Episode 41: She Was a Hiring Goddess

This episode is dedicated to Ivy Garfield. Back in 1996, Jay Goltz had no real hiring process and the results to prove it. “My hiring success rate,” Jay tells us, “was probably, I don't know, 30 or 40 percent, which isn't much better than whoever walks in you hire.” And then he asked Ivy Garfield to take over his hiring. As Jay explains, Ivy brought an instinct, an understanding of how to assess people. “She profoundly changed my business,” he tells us. “She was here six years. Most of my key people she hired. They’re with me 25 years later.” Jay talks about the secret to Ivy’s success and why entrepreneurs like him tend to be terrible at hiring. Plus: Dana White talks about being disappointed by a mentor. And Jay and Loren offer an apology.

Guests:

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

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Jay Goltz: “She profoundly changed my business. She was here six years. Most of my key people she hired. They’re with me 25 years later.”

Jay Goltz: Jay Goltz on why entrepreneurs are bad at hiring: “They like people. And they’ve got 20 other hats to deal with. They want to get done with this.”

Dana White: “It’s funny how Jay is saying, ‘I wish I could go back in time and tell myself these two things.’ Those are the very two things that he’s told me that have changed my business.”

Full Episode Transcript:

Loren Feldman:
Welcome Jay And Dana. As you know, the whole premise of 21 Hats and this podcast is that you have to wear a lot of hats to build a business, and no one can possibly be prepared to do all of the things you have to do to build a business. So how do people handle that?

One way I’ve heard from lots of owners is to try to find a mentor—somebody who can offer some guidance—and I’m curious what your experiences have been in this area. How do you find one? How do you know you have the right one? Jay, have you ever had a mentor?

Jay Goltz:
No, and not only have I never had a mentor, I’ve never had a job. [Laughter] So I was just plopped in. I started my business by myself. My father owned a dime store. I certainly had a good idea of taking care of customers, but I never knew what happened in accounting. He didn’t advertise. He had one employee, Edna.

I really was just thrown into the world by myself, not knowing anything. But the problem was, I didn’t know that I didn’t know anything. As I always say, I don’t want to brag, I think I’ve made every mistake you can make. It was extremely painful, extremely stressful, not efficient. I don’t think the word “mentor” was even used much back then. It never even would have crossed my mind.

Loren Feldman:
It didn’t occur to you to try to find one.

Jay Goltz:
It didn’t even occur to me, and I just went [on] for years: try, fail, try, fail. I did figure it out along the way. But it was just a long—I’m talking about 15-20 years.

Loren Feldman:
Looking back, do you think it would have made a difference if you’d had a mentor?

Jay Goltz:
Oh my gosh.

Dana White:
I think you had a mentor, Jay.

Jay Goltz:
Really? Who would that be?

Dana White:
You had a mentor: your uncle.

Jay Goltz:
Oh, no, no, no, no. I was very tight with my uncle, but he worked at my father’s store with him. I grew up, he played catch with me. But he was not at all… No, I really did not. I did have a few good conversations with people over the years that I can tell you off the top of my head—things that profoundly changed my head.

One was, I was in a business group. This guy was about 50-something. I was 30, and he said something to me that was maybe the smartest thing that anyone ever said to me. He said, “You know, Jay, everyone gets to a point where they realize they have limitations, and it’s usually when you hit 50.” Now when he told me that at 30, I said, “Oh my God, that’s pathetic. Not me.” And then I turned 50, and I thought, “Oh my God. Was he on the money!”

And then I had a guy tell me one time, he said, “Listen, in business, you’ve got three potential problems: partners, the bank, and a landlord.” That was very profound too. And you know what? I got rid of my landlords, almost all [of them]. I’m trying to get rid of my bank and I don’t have any partners. I think that was also profound.

And then the last one, I joined a business group. They’re mostly older guys. I’m probably 30. This guy looks across the table to me, and all he says is, “So have you toughened up yet?” Wow. That’s like the extent of my mentorship. The rest of it…

Loren Feldman:
Do you think it would have made a difference if you’d had one person through the years to talk to?

Jay Goltz:
Absolutely. I’m not exaggerating when I say this. I literally went through 10 production managers over a period of, I don’t know, two or three years.

Loren Feldman:
This is the person running your factory, making frames.

Jay Goltz:
Yeah, running the framing factory. I had probably 30 people at the time—20 or 30—and I was trying to get out of the back. I was trying to get someone to run the thing. And every time, I’d hire someone, I’d think this is going to work out, and then it didn’t.

I did have one guy, Monroe Roth. He’s 92 years old now. I hired a consultant, and he looked at what I was doing. And he said, “Jay, I figured out your problem. You keep hiring production managers, and you think you’re hiring CEOs.” Boom. Right on the money.

Loren Feldman:
What did he mean by that?

Jay Goltz:
Easy. I knew exactly what he meant. I thought, you hire a guy who’s older than you, who’s run a factory, and you tell him what to do. Then you go back to whatever you were doing, and he’s going to take care of it. That was half the problem, and frankly, he didn’t get the other half. He was totally on the money with that, that you need to train people and stick with them for months. You can’t just hire someone to leave him alone.

But when you’re 30, and you hire a 50-year-old, you think they know. They used to run a factory. You assume they know everything and you don’t need to do it. That was the first problem. The second problem was, for the amount of money I was paying, I was not going to get a really successful, smart person to run a factory. The guys who I was hiring were basically people who failed at their last job.

Let’s just take a number. Let’s say you decide to hire someone for $50,000 a year. For a 50-year-old guy or a woman, to pay them $50,000 a year to run a factory, that’s not a lot of money. So who am I going to get for that? I’m going to get people who are desperate for jobs versus I hired a 27-year-old. That’s a good job for a 27-year-old who’s making 40k, right? Here we are 25 years later, and he’s still with me, and he’s making a good income now. And if I would have had a mentor, oh my God. One 60-second conversation would have given me the clue.

Probably the biggest mistake I’ve made in business, for sure, cash-wise: I wasn’t charging enough. I was growing like crazy. I didn’t have a great bottom line and I should have charged 3, 4, or 5 percent more because I was giving a tremendous value and a tremendous service. Dana, you know, because I’ve talked to you about this. That’s one of the common mistakes of entrepreneurs. They’re always afraid to charge what they should charge. People in the framing industry use the phrase, “Oh, I want to be fair.” Or, “I don’t want to rip anyone off.” Those words are not the right word. The right word is: are you charging the “appropriate” price? And the appropriate price is, if you’re giving a tremendous service and a tremendous product, you need to charge a certain amount of money in order to have a bottom line. You cannot simultaneously give the greatest service and be the cheapest place. Those two things don’t work together.

Loren Feldman:
And if you had charged more, it would have presumably brought in a little bit more money, but it also would have slowed the growth. Would that have been a good thing?

Jay Goltz:
Absolutely. It would have been magical. I was growing at 20, 30 percent a year. It was nonstop chaos, and so, yes, it would have slowed the growth down, but I would have not gotten into the bank thing, of borrowing from the bank. I went to the bank—I remember this like yesterday—this is the first time I ever borrowed from a bank. I went to the banker with my financials, and I said, “Listen, I’m a little embarrassed. I didn’t make as much money as I thought I was going to.” Opens it up, goes, “Well, you made money.” And that was the end of the conversation. Now, if he wasn’t a banker, and he was a business consultant, he would have said, “Jay…”

Loren Feldman:
Or a mentor.

Jay Goltz:
Or a mentor, right. He would have said, “What? You’ve got a 2 percent bottom line. You’re borrowing money? Why don’t you raise your prices 5 percent? You won’t have to borrow money from the bank.” So yeah, it’s those kinds of things.

Loren Feldman:
Dana, how about you? What’s your experience been? Have you had a mentor?

Dana White:
I have. It’s funny how Jay is saying, “I wish I could go back in time and tell myself these two things,” and those are the very two things that he’s told me that have changed my business. I consider Jay a mentor. It’s not official. We didn’t go to the mountaintop and declare it under the stars.

Jay Goltz:
I do have some paperwork I’m sending you to sign though.

Dana White:
It started when we all met in Chicago for dinner and I was really, really stressed out. I just kind of casually mentioned an overview of what I was stressed out about, and Jay said, “Oh, no, you’re fine. That’s how business is.” And I looked, because it wasn’t so much what he said. It was how he said it, and with his experience, the ease at which he was like, “Oh, yeah, that’s fine.” I’m thinking these are red flags that I’m closing my doors, and that was the beginning of me saying, “He might have some insight.”

So over time, even our listeners on the podcast can hear, “Hey, Dana, you’re paying somebody so many dollars per hour and expecting them to do a $50,000 or $60,000 a year job. If you want your business to grow, you have to pay the person.” Well, that’s what Jay wishes he could have had someone tell him. Well, that’s what he told me, and it changed my business drastically. “Dana, raise your prices. Raise your prices. Raise your prices.” So we did, and that bump in price has helped. I’ve had a mentor, and Jay has become my mentor.

Jay Goltz:
Am I the main mentor? I want to be the main mentor.

Dana White:
You’re the main mentor.

Jay Goltz:
Woohoo!

Dana White:
Number one. Prior to Jay, I was on the lookout for a mentor, because I understood that it would be integral for my growth. I knew that, for my business, I wasn’t going to find a direct mentor. But I did know I needed someone who had enough business experience—

Loren Feldman:
Why is that, Dana? Is it because you feel like you’re breaking new ground and it’s a new business that other people wouldn’t understand?

Dana White:
Exactly. It’s not that other people wouldn’t understand it. It’s just because I’m doing something different and I’ve had to bend some of the business rules to fit my business. I knew I wasn’t going to find a woman who had operated a walk-in only, Lean manufacturing hair salon for 10, 20, 30 years. I knew I was the one. I know I’m doing it. But it doesn’t mean that I couldn’t find somebody who had years of experience in manufacturing, had years of experience in business in general, so that’s what I found. Unfortunately, that mentor-mentee relationship became more about control and power than it did about—

Loren Feldman:
This is not Jay you’re talking about here.

Dana White:
It’s not Jay at all. No, no, no.

Jay Goltz:
I have no power.

Loren Feldman:
Or control.

Jay Goltz:
And certainly no control. [Laughter]

Dana White:
Some years ago, I felt it was time for me to get a mentor. I’m having a lot of questions that I need answered from somebody with experience. I found a mentor, asked them if they would be my mentor, and they agreed. And over time, like I said, that relationship… although I did get very valuable things out of it. There were some things that I got that weren’t so good, or some lessons that I got that weren’t so good.

Loren Feldman:
Can you give us a hint? What are you talking about?

Dana White:
The lesson that I learned is, for myself as a business owner, there are some questions that you… “Grow up, Dana,” meaning there are some questions you need to ask up front to make sure that the intentions of your mentor are above board. And even though you may not get an honest answer—I was a little naive, thinking, “Oh, yeah, just mentor-mentee.” That was not the case. There were other things that they wanted, that I was unwilling to give, and that is how that relationship turned from mentor-mentee with a hint of control and power, [to] a need of control and power that were being exercised.

Jay Goltz:
You’re talking about ulterior motives, basically.

Dana White:
Ulterior motives. That’s it. They had ulterior motives, although they gave me valuable insight, really worked with me about this ever-looming fear I would have about my business—always worried that I was two steps away from failing or one decision away from failing—they helped with that. But what I didn’t know was there was this undercurrent of ulterior motive, and as I grew as a business owner, that came more and more and more to the surface.

Loren Feldman:
Did you meet this person and develop the mentor-mentee relationship just by chance? Or had you been looking for a mentor?

Dana White:
I had been looking for a mentor. I was at an event, and I saw this person. I heard this person speak. I said, “This may be the person. I think this would be the person that may be a good mentor.” So I approached them, and they agreed. For several years, we would meet and talk about business. I think one of the things I learned from a mentor-mentee relationship is that it’s not one-sided. that they, too, were getting valuable lessons from me, having been younger. My perspective on business was different because I was younger.

But like I said, there were ulterior motives that would occasionally percolate, and I was naive thinking, “Oh, no, no, that’s not what they meant. Oh, no, no,” right? But over time, and as I grew as a business owner, I realized that, yes, there are valuable things that they’re getting, but it can’t continue healthily if these ulterior motives don’t go away. I found that they were rooted in control and power. There was a power that was being wielded, a liking of seeing me squirm, or of having this younger person listening to you, taking what you’re saying as gold, and using that to their benefit. It’s not a great feeling.

But then you meet somebody like Jay who just wants to share what he knows. Then I’ve shared it with other people, and I’ve had people [go], “Can I talk to him? I need to talk to him. Mind if I call Jay?”

Jay Goltz:
I’m unlisting my phone number.

Loren Feldman:
I hope you sent them the link to the podcast when they asked.

Dana White:
Some of them are already listeners. And that’s another reason they know who Jay is.

Jay Goltz:
I have three things I want to share. I went to a business seminar. It was the owners of the White Sox, Jerry Reinsdorf and Eddie Einhorn, and they were talking. You gotta get perspective. I’ve never worked anywhere. I’ve never had a boss, so I’ve never really gotten feedback. And they’re talking about some of the screw-ups they did in buying the White Sox, and it’s like, I literally sat there and thought, “Oh my God. These two smart guys made mistakes. I thought I was the only one making mistakes!” I really didn’t understand it, which was really a breakthrough, which is why, Dana, when I said to you, “Well, listen, that stuff happens,” just getting off the hook with thinking you’re not an idiot is a valuable thing. I used to torture myself all day long, thinking about how stupid I was. And I realized that, when you’re growing a business, this stuff happens regularly. That’s the first thing.

Number two is, Dana has been—and I certainly didn’t do it for this reason—but this has been an extremely trying year with all the social unrest and I had my window broken and the whole thing. Dana has been a gift from God to help me understand this better. I thought I did, but I really didn’t. I’ve told her this: as much as I’ve helped her, she’s helped me. I’m not saying it always works out that way in every situation, but in this case, she has given me insights that I would have never been able to get anywhere else. She owes me nothing, and we are even. That’s number two.

And number three is, I like helping. I like picture framers. I love picture framing. That’s my main business. I like helping people with stuff that nobody helped me with because it was extremely frustrating. I like being on the podcast because I want to help ease the pain of all these people who are out there trying to figure this out, because being an entrepreneur is a very lonely thing.

Loren Feldman:
I’ve been dying to ask you about something that Laura Zander said on the show last week about hiring. She talked about how she has had success through the years, not hiring people to fill needs, but hiring people who she thought were good people [where] she could bring in and then figure out what they would do.

The latest example is a salesperson she hired who’s a long-time friend. He’d been a sales rep who had sold her company things through the years. He had moved on to do other things, and she decided she wanted to bring him in. She hadn’t been looking for a salesperson, but he was available, so they set it up. He’s now responsible for 50 percent of the revenue at Madelinetosh, the yarn supply business that she bought some time ago. So my question to you is: does that make sense to you?

Jay Goltz:
I think that certainly can work and does work. But I don’t know that that’s in place of figuring out what you need, putting an ad out, writing the right ad, but that certainly can work. I certainly wouldn’t call that, in my mind, a strategy for hiring. But if you happen to find someone you like, who you think is competent, who is into what you’re doing, yes, certainly, I think that would be a great thing to do. But I still think the conventional write a great ad, put it out there, interview 5 to 10 people, and find someone that’s right—that works, too.

Loren Feldman:
Which is what you did, Dana, when you hired your operations manager recently, correct?

Dana White:
Yes, so we hired the operations manager, we put out an ad, and several people applied. She applied.

Loren Feldman:
So you knew what you needed. You had a job that had to be filled, and fortunately seem to have found the right person.

Dana White:
Yes. When she applied, it was great. She applied, we interviewed her. She walked out, and we were like, “Whoa, that was great.” And again, when I was looking to hire her, I called up or texted Jay, said, ‘“Hey, this is what I’m thinking about doing.” And he said, “These are the things you need to look out for and hear what her references have to say,” which all added up. When she came on, we shut down the salon for two weeks so we could do a hiring drive. And it’s been working out great.

Loren Feldman:
Jay, you were talking before about how much you struggled hiring that production person. Was there a turning point for you with the company where you figured out—

Jay Goltz:
Yes, absolutely. Yes, here it is. I am interviewing. My turnover is horrible at this point. My hiring success rate was probably, I don’t know, 30 or 40 percent, which isn’t much better than whoever walks in, you hire. I mean, if you just hire whoever walks in, you’ll probably have a 25 percent success rate. Mine was marginally better than that.

So I’m interviewing this woman—I was 40, she was 35, let’s say—and I’m having a hard time with the hiring thing. And I asked her, she’s running a lighting showroom, selling fixtures, lighting fixtures. So I said, “How many salespeople do you have?” She goes, “Four.” I said, “How many did you have to hire to get to the good four?” And she goes, “Four.” I literally laugh out loud. I laugh and I go, “Wow, either your standards are lower than mine, or you’re some kind of hiring goddess.” Her name was Ivy Garfield. She starts hiring for me.

Loren Feldman:
You hired her.

Jay Goltz:
I hired her.

Loren Feldman:
What convinced you that she was—

Jay Goltz:
I figured I’d give it a shot. I needed a manager. Now, this was 1996. Most of the people she hired for me still work for me. She was a hiring goddess and I would sit through interviews with her, and then they’d leave, and she’d go, “What do you think?” And I’d go, “Yeah, I think Loren Feldman should work out okay.” “Are you kidding?!” And then she would give 10 reasons why it wasn’t gonna work out, and she was right. She profoundly changed my business.

Loren Feldman:
What did she know?

Jay Goltz:
Well, I’ll tell you what she told me, and then there’s the rest of the story, which I’ll share. She said, “I’m gonna tell you why I’m successful in hiring. My parents got divorced when I was a year old. My mother has no maternal instincts whatsoever. I basically had to raise myself, and I’ve learned not to trust anybody.”

Loren Feldman:
Wow. And that’s the secret to hiring?

Jay Goltz:
Absolutely. This is one of those things people are going to take offense when I say this. But I’m sorry, I just have to tell you, because this is going against something your mother told you and you’ve heard your entire life. When it comes to hiring: guilty until proven innocent. Just because someone goes, “Oh, I’m a hard worker,” doesn’t mean that’s true. You need to check it out. You need to call their references. You need to ask the right questions to really flush out—”Oh, you’re good with customer service? Tell me about a difficult situation with a customer. How did you handle it?”

I’ve always said this: entrepreneurs make the worst people hiring a lot of the time. Why? They like people. They want to talk about their company because they’re proud of it and they’ve got 20 other hats to deal with. They want to get done with this and they want to get that person hired. I’m as guilty of this as anyone. I was just doing it like that. And then over the years, when someone left—either I had to fire or they quit—I would do an autopsy. 80, 90 percent of the time, I would think back to, “Yeah, there was a red flag on the interview. I just didn’t want to pay attention to it.” Or, “I didn’t check the references enough.” Or, “She gave me her coworker as a reference, not her boss.” Hiring is an art and a science, and I didn’t get it. She profoundly changed my business. She was here six years. Most of my key people she hired. They’re with me 25 years later.

Loren Feldman:
Wow. She was only there six years?

Jay Goltz:
Yes.

Loren Feldman:
That’s amazing.

Jay Goltz:
Yes. They’re still with me. I have people with me 25 years, 24 years, 23 years. I’ve got a salesperson selling framing. He’s been with me 21 years. They’re still here.

She moved to Oregon. She would call me twice a year. I would talk to her. Today’s Thursday. Tuesday night, I got a call. She died.

Loren Feldman:
I’m sorry to hear that.

Jay Goltz:
And I have to tell you, I got up at 2:30 in the morning. I went in the kitchen. I started typing, and I just cried. She believed in me. She believed in my company. She believed in these people. It really has shaken me up. And part of the reason I’m telling you this is, anyone who thinks that business is just business… When you work with people, and you’re on the mission together, this is really the first person I can think of in 42 years that I worked with who died. It kind of shook me to my core.

I came to work, and I talked to the people who she had hired, and everybody was crying, and I said, “Good.” Ivy deserved people to be crying for her. And I owe her a lot. She totally put my company on a different trajectory, which is part of the reason why I’m thrilled to be able to talk to Dana and anyone else and help them, because she helped me.

Loren Feldman:
I’m sorry that you got that news.

Dana White:
I am so sorry to hear that. I was shocked.

Jay Goltz:
Yeah, me too.

Loren Feldman:
Dana does that guilty-until-proven-innocent thing make sense to you?

Dana White:
Yes, I like guilty until proven innocent. I like, everybody is on stage. That’s how I look at it. When I’m sitting down within a candidate, the Oscar goes to… I listen to their performance, and I glean from their performance what I can, understanding that they will break character at some point, and then that’s the meat of it. That’s when you get to see who and really what they are, and what they’re going to do. The way you can break through that performance, make cracks in it, is by speaking to their references. Because their references worked with them when the curtain was down behind the scenes, so that’s what I do.

Jay Goltz:
I’m not cynical. I’m not saying everybody’s a liar. If you want to hire great people—I don’t mean okay people. If you want to hire great people, and whenever I’ve done this speech in front of a bunch of experienced business owners, everybody’s head is nodding yes. Out of 10 people, one’s a great hire. Three of them would be okay, but just not at your business. They don’t like retail, they live too far. But they might be a great employee doing something else. So that gets us up to four. And then there’s another three or four who are just solidly mediocre. They’re okay, they’re not there. And then the last couple can’t keep a job. This isn’t about being cynical. This is about math. That’s what this is. This is about simple math.

Since I’ve adopted this, since I’ve gotten better at it, our hiring rate here is… I’d say 85 percent of the people we hire work out great. And I’m happy to say that one of the managers [Ivy] hired—I just coincidentally talked to her Saturday. I went up to her, and I said, “I just want to tell you something”—cause they know how I feel about Ivy. I’ve always used her as the gold standard—I said, “You’ve gotten just as good at hiring as she is.” And it’s true. My people have gotten better at it and as a group are better at it.

And I would challenge someone to tell me what is more important as a business owner than hiring the right people? I’d be curious, I would challenge someone to tell me what would be more important. And when I do speeches, I ask people in the audience. There’ll be 50, 100 people, and I’ll go, “Raise your hand if you’ve ever had some training on how to properly hire someone.” Almost no hands ever go up. It’s not even on the radar.

Dana White:
Since hiring our operations manager, we now have a waitlist for people for hire. We’re talking about, I had three people on October 19th. And we’re fully staffed with a waitlist.

Jay Goltz:
And for those of you who have been listening to this podcast since the beginning, I hope you’re as thrilled as I am that Dana is 10 years older than she was six months ago, a year ago.

Loren Feldman:
This year’s aged all of us, Jay!

Jay Goltz:
No, I mean it. Twenty years. I met you in New York at the Forbes thing that Loren was at, and I still smile when I think of this. You sat up there, and you said, “I don’t do messy.” And I laughed. I told you later, “Yeah, business is messy.” I know what you were saying, but I think you figured out that, yes, business is messy, and our job is to clean it up.

Dana White:
Yeah, the messy part can be, there are business owners who can get too in the weeds, and that’s messy. Business owners who don’t delegate properly, that’s messy. There’s business owners who need to be in control, and who have baggage from other jobs or insecurities from their life, and they bring it into the workplace, and that’s messy.

Jay Goltz:
Yeah, and dysfunctional.

Dana White:
Extremely dysfunctional. I had a conversation with an entrepreneur yesterday, and her leadership team, although qualified, are not empowered to do anything without picking up the phone and calling her, and it’s driving her nuts. And so I had to have a really candid conversation about how she’s contributing to that problem. She yells at them. She said, “I run my house the way I run my business, and vice versa.” I said, “These people that work with you are not your children.”

Jay Goltz:
Great, so then your employees and your kids will hate you. Great. That’s consistent.

Dana White:
I love what my operations manager said about constantly hiring, but she’s setting up an environment where we’re not having to do so all the time. What she’s seen by constantly hiring is that when a staff member leaves, we don’t have to adjust the business in order to keep the business running. In Ashley’s mind, the business comes first. “Here’s the business standard. This is what it takes to open and operate it.” So finally paying somebody who has the experience and the knowledge to make sure that the business stays consistent so we can grow is invaluable, so Jay, you’re right. I would have never hired an operations manager had you not said to me, and Laura—Laura said, “You can’t afford not to.”

Jay Goltz:
Right, and I only know that because I tried treating $18-an-hour employees as managers of 20 people, and it’s a different level. I only know, because like I said, I’ve done it 20 times wrong.

Can I just throw one thing in that you mentioned? Yelling is destructive behavior. End of the story. And for those entrepreneurs who say, “Oh, I’m just passionate.” No, you’re an asshole.

Dana White:
I have said this to entrepreneurs. You never, ever show anger.

Jay Goltz:
It screws people’s heads up. You have no idea what you’re doing to them. You have no idea what you’re doing to their head. You could remind them of their screaming mother, their father. It’s not right. You’re humiliating them. You’re humiliating yourself. It’s just destructive behavior.

Dana White:
I never show anger. I think I showed it yesterday on the phone with operations management:- disappointment.

Jay Goltz:
Oooh. Ouch.

Dana White:
That’s being quiet and letting it sit—the answer to the question that I’ve asked her—and letting it sit, and I’ll stay there for a minute to get an answer. And it’s not an answer to be condescending. It’s not an answer to prove a point. It’s an answer to get understanding. That yelling thing that people do, and some people do it because they believe from some sitcom they saw in the 70s that that’s how—

Jay Goltz:
No, no. That’s one of the last things that’s left that it’s okay to make fun of—the screaming boss. And it’s not funny. Here’s the key. It is more professional and more humane and more productive to quietly—if you’ve already told them something six times, and they’re not getting it—you call them into the office and say, “Dana, I’m sorry but we’ve talked about this six times. This is the wrong job for you. Today’s your last day.” That’s professional management. Humiliation in front of six people is not going to help them, is not going to help your business, and is going to hurt everybody. And believe me, 30 years ago, I was screaming because I was at the end of my rope, and I’m not making excuses for it. I was wrong. It’s bad.

Loren Feldman:
All right, we’re gonna do something a little bit different this week, which is Jay and I are gonna make an apology. I think I speak for both of us in saying: We don’t like to make mistakes, but we’re eager to correct them. And we appreciate it when somebody calls them to our attention. Earlier this year, over the course of several podcast [episodes], Jay, I asked you about things you were doing to try to stay on the offensive during a tough economic time. And we talked about how you had a series of conversations with the owner of a picture-framing shop who had announced he was closing that shop.

In the process, we made a couple of mistakes. Number one, we assumed that since we didn’t mention his name, his store, his location, that no one would know who we were talking about. But it turns out that some people in the industry did connect the dots. And in retrospect, we should have known better. And the second thing is—

Jay Goltz:
Let me take over from here. Let me take over. That was your side. You can take that half of it, and I share that with you. The other half is, I figured out in the middle that I really didn’t want to stick my neck out, and I wasn’t sure it was going to work out for me, so I offered to sign a lease, but I wanted an escape clause, and he didn’t want to do that. Okay, fair enough. And then I offered to buy the mailing list, because I was under the impression—wrongly and this was my mistake—I just assumed he was closing. So I said something—I don’t remember exactly what I said—about ways he made a mistake. I was wrong. I shouldn’t have made that assumption, because I had no idea.

Loren Feldman:
The mistake was you assumed you knew more about why he was doing what he was doing—

Jay Goltz:
I just figured he just wanted to close the shop and move on, which I completely understand and respect. He has a lovely business and, and he’s a lovely guy. And I will tell you, I was sick to my stomach when I realized that I said or did anything that upset him or gave the wrong impression. I am profoundly sorry. That certainly wasn’t my intent. I shouldn’t have made that assumption. And it sounds like he made a good thing for himself, and someone else is taking it over. Good for both of them.

Loren Feldman:
It’s worked out well for him. He sold the business.

Jay Goltz:
Yes, and I’m happy for him. And I’m happy for the person that did it.

Loren Feldman:
I have to say, when I picked all of the regulars on this podcast, I picked them precisely because I’d known them for years—especially you, Jay—and because I knew that they would all speak authentically.

Jay Goltz:
And unfiltered, perhaps?

Loren Feldman:
Well, as much as possible.

Jay Goltz:
Well, that’s a problem. I guess.

Loren Feldman:
There is a line somewhere, and I think we may have crossed it in this situation.

Jay Goltz:
Yeah, no, we did. I did. Not you. I won’t put this on you. This is on me. I shouldn’t have said that. And I feel particularly bad because he’s a really nice, good guy. And I like him, and I’m just grossed out that I caused him or anyone else any grief.

Loren Feldman:
I’m glad you said that, but I don’t want you to get too civilized. We want to hear your unfiltered thoughts as much as possible, as close to that line as possible. I’m curious, this wasn’t the first time that you’ve talked to somebody about the possibility of buying a framing shop. You’ve been through that before, right?

Jay Goltz:
No, I took inventory in my head. I’d say in the last, I don’t know, five, six years, occasions have come up that either I knew someone was getting older or I knew they were maybe selling. I reached out to—this would make the eighth frame shop. And four of them ended up not selling. They’re still running it. Okay, that’s fine. And three of them I called and said, “Listen, if you’re ever interested, call me.” They didn’t. They just sold to someone else. Maybe they don’t like me. I don’t know, which is certainly possible. And then this situation.

So I’m zero-for-eight, and at this stage, I think I’m done. This is the revelation. I’m trying to be disciplined, which has always been difficult for me. I’m a recovering entrepreneuraholic. I need to stop starting businesses. I need to stop buying businesses. My business is big enough. I never thought there was such a thing as that, but there is. And yeah, I need to stop doing that.

Loren Feldman:
Dana, you’ve thought about, as you grow your chain of hair salons, the possibility—especially given what’s happened this year—of not just building from scratch, but taking over an existing salon. Is that something that you still think is a possibility for you?

Dana White:
Yes, but not in the form of buying it. For Paralee Boyd, with the opportunity to expand nationally, unfortunately, several salons have closed. And for safety reasons, many stylists have gone into salon suites.

Loren Feldman:
What’s a salon suite?

Dana White:
A salon suite is a big space. That whole space is broken into individual salon suites, meaning there’s a sink and a chair or two sinks and two chairs. That stylist is in that suite by themselves.

So with an opportunity to expand to maybe two to five locations nationally, wow, what a time to come in and say, “Hey, I’ve got landlords saying, ‘I can give you a discount.’ Or you can rent from me at a discount.” That’s what I’ve been looking at, is the cost of build-out would be reduced, because I’m not spending as much. Because some of these salons are beautiful, and they’re already done.

Jay Goltz:
It’s good for the landlord. No, it’s good for the landlord, for everybody.

Loren Feldman:
If you bought one of these stores, to what extent does that make your job more difficult, because nobody does it quite the way you do it? Do you get an advantage if you have to retrofit the store? Do you get an advantage if you’re taking on people who have been working there previously and haven’t been trained in your techniques?

Dana White:
No. I’ve had people email me several salons that are for sale and most stylists in the salon don’t know that the salon is going to be for sale, and they are all full-service salons. They’re not like my salon. Buying a salon would be a challenge for me.

Jay Goltz:
A lot of small businesses just close. I mean, in the framing industry, there were 25,000 frame shops in America 10 years ago. Now there’s eight, so…

Loren Feldman:
Wait, wait, wait. Eight thousand, right?

Jay Goltz:
Eight thousand. Yeah. There were 25,000. Now there’s 8,000, but the bigger ones are the ones that are left, so that doesn’t mean the industry shrunk by—whatever percentage that is, 80 percent.

Loren Feldman:
Are people getting just as many things framed or is there less business?

Jay Goltz:
No, it’s a lot of things. It’s a combination of the Baby Boomers are, in large part, done framing, and that drove a lot of framing. People are putting pictures on their wall without frames, which is heresy, but actually people do that.

Loren Feldman:
That’s unbelievable.

Jay Goltz:
I know. It’s the beginning of the end of civilization, probably. But all right, whatever. Canvases that are stretched don’t take frames. And then there’s framed artwork you can buy in the stores now that, 20 years ago, there weren’t that many stores that you could walk into and find a bunch of framed artwork. Then there are the big chains. There’s lots of reasons, and then here’s one that people don’t think about. Do you have a TV hanging on your wall?

Loren Feldman:
I don’t, but I know what you’re talking about.

Jay Goltz:
Right. If the average apartment or house has one or two TVs hanging on the wall, wherever that TV is probably would have been a picture. That could be 10 percent of your walls in a house. There’s 10 percent right there. The stores that are selling framed pictures? That might be another 10 percent.

Loren Feldman:
Jay, you need a strategy to get TVs off the wall.

Jay Goltz:
No, my strategy is, the industry’s probably shrunk by 30 percent. I think it’s stable. My strategy is, just do a really good job. There’s people that do want to do framing, and it’s okay. And I will tell you, and I’m dead serious when I say this. I would challenge anyone: You put a frame on a picture, it looks better than without a frame. So, just saying.

Loren Feldman:
On that note, guys, we’re out of time. My thanks to Jay Goltz and Dana White.

Jay Goltz:
Wait, I have one more thing to say. Loren, can we dedicate this show to Ivy Garfield?

Dana White:
Ivy Garfield, yes.

Loren Feldman:
We can do that. We can do that. Because of the holiday, we won’t be taping next week, which means we will not have an episode the following week. But I hope you, Dana and Jay, and our listeners have a wonderful, but most importantly, a safe Thanksgiving. We do want to see all of you back here. Thanks, everybody.

Episode 40: We’ll Find Something for Them to Do

This week, starting with a conversation about crucial hires Dana White and Laura Zander have made recently—an operations manager for Dana, a salesperson for Laura—we found ourselves exploring some of the great unresolved debates of entrepreneurship. Which comes first when hiring: filling specific needs or finding places for good people? With sales people, do you motivate by paying commission or build a team by paying salary? And in finance, do you bootstrap to maintain control or raise capital to grow faster? Obviously, there’s no right answer for these questions, but Dana and Laura tell us what’s been working for them.

Guests:

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

Laura Zander is co-founder and CEO of Jimmy Beans Wool.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Laura Zander: “Maybe we end up hiring a little earlier than we would have because we’re constantly keeping our eyes open for good people.”

Laura Zander: “He’s a real team player. He’s really given his all, and he’s accounting for probably 50 percent of our revenue right now.”

Dana White: “They’re not in Silicon Valley or Silicon Alley. They’re looking for businesses like mine. They’re looking for minority women businesses to take on that aren’t in tech.”

Full Episode Transcript:

Loren Feldman:
Laura, the last time you were on, we were talking about your real estate issues and the building that you tried to buy that didn’t go through. But along the way, you mentioned that you’d hired a salesperson who was having quite a bit of success. Can you tell us a little bit about that? What led to the hiring and how is it going?

Laura Zander:
Sure, it’s a lot more serendipitous than it sounds. I’m not quite as intentional. But I had a sales rep that would visit me all the time, a guy who I had become friends with and we would talk outside of work. And he was working—

Loren Feldman:
I’m sorry, this was a sales rep that was trying to sell you something?

Laura Zander:
Yes, yes. At Jimmy Beans, he worked for one of the yarn companies that we bought from, a company that was out in New York. He worked for them for, I think, seven years. He would come and visit our shop twice a year. And then, whenever we had issues, we could talk with him. He was a great salesman. Really, really good, really knowledgeable, really understood the product. Did a great job and was a real hustler.

He and I happen to be what I call “self-improvement buddies.” Over the last 10 years now, we’re always like, What’s up? What’s the latest?” He just bought me a book called How to Think Like a Monk. We’re always comparing notes and on this journey of constant, never-ending self-improvement together.

He left the yarn company a couple of years ago, maybe two years ago, and he went into real estate and didn’t like real estate. Then he went and worked for a corporate company, and just was miserable. He missed traveling. At the same time, I had been talking to him for about a year, because we had purchased that company Namaste, which is now Della Q. We were making handbags and had been thinking about how to expand our reach with that and had talked with him, kind of loosely, casually, about, “Hey, maybe you could go to Australia for us, and take our bags, and see if you could sell them to some different yarn shops.”

But it never financially made sense. The market wasn’t big enough to support the cost of sending him to Australia or sending him to Canada, and then the hotels, and all the expenses that go along with it. We didn’t think we could get enough revenue to make it worth it. Anyway, so when we bought this Madelinetosh company—this yarn company, which is a multimillion-dollar business—I was talking to him in January, and again, serendipity. He needed a full-time job for his own personal financial reasons, as opposed to being just a sales rep, which is usually a strictly commissioned job. The reps in our industry get anywhere from eight to 12 percent on all sales. He needed a full-time job, and we just decided, “Why don’t we do this? Why don’t we try it? Why don’t we hire you as an employee, and then we’ll pay your expenses, and you can drive around the country and sell our yarn and our bags to different shops?” It could be a win-win, where he gets to travel all the time. We actually bought him a tent that goes on top of his Subaru, on top of his car.

Loren Feldman:
You make your sales person live in a tent? [Laughter]

Dana White:
Wow.

