die at 85, it would pay like 6.4 percent return on the money. Not an investment, just the payout from the face value of it. So I say to the insurance guy, “How can the insurance company afford to pay that kind of return?” He goes, “Easy. If they thought you were going to keep the policy ‘til the day you die, they’d never sell to you. They make all their money on the people who cancel the policies. Over half the people who buy those policies cancel them.”

So, if you hold on to the policy… You know, people get divorced, their spouses die, their kids die, their kids aren’t talking to them, people run out of money. There are lots of reasons why people cancel life insurance policies. If you are 100 percent confident that you’re going to pay it til the day you die, it’s a good deal. So I tell him all this. I did a whole spreadsheet that laid it out. He says to me, “Do you know what commission those salespeople make?” I go, “Yeah, what do I care?” He couldn’t get past that. He just couldn’t get past that—even though I did a whole spreadsheet. He couldn’t get past the fact that the salesperson was making 30 grand on the sale or something.

Loren Feldman:
Is that the way he thinks about your business in general—more focused on the fees that you pay?

Jay Goltz:
Yeah, I don’t sit down once a year and go over the business stuff with him. I just don’t, because I’ve learned over the years.

Shawn Busse:
He’s a downside thinker.

Jay Goltz:
Or no, he’s a good accountant. He’s a very good accountant.

Shawn Busse:
But he’s not an upside thinker, right? Like, what’s the upside potential versus the downside rick?

Loren Feldman:
He’s not an entrepreneur.

Shawn Busse:
Yeah.

Jay Goltz:
Right.

Loren Feldman:
Jay, I’m curious. I know you have a CFO now, so maybe this doesn’t make sense for you, but earlier in your career, building the business, did you turn to your accountant for advice?

Jay Goltz:
Listen, I’ve had lots of years I didn’t make enough money, for sure. And then you pull the string, and they go, “Your overhead is too high.” So, that’s not always the case. I’ve said this before, I’ll say it again, and I can’t say it enough times: It is really sad that the banks and the accountants, not one of them said to me, when I was growing at 20 percent a year and I’d have a 3-percent bottom line, “Hey, idiot, raise your prices 5 percent. It’ll slow growth down, and your bottom line will double.” Nobody said that. So the answer is no, I’ve never gotten great advice.

Shawn Busse:
It reminds me a lot of the early days of the pandemic. When the PPP funds were coming out, I was talking to this lawyer. And he’s a very cynical human. And he said, “Well, there’s a strategy where you take the PPP funds, and then you just close your business. And essentially, you kind of wait out the storm.” And I’m like, “Yeah, I mean, I guess.” He’s like, “Why wouldn’t you do that?” And I told him, “Like, well, because I’m not an asshole.”

Jay Goltz:
No, no, this is the problem. I’m gonna give you the word. I think it’s, we believe that businesses have souls. Our businesses have souls, and that includes our employees and our customers. We believe they have souls. And when you’re a lawyer or an accountant… And all lawyers do is deal with problems. It’s not like they are dealing with celebrations. You call it cynical. I might just say, occupational hazard. They just see problems all day long. You know, if you were an emergency-room doctor, maybe you’d stop driving cars. Because, “Oh my God, everyone’s driving in cars getting into accidents.”

Loren Feldman:
We’re almost out of time. I want to ask you guys one more quick question. We’ve kind of touched on this a little bit in the past, but I’m curious: How do you handle situations where somebody in your business isn’t doing something right? You’re not aware of it, another employee spots it. Do you expect employees to come to you and tell you that someone else is doing something wrong or something they shouldn’t be doing?

Jay Goltz:
I have a very easy answer to that. I have work-withs, and I have work-fors. Not everyone is a work-with. They come to work every day. They work for it. They come to work every day. They do their job. I wouldn’t expect them to have the confidence and whatever to come and tell me. There are plenty of people that work for me, I absolutely would expect them to say something, and they do. I don’t think you can make a blanket statement. Some employees, you should expect that for how much money they make, for your relationship with them. And other employees, it’s asking a lot to think that somebody’s going to come and go to the boss and say, “Hey, so-and-so…” They don’t want to get stuck in the middle. I get that. So I think it goes both ways.