Laura Zander:
No, he wanted it! He was so excited. I mean, what a great win-win. You know, tents are expensive. It was a couple thousand bucks. But it takes 15 nights of him staying in the tent, as opposed to the hotel, to pay for the tent. And now he’s got a tent that he can go camping with whenever he wants. He’s like me. He sleeps in the car sometimes. Before we got the tent, he would just sleep in the car.

Loren Feldman:
Do you want a salesperson sleeping in the car before they call on an account?

Laura Zander:
I trust him, and I trust his judgment that he’s not just going to sleep in the car right before he goes to an account. Maybe he does that two nights before, and then he stays somewhere where he can take a shower. But the point is that he is fully committed and invested. We’ve got to cut costs, and we’re trying to figure out how to build up inventory, and he’s not going out to super fancy dinners. He’s a real team player. He’s really given his all, and he’s accounting for probably 50 percent of our revenue right now.

Dana White:
Wow.

Loren Feldman:
Whoa.

Laura Zander:
Oh, yeah. It’s ridiculous.

Loren Feldman:
What had you been doing before? Had you ever had a salesperson like this?

Laura Zander:
No. The Madelinetosh business—this yarn business in Texas—they had a group of sales reps, I think six of them, and those reps would go from store to store. They were paid strictly on commission, but they also had other accounts and other companies that they repped for. So while they contributed a fair amount, this wasn’t their full-time job, and this wasn’t the only company that they were repping. We thought that by having one full-time guy who was 100 percent devoted to us that we can make a big difference that way.

Loren Feldman:
So, before buying Madelinetosh, you’d never really had the need to have a full-time person like this.

Laura Zander:
Correct.

Loren Feldman:
I know a lot of business owners struggle with hiring that first salesperson. There are concerns about whether they know what they’re selling as well as the owner does. There’s also the issue of how you pay somebody. Is it salary or commission? Were you concerned about any of those issues?

Laura Zander:
A little bit. I wasn’t concerned about him knowing the brand and knowing the line as well as I did, or as well as any of us did, because this is what he does. He’s really good at knowing it and learning it. He knows the product way better than I do. Granted, I’ve only been there a year, so it’s not like I was the founder of the company.

Loren Feldman:
Right.

Laura Zander:
He doesn’t know it as well as the founder. That said, this is what he does, and this is what he’s good at. In terms of the pay structure, that’s where I’d like to say that this was super intentional. I guess at some level it was, because we talked about the different ways that we could approach it. Do we just do a commission thing? Do we do a salary plus commission? But when it came right down to it, we ended up in a very unique situation where we came up with a win-win scenario for both of us, and we both had to give a little, and we both had to trust a little.

Loren Feldman:
How are you paying him? What percentage is salary, what percentage commission?

Laura Zander:
No commission. Just full salary.

Dana White:
Oh, wow.

Laura Zander:
Yeah.

Loren Feldman:
That’s really interesting. I’ve had a lot of great conversations through the years with a lot of very smart business owners who have told me that they think it’s a great idea not to pay commission, that you want employees to feel like they’re on the team and part of the organization, and not just lone wolves out there for themselves. But then when I raise this with other business owners, they think that idea is completely insane. How did you decide to just do salary?

Laura Zander:
Again, this was very situational. He needed the constant income. And so we gave him a salary that would be the equivalent of what he would make in commission if he were to sell X number of dollars for the year, which is where we feel comfortable. But we knew, and he knew, that he wouldn’t be able to sell that amount for at least a year or 18 months because they don’t get commissioned until the customer actually pays. The way our industry works, and the way our business works, is he could put an order in, but the customer is not going to receive the product for four months. So then he’s not going to get his commission for four months. He wasn’t in a position personally to be able to wait for those four months.

Again, what we just decided is, “Look, we’ll pay you this salary. And then, once you start to exceed that, then maybe we can talk about bonuses, we can talk about whatever, but that’s not going to be for a year or a year and a half.” That said, in our kind of loosey-goosey arrangement, where we’re at is we bought him a couple-thousand-dollar-tent for his thing. We’re being really flexible. We’re like, “Okay, what part of the world do you want to go visit?” Once things open up, of course.

Loren Feldman:
Does he know that he’s accounting for 50 percent of your sales?

Laura Zander:
Oh, yeah, absolutely. He comes to Texas, and everybody hugs him, and the whole team is so grateful because he’s providing jobs for some of these people.

Loren Feldman:
I’m not sure you’re supposed to be doing that right now.

Laura Zander:
What do you mean?

Loren Feldman:
The hugging part.

Laura Zander:
Oh, no, okay. I hope they’re not actually hugging him, but they’re virtually… great point. No, they’re not actually hugging him. But they’re all like, “Thank you. Gracias.” Anyway, I think part of the give and take is, “Hey, how does Australia sound? Does that sound fun? Or do you want to go to New Zealand?”

Loren Feldman:
Had this been an international business before? Is that what you bought? Or is that something that you’re initiating?

Laura Zander:
It has some international sales, but it could grow 500 percent easily. They haven’t done a lot of work to encourage international sales. As soon as Canada opens up, he’ll go to Canada. We’re doing that, and then his dream in life is to have a van—a Sprinter van that’s got a bed in it and all that stuff, so we’re looking at buying him a Sprinter van. And then he can drive that around instead of using his own car, and then he can sleep in that instead of sleeping in a hotel most of the time. It’ll have its own shower.

Loren Feldman:
I was going to ask… I think the shower might be key. [Laughter]

Laura Zander:
Then he can take yarn with him and sell yarn, like cash and carry, and we’re just being really flexible with each other. Here’s a van that could potentially cost $100,000. How do we make that make sense from a financial standpoint, but then also give him a really cool lifestyle? Again, like I said, it’s kind of a unique situation.

Loren Feldman:
Yeah, it is because you had the person first. It’s not like you decided to hire someone and then searched the world for exactly the right person. Do you think you’ve learned anything doing this? Has it changed your thinking about how you want to sell going forward? Would you hire more salespeople?

Laura Zander:
It has changed the way we’ve thought about things a lot, actually. What Adam and I—Adam is the salesman—he’s really trying to get involved with the development side of the business as well, not just the sales part. We talk a lot about, “Do we need sales reps?” We love our sales reps, and we’re not going to let them go, but at some point, when one of them drops off, or one of them is going to do something else, do we need to replace them? Or could we have Adam literally just go to all 50 states and drive around, and then we build an inside sales team just to support him and do follow-up that way?

Do we have more people, like you said, on salary and less people on commission? We’re just kind of exploring it and testing it out. But you’re right about the fact that we had the person first, and I mentioned that because that’s how we’ve approached a lot of the business. People were like, “Let’s go hire for blah, blah, blah.” And I’m like, “Well, I don’t want to hire for them. I want the person to come to us.” Like the woman who we just hired from Denver—we just hired two people from Denver—and they came to us, and we found positions for them. We created positions for them. We weren’t really looking for them, but when somebody good shows up, then we figure it out. Then what has happened historically is the business grows to support them as a result of having them, so maybe we end up hiring a little earlier than we would have because we’re constantly keeping our eyes open for good people.

Loren Feldman:
Interesting.

Laura Zander:
We haven’t had to get to a point where we’re like, “We need a salesman,” because we ended up filling that position before we realized we needed it.

Loren Feldman:
Dana, you have told us in recent conversations about a big hire as well. You hired an operations manager that you were very excited about last time we spoke. How’s that working out?

Dana White:
It’s working out really well. It’s working out really fast. She hit the ground running, and it’s going really, really, really fast. She’s excited about the work that she’s doing. She’s excited about the business, and I’ve been happy to have the conversation with her. You know, “What are you seeing?” My view is very different. I’m the owner. Sometimes to me, all I see is doom and gloom. But then you’ve got somebody who was the director of operations for a national chain, was a general manager—

Loren Feldman:
A national chain of hair salons.

Dana White:
Yes, a national chain of hair salons, and so her perspective is very valuable. She’s been with me over a month now, and we talk all the time, but her assessment on Paralee Boyd was, “Wow, this is a plug-and-play business.” The manager who she hired and who also has experience managing several salons is, “I’ve never seen anything like this.”

Again, I’ve set up relationships with them, even though [they’re] short. I’m not into flatteries. Don’t butter me up. That’s the worst thing to do, because I see right through it. But I like the fact that their personalities aren’t that way. They are straight-shooters, so listening to their feedback on what they think, with their vast experience, about what Paralee Boyd is, and they still stand true with the fact that, “There was nothing wrong with your business. You just need good leadership, and you need volume.”

Loren Feldman:
And good people. I think the last time you were on, you talked about shutting down the business for maybe a week or two to staff up. You had been struggling to keep people working, and I think she was leading that process of staffing up. How did that go?

Dana White:
It went amazing. Fully staffed.

Loren Feldman:
Wow.

Dana White:
We had one more position but we decided to add that after. So our goal for reopening was met and exceeded with a waitlist of stylists.

Loren Feldman:
What did she do differently? Why was she able to get you staffed up like that so quickly?

Dana White:
She hired for the person, not for the position. Because she said, “Your systems and processes are strong enough we can train anybody, as long as they have a license.” She said, “We’ll train anybody.” And she said, “That’s what I mean, your business isn’t as bad as [you] thought it was.” She said, “Please, I walked in here on the day of my interview, and my job is to look at what’s going on that the owner isn’t talking about: missing light bulbs and anything that was a concern. We didn’t have retail on the shelves, but you had a plan for that. But you needed leadership to help you execute, so all I saw from day one, interview one,” she said, “was you need leadership. And I came in, and now look at your business.”

Our numbers have gone up. We had a couple of slow days, but she’s really, really eager. I think Jay or Paul brought up a good point in a previous episode about having a leader who used to be in a corporate environment where things move very quickly. Things move quickly at Paralee Boyd because there’s not a lot of layers. But I have a social media person who has our calendar planned out for what the posts are going to be. Sometimes I’ll get a text message: “Dana, we should post about this today.” And it goes, “Oh, okay, I don’t think she realizes how deliberate our branding is.” They even created a site for us to hire on Facebook—a Facebook page—and I said, “Take that down.” It was not branded at all. Didn’t have our logo. Weren’t our colors. It was another Paralee Boyd Facebook page, so they were very anxious. But I said, “Guys, similarly to a corporate environment, that has to be approved, and that has to be designed so it’s the brand.” That was just the manager who was used to running smaller salons. It didn’t come from my operations manager who knew that.

They’re working very quickly, and I think they’re very excited. But we met and exceeded our hiring goals to the point where we have a waitlist of about three or four stylists. We also were able to start an earn-to-learn program because the problem in Michigan is you have young ladies and men who want to be cosmetologists and get their license. But the time requirement doesn’t allow them to work and support their children or their families. Well, Ashley has started an earn-to-learn program where you can get your basic amount of hours for cosmetology school while working at Paralee Boyd. And then because she’s an instructor, she can transfer the hours to finish your cosmetology license at a full school if you choose.

So they could just work here, make money, get their hours, we’ll train them, and then they can decide if they want to complete at a cosmetology school. We have two people already in the program, and that’s it. It’s working out really, really well. I just have to—what’s the word or the phrase—I guess, “get ready” and make sure I’m the leader ready for this type of employee.

Laura Zander:
Are you having trouble letting go at all?

Dana White:
Not at all.

Laura Zander:
I guess I struggle a little bit with the phrase “letting go” because I’m like, “I don’t have any problem letting go. I have a problem letting go if somebody doesn’t know what they’re doing.”

Dana White:
Exactly.

Laura Zander:
But if I find somebody who I trust, or they are competent… But okay, so are you having any control issues?

Dana White:
Not at all.

Laura Zander:
You’re not. Huh…

Dana White:
No. I did a lot of work on the front end and I was very clear about what I wanted and how I wanted it done. The only time I’ll take back that control is if I walk in my salon and see something else. What I think we’re going through right now is the establishment of trust and the understanding that, “Yes, I understand that you have umpteen many years in salon experience. But this is a different salon.” I think she gets that it’s a different salon, so she defers to Dana. So this is different. I know it would have worked at Great Clips or Lady Jane’s, but let me make sure it works here.

Laura Zander:
[Laughter] Dana in the third person. Do you refer to yourself in the third-person when you talk to her?

Dana White:
No. But she defers to Dana, because she’s like, “Let me make sure.”

Laura Zander:
Got it.

Dana White:
She said, “This is a very precise business.” She says, “I’ve never seen anything like it.” And it wasn’t until we were busy one day, and she looks and says, “Oh my goodness, it’s a machine.” She kind of stood there and watched everything just kind of fall into place. It made her role clearer as to what she needs to do to make sure that everything just keeps running like a machine.

Laura Zander:
I love that she’s hiring for people, not for position. You just articulated what I was trying to say. That’s been our approach the whole time, I think just intuitively. And man, some people do not like it. They get really frustrated internally because they’re like, “This is exactly the skill-set that we need.” I’m like, “We’re not a factory. We’re looking for people.” If we find somebody who fits that skill-set 50 percent, but they have 50 percent of other skills that we didn’t even know we were looking for, and they’re a good fit for the business, then we’ll figure it out. That’s the beauty of being flexible.

Dana White:
She basically hired based on who I am and what I need.

Loren Feldman:
Is she literally hiring people who have no experience doing this?

Dana White:
No, no, no, no. So in cosmetology, you have to have a license for so many hours. It’s not like retail, “Okay, you’re running the cash register, you’re managing the floor for putting apparel out.” No. We have an industry standard and she meets that, but what we were doing differently in the past was we were checking the boxes and hiring people who were out for self, hiring people who didn’t quite grasp the vision and what we’re trying to do, couldn’t quite let go of the fact that this is not a traditional salon and were trying to perform traditionally in this salon. They weren’t making it. What I think and what I believe I’ve seen her do is she’s hiring for, “Do you understand who we are and what we’re doing? If you can grasp that, how the salon is different-”

Loren Feldman:
What is it that they don’t grasp, generally? What do they not understand about your salons?

Dana White:
They want it to be walk-in-only, seven days a week, but I want to take my time. I want to talk. I want to promote myself. I want to have my cell phone on the floor. I want to talk to this person in my chair as if they’re my customer versus Paralee Boyd’s customer.

We had an example of a young lady who came in, and she didn’t realize who she was talking to. You have no idea that that’s the chief-of-staff for such-and-such, but you’re just running your mouth. Because in your mind, this is a traditional salon: “This is my customer.” No, this isn’t your customer. This is a customer of Paralee Boyd.

We had another customer who felt that he was giving a client a compliment because her hair looked nice. He said, “You’re gonna make a baby tonight,” and she burst out in tears. And she said, “I really hope so.” Not realizing that she and her husband had been trying for a very long time. You don’t know who’s in your chair.

She hired people who would have no problem carrying out the customer-service level and the mindfulness level of Paralee Boyd. And she said, “These people came to us. These are people who started following us on Instagram. These are people who sent their resumes, not necessarily through Indeed, but who were referred to us, who wanted a change. They kind of already knew that they wanted something different. And I said, “Well, what was that something different for them?” And I’ll tell you guys, seriously: they wanted to work in a salon owned by a Black woman or a Black person.

Loren Feldman:
I’m glad you mentioned that, Dana, because one of the things I wanted to ask you is, you’ve expressed concern that, in the past, when you had even a white receptionist that some of your customers wondered if the salon was still Black-owned. I believe your operations manager, you told us, is white. I’m wondering if the same issue has come up.

Dana White:
Absolutely, absolutely. I’ve had people text me, “Do you still own it?” I’ve had people lean over and whisper to me, “You still own Paralee Boyd? Right?” I say, “Yeah, why?” “Girl, we saw two white girls in there.” “So, why don’t you think I own it?” And then they get caught!

I guess annoys me even more is how impressed they are. The fact that I could have two white people working for me now, they’re super-impressed, and they respond to the business differently. But they’re not surprised when it’s the inverse. When you see two Black people working in an all-white business, you don’t think that the business is Black-owned. It’s just one of those obvious things.

Laura Zander:
I know it’s not the same thing, but in a similar vein, that’s what I experienced for the first probably 10 years because of my age. All the women who worked for us were 20 years older than me and so people would come in, and they’d say, “Can I talk to the owner?” They just always assumed I was the high school help and would go to the other woman who was working there and just assumed. Again, I know it’s different, but it is similar in some ways, what the preconceived notions are. And then when they find out it’s me, they’re like, “Whoa.” And actually, that still kind of happens when I go to trade shows and stuff. They’re like, “Wow, I was expecting this old white guy.”

Dana White:
I get that too. I get age, color, and marriage, actually. Because they’ll look down at my hand and see there’s no ring. I’ve gotten that before. And then it’s funny because if I’m standing next to [my boyfriend], they refer to him as the owner. Then he said, “I’m here to change the light bulb. You might want to talk to her.” And so, it’s a couple different things. But with my team, that has definitely been, especially over the first couple of weeks, even though there’s a gigantic picture of me that you can see from across the street, they still wonder if I’m the owner.

Laura Zander:
What do you say to your team about that? How do you address that with your team?

Dana White:
I don’t really. I kind of laugh about it with them. Both my manager and operations manager have told me, “You have one of the most loyal customer bases [we’ve] ever seen. They want you to do well. They’re just waiting for you to just take off. They want you to do well.” And communication with them is key, but communication by phone. My guests are not email people for some reason. They’re not website people. They’re not social media people. So they have been making a lot of phone calls, calling people and talking to them, checking in with them.

Loren Feldman:
So Dana, you’ve told us two things, you’ve told us that some of your customers are concerned that you might not be Black-owned anymore. But you’ve also told us that some of your customers are impressed that you have white employees. Is this a net positive for the business? Or a problem that you think you have to deal with?

Dana White:
I think it’s a net positive, and I don’t think they’re two different categories. They’re both. The first response is, “Is this Black-owned?” “Yes, it is. They work for me.” “Oh!” Net positive for the business.

Loren Feldman:
Interesting. The other thread that we’ve been talking to you about, Dana, is your winning Detroit Demo Day and a $200,000 infusion that you have to decide whether you want to take as a loan or as a convertible note, and you have to decide how you’re going to spend it. And also the possibility that that could lead to other investors taking an interest in what you’re doing. Where does all of that stand?

Dana White:
I have a VC who is interested. Actually, I’ve had a few approach me since winning. I have a VC who I’ve spoken with who I’m actually very interested in working with, and so I haven’t touched the money yet. I have a call with the team next week to talk about new developments, and this new development is the next step in pursuing VC dollars, so that’s where we are. After I had this initial conversation, it was, “Hey, don’t spend your money. Hold on.” And so, okay, let’s hang on. I’ve done my vetting. You talk to people who know who these people are, what they’re about, and everything’s been glowing and positive.

Loren Feldman:
Have you talked to other entrepreneurs that this VC firm has invested in?

Dana White:
No, I’ve talked to other entrepreneurs who are in the VC world who know who they are. I don’t want to say it’s a club, but it’s, “Hey, who will take you on?” And most of the people who I’ve talked to who are in this VC world really are interested in this firm taking them on, and they’ve gone on to tell me why.

They just have a really great reputation for taking care of the businesses that they work with. They are definitely not a traditional VC, and that was part of the conversation. If you’re going to work with Paralee Boyd, similarly to a tech startup where you’re expecting so much of a return in a year, this is not the company for you. And they agreed. They said, “Nope, we’re of the same mindset.”

Loren Feldman:
It sounds like you’re clear in your mind that you are willing to sell some equity to bring in venture capital. We’ve all heard the horror stories about that, are you sure this is something you want to do?

Dana White:
It is. Because it’s not VC in general—it’s the unicorn VC. And we’ve talked about that before, to make sure that it’s—

Loren Feldman:
“Unicorn” meaning not that they’re looking to invest in unicorns that grow really quickly but “unicorn” meaning there are different kinds of venture capital firms.

Dana White:
Exactly. Similarly to Laura hiring and myself hiring, or even taking on a VC, it’s all about fit. Who works? Who doesn’t? The end game might be great, but if it’s not the right fit, it’s going to be ugly in the end. For me, in trying to figure out, one: Is VC the way to go? I believe so. You have to reverse-engineer your vision, and say, “Okay, what’s the best way you feel you could get there?” And I did that and I think VC is the way to go, but you want to make sure you want people who don’t want you to have 10 percent ownership. Because then the next series round, it doesn’t look good if Dana only owns 10 percent. Working with people who understand that Dana needs to have a sizable investment is important. And not every VC firm is like that. Some VC firms are, “We want half upfront.” You’re like, “Whoa. You want 51 percent of my company? For how much?”

Loren Feldman:
I’m curious what Laura thinks. You have any thoughts?

Laura Zander:
No, I’m just excited to watch how this all plays out and to talk to Dana in two years and see what the experience was like. You have such a different model and experience than we do because you want to open other locations. So in my mind, you do need a lot of capital, right? And you need somebody who can help make that happen. I mean, that’s a totally different situation than we’re in. So, it’s exciting.

Dana White:
I’m a little nervous, because we’ve all heard the horror stories, and I’m just like Miss Cieley in The Color Purple. I’m just waiting to see what color the wall’s gonna turn next.

Loren Feldman:
You know, Dana, the other thing that’s interesting about it is, we’ve all read countless stories in recent years about how it’s almost impossible for women to get venture capital, that the percentage is tiny. It’s even harder, almost impossible, for minorities to get venture capital. And it’s really hard for non-tech companies to get venture capital. So you’ve got a trifecta here.

Dana White:
I know.

Loren Feldman:
How do you explain that?

Dana White:
I think it’s the VC firm and what they’re looking for. I don’t think they’re looking for tech companies. This is a company based in the Midwest. They’re heavily involved in the Midwest. They’re not in Silicon Valley or Silicon Alley. They’re looking for businesses like mine. They’re looking for minority women businesses to take on that aren’t in tech. You look at their portfolio, especially the list I have of about five to six potential VCs, and they seem like they would be a fit. They all have a business development component. They all come with a vast network, literally a phone call away, to help get you what you need to grow. They’re very invested in making sure you grow, not so much for the short return.

But again, they want to set you up to succeed so they can get bought out and you can move forward. So yeah, it’s kind of a weird trifecta, but I think COVID brought that on, too. I think COVID required VCs and all these other companies to look at what are viable companies differently. When thrown something like an international pandemic, some of the ones you thought were going to just skyrocket and take off didn’t. They closed. I think businesses or VCs or people are investing or looking at companies a little differently, based on the new information from the pandemic and what we’ve learned about the resilience of companies.

Loren Feldman:
We’re almost out of time. I’m not sure this question makes sense for you, Dana, but I’d like to ask Laura the question that I asked William, Jay, and Paul last week, which is about what this year has done to all of you, in some sense, and to your businesses. I’m curious, one: Do you think your business is worth more or less today than it was when this year began back in January? And I’d also like to ask you: If somebody were to come along and offer you twice what you think the business is worth, would you consider selling it now?

Laura Zander:
Great question. Do I think the business is worth more or less than it was?

Loren Feldman:
Yeah.

Laura Zander:
I don’t know. I guess it’s probably worth more. But a big part of that is because we bought a company that was about to go bankrupt.

Loren Feldman:
And turned it around.

Laura Zander:
Yeah, and we’ve turned it around. So our revenue has grown 50 percent, or 80 percent, or something this year, versus last year. But that’s because we bought another company. We’re not comparing apples to apples.

Loren Feldman:
If you hadn’t bought the company, Jimmy Beans Wool still would have had a pretty good year, right? People have been knitting.

Laura Zander:
Yes, we’re really lucky that we’re in an industry that has really benefited from people staying at home and needing something to do to reduce stress. So yeah, we’ve had a good year. Would I walk away if somebody offered twice what it’s worth today? Probably not, only because in the next three years, we’re going to be worth twice as much. This year is still a year of huge investment. We got a new facility that’s going to be custom-built. We’ve invested, we’ve tripled our inventory, and on the Texas side of things, we’ve invested in a new computer system, so it’s not worth as much as it might be.

Loren Feldman:
Was that a deliberate decision to triple inventory?

Laura Zander:
Yes. When we bought it, there was almost zero inventory.

Loren Feldman:
Oh, I see.

Laura Zander:
I mean, there was literally zero inventory, so we’ve had to go in and—

Loren Feldman:
So three times nothing.

Laura Zander:
I mean, there was some, but it wasn’t even the right inventory. That’s a great question. Like, who wouldn’t walk away? Or, if somebody offers you two times for your house, of course, you would move, wouldn’t you? Why wouldn’t you?

Loren Feldman:
Well, it depends on your situation. And you just gave us a good reason not to, because you think it’s going to be worth even more soon. And that’s kind of the answer that William gave us. Paul said the same thing you just said: “Why wouldn’t I do that?”

Laura Zander:
For me, it’s really fun. I enjoy it.

Loren Feldman:
And that’s what Jay said. Jay, is further along than any of you.

Laura Zander:
Yeah, he’s old. [Laughter]

Loren Feldman:
We’ll find out if he’s listening.

Laura Zander:
Yeah, exactly.

Loren Feldman:
But he likes going to work, and he doesn’t have any hobbies, and he doesn’t want to move to Florida. But if somebody offered him three times, I think he would really start thinking about it.

Dana White:
I’m eight years in. This month will be eight years for Paralee Boyd. My answer is absolutely not.

Loren Feldman:
Well, you’re at a point where exciting things are happening. It really wouldn’t make sense for you to walk away at this point.

Dana White:
I love the possibility of the vision way too much. Offer me four or five times. That means, you know it’ll probably do 10 times. If you’re offering me double, you probably know it’s double that. So, no. I want to see what the end of the story looks like, and I don’t necessarily need to be in the front seat, but I definitely want to be in the cockpit when I see what happens.

I think the value of my company has definitely increased this year, and I’m so surprised by it. Our numbers, it’s hard to say, because I closed a location. In our midtown location, yeah, numbers have gone up, because we don’t have the Southfield location, but we’re there. So we’ll see. But I think we’re much better situated now than we were last year.

Loren Feldman:
Last question: I hate to do this, but we are having this conversation at a time when COVID cases are just exploding across the country. I’m curious how concerned both of you are by that and what impact you think it might have on your businesses. Dana?

Dana White:
I’m very concerned, but we’ll do what we have to do to keep my staff and my customers safe. If we need to close down, we need to close down. I hope we have a plan in place. My product line will be here by Black Friday. So there’ll be things that people can buy online. We’re just trying to see: if we have to close down, we will keep the staff safe, but I just hope the government is prepared to help small businesses like they were before.

Loren Feldman:
Laura, you were going to open your one brick-and-mortar retail location last time we spoke. Did that actually happen?

Laura Zander:
It did. Yeah, it’s open. Just a little bit. I mean, we don’t have a ton of traffic. I think I think we’re just open on Saturday and Sundays, just for a little while. But am I concerned? I think I’m with Dana. Many of us have grown accustomed to this as the new normal and the new way of life, so whatever needs to happen is what needs to happen for the greater good, and we’ll just adapt on the back end. I’m not concerned because I know we can adapt because we’ve had practice.

Loren Feldman:
Dana White and Laura Zander, thank you as always.

Episode 39: Are You Ready to Sell Your Business?

This week, Paul Downs, Jay Goltz, and William Vanderbloemen assess the damage of a stressful year. We started with the impact the year has had on the value of their businesses. Then we discussed whether they would be ready to sell their businesses if a generous offer were to come along. That prospect, Jay tells us, would likely cause him to do some soul-searching, but he would consider it skeptically. It seems to be a well accepted fact, he says, that most people who sell their business end up regretting it. Plus: as we head into budget season, we find out whether the three owners are planning to give raises. And in this week’s Morning Report News Quiz, we learn what happened to Inspiration, Imagination, and Fantasy.

Guests:

Paul Downs is founder of Paul Downs Cabinetmakers.

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Paul Downs: “I don’t think the trouble has really arrived yet. I think it could easily get much, much worse. I just have no idea where we’re gonna be six months from now.”

Jay Goltz: “This seems to be a well- accepted fact, that people who sell their business—85, 90 percent of them—regret it after they sell it. I don’t think I would do it.”

William Vanderbloemen: “If I were looking to sell, it would have been better to sell in January or February than today. But ask me again in 12 months, and it’ll be better than ever.”

Full Episode Transcript:

Loren Feldman:
We all know this has been a turbulent year with the pandemic, the economic crisis, the election. It’s been a lot of stress on you and on your businesses. I’d like to start today by asking: What impact you think all of this has had on the value of your businesses? How do you think your business valuation today would compare with your valuation in, say, January? Paul, do you wanna take a crack at it?

Paul Downs:
I think you could look at it two ways, one being just a very straight EBITDA calculation based on the profitability of the company this year as opposed to last year, and assuming for small manufacturing, the value’s going to be about three times the earnings, then it went down by about a million bucks.

Then there’s the longer-term question, which is: Doing what I do, is the market for the product going to be the same as it would have been without COVID? And I think it just remains to be seen. It’s too complex a set of equations about whether we outlast our competitors, as opposed to whether the demand for the product shifts in some way. I couldn’t tell you, so I won’t answer longer-term.

Loren Feldman:
When we first started talking to you in June, you were concerned about whether people were going to keep buying conference tables. You seem a little bit more confident now. Is that right?

Paul Downs:
Well, we’ve had about a million bucks in sales since that conversation, so some people are buying conference tables.

Loren Feldman:
Good to hear.

Paul Downs:
The ones who are, they seem to be as enthusiastic about the concept of meeting as they ever were. Now I have more information, but I don’t feel like I have enough to make a solid prediction as to what will happen next.

Loren Feldman:
Jay, how about you? Do you think this year’s had an impact on the value of your business?

Jay Goltz:
If I had some metric to do it, I would say, yeah. Just judging with my bank situation at the moment, they look at retailers like we’ve got leprosy or something. It’s just remarkable, and my business has been fine. I’m actually doing just fine now, but if I was to go stick it on the market, I just think that people read all these stories about retail debt and all that stuff, and it’s probably had an effect on things.

I’m confident I could get three different appraisals, and they’d all be different, because this is what I’ve been dealing with since the day I started my business. My framing business is 20 times the size of the average frame shop in America. There is no metric for that. The furniture store [is] a little unique, in that I do a lot of web stuff. I don’t think there would be any way of coming up with a convincing number that somebody could prove, “Oh, yeah, this is what it’s worth in the market,” because I’m not sure it’s worth anything in the market. I’ve also concluded I could have a going-out-of-business sale for six months and probably raise as much money as I would selling it. It’s convoluted, and I don’t care.

Loren Feldman:
William, how about you? Do you think this year’s had an impact on the value of your business?

William Vanderbloemen:
Yes and no. I think if I’m an investor looking at us… well, first of all, I’m less inclined to sell the business than ever, because I think that we sort of won the battle of the first-est, if that’s a battle, if that makes sense. Within our little vertical of a faith-based industry, we were the first executive search firm, and we won the battle of the first-est. I think that the pandemic—I don’t wish business closure on anybody, but it’s happening to the few other people who try and do what we do. And now we’re gonna—I’m hoping and believing—survive the battle of the last-est.

When this is all over, however long that takes, we’ll be the only one standing in the middle of a market that’s going to have more churn than ever. There’s going to be a giant musical chairs game across every industry once this is over, but particularly in our vertical. If I were inclined to sell right now, I would think I’m an investor who can get something cheaper than I need to pay for it, but it’s going to turn into a really good investment within 12 months. But as the guy who owns it, that’s just not not my place. That probably didn’t answer your question. I would say the raw value of the thing—if I were looking to sell, it would have been better to sell in January or February than today. But ask me again in 12 months, and it’ll be better than ever.

Loren Feldman:
So as a way of assessing the impact this crazy year has had on each of you, if someone were to offer you twice what your business is worth, in cash, would you take it? How about you, Paul?

Paul Downs:
I think the answer is, for me, yeah. The reason would be that twice what my business is worth would be enough for me, at my age, which is 58, to sort of coast into retirement early. If I actually encountered someone who was willing to overpay for my business in cash, I think that’s sort of a miracle scenario, so I wouldn’t pass it up.

The flip side would be: Why wouldn’t you do that? And if the business wasn’t worth enough for me to comfortably walk away and try to find something new, then that would be a different answer. Or if I felt that the primary satisfaction of my life was coming to this particular business and these particular people every day, and being boss in my own little kingdom, and then the alternative to that is I sit alone in a room with my millions of dollars, then maybe I wouldn’t. But I’m pretty confident that I could find a way to be satisfied and to take my skills to some other situation and help a new group of people, so I probably would take that deal.

Loren Feldman:
Does that have anything to do with the stress of this past year?

Paul Downs:
No. I think the most surprising thing of 2020, to me, has been that, considering the arrival of disaster after disaster, I have not personally felt very stressed by it because it’s never reached a level that compares to other stressful moments in my business life. To put it very simply, I never came close to running out of cash. And that’s pretty much exactly my stress level: how much money I have in the bank.

Loren Feldman:
Jay, how about you? If somebody offered you twice what your business is worth…

Jay Goltz:
For me—and this all very much parallels what Paul just said on many levels—the first question is: Do I need the money? Would it change my life any? And the answer’s no. I wouldn’t have a nicer car. I wouldn’t have a nicer house. I wouldn’t travel more. It wouldn’t affect my life day-to-day, which gets to the second question of: Do I like going to work every day? Absolutely.

I have a few friends who are retired now, and when I go out to lunch or dinner with them, I want to poke pencils in my eyes when I hear about, “Oh, I went to the senior center.” And it’s like, “Oh, really, that’s great.” And then it usually rolls into their prostate. And I have no interest in hanging out with a bunch of guys playing cards or whatever—which I’m not criticizing. I have no interest in doing that. I like going to work every day.

The third thing is, I think my kids have interest in it… I think. I’m flushing that one out. I wouldn’t feel great about my employee situation. I’m not saying I wouldn’t do it for this reason. I would never criticize somebody for selling their business. But I’d be leaving my employees hanging, which I would rather not, if I could. And lastly, there could be a situation where you might have a business that you think, “Oh, I’m going to get swallowed up by Amazon or I can’t stay competitive.” I don’t feel that way at all. I still feel I can be competitive.

For all five of those reasons, I have absolutely no interest in selling out. Now, if someone came in and offered me some stupid number, like stupid number, like two, three times… With that, would I have to do some soul-searching? Yeah. I don’t know what I’d do, but boy, I’ve gone to seminars and stuff, and this seems to be a well-accepted fact, that people who sell their business—85, 90 percent of them—regret it after they sell it. I don’t think I would do it. But if somebody offered me a ton of money, that would be quite a dilemma. But that’s not going to happen, so I don’t lose any sleep over it.

Loren Feldman:
William, how about you?

William Vanderbloemen:
Probably not. First of all, you say “twice what it’s worth,” I mean, what’s it worth? You know, what is that number?

Loren Feldman:
Whatever you think it’s worth.

William Vanderbloemen:
Well, let’s make up giant numbers. For me, Loren, I’ve been a serial entrepreneur my whole life, all the way back to nine years old and being a paperboy who bought out the routes around me so I could redraw the districts. But there’s a part of me that says it would have to be the right buyer, too. It’s my name that’s attached to the thing, and the whole reason for doing this company is for a cause. That’s the primary driver, not a giant payday, so a lot of things would have to align.

But the flip side is, I’m 50, which I hope means I’ve got a lot of life left. I’m watching so many entrepreneurs fall prey to the idea of, “Hey, I caught lightning in a bottle once. I can do it again.” If the cause were right, and I believed in the people and I thought they could secure the work and take care of my staff, I would then also have to have a number that’s big enough that I’m not going to have to work again. Because I’m not going to fool myself into thinking I can just go start another thing, and it’ll be another great idea. I’ve seen too many people believe that and then end up, “Oh my gosh, what am I going to do for income for the rest of my life?”

Jay Goltz:
Twelve million dollars, William. Robert Half calls and says, “You know, we’re looking to expand. We already do this for a living—or some other firm that does what you do—and this is a great niche. We love what you’ve done. We treat our employees well. We want to give you $12 million.”

William Vanderbloemen:
No. That’s easy.

Jay Goltz:
Wow.

Paul Downs:
Twelve million. Really? I was thinking 2 million I’d be pretty happy.

Jay Goltz:
Wow. Okay.

Loren Feldman:
William, you said it would have to be enough money that you wouldn’t have to do anything else. If you didn’t have to do anything else, what would you do?

William Vanderbloemen:
Well, I’d probably start some kind of nonprofit work. I’d probably open some kind of coaching for the people I’ve placed over the last 12 years. I’m getting old enough now that I’ve made enough mistakes that I can tell people what not to do. A lot of the younger guys we’ve placed are looking for a higher level of executive coaching, and they trust me. I’d probably do something like that. I don’t know.

Jay Goltz:
What about start a podcast? Everybody wants to start a podcast. That seems to be the rage these days. Do you think about that?

William Vanderbloemen:
I’ve got a couple of those. I don’t know, Loren. It wouldn’t be sit still. I’d just want to know that my family—and that’s not just Adrienne and me. I’ve got seven kids. They’re gonna start having kids. I’m a believer that if you do really well, you should be able to help care for your children and their children. I want to be able to do that.

Jay Goltz:
And $12 million isn’t enough to do that?

William Vanderbloemen:
Well, it depends on what “care for” means. I give a lot of money away, Jay.

Jay Goltz:
Yeah. 50 million. 50 million. Fifty!

Loren Feldman:
It’s not an auction.

Jay Goltz:
Yes, it is. That’s kind of the point. It’s absolutely an auction. There is a number—

Loren Feldman:
Well, not right here.

William Vanderbloemen:
I’ll say this: What’s the line? “Not everything’s on sale, but everything’s for sale.” I mean, other than my wife and children, there is probably a number where it makes sense, and then I could go do great benevolent work and not charge anybody a nickel and have enough. Yeah, of course, there’s a number. And I know what that number is. My financial planner and I are pretty clear on it. But it’s probably not right now.

Loren Feldman:
Have any of you ever paid to have a valuation of your business?

Paul Downs:
I have.

Loren Feldman:
What prompted it? Why did you do it and how long ago was it?

Paul Downs:
It was two or three years ago. My business at the time had three stockholders: my father, my brother, and myself. I owned about half and then the other two split the other half. My father was reaching an age when he was starting to decline, and I was anticipating needing bank loans. I didn’t really want to have him involved in trying to negotiate lines of credit, or having to be a cosigner and doing any kind of paperwork, and so I bought his shares out. In order to do that, I needed to have some valuation of the business. As it happens, there’s a guy in my Vistage group whose business is producing small business valuations for SBA loans, and he had a whole process set up, and I was just like, “Well, I’ll pay you—” whatever it was, 600 bucks. And the process—

Jay Goltz:
Is that all it was: $600?

Paul Downs:
Yeah, because he’s got it very much down to a science. I was looking for a low number at that point, because I’m buying stock as opposed to selling. We put the numbers through his formulas, and it came up with a relatively low number, because the business wasn’t making any money. We’d lost a quarter million bucks in the preceding two years, so it wasn’t worth much.

Jay Goltz:
How did your brother feel about the whole thing?

Paul Downs:
Well, I will say that my father and my brother have been the ideal partners for the last 25 years, which is that they’re utterly unconcerned with how I run the business. If I feel like something is a good idea, they’re like, “Go for it,” mostly because neither of them have any reliance on my business to support themselves. And frankly, to them, the amounts of money are pretty much a drop in the bucket, so that’s easy. That’s not everybody’s situation, but that’s my situation.

Jay Goltz:
Just to be clear, from what I know, if you go hire an accounting firm or someone to do that, from what I understand, add a zero to that. I think an appraisal is like 5 or 10 grand. I don’t think $600 is the typical price.

Paul Downs:
Yeah, it may have been $900, but keeping in mind that this is a guy who does this for banks. It’s not automated, but it’s not intense discovery.

Loren Feldman:
I’ve read a lot of stories—I’ve probably edited a few stories—that suggest that business owners should periodically get a valuation, just the way you get a physical, that it’s a good idea to know what your business is worth, even if you have no intention of selling it, in part, because it may turn up some issues that you should deal with. It doesn’t sound like any of you necessarily have followed that advice. William, have you thought about it at all?

William Vanderbloemen:
I have a golf buddy who does this for a living. Back when we first looked at buying a couple of other search firms—and we did buy one—we went through the exercise and he just kind of said, “Hey, let me just do this for you.” I think Jay’s right on the cost, but we got the friends-and-family discount and didn’t have to deal with it.

But the valuation—Jay’s right. It is with EBITDA. Sometimes it’s top line, and maybe it’s top line times two. But I think in our industry, it’s EBITDA times a multiple. And what changes is: What is that multiple? I mean, there were some pretty crazy multiples right before the pandemic going on in the search world. You know, 7X, 8X, 9X, and that’s not there anymore, but it’s a very cyclical thing.

Jay Goltz:
I’ve been to enough seminars to know—and I’m ADD, I can barely sit through an hour long—I have to tell you, I went to one and I paid attention for the whole hour, because it was interesting. And one of the things that they all say is, “The bigger your business, the better the multiple.” You get to a $10 million, $15 million, $20 million business, your multiple on the EBITDA is going to be greater because there’s more potential there. There is a science to it.

William Vanderbloemen:
And Jay, what I understand—and again, I’m a recovering preacher. I have a religion and philosophy degree and a master of divinity, so what do I know, right? But I also hear it’s not just the size of the company, but it’s a couple things. One: How much is the company driven by the personalities that are there?

Jay Goltz:
Yeah.

William Vanderbloemen:
And two: How much is the revenue of the company driven by repeatable technology? Technology multiples go up into the 20s and 30s. I mean, it’s ridiculous. And then if it’s personality-driven—we’ve got to have these four partners here, or it doesn’t work—well, those valuations go way down fast.

Jay Goltz:
And then there’s also: Do you have two big customers that make up 50 percent of your business that all you have to do is lose the one customer and the thing goes in the toilet?

William Vanderbloemen:
Our biggest customer is a little less than 1 percent of our annual revenue.

Paul Downs:
I would guess that William’s business is actually quite well-poised for a good multiple, because not only do you have a diverse group of customers, but you also have that very strong plan for how to operate the business when you go—that succession plan. I think that people who are looking to buy a business are going to be looking for systems in place so that it will run without the founder.

William Vanderbloemen:
I will say, I have a pretty good friend who does quite a bit of merger and acquisition here in Houston. I talked to him about this a number of years ago, because he was encouraging me—I said, “I don’t want to sell. I don’t want to sell.” He said, “Well, you just need to be ready to sell.” I said, “What do you mean?” He said, “You’d be shocked. The overwhelming majority of companies that think they’re ready to sell don’t have their accounting and their books in order. Make sure you’re keeping”—and he showed me the standards—”keep your accounting and books in really good shape, because that’s where, if you ever get to where you have to sell because of health or you want to sell or something comes along, you’re gonna make yourself much more attractive by having your financials in very, very good shape.

Jay Goltz:
You know, that’s interesting, because let me tell you, from the front line here, I’ve been paying to get a review from my accounting firm. My 30-year-old kid has started to get a little involved with the finances, and he goes, “Dad, do you realize that you’re paying $25,000 for a review?” No, I didn’t realize that. So I looked into it, and I got the bank to back off of that. They don’t need it. So I say to my accountant—my accountant of 22 years—”Why am I paying $25,000 a year for a review?” “Well, it’s good if you want to sell your company.” “Well, I’m not selling my company.” It’s certainly good for him though: $25,000 a year.

Loren Feldman:
That was a review but not an evaluation?

Jay Goltz:
Right. Just the review. They’ve sent two guys to sit in the office for four days doing whatever, and they’ve never found anything. Keep in mind, part of this is, I have a CFO. He’s a CPA. They’ve never found anything that needed to be adjusted, but they don’t mind charging $25,000 a year extra, and you know what—

Loren Feldman:
What were they telling you in that review? Were they just telling you, “Everything’s okay”?

Jay Goltz:
Yeah, “Looks good. Looks good.” Great. Twenty-five thousand dollars. You do that for 10 years, you just bought yourself a condo wherever you want it. That’s a lot of money. So I guess part of my point is, it’s really good for the professionals who run around telling everyone, “Oh, it’s a good idea to do this. Oh, yeah, do this over here.” I have a phrase: “commerce over conscience.” Sometimes the quote-unquote professionals don’t mind selling you a couple of extra bells and whistles that maybe you just don’t need, so it’s food for thought.

Paul Downs:
But Jay. don’t you feel good that you bought your accountant a condo wherever he wants?

Jay Goltz:
That’s kind of the point. No, I really don’t. That’s kind of my point. When he takes me out to the country club once a year for their big event, and it’s all you can eat, and it’s like, I don’t need that nonsense. And let me tell you, the interesting part of this, for me at least, is having my kid come into the business to look at this. You know what? Good for him. He just saved me $25,000 a year, and he’s the one that goes, “Dad, do you really need to go to the country club?”

That whole old school thinking, and when I hear about golfing buddies—William, to your point—golfing buddies, country clubs, going to the basketball game, this whole world of the professionals taking you out and wining and dining you: What’s it costing you? I don’t really need to be friends with my accountant. I really don’t. I don’t need to be friends with my insurance guy. I want to get a good price. I want to be serviced properly. That whole world of getting wined and dined so that you no longer shop around for services is really good for them, frankly.

Paul Downs:
Well, I’m not a member of a country club.

Jay Goltz:
Not you, but is your accountant or your lawyer a member of a country club?

Paul Downs:
No, you’d like my accountant. She comes in and talks at me at about 350 words a minute for 20 minutes.

Jay Goltz:
Great. Is she a New Yorker?

Paul Downs:
Philadelphia. But it costs me 2,500 bucks a year. I have a bookkeeper who does the basic things, and it’s very no nonsense. I don’t think she’s a member of a country club either.

Loren Feldman:
Do you feel you have enough eyes on your finances, keeping track of where you stand?

Paul Downs:
I mean, I have both my eyes on my finances pretty much all hours of all days. I still sign every check, and I know where every penny is, and I project out payments and cash flow and all that. Yeah, I’m not worried about it.

Loren Feldman:
William, do you have a CFO?

William Vanderbloemen:
Ummm… no.

Loren Feldman:
[Laughter] You had to think about it for a second.

Jay Goltz:
What’s the title of your head accounting person, a controller?

William Vanderbloemen:
Director of finance.

Jay Goltz:
Okay, which begs the question: What’s the difference between a director of finance and a CFO? I don’t know. I mean, I have an accounting degree, but they don’t teach any of that stuff.

William Vanderbloemen:
I think the thing that I missed for a long time that we’ve gotten out, our titles aside, is the ability to forecast cash. And that’s not just a statement of cash or read the P&L, but we have a pretty lumpy business. We sell a rather large widget and we’re not selling a bajillion of anything that’s $10. How do you predict lumpiness? Software has helped a lot and our director of finance is outstanding.

Jay Goltz:
Does your director of finance have an accounting background?

William Vanderbloemen:
Yes.

Jay Goltz:
CPA?

William Vanderbloemen:
Yes.

Jay Goltz:
Okay, so—and that I’m not baiting you, I really don’t know this—in your mind, do you have a difference between a director of finance and a CFO? Because I don’t.

William Vanderbloemen:
This is just my perception, but my perception would be a CFO is over an actual finance department, which has many people in it, and we don’t have that. I’m learning Jay—I learned this the hard way—when we started the company—this is so funny—and they’re just four of us, we just start handing out titles like, “Well, I’ll be the CEO, and you be the COO, and you be the CFO.” You know, that sounds all fun. But then people, the business outgrows their ability, and you’ve got a problem. And the other thing that my COO has done a good job of bringing to pass at our company in the last two years, is: Don’t just hand out high titles. Give people a path of progression so they’ll stick around.

Jay Goltz:
Yeah, because when you do the COO and CEO and CFO, you end up with an uh-oh, and we’ve all had the uh-ohs.

William Vanderbloemen:
Well, it’s not just that, Jay, but if you’re a director, well, maybe one day, you could be EVP, and then maybe after that you could move to a C suite. There’s a path of career progression in front of our people, not just, “I get the biggest title,” because what’s the difference?

Jay Goltz:
So here’s the dilemma of the week: Inflation, cost-of-living increases now come out at about 1.4 percent, depending on who you look at. But nobody’s at two and no one’s at one. Let’s just say it’s 1.4. You’re doing a plan for next year. You’re trying to figure out your salaries. Are you giving all your salaried employees a one-and-a-half percent increase? Or are you thinking, “Oh, it’s been a brutal year. I think I’m gonna go 2 percent.” Or, “Oh, it’s been a brutal year, I think I’m gonna go 1 percent.” I mean, what are anyone’s thoughts on it?

Paul Downs:
Why are you assuming you’re giving anybody an increase at all?

Jay Goltz:
Because I believe you need to with cost of living.

Paul Downs:
I don’t do it that way. I try to give money when we have money, and the state of the business is independent of the cost-of-living increase that the government defines. How real is that, anyway?

Jay Goltz:
It’s probably fairly close, meaning if you paid someone 50 grand last year, they’re taking a one and a half percent hit this year, just by doing nothing, just because things cost a little bit more. I mean, things do go up with inflation.

Paul Downs:
Well, just out of curiosity, if you’re buying health insurance for your people, and it goes up 12 percent for you next year, what do you do with that?

Jay Goltz:
That’s an excellent point. That’s why this podcast is so valuable, because you’re a real-life business owner. That is an excellent point, which I’m dealing with, and as a result, I’m probably going to go to 2 percent, because I’m going to eat a little bit of it, but they’re going to eat a lot of it. And a lot of my employees are at the point [where] most of them aren’t rolling in dough. They’re making their 44 grand a year, and they’re gonna have a hard time paying their bills. So the health insurance thing is an issue. I’m gonna give them a little more raise, and I’m probably gonna raise my prices a little bit, because the health insurance thing’s out of control.

Paul Downs:
To me, a lot of times, we end up eating costs that prevent us from just handing out more cash to the employees. The critical thing is making sure they understand how the business spends money, what it spends money on, what we can control, what we can’t, and how that relates to their success. I spend a ton of time keeping everybody up to date on all of the spending we do, so when something like that happens, I could say, “Okay, well, that’s going to be another 25,000 bucks next year that we’ve got to cover somehow. I’m not sure we’re gonna get the sales, so what are we going to do about it?” And that puts the question of, “Oh, am I guaranteed a raise?” that is a partial answer to that. If we got nothing better to do with the money, sure, I’m happy to give it to people. But if we’re required to spend it on something that’s out of everybody’s control, then no, it’s just not there. You’re not guaranteed a raise. If you want to be guaranteed a raise, go work for Jay.

Loren Feldman:
William, have you thought about raises for next year?

William Vanderbloemen:
We’re in the middle of doing [our] budget right now.

Loren Feldman:
And?

Jay Goltz:
So what side of this are you on? My side? Or Paul’s side? Does everyone get a raise—at least a bare minimum cost-of-living raise?

William Vanderbloemen:
I don’t know what the cost of living in Houston looks like, because it is geo-specific. It’s not just any one spot. Arguably Houston’s a more palatable place to live than Chicagoland economically. You guys have had some issues that drive costs up—at least in the salaries that we’ve been doing for our comp studies. So I don’t know. I’ll see what my COO brings, and we’ll—

Jay Goltz:
But have you traditionally given a cost-of-living increase every year?

William Vanderbloemen:
When there’s a cost-of-living increase.

Jay Goltz:
So you’re thinking that’s a possibility that Houston did not have a cost of living increase?

William Vanderbloemen:
We haven’t had one in years. We went down last year.

Jay Goltz:
Wow. Wow. That’s shocking.

William Vanderbloemen:
We watch this stuff like hawks. One of our verticals is compensation studies. So we have real algorithms, real stuff that we use to determine that sort of thing. The cost of living in Houston just has not gone up. I don’t know what next year’s indicators are, and I’ll review it sometime in the next couple weeks, and we’ll make a decision. But yeah, if people are incurring more costs, just because life costs more, I try and help with that. But I kind of agree with both of you. If I don’t have the revenue, then I don’t have the revenue.

Jay Goltz:
Loren, what kind of cost-of-living increase are you giving yourself this year? [Laughter]

Paul Downs:
Welcome to the real world, Loren.

Jay Goltz:
Because I think I speak for all three of us when I say, we really think you deserve a raise.

Loren Feldman:
Yeah, I’m doubling my salary.

Jay Goltz:
Excellent. That’s what we want to hear.

Paul Downs:
You could triple it, probably.

Loren Feldman:
Yeah, I could.

Loren Feldman:
The main thing I wanted to assess today by asking these questions was, to what extent, if any, the three of you were feeling burned out, and happily, none of you are looking for the exit door. After the year we’ve had, that’s a happy thing.

Jay Goltz:
Well, you know, whatever doesn’t kill you will make you stronger. There is a certain amount of energy—at least for me, and I think I’m speaking for all three of us—you survive something like this, you feel good about it. Like, I look around at my people—we’re all in it together, and we’ve stuck together, and we’re getting the job done. The customers are happy. And like, I’m kind of emboldened.

Loren Feldman:
Does Jay speak for all of you?

Paul Downs:
No, I don’t think the trouble has really arrived yet. I think it could easily get much, much worse. As long as I’m not actually under duress, I don’t torture myself and pretend that I am. We’re just not, but we could be. I just have no idea where we’re gonna be six months from now.

Jay Goltz:
I’m still in delusion, so I’m going to stay there for the moment.

Paul Downs:
Yeah, you are.

Jay Goltz:
Ignorance is bliss, and I want to be blissed for a few moments.

Loren Feldman:
It’s worked so far this year.

Jay Goltz:
It has worked.

Loren Feldman:
You guys may think you’re off the hook, and I’m about to let you go. But I’ve got one more thing for you, which is, I’ve prepared a Morning Report News Quiz to see if you’re paying attention to what’s going on out there, outside your own businesses.

First question: This company kind of beat Amazon to e-commerce. Its website went up in 1996 when Amazon was just a bookstore. By 2000, it had $80 million in revenue. What was the company?

Paul Downs:
SkyMall?

Loren Feldman:
That’s right, Paul. Question number 2: A recent study found that the 99 cent pricing trick, where you try to make something seem cheaper by ending the price in 99 cents—it’s also known as “left digit bias,” which I’d never heard before—this study indicated that it works in one particular situation, but not in another. Anybody know what those two situations are?

Jay Goltz:
It doesn’t work when you’re golfing. You can’t scream three-ninety-nine. You still have to scream four. Am I right?

Loren Feldman:
No, you’re not. That’s good, though. Nobody?

Paul Downs:
I’m just trying to remember. I think it works when you’re shopping. It doesn’t work when you’re not shopping.

Loren Feldman:
Well, that’s sort of it. It works when you are looking at prices side by side. If you’re looking at a price independently, without comparison to any other similar products, it doesn’t have an impact.

Jay Goltz:
I would argue it’s a sophistication thing. When you look at Ralph Lauren’s pants, you expect them to be $90, not at $89.99. And when you go to Walmart for toothpaste, you expect it to be $2.97. I think it depends on whether you’re a discount-y kind of product.

Loren Feldman:
Question number 3: According to a recent study, if a restaurant can improve its Yelp review by one star, it will boost its revenue. But by what percent?

Jay Goltz:
Eighteen percent.

Loren Feldman:
Anybody else?

Paul Downs:
I don’t know.

William Vanderbloemen:
No idea.

Loren Feldman:
That’s aggressive, Jay. The right answer is between five and 9 percent, which is significant anyway.

Jay Goltz:
Well, let me tell you. I thought about it after I blurted it out. I was wrong. That’s because some people simply don’t look at Yelp. My guess is that it would help people who looked at Yelp a lot more, but the fact is, a lot of people just don’t look at Yelp. It’s not going to have any effect on them. That’s why my number is twice as high.

Loren Feldman:
Question number 4: This week we highlighted a story about finding a final resting place for Inspiration, Imagination, and Fantasy. What was the story referring to?

Jay Goltz:
Entrepreneurship?

Paul Downs:
I don’t know.

Loren Feldman:
William, you’re awful quiet. You haven’t been reading the Morning Report, have you?

William Vanderbloemen:
I read it. But I’m not recalling that.

Loren Feldman:
Inspiration, Imagination, and Fantasy are all Carnival Cruise ships, and they are being stripped down off the coast of Turkey to be sold for scraps.

William Vanderbloemen:
I was waiting on someone to mention the election somehow with that combination.

Paul Downs:
I thought we agreed to not talk about elections.

Loren Feldman:
Question number 5 is about the election, but not the presidential election. Lost perhaps in the Election Day confusion was one bit of news that should be of particular interest to business owners. One city managed to pass the nation’s first CEO tax.

William Vanderbloemen:
San Francisco.

Jay Goltz:
Yeah, I got that one.

Loren Feldman:
That’s the right answer—which will tax companies that pay their CEOs more than 100 times what their median employees are paid. The question was what city, and you got it. It’s San Francisco. Any thoughts on that one, guys?

Paul Downs:
Yeah, it’s also known as the Get the Hell Out of My Town Act.

Loren Feldman:
Once again, my thanks to Paul Downs, Jay Goltz, and William Vanderbloemen. Appreciate your time.

Episode 38: This Week, The Pandemic Hit Home

For Jay Goltz, William Vanderbloemen, and Laura Zander, concerns about the pandemic loomed large this week as one of them had to self-isolate in his basement after being exposed to the virus. That fact helped surface a number of interesting questions: Are the three owners being careful enough? What should they tell employees who choose to travel over the holidays? Should employees who travel get paid if local rules require them to quarantine after they return? And if traveling employees do have to quarantine, will these businesses have enough staffers available in December and January to function? And then there was the question Laura demanded of Jay after Jay explained how exactly he was exposed to the virus: “Wait, no,” she said, “You didn't answer my question. Were you wearing a mask?”

Guests:

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

Laura Zander is co-founder and CEO of Jimmy Beans Wool.

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Laura Zander: “Wait, no. You didn’t answer my question. Were you wearing a mask?”

Jay Goltz: “My wife and kids have paid a price for having a father who is an entrepreneur. They’ve had the benefits of it, but they’ve also paid a price.”

William Vanderbloemen: “The way a lot of my clients say this, Laura, is you work all day as if everything depends on you, and you go to bed knowing it’s all in His hands.”

Full Episode Transcript:

Loren Feldman:
Let’s get started. Laura, last time you were here, you were feeling a little discouraged because you’d found a great new building for your Fort Worth yarn maker. You got SBA approval for a loan, but you’d been through a bunch of banks and hadn’t been able to actually get that loan. Bring us up to date. How are things going?

Laura Zander:
Much better. I’m much more at ease and a lot less discouraged, even though I know I should never be discouraged, because entrepreneurs—according to Jay—don’t get discouraged.

Jay Goltz:
That’s not true.

Laura Zander:
It’s wrong of me to say that.

Jay Goltz:
Sometimes it’s worth getting discouraged. If you launch a new product and it’s not working, there’s a time to go, “It’s not working.” But not when it comes to dealing with banks when you should be able to get a loan.

Laura Zander:
I’m learning which emotions I should have and not have, thanks to this podcast. [Laughter] So what happened was we signed the lease about two days ago on a different place. Just to catch you up, I still had irons in the fire with a couple of different banks, and maybe they would have gone through, maybe they wouldn’t have. I wasn’t discouraged. I was thinking hopefully that it would work out. But the Phase II environmental report came back, and there was some serious contamination and the environmental company said they couldn’t tell us—it could cost $50,000 to fix it, it could cost $500,000 to fix it.

So we went back to the sellers. They didn’t have the money to fix it, so we tried to negotiate a deal with them where we would pay to fix it, but then whatever we paid would come off of the purchase price once we were able to buy it. We would move in, we would lease it, part of our lease money would go toward the purchase price, blah, blah, blah.

We just couldn’t come up with a deal that made sense to us from a risk standpoint. It still put us in a pretty bad spot if the contamination ended up being pretty bad. We looked at adjacent places to see if they had had contamination, and there’s a big company across the highway…

Jay Goltz:
Wait a minute. Just fill in the blanks here. The problem really is: how long have these people owned the property for?

Laura Zander:
Forty years.

Jay Goltz:
That’s the problem. Forty years ago, they weren’t paying attention to this stuff. Had they bought it five years ago, they would have already had to have gotten through this mess. When you buy a property that hasn’t changed hands in years, and there hasn’t been a bank involved, this can happen. I bought a building. There was a gas tank underground, but that’s pretty limited. They took the tank out, all done. But in this case, I think you’re right. This thing could have gone on… Who knows how extensive this is?

Laura Zander:
Yeah, I mean, it was heartbreaking, and I felt really bad for them. Like you said, they bought it 40 years ago, and the awareness wasn’t there.

Jay Goltz:
Maybe the contamination wasn’t there 40 years ago either.

Laura Zander:
Absolutely, one hundred percent. Anyway, so at the same time that we were trying to renegotiate with the sellers, I started to go look for other places and we found a spot that we really liked. Again, took the whole crew, took all the employees over there to see if they liked it. And it actually turned out that a couple of them had worked in this building before for the previous tenant.

But long story short: found this building. It’s a little bit bigger. It’s in a better location, actually. It’s in a safer location. It’s more central. It’s right down the street from TCU, so we’ve got some potential labor pool possibilities there. It’s also close enough to a lot of our employees’ homes that they could even ride their bikes. It’s right across from a school. It’s got good signage for the factory store that we open. The building itself is much bigger at 75,000 square feet, but we would lease 30,000 square feet. The owner was unbelievably generous, a super nice guy, gave us a really good deal…

Jay Goltz:
Because he’s really a nice guy, that’s why he did it—not because the market sucks, and he’s having a hard time renting it. He did it because he’s a nice guy.

Laura Zander:
Absolutely. That’s what I think, right? [Laughter] Well, so we got a good deal, and we got the added benefit of he seems like a really nice guy and really bent over backwards. He owns a bunch of different properties—so many different properties that he has his own construction crew, so they’re able to come in and do a lot of the upgrades that we need, or that we wanted. So that’s a huge stress off of our backs. They’re going to go in, and they drew up plans to create a kitchen for us—that’s an air-conditioned kitchen—which is something that this team has never had before.

I’ve mentioned before, when it’s 100 degrees out, in the kitchen when they’re dyeing yarn, it could be 120-130 degrees. We’ve had a lot of turnover from dyers as a result of that. So now all of a sudden, we’re going to be in a better location, we’re going to have 50 percent more square footage for less per month, and it’s custom-built. We’re gonna have plumbing to each of the sinks, and each of the stations.

Loren Feldman:
Wait, you didn’t used to have plumbing?

Laura Zander:
No.

William Vanderbloemen:
Oh, wow.

Jay Goltz:
And an outhouse?

Laura Zander:
Well, we had plumbing, but not custom, super efficiently created plumbing. Now the way that this will be built, it’s very custom-built for what we do.

Jay Goltz:
How long was this place for rent?

Laura Zander:
That’s a great question. Six months, nine months? I know they just rented the other two spaces. We told him that we really wanted to buy it, so we have something in the lease:, right of first refusal. He’s aware. If that ends up being in the cards for us, then potentially we could buy the building.

Loren Feldman:
I know you were excited about the possibility of buying previously. Are you disappointed that you’re not buying right now?

Laura Zander:
Contrary to what Jay thinks, I do believe that everything happens for a reason. [Laughter]

Jay Goltz:
I was just gonna say, you don’t know what I think. But you are right. I hate that.

Laura Zander:
I know you do.

Jay Goltz:
Things just fall in your lap, and it’s not about any decisions you make. Things just happen. Great.

Laura Zander:
I don’t think that’s true! I just think that if I work as hard as I can possibly work, and I push as hard as I can possibly push, that when one door closes, another door opens.

Loren Feldman:
I want to hear from William on this. This is his area.

William Vanderbloemen:
The way a lot of my clients say this, Laura, is you work all day as if everything depends on you, and you go to bed knowing it’s all in His hands.

Jay Goltz:
Okay, so the answer has nothing to do with the fact that while your other deal was going sideways, instead of sitting around hoping, you went out—because you’re smart—and you kept looking for other options. It couldn’t be because of that, that you were out there making things happen. It couldn’t be that.

Laura Zander:
No, I’m not saying that. I mean,we made this happen. We absolutely made it happen, and Loren asked if I was disappointed that we didn’t buy something. And am I disappointed? Yes. But am I attached to the fact that we wanted to buy something? No. I have to let that go because I did everything that I could to make that happen, and it didn’t happen.

Jay Goltz:
But it’s not just that. You found a situation that might in fact be better.

Laura Zander:
Exactly.

Jay Goltz:
So this was just a good business decision. This guy is going to put a lot of money in the place, custom to what you need. And in fact, this might be a better alternative than buying a building. It’s not about, “Things happen for a reason.” You went out, you found this guy. Good for you, and it works for all parties.

Now my question is, he did the right of first refusal. That’s not the same as being able to buy the building, because if he never puts it up for sale, you can’t. Is there anything there that says at a certain date you have an opportunity to buy the building?

Laura Zander:
Yes.

Jay Goltz:
Okay. Well, that’s different. That’s a good thing.

Laura Zander:
It is. But we may not be able to buy it by that date. We just may not, loan-wise and everything else. If we can’t buy it by that date, then at least we’re still in the mix, just a little bit.

Jay Goltz:
It sounds like you found a good situation for yourself. So to my point, this has nothing to do with what was meant to be. You worked hard. You went out, and while other people would have sat around waiting for that other deal to happen, you covered your bases, you went and checked out some other options, and you found a better option.

Laura Zander:
We did. We didn’t even really have to negotiate, but we asked for the per square foot rate to stay steady for the next five years, and then for it to only increase by 10 percent. So we have two five-year options after the first five years, and he went along with it all.

Jay Goltz:
Wow.

William Vanderbloemen:
Wow.

Laura Zander:
He is nice. And then I said a condition of the lease was that he go to lunch with me twice a year, because he’s a really accomplished businessman in the area. He just seems like a nice guy, so I would like to go to lunch with him.

William Vanderbloemen:
Laura, we’re on the flip side of this. As we’ve discussed in a previous episode, we have more space than we need because we had decided before the pandemic to decentralize our offices and to have regional offices open across the country. Our central office doesn’t need all the space we have, so we’d sublet that half of it out. And the other half, we’d said, over time, the subletter is just going to take it over because their company is going to grow.

Well, the pandemic hits, and that’s all kind of uncertain now. I’ve had unsolicited offers from, quote, really nice people who want to take the lease off my hands. Their offers aren’t even covering the utility bill. And it’s like, “Guys, it’s not that bad yet.” It’s definitely pandemic-driven bargaining that’s going on right now.

Jay Goltz:
The vultures are out flying around, looking for opportunities.

William Vanderbloemen:
Oh my gosh, yes. And some of them really are nice people, but they’re making offers, like, “Guys, no.”

Loren Feldman:
William, how are you doing otherwise? How’s business?

William Vanderbloemen:
Well, it’s all knock on wood, right? France and Germany just shut back down a couple days before we started this recording. It feels like we’re watching Groundhog Day. All I can talk about is what I know at this moment, and at this moment, August of this year outperformed last August. September didn’t quite, but it was close. October looks to be rounding out about the same as last year.

For three months, we’ve had some degree of return to the numbers from last year. Now, every year we’ve been in existence we’ve grown, so even that is a different scenario than I would have planned out. But boy, it’s a whole lot better than March, April, May. If we can hold serve for the rest of this calendar year, I’ll be very pleased. Who knows, right?

Laura Zander:
So most of your customers or clients, are they holding in-person services?

William Vanderbloemen:
I would say most of them are, somewhere in the 70th percentile.

Laura Zander:
Wow. Are they taking any responsibility at all for it not going away, by having all these in-person—are they all wearing masks?

William Vanderbloemen:
I don’t know that we have a single client that doesn’t have extreme precautionary measures in place. It may be that we’re not representative of churches in general. Churches who tend to hire us—and this is going to sound arrogant—but they tend to do things fairly professionally. I mean, they’re hiring an exec search firm and we’re a new idea.

Laura Zander:
Got it.

Jay Goltz:
There’s something to that, for sure.

William Vanderbloemen:
I think they just tend to do things right. Our largest gatherings that are happening are in places like Southern California, where it’s 72 and sunny and you can do it all outside, or you can have drive-up. They’re finding ways to do it. Nobody’s having huge crowds. I think the highest numbers I’m hearing are like 50 percent of this time last year’s attendance, and the more normal thing is 30 to 40 percent.

But the other reality, Laura, is most churches—Protestant churches in the U.S.—have been stagnant or in decline for 30 years. My mother’s church is a great church. They usually have 200. They’re not meeting yet. They’re in a hot spot. But their sanctuary could hold 400 easy, so whenever they go back, they could have a normal Sunday and only be at 50 percent capacity. It’s a little silver lining to the long slow decline in a whole lot of churches that’s been going on, but the spaces are big enough.

Laura Zander:
They’re socially distancing, just naturally.

William Vanderbloemen:
Yeah, and as you would guess, the big question mark is: what do we do with kids? And that’s the puzzle everybody’s trying to figure out. They’re going back and finances are good. Our client base has shifted quite a bit where very large churches hire us to do a whole lot of staffing for them. Then the other half of our work is normal-sized churches looking for a pastor. Now, normal-sized churches looking for a pastor is far and away the most prevalent thing we’re doing, and the larger churches are just kind of having to press pause until they’re meeting again.

I think we pivoted—although I’m exceedingly tired of that word—toward that reality fairly quickly. And then hopefully, when we’re on the other side of this, whether that’s this time next year or whenever, the people who have hit pause will come back. They’re not closing. We’ll have increased our ability to reach different kinds of organizations.

Jay Goltz:
Yeah, the question becomes: how many times can you pivot before you end up right back in the same place you started in? [Laughter]

Laura Zander:
That’s funny. Oh Jay, you’re so wise.

Loren Feldman:
Jay, how about you? You usually call into this podcast from your office. You’re in a different location today. Where are you?

Jay Goltz:
I’m in my underground bunker. I’m at home in my basement because someone that I work with tested positive, and I’m just being ultra… We’re following all the guidelines, so I’m at home, and the fact is, I don’t do that much there anyway. I can do it at home. And I just can’t emphasize enough that you can’t be too careful with this stuff.

Loren Feldman:
What was the situation? Tell us what happened.

Laura Zander:
Wait, you tested positive?

Jay Goltz:
An employee brought her son to work who’s 20, and—I’m kind of torturing myself that I should have told her, “Don’t bring him into work.” He wanted to talk to me about something, and we were in a room together, and we were across the room—definitely spaced away. And she tells me two days later he tested positive. I can’t emphasize enough, this is like, “Well, I wear my seatbelt usually.” Or, “Well, I only went out drinking one time.”

All of our lives, especially if you own a business, or even if you don’t own a business, all it takes is that one extra drink at a restaurant when you shouldn’t have drove, or that one time you didn’t wear a seatbelt, or maybe you put an extension cord on your heater at work and you shouldn’t have, and you forgot to turn it off and it burned your building down. It’s just extremely frustrating that—

Laura Zander:
Were you not wearing a mask?

Jay Goltz:
I was across the room from him. I mean—

Laura Zander:
Wait, no, you didn’t answer my question. Were you wearing a mask?

Jay Goltz:
No. I’m guilty as charged. I don’t know what to tell you. I’m guilty as charged. I’m guilty as charged. I wear the mask all the time, except this time, he was totally across the room, like 20 feet away.

Laura Zander:
Did you get tested?

Jay Goltz:
I’m getting tested. I feel fine. But the reality is—I’ve done some research—40 percent of the people who have it are asymptomatic. And I have to tell you, when you’re sitting at home, God help you if you’re watching 24-hour cable news all day long, I don’t know how you don’t just…

Loren Feldman:
I would recommend against that, Jay.

Jay Goltz:
Well, I was watching South Park episodes from 15 years ago.

Loren Feldman:
That sounds better. How about other employees? Did anybody else have contact with your employee’s son?

Jay Goltz:
Not really. He came in with her. I said this to my managers: “We’re going to have to suspend the Jay Goltz rule of 42 years that the customer [rule], ‘Do whatever you need to, they’re always right,’” because at this point… A customer wants to come in without a mask, we’re not letting it happen. And if the customer’s mad at us because we couldn’t deliver something—I have to expect there might be some service failures here, because someone’s taking off regularly these days because they found out their cousin who came over had it. At any given moment, there’s usually somebody who’s sitting at home, because we’re being careful, and I’ve had to just accept the fact that—

Laura Zander:
Are you paying them when they sit at home?

Jay Goltz:
Yeah. First of all, there’s the government thing where they reimburse, but in one case, he already took that—

Laura Zander:
Oh, really?

Jay Goltz:
Yes, yes.

Laura Zander:
Oh, I need to do that.

Loren Feldman:
Is that a federal thing or a state thing?

Jay Goltz:
I think it’s federal. You can take it out of the payroll tax or something.

Laura Zander:
Oh, that’s right. I forgot about that. Yeah, because we’re always down two, three people because of somebody’s husband, somebody’s kids.

Jay Goltz:
Right, and it tries your soul.

Loren Feldman:
Jay, didn’t you have an employee who went to a motorcycle—

Laura Zander:
Nooooooo.

Jay Goltz:
Yeah, well, here’s the story. He’s going on a motorcycle thing, my oldest guy. And I go, “Do you really need to?” “Oh, we’re gonna be wearing masks and blah, blah, blah.” I said, “Okay, but you’re gonna quarantine.” So he goes on it. He quarantines. He comes back. He tells me this week that his 32-year-old friend that went on it with him died. Left two kids and got it and died from it.

Laura Zander:
Wow.

Jay Goltz:
So talk about, “Oops.” And like, I understand that people get it, but for anybody to suggest that—it’s certainly not most people who die from it. It’s a small percentage, but any percentage is too much.

Laura Zander:
It happens.