Loren Feldman:
What about one of those work-withs, if the person they’ve spotted doing something is further up the ladder than they are?

Jay Goltz:
I’ve had it happen.

Loren Feldman:
They’re ratting on one of their superiors. Do you want them to do that?

Jay Goltz:
Absolutely. You call it ratting. This is part of the problem, high-schooler. [Laughter] It’s not ratting. It’s looking out for the best interests of the company. I had a 20-some-year-old walk into my office and go, “Jay, you got to get rid of so-and-so, the vice president.” Yeah, and that’s why he’s running my company now.

Loren Feldman:
Shawn, do you feel the same way? Because I’ve been in situations like that as an employee. And one of the things that occurred to me was: Well, suppose I do say something about this, and something happens, and other employees are aware of it. They’re just going to remember that I got somebody in trouble and wasn’t loyal to a colleague. They’re not going to look at me as someone who had the best interests of the business at heart, necessarily. Maybe they will, maybe they won’t. What do you think, Shawn?

Shawn Busse:
I mean, I can only speak to my experience. The thing that I worry about most, having been through it, is when low-powered people don’t feel like they can have an honest conversation about somebody who has more power than they have.

So think of this as middle management. If middle management is doing something wrong, or is just really debilitating to the organization, do the people down in the trenches feel safe enough to come to me? And I’ve had an experience where several people didn’t feel safe enough to do that. And I really, really—this was a while ago—realized, like, “Wow, I’ve got some issues in myself, where I haven’t created a place where people feel like they can come talk to me about these things.”

Jay Goltz:
I just had a manager tell me that two of his employees came up to him—new employees—and said, “We’re thinking of quitting because of the way so-and-so talks to us.” So he went and talked to the other assistant manager, and he thinks he straightened it out somewhat. And you know what? I don’t go to my factory much anymore because of the whole COVID thing. So I don’t even know some of these people. I said, “Call these two guys into the office.” He calls them both in. They’re probably a little freaked out: What’s the owner want to talk to me about?

I just said to them, “I just want to tell you, I started this company with the idea that people were going to work together for a common good and take care of customers. I really appreciate you speaking up and saying something about that issue. Thank you, that’s what we’re counting on, blah, blah, blah.” You’ve got to think they left there feeling good. And they spoke up to the guy. So that is the problem in business. And Loren, I have the answer for you: You worked in corporate, screwed-up environments. [Laughter]

Loren Feldman:
There’s some truth to that.

Shawn Busse:
So what’s interesting is the situation I’m describing—which I mean, to be fair, happened once in my 23 years—the person who was the problem came out of the corporate world. And what I realized in hindsight was she was a wolf in a flock of lambs, in terms of, she really understood how to manipulate and play politics. And we didn’t do that. And so, somebody came in and was really good at taking folks and either making them feel like they weren’t safe enough to say anything or to create these weird alliances. It was terrible.

Jay Goltz:
You just summarized exactly the conclusion I came to. I don’t know, I haven’t worked in it. But from what I’ve seen, some of these companies, all they do is play politics. “How do I look good? Who makes me look bad? Who should I make look bad?” And they spend all their energy on politicking instead of in a collaborative environment, which I believe we have. We’re just focused on taking care of customers and making things happen.

Yes, taking someone from that other environment is—I tell them in the interview. I say, “Listen, if you take the job and we offer it to you, this is either gonna be a great experience or a nightmare.” All for the same reason. We’re on an adventure, things change. Two, we don’t do the politics thing here. There’s nowhere to hide. If you do well, everyone’s gonna know. And if you screw up… That scares some people off. And that’s good, because that’s what I want to do.

You’re 100 percent right, though. That’s one of our advantages—being a healthy, small company—is that we can be mission-driven and collaborative. I don’t think you can describe most big companies as mission-driven and collaborative.

Shawn Busse:
Well, and the thing about it is, as a small company, you can’t afford to get that wrong.

Jay Goltz:
No, absolutely not. That’s all we’ve got.

Loren Feldman:
All right, my thanks to Shawn Busse and Jay Goltz, and to our sponsor, the Great Game of Business, which helps businesses use an open-book management system to build healthier companies. You can learn more at greatgame.com. Thanks, everyone. Thanks for listening.