Jay Goltz:
It happens. So he’s sick to his stomach now, and you know, it’s just difficult. Here’s the new thing in Chicago. Anyone that goes to Wisconsin, Indiana, all these states, you’ve got to quarantine. Well, this isn’t perfect, because if somebody went to visit their father who’s living by himself in an apartment and only went to see him in Wisconsin, they’re supposed to quarantine. But then somebody who went to their friend’s house with eight college friends, they don’t have to. This is clearly not a perfect thing or even close to perfect. It’s clearly a shotgun approach of trying to stop this stuff.

But all I’ve decided—and believe me, I’ve had long conversations with my key managers—we’re clinging on to, “We’re going to follow the city of Chicago rules, as imperfect as they are. We’re gonna follow the rules.” And that’s all we can do. And yes, somebody could argue, “Well, I just went to Wisconsin.” I got it, but the second you start making adjustments for it…

Loren Feldman:
Jay, are you concerned about that with the holidays coming up?

Jay Goltz:
Absolutely.

Loren Feldman:
Are you gonna have to keep track of who goes home or wherever?

Jay Goltz:
Yeah, this was the whole conversation with my managers. They are going to want to go home for holidays. I can’t tell people, “You can’t go home for the holidays.” And we’re just gonna have to say, “You’re gonna have to take two weeks off during my busiest month of the year,” which is why I say I’ve accepted that fact. If someone goes home for the holidays and they self-report, which is what we asked them to do, I’m going to have one screwed up December with not having enough employees there.

If there’s ever a moment in time—maybe this is the first moment in 42 years of being in business that truly highlights the difference between being the owner and the employee. As the owner, you’d like to go, “Really? Could you not look out for the business some? It’s our busiest month, and we really need the business. And can you not?” You know what? I don’t feel comfortable doing that. And at the end of the day, those who want to go home and they’re going to get quarantined for two weeks, what am I going to do? They’re not slaves.

Laura Zander:
You’re gonna pay them for the quarantine time?

Jay Goltz:
Well, they’ve got the federal rule. They’re going to get it. Yeah, this is the reality, and I’m not going to be cynical and go, “Oh well, gee, what do they have to lose?”

Laura Zander:
Don’t go.

Jay Goltz:
I got it, but they can go home for the holiday, and then they get two weeks off that they get paid. Not a bad deal. Now, I’m not suggesting they’re going to do it for that reason, because I really do have good, honorable employees—trustworthy, whatever you want to call it—but do I think that they’re going to put the business first over going to see their family?

Laura Zander:
Do they have work that they can do from home?

Jay Goltz:
No. The ones who are working from home… I haven’t seen my controller for four months, literally. I mean, the people who can work from home are already working from home. But I’m a retailer. Someone comes into my business, and they actually expect someone to walk up and say—with a mask, and everyone’s wearing a mask—“Can I help you?” It’s the first time in all these years I’m just kind of helpless. Like, I’m gonna do everything I can, but I am going to have some service failures in December. And then to add insult to injury, now someone can go on Yelp and go, “Oh, that place. No one came and greeted me at the door.”

Loren Feldman:
William, you’re not a retailer, obviously. Maybe the stakes aren’t as high, but are you at all concerned about employees traveling over the holidays?

William Vanderbloemen:
You know, we haven’t given it a whole lot of thought, and we probably should. In a normal year, January is when we get slammed because church staffs are under this crazy impression that when the new budget year arrives, they have “new money,” whatever that means. It’s fine, because they start hiring people. So January is usually a very busy month for us, and if we had to send everybody home, it wouldn’t cripple us, but it wouldn’t be great. I think the agility our team showed during March, April, May, has reassured me that if we had to go virtual for a period of time, it wouldn’t cripple our business.

Loren Feldman:
Laura, are you concerned?

Laura Zander:
I’m with William, in that I actually haven’t given it a ton of thought, because I’ve had so much other stuff going on. But now that you mentioned it… Wow, thanks a lot.

Jay Goltz:
That’s what Loren does. He finds the stuff that we weren’t thinking about.

Laura Zander:
Can I worry about it next week? [Laughter]

Jay Goltz:
I’m giving you permission to take a vacation from worrying about that until next Thursday. Let’s say next Thursday.

Loren Feldman:
Permission granted, Laura, but you mentioned that you’ve had two or three people out at a time already, so this is already on your radar.

Laura Zander:
In Texas.

Loren Feldman:
Oh, just in Texas.

Laura Zander:
Just in Texas, yeah. So in Nevada—actually, in Reno—we’re going to open our retail store for the first time now, I think on Saturday, next week. We’ve had our retail store closed the whole time. We haven’t had anybody out. In terms of people going home, everybody is from here, so there’s nowhere to go. That’s not a big deal.

Jay Goltz:
Every single person who works for you is from there.

Laura Zander:
Pretty much. Probably 95 percent?

Jay Goltz:
Wait, wait, wait, that doesn’t change anything. Think about it. It’s not about traveling. It’s just that they’re going to the relatives’ house with 12 other people. It’s not about being from Reno. It’s a matter of, they’re going to Thanksgiving dinner with 12 people.

Laura Zander:
We have two very different cultural groups. In Reno, 98 percent of the staff is so freaked out by this that they don’t even pick up food. Like, they don’t go out to eat.

Jay Goltz:
Wow.

Laura Zander:
Yeah, they’re mostly millennials, and they’re very, very hyper-conscious. There’s no partying, and there’s no group things. Most of them are friends. Most of them came to work as friends already, so they’ve kind of created this little pod.

Loren Feldman:
And in Texas?

Laura Zander:
In Texas, it’s very different. Granted now, a lot of the employees are related, so they do all intermingle all the time, both personally and professionally. As far as going home, I think probably a number of them are going to go back to Mexico, where they have extended family. That’s something we’re going to have to address.

To be honest, I hadn’t even thought about—I’ve been so focused on us moving into a new building and us being so far behind. Sales in Texas have just gone through the roof. The demand has gone through the roof. I mean, we’re booked up through the end of January already, and so we’re over capacity. And we’ve, like I said, we’ve had two or three people—

Loren Feldman:
Laura, that’s great. Why is that? What changed?

Laura Zander:
Well, knitting is popular.

Jay Goltz:
Not just that. People are home with nothing to do.

Loren Feldman:
But that’s been true for a long time. It sounds like this is more recent. Did you do more marketing, or …

Laura Zander:
I’m hoping we’re just doing a better job. Today is our one-year anniversary. So we bought this business exactly one year ago.

Loren Feldman:
Wow. Congratulations.

Jay Goltz:
How about this theory: how many times do you come to work in your office and find someone knitting at their desk? I’d say never, right? Now they’re working from home. And some people—I know, this is a crazy thought—but there are actually some people that are working from home that are taking some knitting breaks, and they’re knitting some stuff.

Loren Feldman:
And some people are watching South Park, Jay.

Jay Goltz:
And some people are watching South Park, yes.

Laura Zander:
Yeah, and you knit during meetings. I mean, we happen to knit during meetings in person, because that’s our business. But now people are probably doing it when they’re on Zoom. We also have a full-time sales rep now, and he’s probably brought in 50 percent of our business. I mean, it’s been unbelievable. Now we have a couple of other new employees, one who lives in Denver, another blah, blah, blah. Our team is just really coming together.

Jay Goltz:
Does that guy actually come into your office?

Laura Zander:
Yeah, we actually all went to Texas last week.

Jay Goltz:
So this guy has been all around the country and then he brings with whatever and you actually sat in a room with him with masks on.

Laura Zander:
Yeah.

Jay Goltz:
Wow.

Laura Zander:
Then we had one girl come in from New York City. We had somebody come in from Denver. Nobody’s hugging, nobody’s high-fiving, nobody’s sitting next to each other. Everybody’s got masks on. We’ve got the hand-sanitizer all over the place. You know, we’re just trying to do our best.

Loren Feldman:
You know, we just hit an all-time high for cases yesterday.

Laura Zander:
Yeah.

Jay Goltz:
And there’s plenty of testing that’s not going on, so as much as it’s hit a high mark, like I said, there are tons of people out there who are walking around with it and don’t even know it.

Laura Zander:
I would say our experience though, from the testing standpoint, our employees are getting tested all the time. And it’s now it’s gotten down to like a two-hour turnaround.

Loren Feldman:
Are you paying for that? Is that something that you initiated?

Laura Zander:
We are not explicitly paying for it. But we’ve always offered to people that we will pay for it if they can’t. But if somebody in their family gets it, then they have to get tested before they can come back to work. We had one woman who got tested, had it, got tested seven days later, had it still, got tested another seven days, still had it. Another three days later got tested and had it. But in Fort Worth, it’s really nice because they give you your results within two or three days—I mean, two or three hours.

Jay Goltz:
See, I’ve been told those tests aren’t that accurate, the two-hour ones. That seems to be a well-accepted fact that those tests are not as accurate.

Laura Zander:
But anytime anybody sneezes, they’re going out and they’re getting tested. I’ve actually been impressed at how much people are going out and getting tested.

Jay Goltz:
All we can do is do the best we can. And it’s taken the word frustration to a whole new level.

Loren Feldman:
Jay, I don’t mean to depress you too much, but I called you over the weekend and you were already in your basement at that point. And I interrupted you—you were working on your list of things people should do should you not be available to run the business.

Jay Goltz:
Yeah, I don’t mind talking about that. I have to tell you, I recognized that if I dropped dead, it would be a very, very messy situation. I’ve got a lot of things in the air. And I typed out—I already had it typed up, but I went and updated it—as to what some thoughts are as to how to do things, what to do with money, what to do with the business, what to do with the real estate, and—

William Vanderbloemen:
I’m so proud of you, Jay. We talked about this in a previous episode. Yes, everyone needs an emergency succession plan. Even if it’s just for 14 days of me being in bed.

Jay Goltz:
It’s not just succession. It’s a lot of other stuff. I’ll be specific: do not use the phrase, “Dad wouldn’t have wanted us to do that.” I don’t want anybody to be walking around with this guilt thing of, “Oh my God, Dad’s turning in his grave.” I don’t want anybody to have that responsibility, because here’s my perspective. My wife and kids have paid a price for having a father who is an entrepreneur. They’ve had the benefits of it, but they’ve also paid a price. And I’ve paid a price. There are times like now that being a business owner is very difficult and we have responsibilities that most people do not have.

I do not want to carry it on to the next generation. I don’t want my kids to have to have this thing hung around their neck. “Well, they never really wanted the business, but you know, Dad died, and I had to take it over.” And they end up not doing what they want to do.

Loren Feldman:
Laura, have you thought about what would happen to your business if you were incapacitated for a time?

Laura Zander:
No, because I don’t think I contribute that much. I’m like, “I don’t know. It’ll be fine.”

Loren Feldman:
You don’t contribute that much…

Laura Zander:
I don’t! What do I do?

Loren Feldman:
That’s why you’re in Texas every two weeks.

Laura Zander:
Well, yeah, I’m just eating barbecue and watching TV. No, but that’s a great point. That’s a really, really great point.

William Vanderbloemen:
I would add, since everybody’s sitting around reading, one of the very best books I’ve read about succession is called Dirty Little Secrets of Family Business. It is invaluable if you own your business and if you have family—those two things—then you need to get a copy of that. I get no kickback for saying that. It’s just a phenomenal little book that’ll get you asking the right questions.

Jay Goltz:
I mean, that’s the question. Is that the legacy of family businesses, that when the owner finally dies—this guy who started it or the woman who started it—is that what the legacy has to be, that things have to get messed up? Because I’vegotta tell you, it frequently does.

William Vanderbloemen:
Yeah, there are very few that go past second gen.

Jay Goltz:
Thirty percent.

William Vanderbloemen:
Third gen’s a mess. Third gen is usually the train wreck, and then if you can make it past that, you’re in very rare air. I mean, I think Smucker’s is on their fifth gen. I think Nordstrom is on their fifth gen. I don’t know any large companies that still have families running the business—maybe not owning the whole thing—that are to fifth gen.

Jay Goltz:
Just getting to the second generation, only 30 percent do.

William Vanderbloemen:
That’s right.

Jay Goltz:
The next generation’s another 30 percent, which means that only 9 percent get to a third generation. And I’m saying, “Okay, then the business doesn’t get past you.” Maybe that’s okay. Maybe that’s okay.

William Vanderbloemen:
Yeah, maybe so.

Jay Goltz:
Don’t mess your family up for some quote-unquote legacy that you’ve got in your head. Anyway, I already had it written out, but I updated it. In my case, there’s no perfect thing here. I’m working on it. I’m always working on it. But it’s not easy.

Loren Feldman:
We’re running short on time. I want to acknowledge something, which is that this episode is going to be published on election day. We avoid talking about politics on this show, and I want to keep it that way. But I’m curious, have any of you been planning anything different? Have you been holding off on anything to wait and see what the outcome is? Or is it just another day for your business?

Laura Zander:
For us, it’s just going to be another day. We may, privately as a group, celebrate one way or the other, or mourn, but that’s it.

Jay Goltz:
I’m just putting that in the category of: whatever. Nothing I can do to control it.

Laura Zander:
And that’s where we’re at.

Loren Feldman:
And no plans that you feel you need to make or decisions you need to make?

Laura Zander:
No, I mean, it’ll be nice if the tariffs go away, but that’s whatever. I can’t control it.

William Vanderbloemen:
For us, the election, I’ve got red churches, blue churches, purple churches, rainbow churches, every kind of church. The who-gets-elected, to me, is not nearly as important to our business as that somebody gets elected. The angst that—if you’ve seen the movie, The Perfect Storm, it’s when three different storms came together, and you know, it was the end of George Clooney—that’s kind of the recipe that a lot of people who are leading Christian schools and churches are facing right now.

They’ve got a pandemic that we really don’t know what we’re doing with, and you can criticize responses, but unless you were alive 102 years ago, you don’t really have anything to base your response on. So, whatever. You’ve got civil unrest that’s rooted in a whole lot of racial tension, and then you’ve got this election that, frankly, polarizes the two dogs in my house. They have different opinions. The pressure that all three of those at the same time is creating is leading it—probably seven out of 10 of the pastors I interact with are about six inches away from quitting. I think getting one of those three pressure points off will be an enormous help.

Jay Goltz:
I am 100 percent with you on everything you just said, including, you used the word that is a new word in our vocabulary that my doctor used with me: “angst.” That’s the new word. I suffer from angst. And I agree 100 percent with what you’re saying. We just need to get this election done. That’ll be one little thing off of us at least, or one big thing.

Laura Zander:
Yup, some certainty.

Loren Feldman:
For a lot of people, I think the biggest concern is that the election could drag on. Or at least, determining the winner could drag on for weeks or even more.

Jay Goltz:
There you go, Loren. As usual, you’ve outdone yourself. You’ve brought that one last piece in that we should be worried about. Thank you!

Loren Feldman:
My thanks to Jay Goltz, William Vanderbloemen, and Laura Zander. As always, guys, thanks for sharing.

Episode 37: What Would You Do With $200,000 Right Now?

And so, yes, Dana White was in fact the big winner at last week’s Detroit Demo Day, taking home the top prize of $200,000 for her hair salon business, Paralee Boyd, which specializes in serving women with thick and curly hair and which has an unusual walk-in-only business model. Of course, Dana now has some decisions to make: Does she want to take the money in the form of a zero-interest loan? Or does she want to take it in the form of a convertible note, which can convert to an equity stake in her company? And perhaps, more importantly, how exactly is she going to spend the money? As she tells Paul Downs and Jay Goltz in this conversation, she’s thinking about spending it on marketing, on opening another location, or on creating retail products for sale online or in her salons. What do you think Dana should do? Please email your thoughts to [email protected], and we’ll share them on the podcast and in the Morning Report.

Guests:

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

Paul Downs is founder of Paul Downs Cabinetmakers.

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Dana White: “Unfortunately, several salons in the area have closed. So if I want to open up, or reopen my Southfield location, I have options to choose from that I don’t have to build out from the studs.”

Paul Downs: “Given the uncertainty of the time and the fact that you were making a major business and operational move anyway, have you considered accepting the check and doing nothing for six months?”

Paul Downs: “I think it’s always tempting to think about what new shiny thing I could be doing, but there’s often huge value in just getting better at what you’re doing now.”

Full Episode Transcript:

Loren Feldman:
I was really hoping one of you would have some big news to talk about this week, because I didn’t really plan anything else. Unfortunately, I guess nothing really happened. Jay, did you have any big news this week?

Jay Goltz:
Um, my cholesterol is looking good. I heard from the doctor.

Loren Feldman:
Well, that’s good. Paul, anything big happen to you this week?

Paul Downs:
Yeah, I ordered a new pair of socks.

Loren Feldman:
Wow.

Jay Goltz:
Wow.

Paul Downs:
Yeah.

Jay Goltz:
One or more than one?

Paul Downs:
No, you order them two at a time Jay.

Jay Goltz:
Oh, all right.

Loren Feldman:
Dana, I don’t suppose anything big happened to you this week?

Dana White:
Well, no, not much. I just won $200,000 and I’m deciding on what I’m going to do with that.

Loren Feldman:
Congratulations, Dana. That is big news. Of course, you knew it. You couldn’t tell us, although we could kind of hear it in your voice, I think.

Dana White:
Okay, I tried. I used all the appropriate adjectives and adverbs and tenses, so I tried.

Loren Feldman:
I watched your pitch. I suspect we all did. The pitch was fun and interesting—a little Shark Tank-like. What was it like for you doing that?

Dana White:
I was a nervous wreck. I could tell I was nervous. People who watched it have said, “Oh, I couldn’t tell you were nervous at all.” I was a mess. My knees were shaking and they did a very good job editing it because my clicker decided not to do anything. They edited one of the production assistant’s crawling on the floor behind the table to fix it.

Loren Feldman:
Is this something you prepared specifically for this? Or have you been using this basic pitch for some time?

Dana White:
No, I did prepare it specifically for this because other pitches I’ve done have been three to five minutes. This one was 90 seconds, so I worked with—

Loren Feldman:
That’s a lot of money for 90 seconds.

Dana White:
I know. Pressure! Pressure! Well, here’s the thing. Normally, you’re given six weeks to prepare for this. We were given two. We worked with the Quicken Loans team and their help with coaches and their pitching. I had done pitching before, once or twice before, but nothing to this scale.

I’m a note taker, and I have notebooks. I went into my old pitch notebooks, brought out my old pitch video, and just tried to pull from that to cover. And then based on the suggestions of the coaches, I was able to put something together in a couple of days.

Loren Feldman:
And why do you think you won?

Dana White:
I’ll be honest with you. After I pitched, knowing how I delivered the pitch versus how I practiced, I didn’t think I’d won. I genuinely didn’t think I’d won, because I knew how I’d practiced versus how I pitched. I think I won because I answered their questions very well. I spoke about how I was going to use the money. I think I had a validated business model with numbers behind it. I think my presentation, how I presented myself—I heard from the time I walked in. I said, “Boss!” People have said, “You looked like you were the head of a multimillion dollar company already.” So I said, “Oh, great!”

You know, you interview at Target, you wear a red shirt and khakis. I guess if you pitch for Demo Day, you wear a black dress and heels. I don’t know. But I think that’s why I won, and I was pleased to hear what the judges said after I had pitched. That was really shocking, because I had walked away, so I didn’t know.

Loren Feldman:
Did you just find that out when they posted the video?

Dana White:
What they said after? Yes. It was a huge space. I was all the way at the other end getting my mic taken off, collapsing.

Jay Goltz:
So this isn’t like “Dancing with the Stars” where they have all the judges tell you what they think and they hold up numbers and tell you how you did?

Dana White:
Not at all. You don’t know what they think until they walk you in the next day. The next day is when they told us. We had to do everything—physically, we had to look exactly the same as the day before—and they walk us in, and they put me right up front of all the people standing there. They had like three in back and two in front, and I was like, “No, please don’t put me up front. I really don’t think I have it and I don’t want the camera on me when they don’t say my name.” So that was what I was thinking. [Laughter]

Loren Feldman:
And when was this, Dana?

Dana White:
This was September 15th and 16th.

Loren Feldman:
So you’ve known this all this time?

Paul Downs:
Six weeks!

Dana White:
Yeah. If anybody ever wondered if Dana could keep a secret, she can.

Loren Feldman:
So it went public on Tuesday. What was Tuesday like for you?

Dana White:
Man, oh my goodness. Press, calls, emails, text messages. I was bombarded. I had my work planned out for me for the day. Yeah, right! “Dana, we need you down at your salon. Channel Four news is on its way. They’ll be there in an hour.” “Okay.” It was a lot of that. I’m still fielding calls from well-wishers for lunches and dinners and catch ups.

Jay Goltz:
Did anybody try to sell you anything?

Dana White:
Oh, of course. My LinkedIn is full of, “Dana, you know what I think you need? Do you know what I think you need, Dana?” “Okay, I had never thought of that!”

Jay Goltz:
I actually thought of getting off of LinkedIn, frankly, because I get these calls, or I get the emails every day. I think it’s all from LinkedIn. And like, I don’t know if it’s doing me any good. I’m not looking for a job. It does seem to be the source of all sales calls.

Dana White:
Well, it’s doing good for me. I noticed a spike in VCs.

Jay Goltz:
Yeah, for you, sure.

Dana White:
A spike in VCs, so that’s interesting. That was one of the things that has percolated up is this interest now. The money from Dan Gilbert, i.e. Quicken Loans, as I’ve said, is a huge validator. There are people who were like, “Okay, if you can secure $200,000 in capital, let’s see. Let’s talk about it.” I actually have someone coming into town November 4th, to, as she said, “sit down and let’s talk business.” And I can’t wait. I cannot wait to speak with her.

Loren Feldman:
All right, we’re going to talk some more about that. But first, you told us last week that, because of your new hire, your new operations manager who was helping you staff up, you were planning to actually close your salon. Did you go ahead and do that? Is your salon closed?

Dana White:
It’s closed right now.

Loren Feldman:
So it was closed when you won and got all this press as well.

Dana White:
Yep, we were there with an empty salon. The phones were ringing, but we were prepared for that. My customers want me to be walk-in only seven days a week. They are struggling with appointments. And so November 2nd, we’re going to reopen walk-in only, seven days a week, fully staffed. My operations manager and my new manager both—with a combined over 25 years experience in managing hair salons—have been recruiting. That’s their strong point: recruiting and revenue, driving sales for revenue. So right now, they’re just pedal-to-the-metal recruiting, and we are doing interviews October 30th.

Jay Goltz:
Can you explain—because that’s interesting to me that people don’t want to make appointments, which seems like it’s easier to me—why do you think people are struggling with making appointments and need it to be walk-in? I mean, why does someone wake up at three and go, “I gotta get my hair done right now,” versus the next day? Do you have any explanation for that?

Dana White:
Sure. One of the reasons is, I think it’s their schedules and their management of their time, and things happen. I think, with women, things happen. You get the call from school. You get the call from your husband. “What’s for dinner?” I think as women, we carry a lot—not saying men don’t—just saying that they need something that could be catered to them when they need it.

I had a lady who said, “Appointments just never work for me: dentist appointments, doctor’s appointments. The shifting I have to do in my life to get to a doctor’s appointment and keep it when so many things come up…” A crisis at work comes up, and now we’re on a call for two hours, and I’ve got to be on this call. I can’t get off the call and say, “Hey, I’ve got to go to a hair appointment.” The second reason is, our history with hair appointments for my market has been a drain on time. And the fact that you have a place now you can go to that isn’t a drain on your time.

Loren Feldman:
A drain on time in what sense?

Dana White:
Meaning traditionally, for my market—African-American women—it’s been: make your appointment two weeks out, get there at nine o’clock, and be there ‘til three o’clock, be there ‘til noon. And we don’t have that kind of time anymore. We have kids who have to get to soccer. We have book clubs. We have work we have to do. We have a conference call we have to be on.

When you look in the mirror and say, “What do I need right now?” You don’t want to say, “I need to make a hair appointment for two weeks from now.” You want to be able to look in the mirror and say, “I want to go get my hair done. Where can I go right now?”

Jay Goltz:
You’ve got to remember, all the customers that you’ve had for years came there because there were no appointments, so that you can’t draw too much of a conclusion that the entire market’s like that. Maybe there are people who like appointments. They just haven’t been going to you because you didn’t take appointments. So I’m not sure you can conclude that, obviously, everybody doesn’t like this model. It’s just interesting to feel out whether there could still be room for people who want to make appointments, is my point.

Paul Downs:
Could I make one other point? I’ve never made an appointment to go see a barber in my life. I just walk in, and there may be some people sitting there, or not. I don’t think that Dana’s model is all that unusual. It’s just not, I guess, what women are used to.

Jay Goltz:
No, no, I’m not saying it’s unusual. I’m just saying you’re a perfect example. I’ve never gone into a place without an appointment. So the point is, there are both types of people out there. Some people want to make an appointment, and some people don’t. I think it’d be worth keeping an option open for people who do want to make an appointment, because you’ve got a qualified customer base. The people who wanted to make appointments aren’t coming to you because you don’t take appointments. I think I’d leave that option open as you expand your customer base.

Dana White:
The people who want to come to us because they want an appointment have told me, “I haven’t quite grasped the concept of not having an appointment.” They have said that to me. I’m assuming that it’s an appointment, it’s my time, and I’m the only one there. And she said, “But I realize, even when I make an appointment, I walk into my stylist, and I’m not the only one there and I’m still waiting.” So it’s a transition. It’s a paradigm shift for them.

We are going to take appointments when we start opening in the Midtown location at 7 a.m. Once kids start going back to school, and we start getting to some version of normalcy, and women are reporting into work, we’re going to open at 7 a.m. and have women make an appointment between seven and 10 a.m. to come get their hair done.

Jay Goltz:
Good, I think that’s great. Paul, how much do you pay for a haircut? $2.50 $3? Tell us.

Paul Downs:
No! The guy who’s around the corner from me, Al Bonaventura, who took over the shop from his father, he charges 16 bucks. I get a crew cut. I just think that the idea of no appointment isn’t quite as radical as you think. I mean, almost every business sort of breaks down—like restaurants, there are some where you just walk in, you line up, you get the stuff. Some you make a reservation.

Dana White:
For Black women, it’s extremely radical. There’s never been a walk-in-only hair salon for Black women or women with thick and curly hair. Not at all.

Paul Downs:
That’s the experimentation in the market, and we’ll see what happens.

Loren Feldman:
Dana, I wanted to ask you, that was one of the points you made in your pitch. You emphasized that one of the things that you deliver to your customers is time. Because people—starting with your grandmother, who you referred to, and you—were in the habit of thinking you had to spend all day Saturday getting your hair done, and you’re making it possible for that not to be necessary. That’s an entirely different world for many of us, and I’m wondering how often you have to explain that. I’m sure your target market understands that completely, but when you’re pitching investors, is that a concept that you have to walk them through?

Dana White:
Yes, and not just investors, anybody who can’t relate. If you’ve never talked to, or you don’t know personally someone who’s a Black woman, or even a woman with thick and curly hair, and what she goes through to get her hair done—not that it’s traumatic—it’s just timely. It takes a long time. That’s the genius behind this revolutionary idea, is that the people who can give me access to capital, the people who can help me grow a company have no idea of the money that this market is spending and the pain point that I’m solving for. It’s not until you look at it, and you look around, and you go, “Oh my goodness!”

Jay Goltz:
I didn’t know until you told me. That was all very enlightening when you explained it to us months ago.

Paul Downs:
The world of thick and curly hair is foreign to me personally. My wife has thick and curly hair, and she just doesn’t get it cut very often.

Dana White:
In 2017 or 2015, Huffington Post reported that African-American women spend more than the gross domestic product of Greece on services alone on their hair.

Paul Downs:
Wow.

Dana White:
And I’m the only walk-in-only hair salon.

Paul Downs:
Give that woman some seed capital!

Loren Feldman:
So you have won $200,000. But you have to decide: Do you want to take it in a loan, which I believe is a 1 percent loan—

Dana White:
Interest-free.

Loren Feldman:
Interest-free, and do you know what the term is?

Dana White:
No.

Loren Feldman:
And the other alternative is a convertible note, meaning that it automatically converts to equity.

Dana White:
I believe so.

Loren Feldman:
But you’re not sure yet how much of the company they would end up owning?

Dana White:
Nope, I don’t know. They just said it’s a convertible note.

Jay Goltz:
This is totally out of my wheelhouse. I thought—and I could be wrong—isn’t it possible that you have a choice of a convertible note—like at a particular time, either you or the person who gave you the money, it converts on a certain date? Or do they have a choice to either get paid back or take… I mean, are there options?

Dana White:
I believe there are options and I think, from what I’ve heard—and this isn’t confirmed—but from what I’ve heard, it is a 24- to 36-month convertible note. From what I’m understanding, the convertible note is set up to attract another investor to take them out.

Loren Feldman:
What are you thinking?

Dana White:
Convertible note.

Loren Feldman:
Why?

Dana White:
Let’s go. Not fast growth. That’s what I’m thinking, let’s go. It’s not fast growth. It’s not, “I want to have a million locations tomorrow.” I want to communicate readiness, preparedness, access, and network to expand—maybe not expand to five locations. This is the time of COVID. But I want to communicate growth, and that’s why it’s very important what I choose to do with this money. I want to be attractive to, as I’ve mentioned before, a unicorn VC. If you are the type of VC who wants me to grow exponentially in six months, this is not the company for you.

Loren Feldman:
When people use the term “unicorn” with venture capital, they’re usually talking about a company that can grow to be a billion dollars. That’s clearly not what you’re talking about. You mean unicorn in the sense of a venture capitalist who is willing to give you time to grow and not put you on a set time schedule.

Jay Goltz:
On a treadmill.

Dana White:
And understanding—as the VC who has approached me, and other ones who have emailed me and messaged me—that they know the market and they know the pain point I solve for. She may not be a multimillion-dollar, potentially billion-dollar business today, but we already see what she’s doing, and we see that nobody else is out here doing it. And the one that has done it isn’t catering to the market. And she’s killing it, the one who did it. So you know what, let’s get the resources and the capital to her.

Loren Feldman:
Dana, have you heard from a venture capital firm that takes the approach you’re hoping for?

Dana White:
Absolutely. Their multilayered approach to business growth is all about time. It’s business development, professional development, brand development, marketing. It’s, “Okay, we want to grow with you because we’re uniquely positioned to understand what you need and what you don’t have.” And I’ll be honest with you, a lot of the VCs who have approached me are Black. And they know! They know what’s going on. They know.

Loren Feldman:
What do they know, Dana? Do they know your market? Or they understand your business? Or they know your mindset? What are you referring to?

Dana White:
All of that.

Jay Goltz:
And challenges. That’s the third piece.

Dana White:
Exactly. I was about to say, they know my market. They know my challenges. They can look at an idea, see what I’ve done, and understand why I have not been able to do more. They understand the value of the network, the network they’ve cultivated, and why they want to bring it to a business like Paralee Boyd to see if it’s a viable option to grow. They understand that if you’re just going to look at a revenue number, you’ll think that, “Oh, this business is nothing.” No, you have to look at what she’s doing and look at how she plans to do it.

If you approach it one way, when I sit across the table from three or four white men who have no connection to this at all, it’s a bad idea. I can’t tell you how many people—not in the VC world or an investment world—who I talked to, and they just dismissed me as another hair salon, because they don’t quite grasp it. Then on the other hand, I talked to several white men who’ve taken the time to understand the pain point and how it’s affected me.

Jay Goltz:
Are you talking about us?

Dana White:
Yeah, honestly.

Jay Goltz:
Okay, good.

Dana White:
When I first met Loren, I was excited. I never had to hear from Loren again, because I was so excited that someone who didn’t look like me sat down with me on a short bus ride, and by the time we got off—which was like, five, ten minutes later—he got it. And I was like, “Okay, so it’s not me,” right? And that’s what these minority-run VCs are saying, “No, no, no, sweetie, it’s not you.” Goldman Sachs just put out a study, and we’re all reading it. It’s a study about being Black in entrepreneurship. And here we are thinking, “It’s us.” Oh my gosh, like no, the hill is a little steeper for you. It’s not just you. It’s a little steeper for you.

Loren Feldman:
Dana, it’s not just a little steeper. I mean, we’ve all read the stories that relate the percentage of venture capital that goes to women and minority entrepreneurs. It’s incredibly tiny. Is your experience giving you any sense as to whether that’s changing?

Dana White:
I do think COVID has required people to look at things differently. There are pre-COVID businesses that were securing investments and killing it that had to close during COVID. I think it’s more about not just the idea, not just the revenue. I think that people are having to step out of their box, out of their comfort zone. I’ve said this before, “Get Dana out of the box you have her in and listen. Talk to her, find out what her eight years of experience running this business has done, and go from there.”

I think, post-COVID, it’s requiring people to say, “You know what? Revenue is one thing, but what else can we be looking at as a measure of likelihood of success? And maybe revenue isn’t high right now, but why not?” Ask those questions. I think that’s what’s happening. Again, I think people are looking for businesses that are non-traditional. There’s other ways to make money outside of being an app.

Loren Feldman:
You’re getting $200,000. That’s a lot of money. It’s not unlimited money. You’ve got to think carefully about what you’re gonna spend it on. Do you know what you want to do?

Dana White:
I do: marketing. I’ve never had a proper marketing campaign. I’d like to do marketing. My customers would like me to reopen my suburban location here in Michigan, so that’s an option.

Loren Feldman:
How are you thinking about that in terms of what it will cost and how you will do it?

Dana White:
I’m thinking, to start—because I’m hoping that marketing campaign will generate enough over time, generate enough revenue so I’m not pulling from the base anymore—I’m expecting maybe $20,000 to $40,000 on a good startup marketing campaign.

Loren Feldman:
And are you going to hire somebody to manage that?

Dana White:
Yep, and there’s market research we want to do. I’m looking to invest some money in a product line. I’ve already started that. They want me to come to them with Paralee Boyd’s vision on its best day, and that’s why I think the network access is so important. I’ve spoken with previous years’ winners who told me, “When they have that meeting with you, they’re going to set you up to succeed, so be prepared.”

I’m not in a rush to spend the money. I’m not in a rush to get the money. I had an idea—really clear—of what I wanted to use it for. But understanding who I’m about to sit across the table from and have the conversation with, I’d like to set up a solid plan, based on as much data as I can get, and go from there. Then let’s give out the money based on that.

Jay Goltz:
So Loren, to your point, $200,000—it isn’t that much money. You gotta be careful, because it’s certainly a good amount to do something with but like, poof.

Dana White:
Yeah, it’s gone.

Jay Goltz:
All the stuff you mentioned—30 grand, 50 grand, 20 grand, 80 grand—quick.

Loren Feldman:
Tell us about the products, Dana. You’ve talked about that a little bit previously, but we’ve never really walked through it. That seems like a bit of a departure to me. It’s not the basis of your idea. It’s not what you pitched, I don’t think. I guess it wasn’t in the video.

Dana White:
Towards the end. It said, “With this money, we’ll use it for the following,” and I listed four things, and then the product came up on the screen.

Loren Feldman:
But my point, larger point, is it’s a different skill set. You’re talking about mixing materials, creating something that people are going to use on their hair. You’re talking about distribution, supply chains, all kinds of different things that you don’t have to do running a hair salon. How are you thinking about that?

Dana White:
Just as you listed. Most hair salons have a retail space. Most hair salons get most of their money—most beauty businesses, if it’s a brick-and-mortar—from retail.

Loren Feldman:
Not necessarily stuff they’ve made themselves though.

Dana White:
Exactly, so for Paralee Boyd we’ve sold barely any retail, almost not even worth mentioning. I’ve decided to private label—to do our own formulations—based on years of experience, talking to customers, talking to my staff, seeing what works, what doesn’t work, what we have in there that could be better. I’m going to do that, and then a lot of the people want our tools. They want our blow dryers, they want our brushes, they want our combs.

In addition to that, I want to produce a set of videos. “Here’s the anti-itch and growth oil that we’re coming out with. This is how you apply it, and these are the results you should see over time. Here is our edge control. Here’s the info. This is how you apply it.” And have a video on our scalp-treatment kits, everything that we use in the salon. I’d like to be a lifestyle brand. I don’t just want to be a place. Paralee Boyd’s where you come to. I want to make sure you’re exercising haircare when you’re away from us as well.

Loren Feldman:
When you said that people want your brushes and your blow dryers, are those Paralee Boyd products that you’ve created for the salon? Or something that you bought from somebody that somebody else created?

Dana White:
It was something that we bought, but again we were using them differently. There’s a way we blow dry and using those tools. So the type of blow dryer, I brought with me from New York. But what I talked to them about is, “Here’s what I’d like to do to make it better.” The manufacturer, I talked to them: “This is what I’d like to do to make it better, and this is what I’d like to do to make it ours,” and so I’m gonna do that. Again, that’s why the conversation with Quicken Loans and the Detroit Demo Day people is so critical because it’s a matter of: What do you spend the money on that would yield a return that makes a convertible note viable? What are the things you want to do?

Jay Goltz:
I have to tell you, everything she’s talking about, from my perspective, makes perfect sense. We’re also talking about the internet. Just selling it at full price on the internet, all over the country, as well as getting into some stores, and then tribal association is huge. Look what Oakley sunglasses did 30 years ago. I mean, there are so many brands. People were putting stickers on their back window that said Oakley. People want to believe in something. People want to belong to something. If they like the product, I could totally see where they’d just as soon get a brush with your name on it. Why not? It all makes sense.

Dana White:
We’re [doing] CBD. There is no CBD haircare line towards women with thick and curly hair. So right now, we have a CBD hair growth oil, and I’m mailing out some product today. It’s been up for a couple of days, and they’re already buying it. So it’s a matter of getting that out there, and again, the marketing. I know, with the money, marketing is happening no matter what. Marketing, marketing, marketing. Marketing towards products, marketing towards butts in seats. And then it’s a matter of probably doing the products.

Unfortunately, several salons in the area have closed. So if I want to open up, or reopen, my Southfield location, I have options to choose from that I don’t have to build out from the studs. I can take over a former salon, spend money to make it my own, and then reopen. So that’s an option as well.

Loren Feldman:
Do you think the $200,000 is enough money for you to do all three: the marketing, the products, and another location?

Dana White:
I don’t know. I think the $200,000 is enough to get it started. But again, you have to choose something that is going to make money in order for it to be paid back or to convert.

Jay Goltz:
I can tell you, in her situation, that the quote-unquote marketing dollars—most of it’s going to be PR, because she’s got this story to tell now. To go start doing radio ads, TV ads, print, direct mail, it’s extremely expensive. That money will be gone in a heartbeat. Whereas your story can be told and that will be by far the most efficient way of getting out there, on top of—you are a retailer—having a great location is a huge part of quote unquote marketing, but it’s paid for in rent. You could spend $300,000 in marketing in a flash.

Dana White:
Yep, but that thing. When you start it, and it’s out there, it’s gonna start generating money for you. I’m actually going to meet with a publicist. She’s like, “You’re hot right now. It’s time. We can get you a ton of press, even some in the national press, right now.”

Paul Downs:
Has there ever been a PR person who didn’t say that?

Dana White:
Actually, yeah. I’ve had someone say to me, “Your story… it’s gonna be hard for me to market you. It’s going to be hard for me to pitch you to news agencies. You might get small local circulars, but getting you press…” I’ve had someone say that to me, yeah.

Loren Feldman:
But those small local circulars might be more effective for you than national press.

Dana White:
They weren’t.

Jay Goltz:
I’ve talked to many PR people, I’ve hired many PR people, and just like everything else—no, no, worse than everything else. Like if you hire a plumber, he’s probably gonna fix your sink. Whereas you can hire a PR person, and they can do absolutely nothing. So there are people who are extremely talented and gifted and connected who will do a great job. And there are people who will just suck $10,000 out of you over a few months and say, “This thing takes time,” and then you fire them and move on. I’ve been through all of them. And yeah, you can’t be too careful with that stuff, because like they all say—most of them—will tell you they can get you publicity. But the question is: Who are their accounts now and what are they doing for them?

Dana White:
And that’s what I’ve looked at. That’s why I’ve agreed to sit down with them, because I’ve seen what they’ve been able to do for other people and what they’re currently doing.

Loren Feldman:
That national press thing, I think, is something that you have to think about carefully. It might be fun, but is it gonna drive customers into your salons?

Jay Goltz:
Well, she’s selling things online, though. She’s selling products online. That could be great.

Dana White:
It depends on what the national press is. If the national press is Wall Street Journal, maybe not so much. If it’s Ebony Magazine, Black Enterprise, that’s something else, right? So I’m really focused on local. I’ve had national press. I’ve actually had more national press than I’ve had local press. So it’s time for us to really check the boxes on local press here and maybe some national things.

I would like my product to be on the Today Show. I would like my product to be in a magazine, in People Magazine: “Hey, have you guys tried this? It really works.” So those are things that we can talk about and the viability of it. It may not be viable right now. That’s fine. But for now, I’m sitting down with a PR person tonight, because I had a couple who I was meeting with, to talk about the local boxes I want to check off.

Jay Goltz:
Let me tell you the first thing I’d ask them, because like I said, I’ve been through this. This is what a lot of them do. They spend all their time pitching clients, and then they get them and they turn it over to the 23-year-old who’s making $15 an hour to do the mediocre work. I would ask them specifically, “Who is it? Or are you the person who will be working on my account?” Because I’ve just seen that too many times.

Dana White:
Yep.

Paul Downs:
I want to throw out a slightly different perspective. Given the uncertainty of the time and the fact that you were making a major business and operational move anyway, have you considered accepting the check and doing nothing for six months? Presumably you had a plan that was going to result in some success anyway, and now this money arrives, and all of a sudden you’re running around, “I could do this. I could do this. I could do this.” And a lot of times, just plain focus is the critical business skill.

Dana White:
Right. I don’t think they’re gonna cut the check and have me sit on it. I’d rather have the conversation and wait for the first disbursement. I can’t afford not to do anything. I have to do something.

Jay Goltz:
Well, the good news is, before this happened, you’ve been making major progress. Let’s just review, because this is critical. You fixed your pricing problem, which was a problem. That’s finance. You’re fixing your management, you hired a qualified manager. You’ve never had the luxury of that. And you’re figuring out about locations. So the good news is, you’ve been doing a lot of work in the last six months, getting ready for the future, so it’s good timing.

Dana White:
To Paul’s point, I think, if I’m hearing him correctly, it’s a matter of doing nothing, i.e. not spending, and that’s what I’m prepared to do. I’m prepared to not spend and plan. I don’t want to plan to death. I don’t want to plan, and a year from now, I’m still planning. When it’s time to have money dispersed, we’re ready with a pretty sound idea as to what the ROI would be for that investment.

Paul Downs:
Yeah, I guess the point I was making is that you’re in the middle of a bunch of stuff, and a lot of times, what makes or breaks something like that is just being able to do it long enough before you go broke so you really learn how to do it. A $200,000 cushion is just time to me. That’s the first thing I think of, “Now I have time.” It moves the doom day on the horizon back some number of months, and it takes the pressure off what you’re currently doing now. I think it’s always tempting to think about what new shiny thing I could be doing, but there’s often huge value in just getting better at what you’re doing now.

Loren Feldman:
I think you also have to think about the timeline for each of those elements that you’re considering. How long will it take you until you have products ready to sell online? How long would it take you to get another location open? Maybe you want to wait on the marketing until you’ve got both of those things ready.

Dana White:
Absolutely, so one of the products is here, so that’s ready to go. Like I said, I’m shipping some out today. The other two products won’t be available until November. You’re absolutely right: timing.

When you do marketing, expect 90 days before you get anything back. But again, even before you spend the money, you have to prepare the content. You’ve got to prepare the commercial. You’ve got to prepare the social media campaign. All of that has to be done before you can not only get a disbursement, but hit the button to expect an ROI. I understand what Paul is saying. He’s not saying, “Don’t do anything.” He’s saying, “Don’t spend anything until you’re prepared,” and that’s what I want to talk to them about this afternoon. I need to be prepared.

Loren Feldman:
Especially given the crisis that we’re still going through.

Dana White:
Absolutely.

Jay Goltz:
Wait, what crisis are we talking about?

Dana White:
COVID.

Jay Goltz:
Oh, that one. There are a couple.

Dana White:
COVID right now is the one directly affecting me.

Loren Feldman:
We are just about out of time. But we have one loose end to tie up before I let you go, and that is: Jay, you have to tell us what you spend on a haircut.

Jay Goltz:
I spend $36. Yeah, I get an appointment, she washes my hair, and then she pretends like she’s interested in my life, and I talk to her for a little while. I’ve been going to the same person for 20 years.

Loren Feldman:
Wow. We’re gonna have to have her on the podcast.

Jay Goltz:
Yeah, you should. She knows all my secrets.

Dana White:
You know what I’d like to hear back, Loren? I don’t know if your listeners can do this in their comments. I would love to hear what they think I should do with the money.

Loren Feldman:
I would love to hear that too. You know, in the new, reformulated 21 Hats, we’re gonna make it very easy for our listeners to participate in conversations like that. Unfortunately, that is not completely set up just yet. But I will say this: If anybody listening has thoughts about that, here’s my email address: [email protected] If you have thoughts for Dana, I would love to get them from you. And I will, of course, relay them to Dana, and we’ll talk about it on the podcast. My thanks to Paul Downs, Jay Goltz, and Dana White. Appreciate it guys.

Episode 36: Man, If I Win…

This has not been an easy year for Dana White, who has had to close one of her two hair salons and who has struggled, amid the pandemic, to keep the other one staffed. But this week she reveals to Karen Clark Cole and Paul Downs that she’s a finalist for a potentially game-changing pitch competition. “A $200,000 investment from Quicken Loans is a huge validator when you're looking to grow,” says Dana. “When you have first money in from Dan Gilbert, it bodes well for your company.” Dana also tells Karen and Paul that she’s just made her most important hire ever, an operations manager who had a compelling reason for wanting to join Dana. Plus: the Morning Report News Quiz.

Guests:

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

Karen Clark Cole is co-founder and CEO of Blink.

Paul Downs is founder of Paul Downs Cabinetmakers.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Karen Clark Cole: “She wants to show her daughters that she’s working for a Black woman.”

Paul Downs: “I do have a question about this new hire. The basic question with anybody who is good is: Why are they looking for a job?”

Dana White: “Man, if I win… a $200,000 investment from Quicken Loans is a huge validator when you’re looking to grow.”

Full Episode Transcript:

Loren Feldman:
First of all, I have a quick 21 Hats update for you. If you listened to our podcast [episode] two weeks ago, you know that I have taken ownership of 21 Hats, which means I own the 21 Hats Podcast, plus what will soon be the 21 Hats Morning Report, a daily email newsletter. But I have no salary, no employees, and no revenue. That, however, did not stop me this week from giving myself a promotion. [Laughter] I am now officially the founder and editor in chief of 21 Hats Media. Thank you, thank you. Thank you very much.

Dana White:
Congratulations.

Karen Clark Cole:
You don’t want to be the CEO, Loren?

Loren Feldman:
I thought about it. I might add that title at some point.

Karen Clark Cole:
You don’t think that’s an overrated title?

Loren Feldman:
Dana, I believe you have some interesting news as well.

Dana White:
I do. I am proud to share with your listening audience that I am a Detroit Demo Day finalist in the Build category, which is a $200,000 award to the winner, which will be announced Tuesday.

Loren Feldman:
We’re recording on Friday the 16th. We’ll publish this on the following Tuesday, so you mean that you’re gonna find out Tuesday evening.

Dana White:
Absolutely.

Loren Feldman:
And the Detroit Demo Day, tell us whose organization that is.

Dana White:
Detroit Demo Day is sponsored by Quicken Loans, which is owned by Dan Gilbert. It is their way of investing in local businesses that they feel have the ability to build and scale. This year, because of COVID, it’s not a live event. It would normally be live on October 20th or thereabouts. But this year, it had to be done similar to a television show.

What you guys will see when you watch it, it’ll be on YouTube, through the Detroitdemoday.com website. What you’ll see is this Shark Tank-type, beautiful space, long red carpet, and you’ll see me pitching to a panel of judges about Paralee Boyd and what I could do with the money, who we are, what we’ve done, and how the money will help. And then after that, the judges announce who won. And that’s it.

Karen Clark Cole:
Dana, were you there live, and no one else is? Is that right?

Dana White:
We recorded Detroit Demo Day back in September.

Loren Feldman:
You don’t have to tell us, but you already know whether you won or not. Right?

Dana White:
I do, I do, I do. And so what happens is that after the winner is announced, then it goes into People’s Choice. You guys here on the panel and your listeners can go to Detroitdemoday.com. You can go to my social media, Paralee Boyd, on Instagram, and vote for the People’s Choice. If I am able to win, I receive an extra $25,000, so that’ll be great.

Loren Feldman:
Where do we go to watch your pitch on Tuesday?

Dana White:
I believe it’s Detroitdemoday.com or .org.

Paul Downs:
It’s .com. I’m on it right now.

Dana White:
Yep, there it is: .com. Detroitdemoday.com, and you’ll be able to watch the pitch live, find out who the winner is, and vote for People’s Choice.

Loren Feldman:
And what’s this gonna mean for your business?

Dana White:
Man, if I win… a $200,000 investment from Quicken Loans is a huge validator when you’re looking to grow. Even just being a finalist, I’ve been approached by people who are interested in investing in minority-women-led businesses. I was on a panel earlier this week speaking about the lack of VC dollars to minority women businesses and the need for that. Even from that panel through the Milken Institute, people have reached out to me via LinkedIn and said, “You know what, I’ve reviewed your business model. I’ve looked you up online. Let’s talk.”

That validator from Quicken Loans, if I were to win, is his money is first money in, and when you have first money in from Dan Gilbert, it bodes well for your company. If I were to win, I have plans for what I’d like to do with the money and how to scale.

Loren Feldman:
Does he get a percentage of the company?

Dana White:
Really good question. You have two options. Once the winner is announced, I’m assuming they sit you down, and they say, “Hey, it needs to be an interest-free loan or a convertible note.” I have to decide.

Loren Feldman:
A convertible note means it starts as a loan but could become equity?

Dana White:
Yes, it converts over a specific amount of time.

Loren Feldman:
Oh, so automatically, it will become equity.

Dana White:
I believe so. Yes, I believe so.

Karen Clark Cole:
And if it’s a loan, do you know if there’s a term on the loan?

Dana White:
All I know is that it’s interest-free, and I don’t know how long. They discuss all of that with the winner once it’s announced, so I don’t know. I just know that if you win, you have two options: interest-free loan or convertible note. That’s it.

Karen Clark Cole:
Be careful you don’t give too much away.

Dana White:
Say again?

Karen Clark Cole:
Be careful you don’t give too much away if you go that route.

Dana White:
Exactly.

Loren Feldman:
Dan Gilbert, who built Quicken Loans and owns the Cleveland Cavaliers has been, for maybe 10 years now, working on building the entrepreneurial community in Detroit. Does that network mean anything to you? Does that help you?

Dana White:
Absolutely. Again, it’s tied to you winning it. If I win, it’s not just the money. It’s the access to the resources and the network. That’s been made very clear, that the winner will get access to all of that. They said that they want people—the winner’s circle, or the winners—once they are announced, to come to them and talk about their pie-in-the-sky for their business. And they really help you, using their networking and his reach, to help the winner make that happen. So fingers crossed, right? Because that would be amazing.

But even being a finalist, your business grows. It’s thanks to this podcast and the conversations I’ve had and listened to on this podcast that I made the jump and hired my first salaried, make-substantially-more-money-than-I-make employee. And even in the weeks that she’s been there, she has just gone through and turned so much around. And it’s because of Demo Day, being a finalist, and the way they’re setting it up. It’s going to kind of be a commercial, because it’s going to be this huge production. Even the camera crew, Woodward Original, that came and did the interviews with us and did the production on the day of taping—man, it’s a big event!

I’m getting ready for the volume of people who are going to come, and I’m going to be closed actually. I’m going to close my business, probably October 19th, and then stay closed until November 2nd because of staffing and COVID. We are finding that the federal government thought it was a good idea to pay people to stay home, and so stylists who work in close proximity to people—even though my salaries are above what they’re offering—have decided to stay home. Staffing has been a challenge. We’re doing a big hiring drive.

The young lady I hired, her background is recruitment. She used to be the district manager for large hair salon chains. Her largest territory was five states covering over 238 stylists. She is now working at Paralee Boyd because she doesn’t have to travel with two little kids, and she’s putting together a hiring drive so that we can get the staff, get them trained, and be ready to open our doors.

Paul Downs:
I was under the impression that the 600 bucks a week was over, but I haven’t been following it because none of my people are on unemployment.

Loren Feldman:
It is over. It is over.

Dana White:
But it’s not completely over. It’s reduced.

Loren Feldman:
The 600 bucks ended. The president had another initiative, which I don’t think applied to everywhere, but I think it resulted in an extra $300 in many areas.

Dana White:
And Michigan is one of those areas, so in addition to the Michigan state unemployment, they’re getting another $300 a week from the federal government.

Loren Feldman:
Is it a problem, do you think, that you’ll be closed at the time you’re a finalist for this award? Are you missing an opportunity with that?

Dana White:
We are. Ideally, it would be best if we were open, but open with limited staff would turn people away if the service isn’t up to par. If we have one stylist or two or three stylists, and they can only work two days a week because they’re part-time, it doesn’t make sense. My operations manager and I sat down and said, “Okay, what are you willing to do?” And I’d rather you wait a week. I’m not willing to compromise the brand.

Loren Feldman:
What are you going to do differently? Given the problems you’ve had staffing, how are you going to change things so that you find people who are willing to show up?

Dana White:
What led us to this point is that leadership at my business checked out after COVID because they had a lot of things going on in their personal life. That took a front seat, Paralee Boyd took a backseat, and that was not necessarily communicated to me. What was communicated to me was, “Everything’s fine. Everything is gonna be okay.” But no, everything wasn’t fine. I did not have the professional in place, and when we spoke about this on the podcast [episode] before, you guys said to me, “You get what you pay for.” And no truer words were spoken.

What’s going to be different now is that I have brought in an experienced leader of stylists and salons. I’ve brought in someone who is a recruiter, and in that interview process—and I had somebody else with me during that interview process to kind of make sure that I was vetting the right person because this hire was so critical—she just nailed it like Simone Biles with every question. It wasn’t just what I wanted to hear. She actually had experience, examples, and she was able to answer the “how” of how she gets this done. Recruiting for her is a big thing, so right now I just need to give her the time and the space to recruit.

Paul Downs:
I do have a question about this new hire. The basic question with anybody who is good is: Why are they looking for a job? And you said it was because she doesn’t want to travel anymore.

Dana White:
Yeah, she was traveling 21 out of 30 days a month. She has two eight-year-old daughters, aAnd she was starting to see the effects of her traveling on her kids. Her and her partner sat down and said, “Okay, what are we going to do?” And she chose to come off the road.

Paul Downs:
That’s a story that makes sense. There’s a limited number of stories that make sense to me, and dealing with family responsibilities is one of them.

Dana White:
I can tell you the candid reason, what she gave when we asked her. I asked her, “Why Paralee?” I’m looking at her resume. We’re one salon now, we’ll go to two. She did give us what she had seen and what she believes this company can do. But she said, on a personal level, she goes, “I am the mother of two Black girls. I am white, my daughters are Black. They’re eight years old, and they’re starting to believe what the world is telling them, and I’m not there to counter it. I need to be home to counter it.” And she teared up. And she looked at me, and I said, “Okay, I get it.” She’s like, “I need to be home for my girls. They’re starting to believe what the world’s telling them.” And I said, “Okay.” So that’s the real reason.

Paul Downs:
That’s a good reason.

Dana White:
She teared up a little bit and she looked away, but she trusted me with it. And even though that was emotional, I refocused on her experience. Again, a lot of the interview candidates gave me cursory [answers], but she was one of the few who was able to go in the weeds and say how she can do it and give examples of how she’s done it before and how it’s turned a business around and then give references that I could call that can validate what she told me.

Karen Clark Cole:
And hopefully part of her reason is she wants to show her daughters that she’s working for a Black woman.

Dana White:
That’s it too. She said, “I want my daughters to see I work for you.” I said, “Okay.” I didn’t know how I felt about that, though. At first I was like, “Okay,” but you know, she explained it to me. She’s very, very communicative, which I love. So we’re going to turn this around.

Paul Downs:
That sounds great. I think there’s one thing to watch out for when people come from a bigger company, is that they tend to have a list of things that were done for them, because they’re from a bigger company. They could call HR [for] somebody to fix the printer. And you have to be very cognizant that you don’t have that same set of things available and just make sure that you’re clear that, “Okay, if the printer needs to be fixed, you may need to be the one to do it,” or, “I’m the one to call.” But just make sure that she understands she’s in a different world. Set up the roadmap for how to solve those kinds of problems that she’s not used to dealing with.

Dana White:
And that was a question I asked her during the interview. I asked her, “This is a much smaller company than Great Clips. Are you a solutions-based manager? Meaning when marketing needs to go out, marketing is Dana. When you have a filter that needs to be changed, it’s not, ‘Call the maintenance company or this company,’ it’s, ‘Call the landlord.’ Are you able to operate without a network of resources behind you—and leaning on me, and us leaning on each other—and you being solutions-based in order to get some of the smaller to-do items done?” And she talked to me about, when she worked at a small salon, how she did it.

Paul Downs:
That’s great.

Loren Feldman:
Paul, I suspect most people who answer that question know the right answer to give. Have you learned anything about how to figure out whether somebody is sincere in the answer?

Paul Downs:
No.

Loren Feldman:
Fair enough.

Paul Downs:
I tend to not hire from big companies, although I have on occasion. It’s a red flag I’ve more heard about from other business owners, and in particular, my Vistage leader says it’s a huge one if you’re hiring leadership. If someone comes out of a large corporation, they’re just used to a whole different world than in a small company.

In my own company, the problems we run into tend to be of the fix-the-printer or change-the-filter type. And fortunately, woodworkers are really wired to just handle stuff like that. But what my employees are weak at is thinking about systems as a solution to problems. And it’s very easy in a small company to just solve problems with fixes as opposed to systems. If you have the resources to take the next step up beyond a problem fix, and then think about, “How do we implement a system so that this never happens again?” But that requires a lot of communication.

Loren Feldman:
I want to switch directions a little bit here. I want to get to a slightly different topic. As you might imagine, I’ve been giving a lot of thought lately to where entrepreneurs and business owners get their information, what they read, where they go for answers when they have questions. I want to ask you guys about your reading habits and where you go when you have a question. I want to draw one important distinction, which is, there’s news you need to know just to be an informed citizen and know what’s going on in the world. And then there’s information that actually helps you run the business. Both are important, and I’m curious where you get both, but I’m especially interested in where you get information that helps you run your business. Karen, can I start with you?

Karen Clark Cole:
I look at it as it’s my job to identify problems in the various conversations that I have all week long, and the different meetings that I’m in. I’m always looking for ways to improve, or things that aren’t quite working right that a lot of people can’t see, because they’re in the weeds. And so I have the advantage of having a higher view, just sort of floating above it all. I can see where something that we’ve been doing for a while, it’s just not efficient anymore. It’s not the right way to do it anymore. There’s got to be a better way. I don’t know what the answer is necessarily, but I see it as my job to identify the problem.

Then what I’ll do is start talking to individuals, then I may have a conversation with a group of people who I think are the right group of people and start talking about the problem and see what kind of solutions they come up with and start doing the research in that way. I try to avoid having my own solution until I’ve heard lots and lots of input.

Loren Feldman:
I think what I’m hearing from you, Karen, is that you don’t really have a lot of confidence that you would find help for problems that you have running your business in the media at large. There aren’t websites or publications that you would go to for that kind of help.

Karen Clark Cole:
I never have because, you know, somebody else’s advice is best passed on to somebody else, because it’s never of use to yourself—there’s a quote, something like that—because my business is unique, so how could I possibly get that out of a book? There are some big concepts that I use from other places. That’s when I’m trying to solve a specific problem. The answer to that problem is always within our own company, because every company is unique. And so how could anyone else who’s not on the inside possibly tell me how to do it? It’s impossible.

And so where I go to broaden my thinking is the Harvard Business Review. That’s my Bible, and I probably have three publications in my bag at a time, and I’ll just pick it up in the middle and read whatever I open it up to. And it’s always like, “Wow, I never thought about that.” It’s so well written, and it’s so relevant.

Loren Feldman:
Paul, how about you? Is there a place you go to for inspiration or help with running a business?

Paul Downs:
Just the Morning Report, Loren, I don’t read anything else. That’s it.

Loren Feldman:
Your check is in the mail, Paul.

Paul Downs:
Okay. I tend to not look for business books. I just have not had a great experience with—

Loren Feldman:
You wrote one, Paul.

Paul Downs:
I did, because I didn’t like all the other ones. I tend to look for solutions from other business owners, particularly in my business group. I keep an eye open for the general trends just through reading the news. Maybe this has been a huge mistake, but I just don’t read a ton of business books. I think I’ve glanced at the HBR, but it always felt like it was for companies that were just way larger and had more resources than mine.

When I was writing for The Times, I was concentrating on a set of issues that, it seemed by the response to the readers, there is a sweet spot where there’s things that need to be talked about that don’t get aired in the ordinary media. I do agree that it’s tough to look at the problems within your own walls as a business owner and then look around and see that everything out there is too general and doesn’t really address the specifics of my business. But I do think there’s also a set of problems that all businesses share, so that if it was an accounting or bookkeeping issue, it’s not really all that unique to Paul Downs Cabinetmakers. And often, issues of how to deal with different types of employee situations are not all that unique. You may think they’re unique, but as soon as you start asking around, you realize a lot of people share the same issues.

Loren Feldman:
Have you found a place that sheds a light on those issues? I think you might have mentioned on this podcast that you use Reddit.

Paul Downs:
I do use Reddit, but the business parts of Reddit don’t really pertain. We’re a little too big to be in the tiny, scrambling world, but we’re a little too small to be in the Harvard Business Review world. I found the most information from my business group. Now, we do get speakers who have written books, and so we get kind of a digested version of whatever schtick they’re selling, and that’s useful. But Reddit is interesting mostly because it’s such a window into a wider range of people than you would get in ordinary media. It’s a real rabbit hole, though, and can be addictive. I would be careful if you’ve never looked at it to not get caught up in it.

Loren Feldman:
Are you talking about beyond business issues?

Paul Downs:
Yeah, they have various forums, and it’s all over the world. It’s everybody, and that’s always eye-opening.

Loren Feldman:
I find it intimidating. I don’t even know how to get started on it.

Paul Downs:
Well, then just don’t. But the main feature of the business press, or any press, is to figure out what the middle of the road is, and stay there. There’s always a lot left out, and so Reddit is a way to explore every kind of sub-genre of human experience you can imagine. And you just realize, it’s a big world out there. It’s a forum where people can explain their own situation, and people who can do it well, their writing goes to the top, and you get a chance to see it.

I found it to be very useful for just getting a sense of the range of people who work for me. You know, what is it like to grow up in a very, very different background than the one I grew up in? Or what is it like to live in a very different situation than the one I’m in now? Because I grew up relatively privileged, and I still live relatively privileged, but the people who work for me are from a much wider range of places. I just like to hear more about what it’s like to be them, so I can better build a culture using a wide range of people.

Loren Feldman:
And you find it’s easier to learn, to get those answers on Reddit, than talking to the people who actually work with you?

Paul Downs:
In some cases, yes. Because Reddit will explore subjects that I would not bring up to an employee. There’s certain things, you really just can’t put your arm around somebody’s shoulder and say, “Hey, tell me about your personal life and this issue or that aspect.” You just just can’t do that. But you wonder, and I don’t think that it’s a guarantee that reading something on Reddit gives you insight into any particular person, but it does give you a sense of the wider human experience in the same way that much of what I read is just fiction, because I like reading stories about people who are different than me. I think that there’s something to be said for hearing people talk about what they’ve gone through. That gives me a better sense of empathy when I’m trying to deal with the people in my world.

Loren Feldman:
Dana, is there a place that you go for information about running a business?

Dana White:
I do. During COVID, I think the city of Detroit did a really good job of posting up-to-the minute policy changes, up-to-the minute grant and loan applications, PPP information, TPE information. I go to this Facebook group for Detroit small business owners. I also go to my Goldman Sachs network through their app and their Facebook group. The Facebook group for local Detroit isn’t very active. But the larger app that covers everybody is very active, so I go there.

Loren Feldman:
Do you go there to ask questions, or to read what other people have posted or how do you use it?

Dana White:
Both. Especially people who’ve experienced similar things that I have. I go there to ask questions, and then I’ll search while I’m waiting for an answer. I’ll search through previous news feeds and see if anybody’s ever brought it up. I also Google. I Google how to—or not too much how to, but just to check the law, make sure I’m doing it right. The State of Michigan has the cosmetology board standards. I’ll check with them. I’ll read what they have.

There’s a couple books that I like to read and reread, to kind of get an idea of my compass, where to go or how I’m doing or whatever. My main source of information is talking to people. Just having conversations with people who’ve been there, other perspectives from people who haven’t been there. Pretty much just talking to people.

Loren Feldman:
Like on this podcast, for instance.

Dana White:
Yep, the people on this podcast have been great. People I’ve met. I’ll be speaking on a panel somewhere, virtually, and people will reach out to me via LinkedIn, and that will start conversations, especially if they’re in the marketing arena. But pretty much Facebook has been good for local stuff, and my network has been good for looking out, and Forbes has been good for kind of understanding the landscape around business and small business.

Loren Feldman:
Can any of you give me an example: Is there something that has stuck with you? “Here’s an insight I got from somewhere that really made a difference for me in my business.”

Paul Downs:
Well, yeah. The comments I got when I was writing for The Times were game-changing. In terms of an external article, I’m having a hard time thinking of one. But I do remember someone suggesting that I have more meetings with my people, because for the first 26 or 27 years of my boss life, I rarely had a meeting of any kind. And I remember thinking, when I first started using PowerPoints, like, “Oh, I got through 30 years without ever having to do a PowerPoint, how good for me.” And now, I don’t necessarily love PowerPoint, but the concept of going that long without ever regularly sitting down with your people was just such a huge mistake, and I couldn’t see it until someone just said, “You should do this.”

Now, having that venue was not something that’s available to most people. I just like interactive venues. Talking to people is great. Googling isn’t bad, but anything that allows you to ask a question, listen to an answer, follow up, actually have a conversation in one way or another—that could be written or it could be face-to-face—I think those are the best ways to get information.

Karen Clark Cole:
I’ve got one for you, Loren. It’s actually Jim Collins, our age-old business friend. I think about it all the time and I say it all the time, which is the idea of firing bullets, and then shooting your cannon. The concept is, prototype everything. You calibrate, calibrate, calibrate on an idea, and you get feedback, and you refine it, and you get feedback. And you try this, and you try that. This is in response to solving a problem. With your solutions, you think of them as bullets. So you try it on a small scale, try it with a few people, try it with a few more, try with a few customers. And then when you get some feedback, and you refine it, and you get it to a point where you’re really happy with it, then once you’ve got it to the point where it’s working, then you release it to the whole company, you release it to all of your customers, or that’s when you fire your cannon. You put all of your resources behind it, and you really believe it’s gonna work. Then you just go with it.

Loren Feldman:
Did you learn that lesson the hard way? Was there a time when you fired the cannon first?

Karen Clark Cole:
Oh, yeah. All the time. I mean, big cannons everywhere. It’s just the idea, for us, of rolling a kind of new concept out that I’ve worked on with a group of people to a small group of people or a few individuals first, and then it’s working with them, you gather feedback, refine it a little bit, and then you roll it out to a bigger group and a bigger group. And then we make the big company announcement. Everyone’s like, “Well, aren’t we already doing that?” And the answer is, “Yes, you are.” And that’s the beautiful thing, because along the way, you’ve also been doing some change management. People are on board, because they’ve been able to participate. They’ve been able to give feedback. They feel like it’s partly their idea, which is what you want, if you really want this thing to be successful. Same with customers.

Loren Feldman:
All right, well, appropriately enough, I have a Morning Report News Quiz for the three of you, which will test whether you’re actually reading the Morning Report, in part, but also whether you’re paying attention to business news. So if you’re all ready, the first question is: We all know that if you play by the rules, it’s easy to get your PPP loan forgiven. But as we noted this week in the Morning Report, there’s a catch. Do any of you know what the catch is?

Paul Downs:
The expenses you spent may not be tax deductible.

Loren Feldman:
That’s correct, Paul. If the loan is forgiven—as the rules currently are written—you cannot deduct the expense. Now, there’s some speculation that may change, and it’s one reason why some people are saying you should not apply yet for forgiveness. But it means that if you can’t deduct the expense, your income is going to be greater than you expected. Some businesses are going to have a surprise tax bill as a result of that.

Question number two: As we recently noted in the Morning Report, an Oregon based company called Wild—W-Y-L-D—is on track to do $65 million in revenue this year and expects to double that next year by selling a high-end candy made of fruit and something else. Anybody know what that something else is?

Paul Downs:
Cocaine?

Karen Clark Cole:
Cannabis.

Loren Feldman:
Yes, cannabis! Wyld’s director of sales said that the shutdowns earlier this year resulted in real hysteria. People were buying edibles like they were buying toilet paper. I’m curious, when you read something or hear something like that—a business that just explodes in that particular area —what does it make you think?

Paul Downs:
Good for them.

Karen Clark Cole:
Yeah.

Dana White:
Yeah, good for them, but you also wonder, “Well, let me see the business,” and you see, “Oh, it’s cannabis. Well, that’s different. Cannabis is going to sell.” It’s why, yeah, I’m not surprised.

Paul Downs:
I guess the other reaction I have is, look for two years from now some articles about how brilliant the CEO was—no matter what cockamamie theory this person espouses. My observation is, if you stumble on the fountain of cash, it doesn’t matter what you do, you look smart, because the business will grow. And then people put way too much weight on whatever set of procedures led to them not just being destroyed by it and we get the overweighting of the wisdom of the founder.

Loren Feldman:
Question number three: in Silicon Valley, a big debate was recently ignited by the CEO of a company called Coinbase, who wrote a blog post that took a stand for being apolitical, for focusing on profits and not on politics or social activism. He even offered severance packages to employees who decided to leave because of this new policy. My question is, when this started, Coinbase had roughly 1,200 employees. How many chose to take that severance package and leave?

No guesses?

Paul Downs:
Less than 100?

Karen Clark Cole:
Twelve.

Dana White:
I’d say about 100.

Loren Feldman:
You guessed a little high: 60, or 5 percent. My follow-up bonus question is: Can any of you explain what Coinbase does?

Paul Downs:
It’s got something to do with Bitcoin.

Loren Feldman:
It’s a digital currency exchange, and I’m not gonna go any further than that.

Paul Downs:
Yeah, good for them. Speaking of fountain of cash…

Loren Feldman:
Well, maybe.

Paul Downs:
Some guy whose theory may not make any sense, but gets a lot of publicity. There you go. There’s an example.

Loren Feldman:
All right, last question. Netflix recently announced a new policy: it will automatically cancel the subscription of any customer who does something in particular. What is that something?

Paul Downs:
Doesn’t use the service.

Loren Feldman:
That’s right. Any subscriber who fails to watch anything for a year, if you’re not using the service, they don’t want your money. Does that surprise any of you?

Dana White:
That’s good for them.

Karen Clark Cole:
Awesome.

Paul Downs:
That’s great.

Loren Feldman:
Why is it great?

Karen Clark Cole:
It’s being responsible.

Dana White:
Yeah, they don’t want to take your money if you’re not using the service.

Paul Downs:
It probably won’t cost them much, and the value of the PR they got from making that move is pretty high.

Loren Feldman:
And we just contributed.

Paul Downs:
Yup.

Loren Feldman:
Guys, thank you very much.

Dana White:
Loren, I just got an email saying that the voting for People’s Choice starts October 20th, and it ends October 25th at Detroitdemoday.com, and that they can vote one time per device. I just read that: one time per device. So iPhone, iPad and MacBook.

Loren Feldman:
You said the 20th, that’s Tuesday, right? So when people hear this podcast, they will be able to vote—from all of their devices.

Paul Downs:
What’s the mail-in option?

Dana White:
There probably isn’t one.

Loren Feldman:
It’s too susceptible to fraud, Paul.

Paul Downs:
Yeah, that’s right. Well, I happen to own 142,000 devices, so I’ll be busy.

Dana White:
All right. That’s great.

Loren Feldman:
Karen Clark Cole, Paul Downs, and Dana White, once again, thank you very much.

REVISITED: That’s The Price

This, to say the least, has been a challenging year. So this week, we’ve decided to bring you two inspirational success stories by revisiting one of our earliest podcast episodes. Way back in November of 2019, Karen Clark Cole and Loren Feldman attended EY’s Strategic Growth Forum in Palm Springs where we conducted a series of interviews with participants in EY’s Winning Women program. Two of those interviews were with women who started companies from scratch and sold them successfully—learning all sorts of lessons along the way.

Guests:

Karen Clark Cole is co-founder and CEO of Blink.

Sherry Deutschmann is founder and CEO of BrainTrust.

Lori Torres is founder and CEO of Parcel Pending.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Sherry Deutschmann: “He patted my hand and told me I didn’t know anything about business. He said, ‘Just go sell another account.’ So I did, except this time, it wasn’t for his company. It was for mine.”

Lori Torres: “I will tell you that competing with Amazon, some entrepreneurs I’ve heard say, ‘We went out of business because we couldn’t compete with them.’ For me, I’m like, ‘Bring it on.’… It’s made us a better company.”

Full Episode Transcript:

Part 1: Interview with Sherry Deutschmann

Loren Feldman:
Sherry Deutschmann, thanks for joining us.

Sherry Deutschmann:
Delighted to be with you.

Loren Feldman:
We want to talk about all aspects of how you built LetterLogic and your really impressive entrepreneurial journey. To start, I’d like to read something from your book. You’ve written a terrific book that I recommend called Lunch With Lucy. In it, you write: “I was a 42-year-old single mom with a high school education and meager savings when I cashed in my 401k and took a risk. I sold my personal belongings in a yard sale that yielded just enough cash to start a company, LetterLogic, in my basement, which defied every single rule of what makes a sure bet in business. That business grew debt free to a $40 million enterprise.” Give us a quick version of how you wound up starting your own business.

Sherry Deutschmann:
I was working for a company in the same industry that was printing and mailing hospital bills. I was responsible for the sales. I was VP of sales. We screwed up everything we touched. I would sell a new account and lose an account, and it was a constant. Just observing one day, I realized that all of our problems were simple human error. The human error was because nobody cared and nobody cared because nobody cared about them. It hit me like a ton of bricks. I went to talk to my boss about what we could do to affect the morale and change the culture of the company and how that might affect the results. He patted my hand and told me I didn’t know anything about business. He said, “Just go sell another account.” So I did, except this time, it wasn’t for his company. It was for mine.

Loren Feldman:
Unlike a lot of books about culture, you don’t just talk about treating people well, which we all agree you should treat people well. You connect the dots between treating people well and having a profitable business.

Sherry Deutschmann:
Well, it seemed to me it was absolutely a direct line between behavior and profitability. I thought if all of the employees understood exactly how we made money and their part in helping us make money, they would behave differently, and they did. I set out to make sure that all of their basic needs were taken care of, so that when they were at work, they would not be worried about whether or not their lights were going to be on when they got home, or whether or not their health insurance would cover an illness. From day one, I paid for 100% of everybody’s medical, dental, disability, and life insurance.

Karen Clark Cole:
How did you afford to do that on day one?

Sherry Deutschmann:
I never considered not being able to afford it.

Loren Feldman:
It was a little bit less expensive back then.

Karen Clark Cole:
How many employees did you have right out of the gate?

Sherry Deutschmann:
Two. Then we grew to 60 at one time, and they back down to 50. In the beginning, we covered even their families’ insurance. We did that for the first five years. It was the whole family plan. Then we were challenged by a single employee who said, “It’s not fair that I cost the company this much. She has five kids, and she cost the company this much, so I want the difference.” We had to equalize it by paying just for the employee.

We also let them bring their kids and their pets to work, which doesn’t seem like a big deal, but if you’re a single mom and the kid has a wellness visit, you have to take them to school, first, leave work, go to pick them up to take them to their doctor’s visit, take them back to school, and come back to work. You get nothing done. Or if the kid has a runny nose, they can’t go to daycare. Just bring them to work. We all pitched in to help take care of the kids so that the parents could be at work with us.

The most important thing we did, the most game-changing thing, was taking 10% of the profit every month, splitting it evenly, so that the CFO and the janitor got exactly the same dollar amount, letting them know that they were just as important as everybody else in the company on the final results.

Karen Clark Cole:
I read that before you do that, you show them how the company is doing, you show them the financials once a month, and then distribute the profit?

Sherry Deutschmann:
Every month, we brought everybody together in one room and went over the financials so they could see top line and all of our expenses in between and bottom line, and then we talked about the results.

Karen Clark Cole:
What would happen for your employees? Did they understand it right away? Were they interested—all of them? In my experience, it sometimes terrifies employees if they see really what’s going on or it’s too much information. It’s overwhelming. Then how did they feel when when there wasn’t a profit?

Sherry Deutschmann:
For most employees, just the high level was enough. There were some employees, specifically the sales guys, who really wanted to see more. In those cases, I would allow them to come to my office, pull up a chair right next to me, we’d get right into our NetSuite and say, “Have at it, you can go anywhere except to see peoples’ salaries,” and let them see exactly to the penny and to the fraction of a cent our costs. That changed their behavior in regards to going after the right kind of account and selling at the right price because they understood exactly what our costs were.

It took us a couple of years to become profitable, I think 18 months when we were first profitable, and nonstop profitable until about three years before I sold the company. I was investing heavily into technology.

Karen Clark Cole:
In order to run the business?

Sherry Deutschmann:
Yes. Actually building out the e-commerce so that I would no longer be printing and mailing patient statements, but sending the statements to patients electronically and facilitating payments for them electronically. I was spending millions of dollars doing that and not really minding our core. You know, what we were good at? In so doing, we had several months of declining profits, so I would have to stand in front of the entire company every month and say—

Karen Clark Cole:
60 people at that point?

Sherry Deutschmann:
Yes, at that point, it was 60. 63 people I think. I’d tell them, “Our profits were down this month.” It had gone from $7 to $17 to $700 and then it started going back down to $19 and then to $6, which is not even going to buy you a six pack of beer, right? And just tell them, “I’m sorry, we weren’t profitable,” and then two months back to back of losses. And for me to stand up and say, “There’s no profit share, because we didn’t make a profit.”

Loren Feldman:
You said you were sorry. Did you feel it was your fault?

Sherry Deutschmann:
Oh, it was my fault. Absolutely was my fault.

Loren Feldman:
How so?

Sherry Deutschmann:
I was chasing the shiny object. I hired an outside consultant—who ended up being one of the best things that ever happened to me and a lifelong friend—who challenged me to go back to our core strengths and to quit trying to be something I wasn’t and make the company something it wasn’t. At that time, we were on the Inc 5000 list for 10 straight years. The reason you’ve gone so fast is because you’re so good at this. You’re the best at this. You’re the undisputed best at this. Even your competitors say you are and now you’re saying that’s not good enough. I wanted to chase them down a rabbit hole.

Karen Clark Cole:
Did you do that because you were worried about the times changing, everything becoming more digital, and you needed to go there?

Sherry Deutschmann:
Yes, and somewhat a fear of missing out, and my sales team saying, “We lost this account because we weren’t able to do that and you’ve got to do this.” Just fear, totally acting out of fear. Up until that time, we had been partnering with other companies that could provide that part. We just had a tiny revenue share. That was really the right solution. We went back to that, and we quadrupled EBITDA over the next 18 months.

Karen Clark Cole:
So you just cut off all that money you had invested and said, “That’s a loss”?

Sherry Deutschmann:
Yeah, and we had just hired all these people to help us build out the technology. We had to tell them, “If you want to stay with us, we’ll find something for you to do. But we’re not doing that sexy work you thought we were doing.”

Karen Clark Cole:
Did they stay?

Sherry Deutschmann:
Some stayed, a few left, some were contract workers who we brought in and they left. We right-sized back to 51, 52 people and really got back to being—

Karen Clark Cole:
How was that transition for everyone in the company when you had to do the right-sizing and make the announcements?

Sherry Deutschmann:
Such a sigh of relief for everybody because those people who we had hired to do that work, we were hiring them so quickly that we couldn’t train them, we couldn’t integrate them into our culture. There was no place for them to sit so we had to do a build-out to add more office space for them and to try to be cool enough for these techies who were coming in instead of being a manufacturing concern. I was sending mixed signals being a pretty bad leader at that time, just running all over the place. I think that there was a huge sigh of relief for everybody, including those people who were brought in.

Karen Clark Cole:
What was the moment where you hired that consultant? What came into your head that said you should do that and something’s not working? Because you’re losing money?

Sherry Deutschmann:
Losing money and having to tell them there was no profit because of my poor decisions. He came in and for the first week, he said, “This is the best run company I’ve ever seen. I don’t know that you have a problem that we can’t fix pretty quickly.” Then the second week he said, “Oh, you have a huge problem, and it’s this, and you know what to do and you know how to fix it.” It was all on me. I made the hard decisions and made the hard choices and got us back to profitability.

Loren Feldman:
Sherry, you described talking to your bosses at the job you had before you started your own company and you told them what they were doing wrong and what you thought they could do better. Your boss patted you on your hand and said, “You don’t know anything about running a business.” To some extent, they weren’t wrong about that.

Sherry Deutschmann:
Oh, they were absolutely right.

Loren Feldman:
Then you figured it all out on your own. All these steps you took from opening your books to the way you rewarded your employees—was there anything guiding you on that up until the point where you hired a consultant? Or were you figuring out what made sense to you on your own?

Sherry Deutschmann:
I think it was a combination of common sense and innate empathy.

Loren Feldman:
It’s not that common. though.

Karen Clark Cole:
It’s listening to your intuition. I think that’s a strength of a woman leader.

Sherry Deutschmann:
Simple human kindness too. I was just listening to the CEO of Cisco, where they’ve just been named the best company in the world to work for, and he talked about the importance of that, of just realizing that people are just human beings who want to be heard and want to be treated like humans. I employed that trait that I have to serve the company.

Loren Feldman:
We’re having this conversation at EY’s annual Strategic Growth Forum. You’ve come to this event for many years. I met you here because of your involvement in the Winning Women program. Tell us how you got involved and what the program meant for you.

Sherry Deutschmann:
My company culture was so unique that we started getting a lot of press fairly early on and somehow EY heard about me and invited me to apply for the program. I did. When they told me I’d won, that was 2009. I figured it was just like any other award thing. You go to a fancy dinner, which you pay for, and then they give you a little trophy and that was it. It’s not like that at all. It is really a commitment to helping the women with any resources they need to grow their businesses.

Loren Feldman:
Not investing in those businesses. Not that kind of resource.

Sherry Deutschmann:
No, not that kind, but invaluable connections. It gave me credibility in a way that I could never have achieved on my own and introduced me to the network of the other Winning Women. But all the brilliance of EY globally—they helped me several times with sales tax nexus issues and other things. They didn’t charge me a dime, but helped me conquer pretty insurmountable problems at the time. Then the press that I received as a result of the EY Winning Women program has been incredible. That’s how I met you, and as a result, I was featured in The New York Times. I’ve had Forbes talk about me and Success and Business Leaders and Inc and Entrepreneur. None of that would have happened without the Winning Women program.

Loren Feldman:
We’ve heard this really impressive story about how you built this special company and the success you had. Why did you decide to sell the business?

Sherry Deutschmann:
Two things. We had gone through that phase of quadrupling EBITDA in 18 months. The graph of our growth, for the first time, showed the bottom line was outgrowing the top line. On paper, that was exactly the right time to sell a company, when you would get the highest multiple. That coincided with my teenage granddaughter coming to live with me. Trying to raise a 13-year-old and working 60 hours a week didn’t look like a good decision. It’s like it was in the stars.

Karen Clark Cole:
You had a buyer?

Sherry Deutschmann:
Yes, I had a buyer, had a lot of interest, had multiple offers, and chose one.

Loren Feldman:
People had been approaching you about buying it you even before you went looking.

Sherry Deutschmann:
Yes, for many years.

Loren Feldman:
Did the sale work out the way you hoped it would?

Sherry Deutschmann:
Yes and no. Financially, it was a tremendous success. What pains me most is how the culture changed after that. The first thing the buyers did was do away with the profit share. Although, in the dog and pony shows and all the negotiations, they had indicated that they loved the culture and they loved the profit share and they saw how it affected the bottom line, not realizing it was just lip service.

Karen Clark Cole:
Did you have a role in the new company?

Sherry Deutschmann:
I didn’t, I exited. It was an all-cash deal. I invested in the new entity they created and then got a board seat with that investment. Then it was too painful for me after six months. I just said, “Please, I want out of this.” So I was totally out and got my investment back.

Karen Clark Cole:
Did some of the employees leave?

Sherry Deutschmann:
Yes. Today we’re three years after the sale, and of those 51 employees we had at the time, I think only 12 are still there.

Karen Clark Cole:
Wow.

Sherry Deutschmann:
They weren’t 38 mediocre employees. They were the cream of the crop employees.

Karen Clark Cole:
Have they been able to maintain the profitability of the company without those people?

Sherry Deutschmann:
I’m not sure. I think there have been two or three roll-ups since then. I sold a $40 million company. Now probably a quarter billion dollar company has emerged from a lot of roll-ups. I have no idea about their profitability.

Loren Feldman:
Did you feel you were as prepared as you should have been to sell the business? Did you know what you needed to know?

Sherry Deutschmann:
Probably not. I learned a lot in the process and getting the company ready to sell was the most fun I ever had running the business. I loved it.

Loren Feldman:
How so?

Sherry Deutschmann:
We had a brilliant broker who first did a free valuation for us and then coached us on having mini valuations. Every Monday and Thursday, my leadership team had a mini valuation and we made decisions based on valuation for the first time. You would think that your company value wouldn’t change from a Thursday to a Monday, but if you add a big account or you lose an account in that time space, it can change a lot if you’re looking at a seven or eight or 10 multiple. It changed our behavior and we were working as a really tight team.

Karen Clark Cole:
You did that for how long?

Sherry Deutschmann:
About a year and a half.

Karen Clark Cole:
Can I just ask you, when you’re doing your monthly reporting to the employees and doing the profit sharing, how did you choose monthly versus quarterly, which seems more common to me?

Sherry Deutschmann:
It’s really hard to tie your behavior and your actions to something if it’s quarterly or annually. But monthly, if we brought everybody together and said, “Look, we made a ton of money this month, and this is why.” It was like a Swiss watch. Everything happened exactly as it should have. Then there was a direct correlation between their behavior and the profit.

Karen Clark Cole:
You talk about being able to measure profit by treating your employees well. Is that how you did that?

Sherry Deutschmann:
I think mostly it was seeing their dedication to the company and retention of employees. Nashville is one of the fastest growing cities in the U.S. For the last three or four years, we’ve had over 1,000 open IT jobs every day. Our IT workers were highly sought after. They stayed with us and stayed loyal because of the culture that we created.

Loren Feldman:
Looking back, are there things that you would do differently if you had to do it over again, in terms of the sale?

Sherry Deutschmann:
Yeah.

Loren Feldman:
What would you do differently?

Sherry Deutschmann:
I would have coached the leadership team about how to handle the integration with a newer, bigger leadership team. What I thought naively was that we were going to infect the larger company that was swallowing us up, that we were going to inculcate our culture into them. I think we could have done that if I had realized that I needed to train the team on courage and sticking to their convictions. I think I failed in choosing a bad leader. Not a bad leader, but somebody who wasn’t really equipped to withstand—

Karen Clark Cole:
Somebody who had to do your role, right?

Sherry Deutschmann:
Yes.

Loren Feldman:
Although that was going to be hard anyway. Once they got rid of profit sharing…

Sherry Deutschmann:
But the right person would have stood up for that and would have gone to the board and said, “No, this is why we’re profitable. These other companies that you’re acquiring, they’re not profitable. They’ve got tons of debt. They’ve got three times the employees we have with the same revenue.” I wish that I had taught them to take that tack and to infect the other company.

Loren Feldman:
What are you doing now?

Sherry Deutschmann:
Too much. The first thing I did was start a little angel investment firm to invest in women-owned businesses, because women only get less than 2% of the private equity and venture capital. I wrote a book, Lunch With Lucy. It’s available right now on Amazon, but it’ll be out at a bookstore near you on March 10th.

Karen Clark Cole:
There’s a lovely quote at the beginning that you put in by Mother Teresa. Can you tell me about that? Is that an old favorite of yours?

Sherry Deutschmann:
Yes. It might make me cry. She said, “There is more hunger in this world for love and appreciation than for bread.” When you think about how many people in the world are starving literally, don’t have enough food, and more people are suffering from lack of love and appreciation.

Karen Clark Cole:
Yeah.

Loren Feldman:
You started the investment firm, but don’t you have a business now as well?

Sherry Deutschmann:
Yes, I’ve started a company, BrainTrust, which is a peer-to-peer membership for women-owned businesses to help them get to the crucial million dollar mark. Less than 2% of women-owned businesses—I think there’s almost 12 million of us now in the U.S.—get to the million dollar mark.

Karen Clark Cole:
And beyond that.

Sherry Deutschmann:
Right. I think the average is $88,000 in annual receipts. You’re not going to ever build personal wealth or financial independence when your total cash receipts are $88,000. You’re not going to change the lives of your family at that rate and you’re not going to be able to be an influencer in the community to change the world.

Helping women get to a quarter of a million dollars, at that point, they can start paying themselves a little better. By the time they get to a million, they’re making a decent salary. They have several people working for them who are working in the business so they can work on the business. At that point, they are more bankable so they can get a line of credit to grow the business. They can attract investors. Importantly, they can join come organizations like the Women’s Presidents Organization and EO, the Entrepreneurs Organization. But until you get there, you can’t be a member.

I had been lucky enough to be in WPO and EO and found how critically important they were to me. I started this organization for all those women who don’t qualify. I’m going to help you get there. We’re going to help you get there so you can move on and go from a million to 10 million.

Loren Feldman:
Sherry Deutschmann, thank you for joining us. Really appreciate you sharing your story.

Sherry Deutschmann:
Thank you. It’s been a pleasure.


Part 2: Interview with Lori Torres:

Loren Feldman:
Lori Torres, welcome to the 21 Hats Podcast. Really appreciate your stopping by to talk about Parcel Pending. Tell us what the company does first.

Lori Torres:
Thank you so much for having me here. I’m thrilled to be part of it. At Parcel Pending, we have electronic smart lockers. We manage packages. We’re a package management solution company. Envision a bank of lockers that have a keypad where a courier (UPS or FedEx) can go to the touch screens. Once they find your name in the system, they then put a package into the locker, close the locker door, and now it sends you a text or an email that says you have a parcel pending.

Karen Clark Cole:
Is this a physical locker?

Lori Torres:
It’s a physical locker. Imagine you’re at work and you have personal items delivered, and instead of having it stolen off your front porch at home, you can have it shipped to your office, but it goes straight into the locker at your office building. Now you can go on your way home, grab your package, off you go, and you have not lost your package.

Karen Clark Cole:
There are varying sizes that you can rent, I assume?

Lori Torres:
That’s correct. Small, medium, large, extra large. Different sized lockers for packages. We are now in multifamily, commercial, grocery, retail, universities, and commercial office buildings. We even have our lockers in corporate headquarters such as UPS. All their employee packages go through our lockers at their headquarters.

Karen Clark Cole:
When you say multifamily, do you mean apartment buildings?

Lori Torres:
Yes, apartment buildings.

Loren Feldman:
Can you tell us how big the business is now?

Lori Torres:
We’ve grown the company over the last five years. We’re now in 48 states and Canada. We take 1.6 million packages a month. We’re expecting to take 3 million from Black Friday to Christmas this year, so it will be a crazy, wild ride. It’s a lot. We have over 200 employees.

Loren Feldman:
Wow. Where did the idea for the company come from? How did you end up starting it?

Lori Torres:
I was in real estate my whole career. I was working for a large company, a developer in Orange County, California. We had 44,000 apartment units and I was the senior vice president overseeing the operations of those 44,000 units. I kept going to the properties and they would say to me, “Lori, we have such a package problem. We need more headcount, we need bigger package rooms.” And I thought, “No way, we’re not going to add headcount. That’s going to kill on the margin. And we’re not going to get bigger package rooms because just doesn’t make sense.” So I knew there had to be a way to take technology and marry it to something, some type of a box system so it could be self-service.

The other benefit to Parcel Pending lockers is that you can get your package in the evening on your time. We have people pick up packages at 2am, 4am.

Karen Clark Cole:
Can people share lockers?

Lori Torres:
It’s not a one-for-one. It just depends on when your package comes today, your locker might be in the left upper hand side of a small locker. Tomorrow, you might get a package over on the right hand bottom that’s a large locker. It’s not your own designated locker. It’s based on when you have a package. If you don’t get a package but once every five days, you only have a locker used once every five days.

Karen Clark Cole:
You pay per package?

Lori Torres:
No, there are different pricing models. We actually sell the lockers to the landlords and owners and they pay a monthly software and service fee. Some models, we give them the lockers and then the end user pays a monthly fee. In the different verticals that we’re in, there are different models, whether it’s a subscription model, a lease model, or a purchase model.

Karen Clark Cole:
How many years did it take you to figure out these different models?

Lori Torres:
I just thought, “This is going to be genius.” At one point, I actually thought we will never sell another locker and we will only give lockers away and charge this fee and the residents will pay. Well, the industry said, “No, we don’t want to nickel and dime our residents. We want this as an amenity.” And so they said, “We’ll pay for it.” I really thought that 80% would be the subscription model and 20% would be the purchase, and it’s the opposite.

Karen Clark Cole:
How many years did it take to figure that out? Was the subscription model gradual?

Lori Torres:
No, we’ve only been in business six years now. We’ve had to figure out a lot very fast.

Karen Clark Cole:
Wow, you’re growing really fast.

Loren Feldman:
Was anybody else doing this when you started?

Lori Torres:
When I started, no. Then since I started, there have been a few competitors. I’m sure you’ve heard of those guys called Amazon, and they’re a big competitor now.

Karen Clark Cole:
With the same sort of product?

Lori Torres:
The same product, yes. They came into multifamily because they want to distribute more packages.

Loren Feldman:
They’re not just in Whole Foods?

Lori Torres:
They’re not just in Whole Foods anymore.

Loren Feldman:
I didn’t realize that.

Lori Torres:
They’re in universities, commercial office buildings, retail even, and the reason for that is they just want to distribute more stuff faster. But their model is completely different. They’re not doing it for a P&L purpose. It’s tough because competing against them when they’re not out to make money—their prices can be significantly less than ours. We have a value proposition of what makes us different. I will tell you that competing with Amazon, some entrepreneurs I’ve heard say, “We went out of business because we couldn’t compete with them.” For me, I’m like, “Bring it on.” This has been the greatest challenge. It’s made us a better company. It’s made us smarter and think better and be more on our feet. I’ll take it.

Loren Feldman:
But it must have squeezed your margins too, didn’t it?

Lori Torres:
It has squeezed in some areas, for sure. Then the tariffs have certainly squeezed margins because we manufacture in China. We’ve got our challenges. It’s not been a walk in the park by any means.

Loren Feldman:
Oh, that’s interesting. How did you deal with the tariffs?

Lori Torres:
You deal with them. Do you have a choice? We’re actually moving our manufacturing out of country. This year, we’ll start manufacturing still offshore, but in a different country.

Loren Feldman:
Vietnam?

Lori Torres:
Yeah.

Loren Feldman:
Interesting. With that kind of fast growth and competing with Amazon, did you have to raise capital to build the business?

Lori Torres:
I bootstrapped my way for the first year or so. Then I did an angel round of about a million and a half. Then I had a strategic investor. We did a $15 million round. The strategic investor was interesting because we’d set it up in different tranches and we ended up after the first year of that deal going back and renegotiating it. It became a revolving line of credit and I only used $6 million of the $15 million before selling the company. I recently sold the company in January to a French company, Neopost. Now they have changed it to Quadient.

Lori Torres:
They’ve been in business since 1934 in mail, so probably every mailroom you go into either has equipment from Neopost or from Pitney Bowes. The two are competitors. Big, big business but somewhat declining because obviously people aren’t sending mail anymore. The locker strategy made a lot of sense for them and it was in alignment with their business and the other business verticals that they have and products that they have. They already had lockers in Japan and in France, but they couldn’t bust into the United States. So you know what I say: “If you can’t beat ‘em, buy ‘em.”

Karen Clark Cole:
Their locker system in Europe was similar to yours?

Lori Torres:
Yeah, similar technology.

Loren Feldman:
Had you been thinking about selling the business?

Lori Torres:
It’s a great question, because of course, I had been thinking about selling the business from the day I started the business. I will tell you, I think it’s really important that I never did it to make money. While I’ve had a wonderful outcome, it was never my goal. Like, “Ooh, I can’t wait, I’m going to be rich.” Not at all. I was solving a problem. I’m a solution finder. The real estate business I was in—you’re in property management and property operations. All you do all day long is solve problems.

When I saw this problem, I knew I could solve it. But yes, once I started planning for the business and writing my three-year plan (before I even put a name to the company or spent $1, I wrote a three-year plan), I always thought I’d exit in probably seven years.

Karen Clark Cole:
You really are a planner.

Lori Torres:
Yeah, I really am. We were starting to just interview investment bankers who were we going to use. We were going to have our first audit, because we didn’t even have a formal audit yet. We were just in that process and they came along and it was a crazy fast deal. I met them December 3rd in my office, we got a letter of intent December 21st, and we closed on January 23rd.

Karen Clark Cole:
Holy moly!

Lori Torres:
It’s a 32-day deal. They said, “We’ll do light due diligence.” No, EY was involved. Let me tell you…

Loren Feldman:
On your side or their side?

Lori Torres:
On their side, and it was not light due diligence.

Karen Clark Cole:
They went that fast?

Lori Torres:
You know what’s interesting about that? I think you set a precedent. It set a precedent for the new owners if they think that we can always work at this pace, which we do. We work at an insane pace. They said, “We’ve never seen a company fill a data room as fast as you guys filled the data room.” Because we worked day and night and it was over the holidays. December 21st was the letter of intent. The office was pretty empty. People were off because of the holidays and we just worked day and night, weekend after weekend. It was crazy.

Karen Clark Cole:
Wow, congratulations.

Lori Torres:
Thank you.

Loren Feldman:
I hope you don’t mind me saying I read on the internet that you had a very successful outcome. You sold the business for $100 million.

Lori Torres:
It was over 100 million dollars. I don’t like to say it out loud, but it was very public because a public company bought us.

Loren Feldman:
Was that a difficult negotiation or did they come knowing what they wanted to do?

Lori Torres:
They were very clear on what they wanted and they had a clear agenda. I had a clear agenda, and I wasn’t planning to sell the company. I thought we were two years out and our revenues weren’t far enough along. Our new business verticals that I was trying to achieve hadn’t gotten to where they were. I said, “Look, in order to sell, this is the price.” I just stayed firm on it.

Loren Feldman:
You stuck to it.

Lori Torres:
I stuck to it and they stuck to it as well. They’re great people. They were such wonderful people to work with. I really enjoyed everyone at the company,

Loren Feldman:
And you’re staying with the company, at least so far?

Lori Torres:
Yeah.

Karen Clark Cole:
How long?

Lori Torres:
I’m under contract for a couple years.

Loren Feldman:
Did you sell 100%?

Lori Torres:
I did.

Loren Feldman:
You’re an employee.

Lori Torres:
I am an employee again. Here’s the funny thing. I was in corporate America my whole career, for 30 years. I really thought I’d probably be the best person to be acquired by a large corporation because I can deal with corporate America. Is it as much fun? Maybe I would admit that it’s not as much fun as I used to have.

Karen Clark Cole:
Do you get to go to France more often though?

Lori Torres:
I have no invitation to France yet, so no. I’m sure the day will come. I have too much to do. We have huge, huge growth goals. I don’t have time to go to France because we are running with our hair on fire.

Karen Clark Cole:
What’s your role in the new organization?

Lori Torres:
The CEO of Parcel Pending.

Karen Clark Cole:
They kept it separate.

Lori Torres:
Yes.

Karen Clark Cole:
So you’re running the U.S. part of it then.

Lori Torres:
U.S. and Canada.

Loren Feldman:
Do you have a lot more capital to spend now?

Lori Torres:
It is really nice to have the big backing of a billion dollar company. We’re scaling it much faster than what we we were able to do and making the investment back into the company now. It’s a wild time.

Karen Clark Cole:
Giving Amazon a run for their money?

Lori Torres:
For sure. They know us. But Amazon is Amazon. They can make a decision to give away free lockers. If they do that, that’ll be a problem for us, but also they’re not delivering on their promise and their service. Not everyone’s elated with them. I just had a client meeting in Dallas on Monday and the client said, “I can’t wait to get these lockers out of here,” which were Amazon Lockers. But you’re going to have good and bad. I’m sure there are people who say that about us, right?

Loren Feldman:
We’re having this conversation at EY’s annual Strategic Growth Forum. You’ve been here many times because you’ve been a part of the Winning Women program. Tell us, how did you get involved with that and what did it mean for you?

Lori Torres:
It has been a game changer for me. I was in the class of 2017. I have met amazing people. I have friends for life. I have a group of gals where we travel together, we talk. Three of us all sold our companies this past year, and all three of us are struggling somewhat in the new world, just because there are the goals. When a new company comes in and buys you, they want to take it to a whole new level, and we were already growing at this crazy level. It’s challenging, but it’s nice to have some partners in crime and to talk to other CEOs. You can’t have that conversation with your employees. It’s nice to have other CEOs, and that’s what it’s done for me—it’s created this network of people to be able to call and reach out.

Loren Feldman:
You’ve forgiven EY for the due diligence they did on you?

Lori Torres:
It’s funny that you asked me that. But yes, I had a softer spot in my heart because of it, so I didn’t want to wring their necks as much. There were three times during the deal that the deal almost died, but I had leverage. I was not in a hurry to sell. There were three different times where I was like, “If we need to put this on hold, and pause and go clean up what you think is an issue, let’s wait six months.” They were motivated to make the sale happen, so it did.

Karen Clark Cole:
Suddenly the problem went away?

Lori Torres:
It did cause a few pain points for us, I will tell you.

Loren Feldman:
Did you learn anything through that process that you think others could benefit from?

Lori Torres:
Oh my gosh, I learned from every process. In the Winning Women program, the women who take advantage and really embrace the program get so much out of it. The women who don’t, don’t. They don’t show up and don’t participate and they are so missing out.

Then selling the company—especially doing it in 32 days—you just don’t get an experience like that. There were so much I didn’t know. I had to make a ton of phone calls and get advisors in. “What do you think about this? Oh my gosh, I’m not sure what direction this is.” Then what happens is when you’re going that fast, and you’re so tired because you’re working so many hours, you simply start to forget things. You’re like, “Wait, did we negotiate that? Did you get that covered?”

Loren Feldman:
You also can’t run the business the same way when you’re going through something like that.

Lori Torres:
You can’t. The acquisition has hurt—not hurt I wouldn’t say—but it has been a challenge for Parcel Pending for this year. I finally feel now after 10 months, the dust has settled and we’ve got our arms back around this beast. We can go and take on this next trajectory. But it really set us back because there’s this get to know you and so many new processes and new reporting. It’s been a challenging year for sure. I say it’s been the hardest year ever, but I think that maybe it’s like having a baby and you forget the pain, because every year growing my company was really hard.

Karen Clark Cole:
Did your employees know that you were going through that?

Lori Torres:
Yes and no. There was a small group that was under the tent, about six of us. For the beginning, no. My family didn’t even know. I couldn’t even tell my family in the beginning and that was pretty brutal.

Loren Feldman:
Is this because your family is particularly untrustworthy?

Lori Torres:
No.

Loren Feldman:
I was kidding.

Lori Torres:
No, you weren’t. Part of it was when I was growing the company, I ended up hiring a lot of people. There’s this web of a lot of connections. My son knows this guy who works at my company and this guy knows this guy who knows my son, or my other son, they’re best friends, and she works here. My ex-husband’s best friend was an investor in the company. There were all of these interconnections so I felt I couldn’t tell the family until we were ready and couldn’t announce because it was a public company. But I had to go to the shareholders because it was such a short window. I couldn’t get a vote in time. There were a lot of challenges that happened with that quick of a sale. I had to tell my family the day before I told the shareholders because I knew that the shareholders that knew my husband were going to reach out.

Karen Clark Cole:
You didn’t tell your husband?

Lori Torres:
Ex-husband. We weren’t married at the time, but I still had to tell him.

Karen Clark Cole:
What was the reaction from your employees?

Lori Torres:
I think it was mixed. We had a vision and we were clear on what our purpose was, and we were clear on what we were trying to accomplish. Then the game changes and it creates fear, because the first thing that happens when you sell a company, is that people say, “What’s in it for me? And what’s going to happen to me? And oh my gosh, are they going to keep me around?” It’s not like a company that comes in and buys you has all these people in their back pockets, but you hear of all the horror stories where people lose out on opportunities and things change. It was funny because I have an all-hands meeting with all employees once a month, and we talk about what’s going on in the organization. When I announced that we were selling, that we had sold the day that it was closing, I asked the team to raise their hands if they thought we were going through a sale. Half of the room said yes.

Karen Clark Cole:
Really?

Lori Torres:
Yeah, we’re just we’re too transparent of a company and then all of a sudden, we’re doors closed and we’re off-site meetings. It was just not our behavior, and they knew something was up.

Loren Feldman:
Last question: you referred before to how fast you were already growing and then the challenge of being bought by a much larger public company and having to grow even faster. What are you doing to grow even faster and what are the challenges that you’re facing?

Lori Torres:
You want me to give you my secret sauce? I can’t because Amazon could be listening or another competitor. We have had significant growth in prior years. For the first five years, we had 70% year-over-year growth every year. It was just insane.

Loren Feldman:
Now you have to do it even faster.

Lori Torres:
Even faster.

Karen Clark Cole:
So without telling us what it is, do you have a secret sauce? Is it like that?

Lori Torres:
I think that every company has a secret sauce.

Loren Feldman:
Do you have a secret sauce, Karen?

Karen Clark Cole:
I don’t know about that.

Lori Torres:
I think you have to ask yourself what makes the company successful and why are other companies that have a good product and a good service not as successful? I think it’s about the vision of where you’re going. It’s absolutely about the people.

Karen Clark Cole:
I read you talked about employee appreciation.

Lori Torres:
Yeah, because I couldn’t have done any of this without the team. I won the regional EY, and it felt wrong for me to take that that win. It was not me. It’s the team that did it. I could never have done it without the team. Every single person in my company benefited from the sale. I wanted to show my gratitude. They all have stock options, but no one had vested. We hadn’t been in business long enough to vest.

Karen Clark Cole:
That’s awesome.

Loren Feldman:
Lori Torres, thanks so much for taking the time. Really appreciate your sharing your story.

Lori Torres:
Thank you for having me. I appreciate it.

Episode 35: I Would Be Scared, Frankly

In this week’s episode, the tables are turned. This week, it’s host Loren Feldman who fields questions and takes advice after he explains why the BusinessAdvantage TV Podcast will once again be The 21 Hats Podcast. “The bottom line is: I am now the proud owner of a pre-revenue startup that has a daily email newsletter that we've been giving away for free, plus this weekly podcast that we've been giving away for free, and the designs for an unbuilt website that we had hoped to one day charge subscription fees for. Any thoughts?”

Guests:

Paul Downs is founder of Paul Downs Cabinetmakers.

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

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Paul Downs: “I would actually warn against thinking too small, because that’s a trap I’ve found myself in for many, many years.”

Jay Goltz: “So the first thing you do now, before the world finds out that you’re not gainfully employed, is call your credit card company and get your limit raised. Little entrepreneur tip.”

Dana White: “If your product is solving a problem, or walking people toward solving the problem for themselves, they will definitely pay for it.”

Full Episode Transcript:

Loren Feldman:
We’re gonna do something a little bit different this week. For a change, you guys are gonna get to ask me questions, which I’m sure you will all enjoy. This week, of all things, we’re going to talk about why this podcast is going back to being The 21 Hats Podcast. I’m thinking our listeners will find this conversation interesting, and also, because I am now the owner of 21 Hats and since I’m fortunate enough to do a weekly podcast with experienced business owners who have done—

Jay Goltz:
Who are they? When are they going to get on here?

Loren Feldman:
Right after you guys. Experienced business owners who have done what I hope to do, which is build a business, and who also happen to represent my target market—the very people I’m hoping to turn into customers. I’m going to take this opportunity to tell you what’s going on, and to throw some ideas at you and see if I can get some free advice. You guys okay with that?

Dana White:
Great, yes.

Paul Downs:
Sure.

Loren Feldman:
So, first, you guys know most of this. Let me give our listeners some quick background. But all three of you, please feel free to interrupt with questions or boos or anything at any point.

Background: I’ve spent roughly the last 20 years covering entrepreneurs and business owners for the New York Times, for Inc. Magazine, for Forbes. Two years ago, I left Forbes to partner with Adam Witty, who owns a book publishing company, Advantage/ForbesBooks, that helps entrepreneurs write books. The idea was to take what I had learned at The Times, at Inc., at Forbes, and together with Adam, build what we hoped would be the definitive publishing company for entrepreneurs and business owners in America.

And we got off to a pretty good start. We have the Morning Report, the daily email newsletter that goes out first thing in the morning. We scour the web to bring together highlights of all the news business owners need to know first thing in the morning. And with this podcast, which as you guys well know, has been tracking the journeys of six business owners—the three of you plus three others—through this whole crisis.

The next piece of the business that we hoped to build was to be a content and community website—a platform that I spent most of last fall working with developers to design. We got it completely designed. We were really happy with it. But we never got it built. We probably needed about three more months before the crisis hit.

So here’s where we are: Adam and I have come to a very friendly agreement that, given the changing circumstances, he should focus on what he does, meaning Advantage/ForbesBooks, and I should focus on what I do, which is 21 Hats. The bottom line is: I am now the proud owner of a pre-revenue startup that has a daily email newsletter that we’ve been giving away for free, plus this weekly podcast that we’ve been giving away for free, and the designs for an unbuilt website that we had hoped to one day charge subscription fees for. Any thoughts so far?

Jay Goltz:
Good job.

Dana White:
Yeah! Here, here. Here, here.

Paul Downs:
I’d be scared, frankly.

Jay Goltz:
Don’t tell him that part of the entrepreneurial journey. He’s got to figure that out for himself.

Loren Feldman:
Hey, I’ve been talking to you guys long enough to know that I should be scared. And you’ll be happy to know I am. And I’m not sure congratulations are in order just yet, but …

Jay Goltz:
Let me step in here. Congratulations are in order.

Dana White:
Congratulations!

Business is all about leverage and control. Those are my two words: leverage and control, and you have never had control because you’ve always been an employee. So for the first time—from what I can see—in your whole life, you’ve got control over your destiny. And leverage is, you’ve got a great base to work off of.

You’re the only person I know of who has been this intimately involved with small business and has wonderful tight relationships with people. You’ve been there on the front line with them, and you’re going to now leverage that in the right and proper way that feels right and not have to have a distraction of another entity that has its own needs and desires and agendas. And hence the name’s back: 21 Hats.

Dana White:
Woohoo! Love it.

Jay Goltz:
Yeah, which is where we’re at. Congratulations. You’re in your sweet spot. You just don’t know it yet.

Loren Feldman:
Well, I appreciate all of that. Thank you for saying it. The reason I’m scared is because I still have to prove that people will pay money for what we’re doing. I had tremendous confidence that they would pay money for the website, had we gotten it built. The question now is: Can I monetize the assets that I do have, including the Morning Report, this daily email newsletter that I know the three of you read. Do you think people will pay for it?

Jay Goltz:
Well, here’s the beauty of your new business model. There’s no longer an overhead here, lots of employees and office space. Your overhead is so low now that—

Loren Feldman:
My overhead is my mortgage. [Laughter]

Jay Goltz:
Right, so that’s what I’m saying. It doesn’t require turning this into a $2, $3, $5 million dollar business. I believe that there’s enough good content that you give out. Your value proposition, I believe, is solid, and people will pay to get it, because it’s gonna be a very moderate cost. I do believe that you’ll be able to quickly monetize this thing.

Dana White:
I think that people pay for answers and people pay for a map, and so if your product is solving a problem, or walking people toward solving the problem for themselves, they will definitely pay for it.

Jay Goltz:
Let’s look at the marketplace, I mean—

Loren Feldman:
I want to hear from Paul. Are you pulling out a credit card? I know you’re my friend, and you’re going to do it, but…

Paul Downs:
Well, no, I would do it on the strength of, I subscribe to a bunch of papers because I want there to be papers, and so I would subscribe to your Morning Report, because I want Loren Feldman to prosper. And the things that you’ve done over the last 20 years, I want them to continue. I mean, we don’t know what the price is, but I presume it would be something that your average business owner could swing,

Jay Goltz:
Which is great. Tell us, Paul, what you think. Tell us right now, before you get tainted hearing a number. What would you think this price is going to be?

Paul Downs:
I honestly don’t know. Since we have the actual source of information available easily, why don’t we ask Loren what he’s thinking?

Jay Goltz:
No, no, we have to ask you first before you get tainted. So the question is, would you be surprised if it was $50 a month? What’s your visceral reaction?

Paul Downs:
That seems a little high.

Jay Goltz:
Right, okay.

Paul Downs:
It’s an aggregator at the moment. If you wanted to charge more than, let’s say $15 a month— which sticks in my mind as being about the Philadelphia Inquirer across [from] me—you would need to start producing your own unique content. And as Dana said, that content would have to serve as a map and be useful for people. I don’t think there’s any reason why people wouldn’t pay more for good content, but it has to be something that really works for them. And it has to be something that they can’t get cheaper elsewhere.

Dana White:
Who’s your market, though, too? That’s the other question. Is your market the business owner who’s been in business five-plus years? 10-plus years? 15-plus years? Who’s your market? Because that problem you’re helping them solve for, that map looks very different. My map looks very different than Jay’s map.

Jay Goltz:
But that doesn’t mean that the content isn’t equally valuable to you and me. Paul, you did answer the question. Loren and I have talked about that price, and that’s what we were thinking: 10, 20 bucks. That’s exactly where we were thinking, and you hit right into the sweet spot of what seems to be a reasonable number.

Loren Feldman:
And you did raise an interesting question. You’re right that it is primarily an aggregator at this point. Obviously, we’re producing fresh content with this podcast, and that leads to an interesting question: Do I put the podcast behind a paywall? Or do I keep it free as it is now? My preference would be to keep it free, if possible, and produce other types of content. My hope, though, is that the aggregation itself is of value—the fact that I scour the web and pull stories together that I think are useful, valuable to business owners, put them in one place for a quick read every morning.

Jay Goltz:
You’re curating, and yes, curation is an art form. You have got 20, 30 years of experience that most people do not have of knowing what articles are going to resonate and are going to be valuable.

Paul Downs:
Yeah, I think Loren is uniquely poised to start doing something which is actually quite different and better than aggregation, which is to de-emphasize the startup world, and start talking more about the Main Street world. In the articles that I see in the Morning Report now, there’s still this over-emphasis on California and raising money and a bunch of stuff that really doesn’t feel like my world at all.

To wrap it around to you gaining control of this company, you’re at a fork in the road where you either try to bootstrap this thing yourself and start listening directly to your clients and figuring out, “Okay, what does that leave me?” Or try to go out and raise money, which means that you’re responding to the ideas of the people with the money about what they think is valuable.

Dana White:
I’d love to piggyback on that. As Paul said, a lot of the information out there is focused on Silicon Valley and Silicon Alley, which is New York, and it’s not about Main Street. You have a unique opportunity to talk to the business owner who’s been open for five years who doesn’t quite understand what to do.

I’ve been fortunate enough to be able to speak with Jay and you and listen to this podcast and talk with you guys about my fears. And you go, “Oh, Dana, that’s nothing. That’s just a part of it.” Oh, really? There are so many business owners out here who don’t know that. There are business owners out here who go it alone. This podcast and the Morning Report can be somewhat of an encyclopedia, can be somewhat of a roadmap, and say, “You know what? Let me see if there’s a podcast [episode] from 21 Hats that talks about Day One, Main Street. Not Day One, Series A startup.”

You have this unique skill-set with all of these years of experience to talk to everybody in every phase of growing their business. One thing I would love to see you talk about is networking. My goodness, the idea and the revenue will get you far, but if your network isn’t where you need it to be… And you can do that. That is content you pay for, because as an entrepreneur who goes at it alone, you will have this voice in your head, this sound in your ear from the Morning Report, from the 21 Hats podcast saying, “Hey, we’ve been here, too.”

Loren Feldman:
I’ll never forget, I’ve told the story many times, of how I first got to know Paul. He sent me an email, in which he suggested that way too much of business journalism was focused on Silicon Valley, Silicon Alley, high flying, venture-backed companies, and not enough on the 96 percent of other businesses out there. He was in a particularly interesting place where he thought his company was going bankrupt at the time, and he was willing to write about it because he thought it would be helpful to other business owners. And to me, that’s kind of been the premise ever since then—trying to create content that would be useful to that type of business.

Jay Goltz:
And let’s get to the 21 Hats name, what that means. I don’t know if everybody’s thought about it who’s listening, but that was a very deliberate name, meaning 21 hats, there are 21 things, and that wasn’t pulled out of thin air.

Loren Feldman:
Well it was a little bit.

Jay Goltz:
Very little. There’s not 40, and there’s not 10.

Loren Feldman:
Okay.

Jay Goltz:
There’s about 21 things that business owners have to deal with—

Loren Feldman:
About.

Jay Goltz:
About. Okay, give or take five: insurance, hiring, firing, leases, employment agreements. There’s all kinds of things entrepreneurs have to deal with, and there’s really very few resources that really give you the inside scoop on what that’s really about.

Loren Feldman:
I didn’t want to pick a name that includes the phrase “small business” for all kinds of reasons. I think some people are offended by that name. Jay, I know you’re not. You include it in your Twitter handle, if you know you have a Twitter handle.

Jay Goltz:
Oh, I have a handle.

Loren Feldman:
I wanted a name that would show respect, that would indicate we don’t see you just as being small. We see you as doing something valuable that is not easy, and you can’t possibly be prepared to do all the things you have to do—whether it’s 21 or 41. And that was, to me, the main point behind the name.

Jay Goltz:
It’s also not a buffet where you can go, “Oh, of the 21, I’m just gonna pick out these eight. Maybe I’ll pick out the 17.” Because the reality is, you’ve got to deal with every single one of those things. And you can be gifted at some of them, and really good at others—

Loren Feldman:
And outsource others.

Jay Goltz:
But you can’t just go, “Oh, I don’t want to deal with that,” because that’s what could put you out of business.

Dana White:
Exactly. Here, here, Jay. Here, here.

Paul Downs:
I think the other thing to be considered—and maybe this is jumping ahead to a question you’re about to ask—would be: What is the form that this information takes? Because so far, we’ve got an email, a series of emails, and a series of podcast [episodes], but they’re not easily searchable. To me, if you wanted to provide value to these smallest businesses, it would be to start building a knowledge base in a way that’s searchable so that someone who just joined would be able to say, “I’ve got an HR problem, boom, I’m gonna go look at HR stuff.”

Jay Goltz:
You just described the website that he’s been trying to get going.

Loren Feldman:
That was the idea, but you make a really good point.

Dana White:
And social media. Social media is huge. You can do a 21 Hats Facebook group, and you could put all of this stuff in. They could search for it. “Here’s all the posts and links and podcast [episodes] on HR, here’s all the posts and links about sales,” like everything could be organized and catalogued via social media through hashtags and the website can connect to it. It’s easy, and it’s endless, and it’ll really help the podcast.

Jay Goltz:
Done.

Paul Downs:
There you go. That’s all you have to do.

Jay Goltz:
He’s got it. He wrote it down. We’re done. Okay, great. Take care, Loren.

Loren Feldman:
One thing I would point out—I don’t think everybody realizes this—we do create transcripts of every podcast [episode]. So you can go to 21hats.com and search a word version of the podcast [episode] and look for topics that you want to focus on.

Jay Goltz:
If we were sitting on an airplane next to each other, and you told me what you were working on, I would immediately say, “You know what, it doesn’t sound like what you’re doing is going to require a zillion dollars.” The second you try to raise money, that’s a whole job in itself. You’re back to having a boss. I believe you can pull this off without taking any investor money. And by growing it, bootstrapping it, and having control over it, because you don’t have any huge financial burdens that you’ve got to do.

The second you take money from someone, it’s a game-changer. And now someone could say, “Oh, Jay, you’re thinking small.” Maybe. I call it “thinking medium.” I’ve seen enough people thinking big who ended up giving away their business or having nothing but grief, that thinking medium works really well for me. You can make enough money and have control over your life. It’s a “Small Giant” model.

Dana White:
I think you’re thinking today, which is fine. I don’t think you’re thinking small. I think you’re thinking today. Today, I don’t believe Loren needs an investor. I mean, if it comes along, that might be something that he might set up for himself for the future. But today, he just needs to establish himself, have a strong social media presence, analyze his numbers and figure out how to market to get those numbers higher if they’re not high enough.

Loren Feldman:
I do like the idea of proving the concept before taking money, seeing if I can get this thing to work, prove that it works. And then, if there’s an investor that makes sense, consider that. Although I’d be perfectly happy never to go down that road, if possible.

There are now platforms—the best known one is called Substack—that handle the back end of an email newsletter. Substack is particularly popular among journalists who’ve been laid off, who have something of a following, who want to build on that following and monetize it without having to hire a tech person or develop those kinds of tech skills. With a platform like Substack, I can bring over—we now have about 5,600 subscribers—to the Morning Report. I can bring those over to Substack, and they will instantly make it possible for me to start charging, if I so choose.

They encourage you to believe that you are likely—if you try to convert to a reasonable price—to keep somewhere between five or 10 percent of your subscribers as paying subscribers. And if I were able to do that, I think that that would give me the start that would give me something to build on.

Paul Downs:
Can I jump back to what we were talking about just before that, which is Jay’s comment that you want to “think medium”? I would actually warn against thinking too small, because that’s a trap I’ve found myself in for many, many years.

Loren Feldman:
How do you mean?

Paul Downs:
I just focus on what’s in front of me and react to opportunities that come along, and I’ve never really had a grand vision for the company. I think that it’s been a problem, to a certain extent, that I didn’t have anything, any flag on the horizon, that I was heading towards.

Jay Goltz:
It’s not that I had a grand plan, but to what you just said, I did see a flag out there: “Oh, wait, I can do that.” So I did continue to expand. I’m right there with you. I think, yes, you need to look at what opportunities are out there. But I think thinking medium is a great place to be.

Loren Feldman:
Let me bounce this off you. I do think it’s useful to drop in the occasional item about that other world, the Silicon Valley world, just to remind people of the other path that is out there. And sometimes, frankly, it’s done to kind of make fun of it. Last week, we talked a little bit about Magic Leap, that company that raised billions of dollars and then fell flat. Sometimes it’s done just to make fun of the other approach that exists. I think that’s worth doing. What do you guys think?

Paul Downs:
No. Here’s my take on it. The way business journalism in general works is responding to the human desire for a happy fable. We know that most of this content just focuses on people who are outlandishly successful because there’s something in our minds that just responds to that. That’s the junk food of the business information economy, and it’s taken over pretty much everything.

One of the reasons why I challenged you to think big is because I think that there’s actually an enormous opportunity to provide really filling nutritious information to a really large group of people, which is people who are thinking of starting businesses or just started businesses or are in the, let’s say, under 20 employees, or under a million-and-a-half phase. Because that’s where the real danger of failure lives, is most pressing to the people who would use your content.

I think that it’s worth asking the question: What good is it when somebody starts a little business, like Dana or me, and it fails? Who benefitted from that? The ordinary tropes of business journalism have nothing to say to that entire audience, and that’s a big audience.

Jay Goltz:
When I started in business, the next year, a business publication came out—a magazine focused on small business—and I used to read it and think, “Oh my God, I’m not the only one with this problem.” It was real life stories of real life businesses and I could identify, and I could learn something with it. And now that very publication does nothing but talk about all the buzz stuff and it doesn’t have anything in there like that. It actually used to exist 30, 40 years ago. And now, to your point, it’s all about the hype.

Dana White:
That’s what I was speaking about when I said what I said earlier. I would love to see The 21 Hats Podcast and the Morning Report be a tool in the toolbox of a new entrepreneur, or someone who is in, as Paul said, that zone of, “Oh, this may not work, or it may take off.” Because, again, we don’t have that. I guess my other question for you is—and we may address this at the end—but how can we help you? Number one, how can we help, as members of this podcast, to help you launch?

Loren Feldman:
You’re already helping, Dana.

Dana White:
Yeah, but I guess my two cents on the numbers would be, you have the five or six thousand. I would grow it a little bit more before I charged. I would grow it as just 21 Hats. I would grow it in this organic space of it now being yours and grow it a little bit more. I guess the question is: When are you thinking about charging for it? I would just say, “Hey, grow it a little bit more before.”

Jay Goltz:
So in entrepreneur terms, Loren, since you’re new to this, that means take your charge card thing ‘til it’s almost at the limit, but not exactly there. Almost, and that’s when you pull the trigger to charge. Yeah, get that charge card balance up to a little bit higher.

Paul Downs:
I think that’s terrible advice. Not Dana’s.

Jay Goltz:
You know what? As they said in Rocky III, you’ve become civilized, Paul. It happens to all great fighters. You’ve become civilized. You got to take some debt on.

Loren Feldman:
We talked about this last week. Jay told us last week that he has always borrowed against his house. Paul, you’ve told us previously that you have not done that. That’s kind of the crux of what we’re talking about here. Frankly, I would love to do this without borrowing against my house.

Jay Goltz:
And I’m not sure you have to, because I don’t think you have the requirements. There’s not a right or wrong to this. It’s that I would rather borrow against my house and save my business and grow it than have the business go broke but know that the house isn’t being touched. So it’s a different mentality, and I believe my mentality is why my business has gotten to the size it is, but I am certainly not doing—well, I probably have been reckless in hindsight. But at the moment, I’ve gotten over the reckless thing. I’m not betting the house. I mean, I’ve got enough assets in the business that I’m not going to be losing my house, so it’s a balancing thing.

Dana White:
I think debt is translating for [Loren] as risk, and every entrepreneur needs to—

Loren Feldman:
Well, Dana, it depends on how long I follow your advice, how long I go without charging will determine how much debt I run into.

Dana White:
Are you comfortable with taking the risk? How long are you comfortable without charging?

Jay Goltz:
She’s got a great point about priming the pump some more. I think that’s a smart thing.

Paul Downs:
I kind of disagree with that, too. You guys have what? You said 5,600 [subscribers]?

Loren Feldman:
Yes.

Paul Downs:
Okay, so you’ve got it up? The first question I would ask is: What’s the trajectory on this? If you continue to do it exactly as you’re doing right now, would it continue to grow? Or have you plateaued? And the second thing is: What mechanisms have you established to hear from those people, so that if the content that you’ve been kicking out in this podcast are like, “They’re okay, and people like to listen to them for free, but if it could do X, it would be worth money to me,” that’s a question you want to be asking a lot of those people.

Loren Feldman:
That’s a great question, Paul.

Paul Downs:
Let me just finish. I don’t think you should be shy about charging right now, as long as you make it clear what people are buying, which is the continued existence and growth of this information channel, which is already, I think, unique, but with the opportunity to become even more unique and useful. If you had zero listeners, and you had to charge the very first person to sign up, that would be a tough lift. But you got here already. I wouldn’t undersell the possible commitment of the people who are already following you.

Loren Feldman:
I want to address something Paul said. One of the great lessons I learned working with you guys at the small business blog at The Times was that it wasn’t just about the content that we created. It was about the conversations that we created. Paul, you were especially good at this. You would occasionally just put up a post that said something like, “Here are the three problems I’m facing this week.” People would devote an inordinate amount of time to trying to help you with whatever problems you flagged.

Paul Downs:
And they did. I should just put that out there. I mean, we’ve left all the people who are going to listen to this podcast out of the conversation so far. Well, hey, to those people, I say, first of all, thank you, on behalf of Loren, for listening.

But second of all, my experience in The Times really changed my life, because it was the first time I had the opportunity to, first, access other points of view but, second, to get feedback. And that is incredibly valuable. Loren, if you can build a mechanism that allows people to, as much as possible, participate in that kind of experience, it’s definitely worth money.

Loren Feldman:
That would be part of what people would be paying for on Day One on one of these platforms. So for every newsletter, I could ask questions. Something comes up in a podcast where you guys are talking about the merits of borrowing against your house, we can start a conversation about that and people could weigh in. It would make this a much more interactive process and something that I think would make it much more valuable to people.

Jay Goltz:
So Dana, we didn’t ask you. How much were you expecting to pay for this?

Dana White:
Oh brother, about $10 a month.

Jay Goltz:
Okay.

Dana White:
Let me make a point. I’m not the baby, but I’m the youngest business owner here, and some of the people that I know who have listened to it, the content is something that they save for later. Not that they don’t listen right away, but it’s not necessarily affecting them today. A lot of the business owners that I talk to, they’re finding that the Morning Report [is], “Hey, guys, this is what’s going on out there,” and what’s going on out there isn’t necessarily affecting what’s happening right here.

My advice comes from the two cents that I’ve gotten from the business owners I know who read and listen, even from employees who read and listen. You have an opportunity for people who want to own a business to paint that picture and communicate on that level. You have an opportunity for people who have been in business one to five years, and so on. So that’s what I would like to see now that this is your baby, Loren, is crafting that message.

A lot of times when we’re listening to the people on the show, like Karen, William, Jay, and Paul, who have been in business for a long time, you all speak as if you’ve been in business for a long time, because you’ve been in business for a long time. And so sometimes, you’re not disconnected, you do remember, and you do talk about what it was like Day 17, but you’re removed from it. You’re no longer in it.

Jay Goltz:
So as far as Loren making a decision, I do believe that the number is between 10 and 20 dollars. In my mind, it’s clearly not $30.

Loren Feldman:
Let me clarify one thing that I think we may have blurred the lines on, which is that I do have the option of figuring out what people pay for and what remains free. The direction I’m leaning in at the moment is leaving the podcast free and available wherever people get podcasts while charging for the Morning Report. That’s a way of bringing in new people who will find the podcast on Apple or through Google or Spotify, but trying to convince them that the Morning Report is worth paying for at the same time.

Paul Downs:
How much would it cost to to finish out the website so that you could have some kind of interactive community? My favorite model is Reddit, because it allows for self-editing by the audience, in terms of the upvoting of the comments. But to me, that would be the thing to charge for.

Loren Feldman:
That was the original plan, and I certainly don’t disagree with that. It’s not a ton of money. It would certainly be less than $100,000. We had a deal to do it for about $60,000. I don’t know whether that would still be there or not.

Paul Downs:
Does Substack have any of those features to build a following? Do they also give you tools to build a community around it?

Loren Feldman:
Not in the same way we envisioned. We envisioned this website and designed it so that anybody who registers creates a profile page so people can learn about them and about their business. It requires people to register with their real name, to give a little information about their business, what industry you’re in, where you are, some sense of the size.

Then we were going to have forums, sort of like Slack channels by topic, by “hat,” so that, for example, during the crisis, when everybody was focused on figuring out what was going on with the PPP loans, we would have added a channel there, a forum where people could share information. I think that would have been incredibly valuable. That’s not available on Substack.

Jay Goltz:
I think this is where you can do a little research and don’t reinvent the wheel.

Loren Feldman:
Guys, I was planning on giving you a Morning Report News Quiz. But I was getting too much good information, listening to your suggestions, and we’ve kind of run out of time. I hope you’re all okay with that. [Groans]

But thank you for this. This has been a very different experience for me, having this conversation. I think it’s the first of many different experiences for me. I appreciate having all of you to call on. It’s been great getting to know you for years, and to know that you’re here asking what you can do to help is gonna, I think, help me get some sleep one of these nights.

Jay Goltz:
Okay, so the first thing you do now, before the world finds out that you’re not gainfully employed, is call your credit card company and get your limit raised. Little entrepreneur tip.

Loren Feldman:
That might end my marriage, but I’ll take it under advisement.

Jay Goltz:
Well, that’s assuming she knows about it.

Loren Feldman:
I want to thank you, Paul Downs, Jay Goltz, and Dana White, more than ever. I really appreciate this.

Dana White:
Thank you, and congratulations on a new start. This is awesome.

Paul Downs:
You’re one of us now.

Loren Feldman:
When do you become an entrepreneur—when you start a business? Or when it actually is a business? Anybody?

Paul Downs:
You become an entrepreneur when you—

Jay Goltz:
—don’t have a paycheck on Friday.

Paul Downs:
Yeah, when you walk away from the paycheck.

Loren Feldman:
Guys, thank you very much. Have a great week.

Episode 34: Landlords and Real Estate and Banks, Oh My!

In this week’s episode, Dana White, Laura Zander, and Jay Goltz talk about their real estate challenges. Dana decided to close one of her locations rather than keep dealing with an overly aggressive landlord. Laura, fearing her landlord was going to throw her out, decided to buy a building. But she hasn’t been able to close on the deal because, while she’s been to six banks, she has yet to find one that will fund the loan—even though she already has SBA approval for a loan. And Jay wants to take out a mortgage on a building he owns outright just to have some extra cash on hand, but he’s on his 10th bank. “You can’t get discouraged,” Jay tells Laura. To which Laura responds: “Come on, what do you mean, ‘You can't get discouraged?’ You see my face? It’s called discouragement.” Plus: the Morning Report News Quiz returns.

Guests:

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

Laura Zander is co-founder and CEO of Jimmy Beans Wool.

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Jay Goltz: “I’ve always borrowed against my house. It’s not the bank’s responsibility to be my partner. I’ve always been all in.”

Jay Goltz: “This is what I’ve done for 42 years. I get into stuff over my head. I choke on it. And I do figure it out eventually. But I’m not saying this is the way to do business.”

Laura Zander: “So here’s my question: At what point do you throw in the towel? At what point do you decide this is not meant to be?”

Full Episode Transcript:

Loren Feldman:
Let’s get started. One problem this crisis has created is a standoff between business owners who have no revenue or reduced revenue, and landlords who still want to get paid the rent. Dana, I think you’ve told us in the past that you’ve actually closed one of your locations, in part because of your struggle with your landlord. Can you remind us about that?

Dana White:
Sure. So I did, I closed the Southfield location in July, in large part due to the struggle with the landlord. I noticed, in that plaza, I wasn’t the only business who left during that time. I don’t think the landlord viewed our relationship as a partnership. I think he viewed it as, “You work for me.” He has several businesses.

You know, it wasn’t a conversation, even though a conversation was attempted. The conversation was, “Okay, so when are you going to pay me? And how much?” I was in a very aggressive and debilitating repayment cycle with him, but I could not endure and keep my business. So I chose to shut down that location, and we have been in court back and forth. We’ve been—

Loren Feldman:
He’s still trying to get his money.

Dana White:
Yes, and here’s the thing: he will get his money. But what you’re not gonna do is harass me and be mean and try to send me to jail. That’s what you’re not going to do. The landlord’s attorney actually tried to issue a bench warrant for my arrest.

Jay Goltz:
Oh, for God’s sake.

Dana White:
When I took over the space, there was inventory that was there, and I signed saying, “Yes, it was there.” But in order for me to renovate the space, his management people came in and took all that inventory out. Well, he has over 150 tenants. He doesn’t know. So when I returned what I had, they said, “Where is the stuff?” And I said, “Well, that’s what I had.” “Well, no, in September of 2012, when you took over, this is what we had.” And I said, “Yes, but you removed that so I could renovate.” And so his attorney says, “Judge, can we issue a bench warrant for the arrest of Dana White for the two mirrors and two chairs that are missing?” And she said, “Sir, this is a pandemic. We’re not even picking up criminals. We aren’t even issuing bench warrants for criminals.”

Loren Feldman:
This was over two mirrors and two chairs?

Jay Goltz:
No, no, this is just all intimidation. He knew he wasn’t gonna get it. He just wants to show what a big bad lawyer he is and he’s trying to scare you. That’s what this is all about.

Dana White:
The judge eventually dropped it because it’s ridiculous, and it’s a play. We’re at the point now where we’re going to come to a settlement agreement, which I will pay. I really don’t want anything in the way of some of the opportunities that I have coming down the line. I just want this done.

Loren Feldman:
How are things at that other location?

Dana White:
Slow.

Loren Feldman:
Well, in terms of your relationship with your landlord?

Dana White:
Wonderful.

Loren Feldman:
So then your revenue has to be down there. You just said it was slow, but you’ve come to an accommodation with that landlord?

Dana White:
Absolutely. This landlord, every time there’s a loan or a grant that she feels I qualify for, she texts me or emails me. That’s a partner, right? She’s doing what she feels she has to do to keep this tenant in business.

Jay Goltz:
Because there’s not a long line of people waiting to rent these spaces, and somebody needs to remind the landlord. Really.

Laura Zander:
Our guy in Texas, their office was sending us, “Hey, did you know about the PPP? Did you know about the EIDL? Did you know about this? Let us cut your rent in half for the first couple months, and then we’ll see how it goes.”

Loren Feldman:
Laura, you inherited that landlord when you bought the yarn supplier, Madelinetosh, late last year, right? That’s what you’re talking about?

Laura Zander:
Yes.

Loren Feldman:
But it sounds like you developed a pretty good relationship. Is that right?

Laura Zander:
Yeah, I think so.

Jay Goltz:
“Think” being the operative word. She “thinks” so.

Laura Zander:
Yes and no. He owns a ton of property in the Fort Worth area, and as it turns out, he had never been to this operation before, to this space. And they had been in this space for, I don’t know, eight years, 10 years. So he didn’t know what they had been doing, and didn’t know about all of the different changes that they had made to his building. He’d never gotten approval for any of those changes.

We do have a good relationship. He stops by every time I’m in town, and we talk a little bit. But he got very involved, and he started coming in every other day. He would come in early in the morning. He’d come in when I was not there, checking in on the staff, and really checking in on his building, because it had been changed a lot. And so, all of a sudden, he wanted to make sure that his building was okay.

We are going to leave there. The lease ends at the end of December, and he was really good. He said, “We’ll give you half off of rent,” for I think it was April and May, but the lease originally was supposed to end at the end at the first of August. He’s like, “We’ll give you half off, but only if you extend the lease until December 31st.” And I’m like, “Okay, that seems fair.” And that made sense for him not to try to look for new tenants at the end of the year. But I don’t think he’s going to renew our lease at the end of December. We’re kind of scrambling right now. But that’s unrelated to the pandemic or anything else.

Jay Goltz:
Well, yes and no. I mean, because of the pandemic, he’s gonna have a harder time finding a new tenant, so it’s not totally unrelated.

Laura Zander:
I don’t know about that. [The previous owners of Madelinetosh] had been leasing four different units, and so we gave one of the units back to him in June, because we just didn’t need that space, and he had somebody interested. He’s already filled it. He filled it last month. The reason he started coming to us is because he had somebody who was interested in the space that we’re in now, which now expires at the end of December. He’s got people lined up.

Jay Goltz:
Okay, good for him.

Laura Zander:
Yeah, I know. Good for him.

Loren Feldman:
So one question, this raises is, how great would it be if you owned your own location? Jay, you’ve been in that position for quite some time. How did that come to be?

Jay Goltz:
23 years ago, I was a tenant, and the neighborhood was getting hotter and hotter and the block was getting hotter and hotter. When I moved in, in 1978, it was basically an abandoned factory district. I was paying $1 a square foot for rent. I was paying 200 bucks for 2,000 feet or something.

So, over the next 20 years, the neighborhood was turning into a hot block. I recognized I was gonna get pushed off the block. A building came up for sale next door, and I decided I needed to buy it as a placeholder just for when that happens. I got an SBA loan, which is one of the greatest things the government does, and I put down 10 percent, and I bought the building. And then luckily, the building next door came up for sale two years later, and I bought that building. Again, on an SBA loan.

It is clearly one of the critical pieces to my survival and to my net worth. I can’t tell you I was smart enough, or I had someone whispering in my ear, “Hey, Jay, you better buy some buildings.” I did it out of necessity. But now I tell people, probably—there certainly are exceptions to this—you’re probably better off buying a building, especially if you’re in retail where people are coming to you. If you’re in an office that doesn’t matter where you’re at, maybe not as important. But it’s a critical piece to my stability at this point. I own three buildings, and a parking lot, and it gives me a lot more stability as things go bad.

Loren Feldman:
How hard was it for you to afford it?

Jay Goltz:
I came up with 10 percent of—I don’t remember what it was—it wasn’t that much money. The part that I did sweat was, I bought it for land value. The building was just falling down. The roof was caving in. There was no heating. It was a warehouse. I figured I’d put a couple hundred thousand dollars in to fix it up, which of course turned into $600,000, and I was totally stretched out and totally stressed out. It was clearly one of the most difficult periods in my business. It was extremely painful, but it was a game-changer.

Laura Zander:
How long was it painful? I mean, are you talking like, 12-hour labor painful, or 10 years?

Jay Goltz:
No, I would say it was painful for a year or two until I finally… there are multiple layers of pain. There’s also [the fact] that Jay’s nuts and got into a business he knew nothing about: “Oh, we should sell plants. There’s no plant stores around here.” So I opened up a store, it was called Jayson Home and Garden. We opened up a store to sell plants. My home store was still across the street, and the only problem was, I knew nothing about plants. So I opened up this store, I hired people who I thought knew what they were doing, and it was a couple years of pain.

Jay Goltz:
This is what I’ve done for 42 years. I get into stuff over my head. I choke on it. And I do figure it out eventually. It takes me a year or two, but I did figure it out. But I’m not saying this is the way to do business.

Laura Zander:
Is there a moment where you’re just like, “Okay, the pain is over?” In a marathon, at least you know where the finish line is.

Jay Goltz:
This is exactly a moment I had. The woman who runs the store’s father is an architect, and I had a relationship with him. He always comes to our openings and stuff. And I walked up to him during our opening for the garden store, and I was absolutely at the end of my rope. And I said to him, “I’m completely freaked out. I spent $500,000 more than I thought.” I went through the whole thing, and he started laughing. And I walked away, and I said, “Caroline, what’s with that?” She goes, “Jay, you don’t understand. You’re from a different culture. My father’s not used to people being that honest, and he just didn’t know what to say.” If it was my Uncle Irving, he would have put his hand around my shoulder, and said, “Jay, it always costs more when you build these buildings. Don’t worry about it. You’re going to be really glad you bought it in the long-term.” So I am your Uncle Jay, and I’m telling you, it’s okay.

Loren Feldman:
Laura, tell us: Where do you stand? You have to leave your current location. What are you doing?

Laura Zander:
Well, we’re trying to buy a building. We put an offer in June, July. We found a place. Oh, it must have been the beginning of July. I spent about two months working with the bank that we always use.

Loren Feldman:
The bank you always use in Nevada?

Laura Zander:
Yeah, U.S. Bank.

Jay Goltz:
A big bank.

Laura Zander:
Yeah, a big bank. It got down to August 14th, and I think we were supposed to close at this point—no, early September—so we’re just a couple days away from the due diligence period closing, and the loan officer sends a note and says, “Sorry,”—I just reread it—he said, “This went like four levels above what it normally needs to go to for approval. With COVID and with your industry being retail and e-commerce, we’re putting in new standards, and you don’t meet the new standards.”

Loren Feldman:
Madelinetosh is not a retail business. You mean sell to retailers. Is that the issue?

Laura Zander:
It’s a part. 30 percent of the business is retail.

Loren Feldman:
Oh, is that right?

Jay Goltz:
Let me cut to the chase. They all lie. They don’t want to deal with small business. End of the story. U.S. Bank doesn’t need you. They don’t need me. They don’t need small business. They’ve got big business to deal with, and you started at the wrong bank, and a smaller bank needs our business. I’ve been through this 10 times. These big banks always tell you, “No problem. We want to do this. We’re excited.” They come out with their loan officers. And then all of a sudden, out of the clear blue, somebody, somewhere back in Ohio or Toledo somewhere decides—in my case, I was with the big bank, and they literally the day before I was supposed to close, they told me they couldn’t give me the money. One of my friends luckily had a credit line. He lent me money ‘til I could change banks. I asked the banker a year later, he called me because he’d already changed banks. He said, “Well you know how it goes.” I go “No, tell me.” He said, “The new guy didn’t like retail.” That was the entire explanation. The new guy didn’t like retail—that was the whole explanation. So, I’m telling you: The big banks don’t need you.

Loren Feldman:
Dana, you’re listening to all this. I’m wondering, as you think about one day opening another location, are you thinking you want to buy? Or are you thinking you want to deal with another landlord?

Dana White:
I’m thinking I want to deal with another landlord. Eventually buy, but own the buildings, put Paralee Boyd in those buildings. But everything is so different now. This conversation, eight months ago or a year ago? Everything was just so different, and I think—

Loren Feldman:
Because of COVID?

Dana White:
Yes, because of COVID. And so buying is just not on my radar right now.

Jay Goltz:
But to be fair to what you’re doing, you might need a high-traffic downtownish location. And that kind of real estate in a smaller thing might not exist. So for you, if you want to be on a busy street in a bigger building, that’s not the kind of building you can buy. So for you, it might not make any sense to buy a building.

Dana White:
Yeah. For me, I don’t believe it does. Eventually, maybe. But you know, I’d like to take all that I’ve learned in dealing with landlords and put that to use, and then maybe eventually become one for Paralee Boyd—be the best landlord I’ve ever had. Plus, there are economic gains to being your own landlord—how you pay yourself and how you leverage that.

Laura Zander:
A big part of it for us is—I had an agent who broke it down for me, leasing vs. buying—because now we have, in some ways, very different kinds of businesses. The business in Texas is manufacturing, so we need to put $100,000 to $200,000 into the space so that we can use it to manufacture. We’ve got to get vents and plumbing and this and that. Whereas the other business is distribution. We just need pallet racks, and so we can really be anywhere. The other one is a little more dependent. We need to put more investment in.

Doug feels really strongly—and I agree—after experiencing the landlord, nice guy, but being in the building all the time. He threatened to kick us out one day because somebody had the fans turned the wrong way or something, and it was just a light threat, but being under that umbrella of being constantly threatened… If we can be our own masters, I think that that is really appealing. Plus, if we need to invest 100 or 200 grand to make this space into something that’s usable, why do that in somebody else’s building, if possible? That said, we may not be able to get a loan. I mean, I’m on bank six, and I’ve had—it’s been one large bank, and then five small banks.

Loren Feldman:
What are they telling you?

Laura Zander:
It’s just a slow, slow process. I’ve got the one bank that I’ve invested a lot of energy in. It’s a local Texas bank. I’m supposed to find out today. It’s at the—what do they call it—convergence? No, concurrence. It’s the last two guys.

Jay Goltz:
Are you trying to get an SBA loan?

Laura Zander:
Yes.

Jay Goltz:
Do they do a lot of SBA loans?

Laura Zander:
Yes. The SBA agent is who recommended this bank, and the SBA has already given us approval.

Jay Goltz:
Great. That’s a good start.

Laura Zander:
We have approval from the SBA. I’ve got one bank in Nevada, who said, “We would love to do it, but because it’s in Texas, we can’t,” after I spent two weeks giving all the documentation going through the dog-and-pony show.

Jay Goltz:
I can’t tell you how many times I’ve been through stuff with them, where they string you along for a month or two. And then all of a sudden, they tell you something that… My kid went for a mortgage at the same big bank. I said, “You’re wasting your time.” He does development. Finally after five weeks, they said, “We can’t give you the mortgage because you make your money on capital gains.” And it’s like—

Laura Zander:
Why couldn’t you tell me that five weeks ago?

Jay Goltz:
Right. They didn’t know that when he started? I mean, it’s unbelievable. So this is what I’ve learned: They’re salespeople. That’s what they are. They’re salespeople, and then they go back to the underwriters, who are in some room somewhere with no windows figuring out whatever they do with their spreadsheets, and then they bury you.

Laura Zander:
Yeah, but now I’m on a timeline, because our lease is up December 31st. We can’t just move. We need to build. It’s gonna take us probably a month.

Jay Goltz:
Your landlord can’t throw you out overnight. If you have to go back to him and say, “Listen, sorry, but we can’t move till March 1st,” he’s gonna have to go along with you. Because what are the options for him? Go get a court order?

Laura Zander:
Yeah, so I’ve already planted that seed, and I’m like, “We may need another month. We may need another month.”

Dana White:
It’s not even just with buying property, though. I have a girlfriend who’s trying to open a second location. She’s been trying to get a loan, and they told her to put her house up. They told her to do all of these things, all of these hoops. And this has been going on for over a year.

Jay Goltz:
Wow.

Dana White:
And again, there’s nothing like, “Oh, well. You may not know this, or there’s some things we don’t know.” No! It’s this guy sitting in an office who doesn’t like retail.

Jay Goltz:
Big bank?

Dana White:
No, it’s a CDFI. It’s a non-traditional lender, and the reason why they’re more cautious than they were when I initially went through them is because some of the businesses that went through them prior to her but after me didn’t do well with their money, meaning they would submit money, submit their final budget, submit to get a draw, and then use that money for something else other than what they told, other than the invoice they presented.

Jay Goltz:
What kind of money is she looking for, $100,000?

Dana White:
I think $200,000 to $300,000.

Jay Goltz:
And did she borrow against her house?

Dana White:
No, I don’t think so.

Jay Goltz:
Okay, I’m just telling you, I’m here to say from my perspective only, I’ve always borrowed against my house. It’s not the bank’s responsibility to be my partner. I’ve always been all in, and I use the equity in my house. And the fact of the matter is, to be fair to banks, they make a tiny little percentage on these loans. They can’t afford for 10 percent of the loans to go bad. They go out of business. So I understand that they need security.

Laura Zander:
That’s what’s making me crazy, Jay, is that we have enough equity in the homes. We have enough cash in the bank. We have enough for it.

Jay Goltz:
Which is why I’m confident you’ll get a loan.

Laura Zander:
It’s also a property. It’s four acres. So we’re being told that the land—

Jay Goltz:
No, you’re going to get a loan.

Laura Zander:
Well, good God, is this exhausting.

Loren Feldman:
Jay, have you been in a situation like Laura’s, where you had approval from the SBA but couldn’t get a bank to make the loan?

Jay Goltz:
No, that’s never happened. I’ve had three SBA loans, and they all went through, and everybody says, “Oh, it’s so much.” It really wasn’t bad. It was fine.

Loren Feldman:
Can you explain it? Why is Laura having a problem with it?

Jay Goltz:
There’s more behind this story. There’s something going on at the bank, God knows what.

Laura Zander:
Ahhh.

Jay Goltz:
They’re never honest. I’m in the middle of trying to get a mortgage for my building with no mortgage on it, and I’m on my 10th bank. I believe I’ve got the bank ready to do it, and I think I will, but it’s like dating. You’ve got to date 10 girls or boys before you find the right boyfriend or girlfriend to marry. These banks don’t want to take a risk, a lot of them.

Laura Zander:
The other factor that we’ve got going here is that, in the last two years, we’ve acquired three brands. We’ve invested, and we did a bunch of investment in technology. So our books for the last two years don’t look great.

Jay Goltz:
There you go. That doesn’t surprise me. Me neither. I’ve done the same thing. So that’s the answer.

Laura Zander:
They’re doing all these add-backs.

Jay Goltz:
And in my case, this is a zero-risk loan. I have more than enough assets to cover these loans. I have enough life insurance to cover these loans. And all they do is they want to check the one box: Do they have the cash flow to pay for this loan? That’s all. I don’t care if you’re worth $100 million. It’s shocking. All they want to know is you have the cash flow. So it doesn’t surprise me that your books don’t look great for the last couple years. Because this is the same issue I’m having. They just want to see nothing but profits galore.

Laura Zander:
So here’s my question: At what point do you throw in the towel? At what point do you decide this is not meant to be?

Jay Goltz:
I don’t believe in that “meant to be” thing. I absolutely do not buy into “meant to be.” There is a bank that is looking for business right now that would love to do your loan, and you have to find that bank.

Loren Feldman:
Laura, do you have the right location? Are you excited about what you found?

Laura Zander:
Well I am, but I guess where we got scared, or I start to wonder if I need to just surrender and maybe this isn’t meant to be, is because then we got thrown into a Phase II environmental. The due diligence period has actually taken two months now instead of just a month. We’ve had to push it back twice.

Jay Goltz:
Okay, been through that, and I can tell you, it’s all part of real estate. Phase II, part of real estate. No big deal. They find an oil tank that was down there. They get a bulldozer. They take the oil tank out. They fill it in. Not a big deal. I’m telling you, I’ve been through that.

My parking lot I bought, there was something in it, and my lawyer said, who is my brother-in-law, “You can’t buy it.” It would have put me out of business. I called my friend in real estate. He goes, “Please, there’s stuff in all the dirt in Chicago. You’re not putting a well on it. There’s not a problem.” This is just real estate stuff. Phase II’s are normal business.

Laura Zander:
And maybe it’s meant to be because it is pushing it forward so that we can get the loan that we need.

Jay Goltz:
All right, stop with this “meant to be.” You’re in control. You are in control of your destiny.

Loren Feldman:
Laura, you mentioned the equity in your home, so you’ve obviously made the decision that you’re willing to borrow against your home. Was that a tough decision?

Laura Zander:
To be honest, I don’t think they asked us that. I mean, we have to give all of our personal financial information, so we gave them all of that stuff.

Jay Goltz:
You’re going to be signing personally.

Laura Zander:
Are we? Okay. Yeah, we must have made that decision. Honestly, I leave that to Doug, because he’s so much smarter financially than I am. But I think that when we were originally going to do the loan to buy the business, we were going to have to do the same thing.

Jay Goltz:
Banks are not venture capitalists. Venture capitalists make a zillion dollars when the deals go well; banks make a little tiny percentage. They’re not in the business of sharing risk with you. So, I get it. I just wish they’d be upfront. When you show up, they say, “Yeah, you know what? Don’t waste your time with us. We’re not going to do it.” No, they drag you through four weeks, and then they tell you.

Like I said, I’ve been through this more than once. It’s ridiculous. You’re getting a loan today. That’s my prediction. And I say that not because of some spirit out there. You got sent to this bank by the SBA people. That’s an excellent reference. I believe they’re gonna give you the loan.

Laura Zander:
Yeah, I mean, I’ve met the presidents. One of the presidents came and picked me up at the airport.

Jay Goltz:
Wow.

Laura Zander:
Yeah, you know me. I took my best—I took my only nice outfit—and show up and meet everybody there and tell them my story. They all watched my TED Talk. Apparently, they are all in love.

Jay Goltz:
Okay, you’re probably getting the loan. That’s my answer.

Loren Feldman:
And if not, Jay’s on 10 banks. You’re only on six, Laura.

Jay Goltz:
Right, exactly. And every time you go through this, you get a little smarter. So now when I interview the banks, I know the right questions to ask. I’m brutal to them.

For instance, here’s something I didn’t know. I’ve got this new bank who my kid uses for his real estate stuff, and they’re largely a real estate lending bank. And he told me, in talking to him, [they said,] “Listen, we really would like to get this loan. Because since it’s owner-occupied, we can put it on the books as a business loan. We get criticized for being too real estate heavy in our lending.” So this is good for them, and that was good to know. I would have never known that. I would have never figured that out. So this is good for them. They’re looking forward to doing this loan because it’ll help their portfolio balance. I do believe I’m going to get it from them, and I’ve got two others that are interested. So you can’t get discouraged.

Laura Zander:
Come on, what do you mean, “You can’t get discouraged?” You’ve never gotten discouraged?

Jay Goltz:
I didn’t say I’ve never gotten discouraged.

Laura Zander:
You see my face? It’s called discouragement.

Jay Goltz:
No, stop with discouragement. Entrepreneurs can’t have discouragement. We dig in, and we forge on, and we get the job done. That’s what you’re gonna do. No more “meant-to-be” routine. That’s not for entrepreneurs. There’s no meant-to-be.

Laura Zander:
That’s bullshit. I’m sorry, but that’s like saying that you can’t be scared. I can be discouraged.

Jay Goltz:
We’ll save this for the podcast that we have on psychology. We’ll save it for that one. But I’m telling you, if this one doesn’t work, you go back to the SBA people, and you say, “Okay, give me a different one,” and they’ll find someone.

Laura Zander:
Well, I’ve got three other ones.

Jay Goltz:
Ahhhhhh!

Loren Feldman:
There you go. There you go. All right, we’re gonna stay on top of this, Laura. We’re gonna keep track of this. We’ll come back to this topic, but guess what? Back by unpopular demand, I have a Morning Report News Quiz for you guys today. As you may recall, these are questions taken from our daily email newsletter, which brings together all the news a business owner needs to read first thing every morning. You can subscribe at 21hats.com. You guys ready for the first question?

[Silence]

I’ll take that as a yes. Early this week, we highlighted a news item about a special travel adventure for those getting restless during the pandemic.

Laura Zander:
Oh, the flights to nowhere?

Loren Feldman:
Laura, you’re jumping the gun too quickly!

Laura Zander:
I’ve got things to do.

Loren Feldman:
This won’t take long.

Jay Goltz:
She’s just a winner.

Loren Feldman:
Let me finish the question next time, and just to finish this one so our listeners can know what you’re talking about, Nippon Airways sold 300 tickets for a special Hawaiian-resort-themed flight, and a Taiwanese airline sold 309 tickets for a special Hello Kitty-themed flight. The question was supposed to be: Where did these flights go? Laura. The answer was…

Laura Zander:
Nowhere.

Loren Feldman:
They took off and returned to the same airports.

Laura Zander:
Yeah, sorry.

Loren Feldman:
That’s okay. Question number two: As usual, we had a few items this week that mentioned Amazon. One noted that Amazon has been limiting the ability of rival companies—companies with products that rival Amazon products—to advertise on Amazon.com. In other words, the rival products don’t get positioned as well on Amazon.com as Amazon products. Here’s the question: What percent of all product searches occur on Amazon.com?

Jay Goltz:
42 percent.

Loren Feldman:
Not a bad guess.

Dana White:
70 percent.

Loren Feldman:
Dana says 70 percent. Laura?

Laura Zander:
I’d go 82.

Loren Feldman:
Actually, It’s 50 percent. I actually thought it would be higher, too. But still a lot.

Number three: John Mackey, the founder and CEO of Whole Foods, likes to promote what he calls “conscious capitalism.” His stated goal is to get businesses to elevate humanity by recognizing that there are more important things than profits. Here’s the question: Remind me again, which practitioner of conscious capitalism did John Mackey sell Whole Foods to?

Jay Goltz:
Jeff Bezos?

Loren Feldman:
Jeff Bezos, that’s right.

Jay Goltz:
No shame.

Dana White:
Somehow, profit is not important to the people who profit the most.

Laura Zander:
Exactly.

Loren Feldman:
Number four: Instagram is now 10 years old. Our item this week noted that the social network was the first platform to understand that, for all of us, our most important relationship is with A) Jeff Bezos, B) our landlord, or C) our phone. This is an easy one for Jay.

Jay Goltz:
I don’t even know what you’re saying. What’s Instagram?

Loren Feldman:
You have a terrific Instagram feed for Jayson Home. You should check it out some time.

Jay Goltz:
The telegraph is the answer.

Loren Feldman:
Finally, last question. We had an item this week about the decline and fall of Magic Leap, a startup that raised $3.5 billion and a lot of hype to create an augmented reality headset. In 2012, some of that hype was generated by a TEDx talk that was titled “The Synthesis of Imagination.” The question is, that talk consisted entirely of the CEO A) using a Magic Leap headset to guide him while making repairs to a car engine, B) using a Magic Leap headset to guide him while performing surgery, or C) the CEO wordlessly danced around in a spacesuit alongside several people in furry monster outfits. Laura, do you know the answer to this one?

Laura Zander:
I don’t.

Jay Goltz:
I don’t want to know the answer to this one.

Dana White:
B or C.

Loren Feldman:
Car engines, A. Performing surgery, B. Dancing around with people in monster outfits, C. It was, of course, C.

Jay Goltz:
And you said it was three and a half billion dollars?

Loren Feldman:
That’s right.

Jay Goltz:
Okay.

Laura Zander:
And I can’t buy a building?

Jay Goltz:
We can’t get a loan to go buy some buildings to employ people and help commerce and make people happy. But this guy got three and a half billion dollars to dance around—

Laura Zander:
For an idea.

Loren Feldman:
For extra credit: Tell me which publication that I used to work for wrote a cover story about this company that included this paragraph: “Magic Leap’s innovation isn’t just a high-tech display. It’s a disruption machine. This technology could affect every business that uses screens or computers and many that don’t.”

Jay Goltz:
Can you hear my eye roll?

Loren Feldman:
Well, the whole goal of this quiz is to get you to groan, Jay. I think I’m almost there.

Jay Goltz:
You’re there. Done. Mission accomplished.

Loren Feldman:
Let me finish.

Jay Goltz:
I don’t want you to finish. Inc. Magazine.

Loren Feldman:
I’m finishing. It’s my podcast.

Jay Goltz:
Ahhhh.

Loren Feldman:
There’s the groan! I got it!

“It could kill the $120 billion market for flat panel displays and shake the $1 trillion global consumer electronics business to its core. The applications are profound. Throw out your PC, your laptop, and your mobile phone because the computing power you need will be in your glasses.”

Laura Zander:
Well, that’s definitely not The Times.

Loren Feldman:
Correct.

Jay Goltz:
Inc. Magazine.

Loren Feldman:
No.

Dana White:
Forbes?

Loren Feldman:
Correct, it was Forbes. You got it, Dana. That was four years ago. Have any of you thrown out your laptops or mobile phones yet?

Dana White:
Not at all.

Loren Feldman:
Not yet.

Dana White:
But see, this is what’s so discouraging. I know you don’t like the word, but here you’ve got Laura, you’ve got Jay, even myself. Then you have companies that get on stage in a little outfit and jump around, and can raise billions of dollars. You’ve got a woman who cannot even have the box to draw blood at home. It’s just a really good idea. And she can have billions of dollars and former generals—

Loren Feldman:
You’re talking about Theranos, and she is going on trial soon, I think.

Laura Zander:
They’re good storytellers and good salesmen. But it’s the media who are writing—I mean, sorry, Loren—but you have to have people who are willing to be sold to. And so these are these great, romantic, exciting stories that hype everybody up.

Loren Feldman:
Well, let me just say, you’re right, the media did fall for that, but only after a whole slew of investors fell for it. So it’s not just the media.

Laura Zander:
No, you’re totally right. But I just think through Inc. Magazine covers over the last 10 years…

Loren Feldman:
She was one of them.

Laura Zander:
Has anybody done the study to see how many of the people on the covers are still in business?

Loren Feldman:
Hey, when I was at Inc. Magazine, we put Jay Goltz on the cover.

Jay Goltz:
I’m still in business. I’m the one that’s still in business.

Laura Zander:
Exactly, there you go. Evergreen businesses.

Dana White:
So when you have an investor, why are they investing in businesses they don’t know work?

Jay Goltz:
No, I can tell you the answer. This is the simple answer, and I believe this is still true: Only one out of seven venture capital deals work. But when they work, they really work, and they make a zillion dollars. Six times out of seven, they don’t work.

Dana White:
But the characteristics you have to have to be that one business… It seems to me when you’ve got a business like Jimmy Beans Wool, it works. It’s been working. It’s like a car: You turn it on, and there you go. Right?

Jay Goltz:
It’s not going to turn into a billion-dollar company. That’s the problem.

Loren Feldman:
It’s not gonna make an investor rich, right.

Jay Goltz:
Right, so it gets back to, this isn’t the world we live in. That’s the other world. It just is what it is. The number one rule of entrepreneurship: It is what it is. And that’s what that is.

Dana White:
Why can’t Jimmy Beans Wool make somebody rich?

Jay Goltz:
Because the market’s too small.

Laura Zander:
Yeah.

Loren Feldman:
Well, it’s gonna make its owners rich.

Dana White:
Even with the international market?

Jay Goltz:
No, you need a disruptive new technology. Because she’s almost in the same business I am.

Laura Zander:
You know what, though? We have two players in our industry that both raised 60 million bucks. One of them got bought for, I don’t know, $250 million and then got shut down.

Jay Goltz:
I know, but it’s just not hundreds of millions or billions. The point is, she’s in the same business I’m in. It’s a very small percentage of people who actually go into a custom picture frame shop, and very few people knit their own stuff. It’s not a mass market kind of thing. And as a result, the market’s limited.

All we can do is go check out other banks and get the damn loan so we own a building, so in 20 years, your son can say to me, “Hey, Uncle Jay, thank you so much. Because look at the new Porsche convertible I bought.” That’s what we’re talking about: buying the building, and in 20 years, your kid’s going to be rich. Boom!

Loren Feldman:
Guys, we’ve done it again. We’ve completed our 34th straight podcast without a workplace injury.

Dana White:
Nice.

Jay Goltz:
You don’t know that. You don’t know that.

Loren Feldman:
Unless you count the injury to Jay’s psyche.

Jay Goltz:
No, I’m actually good. I’m good because I feel like even though Laura pretends she’s not listening to me, she’s listening to me. Stop being discouraged. Go get the job done.

Laura Zander:
I can be discouraged and get the job done.

Loren Feldman:
My thanks to Jay Goltz, Dana White and Laura Zander.

Episode 33: When’s This Gonna Be Over?

This week, six months into the crisis, Paul Downs, Jay Goltz, and William Vanderbloemen take inventory. What does the crisis mean for the future of their businesses? Has it changed them as leaders? Has it affected their relationships with their employees? And they come to some counter-intuitive conclusions. For one, William tells us that he suspects he will one day look back on the crisis and conclude it was the best thing that could have happened to his business. It’s been painful, he says, but, “in some ways, we needed a jolt, and this gave it to us.” Jay understands: “When things get really bad like this, we start paying attention to stuff that we should have been paying attention to before.” Plus: do the three owners have a plan for how their businesses would continue to operate if they were incapacitated by COVID?

Guests:

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

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

Paul Downs is founder of Paul Downs Cabinetmakers.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

William Vanderbloemen: “I don’t want to sound pollyannaish, but in some ways, we needed a jolt and this gave it to us.”

Paul Downs: “If I was unconscious for a month, that would be pretty bad for the business. I don’t even have a plan for that.”

Jay Goltz: “When a kid gets hung around the neck with a business they never wanted to be in, it is a horrible thing to do to your children or your wife. I don’t want to do that.”

Full Episode Transcript:

Loren Feldman:
William, I’d like to start with you. Last time we spoke, I think you were about to launch a new business. Did that happen? How’d it go?

William Vanderbloemen:
It did, and it’s gone better than we expected. We do executive search, which—whether it’s a church or a school or a relief organization—it’s essentially the C suite of an organization we help them find. But when you get to middle management, the process and what we do really is not worth the money. But we have lots of clients who need middle management stuff fixed and solved and staffed.

So we’ve kicked it around a number of different ways over the years, and COVID finally accelerated our process. What we’ve been working on for a long time got sped up in March and April, so that we could open as churches and schools and businesses started to reopen in the fall. We went into it with realistic expectations, and we’re only not quite a month in, and we’ve beaten everything we thought we’d do this quarter. So it’s good.

Loren Feldman:
Did you have to invest a significant amount of money to launch this business?

William Vanderbloemen:
Not as much as you’d think. If you’re talking about money, like writing checks out of your account, not a whole lot. I mean, there was some. We don’t have a supply chain. Now, in human capital and in wages paid to people to set it up in central office services, yeah, we paid for that. But that was where COVID sped things up. Rather than fire people who didn’t have a whole lot to do in March or April, we put them to work, serving churches, and then starting this new company. Well, while we’re waiting on things to get going again, let’s go ahead and build the framework we hadn’t had time to build. The costs were hidden costs or soft costs. So they were there, but in terms of, did I have to go invest a bunch of my capital back into the business to get it going? It was not as large as you might think.

Jay Goltz:
So you’re talking about some reallocation of resources to some degree.

William Vanderbloemen:
I guess so. But you’ve started businesses, so you know, nobody knows the saying “a penny saved is a penny earned” more than an entrepreneur. Nobody. I very easily could have laid off five or six people in March who I didn’t need, had we not started this company. I kept them. I paid their wages so that they could do something that didn’t generate any revenue, just got an infrastructure built for a new company that may or may not work. The gamble was in those costs that could have been a penny saved, or a lot of pennies saved, or a lot of pennies earned. So that may sound like a spinster way of dealing with it, but the costs were there. They were just soft and not as prevalent as if I had to go take out a loan to buy a building, or a new warehouse, or some of the things that you might encounter, Jay.

Jay Goltz:
I think the lesson from that, and from what I’m dealing with, is I believe that, at some point, you’ve got to get off of defense and get back on offense because you can’t stay on defense forever. I see businesses all around Chicago that I believe are slowly but surely putting themselves out of business because they’re still in panic mode. They stop spending money, stupid stuff like the ice cream shop on a major street that has an awning outside that’s just ripped to shreds. That looks horrible. And you say to yourself, “Really? For 800 bucks, you can look like you’re back in business, and instead you’re sending out the impression that, ‘Yeah, we’re circling the drain.’” It’s not good.

William Vanderbloemen:
That’s very much the attitude we took, Jay. In our industry, or our little micro niche of the search industry, there are very few people who try and do what we do, and they don’t use the same approach. They’re nice people, but I don’t think they do it very well. We determined the industry will probably survive, but it’s going to be who’s gonna be the last man standing at the end of this. So we were like, “You know what? Rather than go into hide-in-our-cave mode, we’re gonna come out swinging. And if we die, we die with our boots on.”

Loren Feldman:
William, when you say it’s doing better than you anticipated, are you referring to revenue?

William Vanderbloemen:
Yes, real dollars in the bank are already better than we projected through the end of the year.

Loren Feldman:
And what are your ambitions for the business? Do you think this could be as big of a business as your executive search? Or what are you thinking?

William Vanderbloemen:
You know, that is a great question, Loren. Exec search, it’s like I’ve owned a Lexus dealership for 12 years. It’s not a Bentley, but it’s a Lexus, and we’ve got a lot of people who are very happy with that. And now I own a Toyota dealership as well. You and I were together a couple years ago at the Ford factory where the Model T was invented, and that’s when Ford started making his money. It was when he got a car everybody could afford. Maybe that’ll be what happens.

It would have to be a whole lot of volume to surpass what we’re doing with exec search, and it’s two different value propositions. If you name the leader of an organization, you can’t impact an organization deeper than that. But if he doesn’t have the rank-and-file, middle-management support staff to get a team put together, then they can’t execute the vision they have. So it’s just two different value propositions.

Loren Feldman:
Do any of you feel as though you’ve been changed as a leader by the crisis we’ve gone through?

Paul Downs:
I feel that I was a much better leader going into the crisis. The crisis has been changed by my leadership ability.

Loren Feldman:
I’m not sure I follow.

Paul Downs:
In other words, in 2008 when my world fell apart, I was barely equipped to handle it. In 2020, when this thing arrives, I feel so much better equipped to handle a crisis that the crisis itself doesn’t feel the same, if that makes sense.

Jay Goltz:
Absolutely. There’s that old phrase, “a smooth sea makes a poor sailor,” and the fact is, when you’ve been through stuff like this—‘08 was horrendous, as you said—I feel the exact same way. I’ve been handling this whole thing a whole lot better than I would have handled it 20 years ago.

William Vanderbloemen:
I may kick myself for saying this, Loren, but I think one day I will look back at this and say, “That’s the best thing that could have happened to me,” because it got me out of managing-a-company role and got me back to, “Hey, we need to act like a startup and we need to rethink everything.” Our agility’s better than it was. It’s not without pain. I don’t want to sound pollyannaish, but in some ways, we needed a jolt and this gave it to us.

Loren Feldman:
Were you aware that you needed a jolt?

William Vanderbloemen:
Maybe. Not as aware. How’s that? I mean, I knew we weren’t in startup mode anymore, but I’d forgotten how nice it is to have the agility of startup mode. It’s not sustainable forever. That doesn’t work, and I want a sustainable business, and we weren’t shrinking. But to have that sort of forced acceleration has really gotten us… it’s like we’ve hit rewind on our agility to a place when we were much leaner and faster.

Jay Goltz:
There’s another good saying: “The sight of the guillotine helps sharpen a man’s mind.” So when things get really bad like this, we start paying attention to stuff that we should have been paying attention to before. So I agree.

Loren Feldman:
William, I think you told us months ago that you were rethinking how you use commercial space, that you had moved into your offices fairly recently but you had a subtenant, and you were thinking you might give up the space. Is that part of the agility that you’re referring to?

William Vanderbloemen:
We certainly explored that, and just to quickly reframe that, we had enough space for our whole staff to be here. Then we decided we were going to decentralize our offices, all pre-COVID, and we were going to open regional offices in major metro areas where we have a lot of business. All set to do that, framed up, we’d already put in the offer for Orange County and hired the guy, and this was the week before COVID. We were scaling down the headcount here in Houston at the central office, so when COVID hit, and we all had to go remote for quite a while, obviously, you revisit the question: “Well, do we need any space at all? Or can we do this all remotely?”

I wish the answer were, “Yes, we can do it all remotely.” I’d rather have that rent money in my pocket. But I think that the conclusion is even further reinforced that people work better together for our type of business. Not true for everybody. But for our type of business, our central office is going to do better together. Do we need A-plus rated space, and do we need as much? No. And if our subtenants, which are growing quickly, because they’re in energy-efficiency, if they end up saying, “We want the whole space. You all move out,” we’ll move out and figure out something else. But I don’t think it will be a 100 percent virtual office.

Jay Goltz:
I’ll make a prediction. You’re going to read articles—I already saw one, I think it was Jamie Dimon from Chase—this panacea of, “Oh, no one’s gonna go to work. We’re all gonna be working from our house. It’s all gonna be lovely.” You’re gonna see lots and lots of stories about they figured out that their occupancy costs were running about 6-8 percent and that their efficiencies went down 20 percent.

I’m sure there are some businesses that are going to work just fine from home—I’m not saying for everyone—but I’m sure there are gonna be lots of businesses, they’re gonna figure out, “Yeah, we did save X dollars.” But when you look at your big number, it’s not rent, it’s labor. So if your labor just slips 5 percent because they’re home with the dog, or the kid, or the mother-in-law, or the neighbor who wants to show them the new car or whatever distracts people at home, it’s not gonna take much to all of a sudden find out, “You know what? Maybe not a bad thing to pay rent and have everybody in the same room.”

Paul Downs:
Don’t you think there’s gonna be quite a bit of pushback for people who don’t care for the commute? Because that doesn’t show up on the business owner’s books—the cost of the commute.

William Vanderbloemen:
I think it’ll be there, Paul. I was gonna say—it’s the perfect springboard—our clients, particularly our church clients, everybody’s like, “What’s the church going to look like after all of this is back to normal,” whatever that means? And it’s not going to be, “Will it be virtual church or will it be in person?” The answer is going to be: Yes. Before the pandemic, 10 percent of all Protestant churches in the United States live-streamed their worship, okay? Now, 10 percent don’t.

Well, that’s part of the reason we started the new company. How many new AV tech middle management people are needed all of a sudden? We surveyed people who have started online—particularly the ones who received PPP money—and overwhelmingly they’re like, “No, this is here to stay. We’re now both-and,” and I think it’s going to be the same with office space.

Where we used to hold maybe 10 percent of our workforce could be virtual because of extenuating circumstances, it might grow a little, and we might have a more flexible work week, like you can work one day a week from home. I think it’ll be a both-and, and I do agree there are some businesses that’ll be fine going virtual. Ours will not, and I don’t think many will, when it’s all said and done. I think it’ll be a both-and, and as my kids reminded me the other day, they said, “Dad, you know the bad part about Zoom?” I said, “No.” They said, “There is never gonna be another snow day for school.” If we have to shut down for hurricanes or whatever, we know how to flip the switch and get some productivity at home if we have to.

Loren Feldman:
It’s interesting, you do see a lot of people going in different directions. Facebook took a huge commitment of office space in New York City. At the same time, just this week, I saw a story about Stripe, which is paying a bonus to employees who move away from cities where they will take a cut in pay, but they get an initial bonus to do that. Obviously they’re betting that the work from home thing is here to stay.

Jay Goltz:
You can even look at real estate. In Chicago, my kid’s trying to sell his one-bedroom condo in the city, and the market is dead. And in the suburbs, the houses are flying off the market because, between COVID and the social unrest, which I have to tell everyone, it’s over here, it’s fine. There’s not picketing every day. There’s not windows breaking. There was certainly a couple of bad weeks there, but it’s all calmed down. These people flew out to the suburbs, and what’s going to happen is, when the traffic gets back to quote-unquote normal, they’re going to wake up and go, “Oh my god. What did I do?” some of them. Because driving into the city everyday is a pain in the ass, and that’s not going to change.

I believe many things, most things, are going to go back to just like they were. And there will certainly be some things—like what you just said, William, with the churches—I’m sure there will be a profound difference with the online stuff, but some stuff is just going to go back to the way it was. I’m confident of that.

Loren Feldman:
Have any of you changed your thinking about your long-term ambitions for your business? Has this had an impact on what you see as the potential for the business? Either do you see more or less potential?

Paul Downs:
I think it remains to be seen. In my case, it could easily swing either way. One of my guiding principles so far in this thing has just been, “Don’t try to outguess what happens.” Because the reality is arriving at the rate it is, which is different from what I would have predicted. And so if I’m trying to see two or three years out, it just seems to me to be a lot of scaring myself over things that may not happen. Either it’s Jay’s right, we’re all gonna go back to normal, and then people are gonna buy conference tables again. Or they won’t. One or the other. But it just remains to be seen which one it is, and I’ll make the decision when I feel like I’m there.

Jay Goltz:
I think conference tables are very important, just so you know.

Paul Downs:
Well, thank you.

Jay Goltz:
They are. I want you to think about this when you do the off-site stuff and people are at home. Think of those conversations, just one, throughout the entire year that you were sitting around with three or four people talking about something, and all of a sudden the magic of the collaboration comes together and you all figure it out.

“Hey, wait a second.” “We should do…” “Yeah, I love…” “No, we should do it this way.” And all of a sudden, you came up with a great idea, or you saw something that was wrong with the business. Those things aren’t happening. Everybody’s at home. And don’t tell me it’s gonna happen on a phone with four people on the phone. It’s not the same thing. I do believe you can’t replace collaborative thinking in a room around a beautiful conference table.

Loren Feldman:
It can happen over Zoom. I hear what you’re saying, but—

Jay Goltz:
Not as much.

Loren Feldman:
Anybody else? William, do you think it can happen over Zoom?

William Vanderbloemen:
Well, I mean, Loren, you’re asking the wrong guy. My entire faith is built on the idea that Jesus decided he needed to be here in flesh to make a difference. So. Zoom doesn’t work. Otherwise he would have just Zoomed it in.

Loren Feldman:
I didn’t see that one coming.

Jay Goltz:
Wow.

Paul Downs:
I guess he was the only guy who had Zoom.

William Vanderbloemen:
Yeah, he could have waited, right?

Loren Feldman:
Well, there’s no arguing with that, William. I think you put that discussion to rest. Let me ask you about this. Has this affected your relationship with your employees at all? For one thing, has this made any of you more sensitive to anxiety in your employees? I mean, it’s always been there. There’s been more of it of late for all of us, I suspect. Is that an issue you’re dealing with more? Do you look at it any differently?

Jay Goltz:
I definitely have people who are having anxiety, and I’m extremely appreciative of the fact whether they’re doing it for me, for the company, for themselves, or for anyone else, that everybody’s showing up to work. I know some of them, they’re dealing with customers, they’re on the frontline, and I’m totally appreciative of the fact that everybody’s toughing it out and doing what they can do. But it’s absolutely an issue, because I have plenty of employees who are having anxiety, and we’re doing everything we can, but it’s a problem.

Loren Feldman:
When you say it’s a problem, or how does that manifest itself?

Jay Goltz:
I’ve got one person who’s worked for me for many years who has been not showing up to work some days because she’s got such bad anxiety. Since I’ve got over 50 employees, I follow—which I would have anyway—the FMLA laws. So it was suggested, “You should go on FMLA,” months ago, and the person didn’t want to, and now…

Loren Feldman:
Family and medical leave, and if someone goes on that, that means—

Jay Goltz:
You make accommodations for them, and you work with them.

Loren Feldman:
You don’t have to pay them while they’re on leave, right?

Jay Goltz:
No.

Paul Downs:
It’s more a guarantee that they can come back, is my understanding.

Jay Goltz:
Right, yes. So here’s something you wouldn’t know if you weren’t on the front lines. You’d say, “Oh, well, just go to the doctor and get a note.” Going to a doctor, some doctors are getting very sensitive about writing notes like that, so the doctor then says to a person, “You really need to go see a specialist.” Okay. Oops, the specialist is booked up for two months. This is what’s going on. Some of these specialists are just overwhelmed, and the system can’t take all this.

So then you say, “Well, then why don’t you just accommodate them?” Well, then you’ve got a problem with the rest of the employees and violating your company policies of: you’re either on FMLA or you’re not on FMLA. And if you’re not on FMLA, what do you do, throw out your employee handbook about you can’t miss X amount of days? It’s a little bit of a challenge for the HR department. It’s not black and white, and it’s not simple.

It’s stuff you wouldn’t have seen coming, and for people who don’t have 50 employees, it’s not as big an issue. But even if you just want to be a responsible boss and want to follow FMLA if you don’t have 50 people, it’s still an issue. Like, how much room can you give people? You’ve got to take care of the customers at some point. So what if that person’s only showing up two days a week? I mean, it’s not simple.

Loren Feldman:
Has this been an issue for either of you, William or Paul, as well?

Paul Downs:
I have one employee who has expressed not so much general anxiety, although I think she has some, but it’s mostly around her personal situation.

Jay Goltz:
Absolutely. I’ve got that also, where there are people who just have horrendous situations because of this that have nothing to do with my company, with their husband, their wife, their family. That’s a whole ‘nother subject. They’re just in a bad spot because of this whole thing. I forgot about that. I’m glad you brought that up.

Paul Downs:
Yeah, I mean, I’ve certainly experienced that myself when my family situation became overwhelming. I think that, just off the bat, anybody who’s got kids who are schooling from home, and you’re ostensibly being the helper and teacher, that’s a big stress.

Jay Goltz:
I got that too. My daughter-in-law’s got—my grandchildren are eight and five—and she’s a labor attorney, and she’s trying to do her job and trying to [take care of] the kids. It’s a problem all the way around. And the only reason my wife is sane is because my other kid has a baby. She goes over there and babysits four days a week so she’s got something to do, because it’s keeping her out of the house. Because this is stressful for everybody, or most people. Unfortunately, the disappointing part is, it’s September and like, we ain’t at the end of it. When’s this gonna be over? Who knows?

Paul Downs:
Yeah, as a boss, you end up having to think about all these situations for your people. I think that part of it is, then it gets down to the individual employee. Are they the type to lay that on you or not? I have a company full of woodworkers. It’s heavily male. They’re not drama people, so they don’t tend to bring stress to me. The one worker I know about who’s been more upfront about it is female, so that may just be part of her personality or just the difference between a very male and very female workplace.

Loren Feldman:
I often wonder about this question: Can you guys be friends with your employees? And has this situation had an impact on your thinking about that? William, how about you?

William Vanderbloemen:
I think that answer has changed as the years have gone by and we’ve grown. We work with a lot of startup organizations, whether it’s a new school or church or relief organization or what have you. It seems like they all start with, “Me and my four buddies started this company, or this church or this school.” And there comes a point in their growth, where I’ve said to them many times, I’ve looked at the founder and said, “Hey, you know what? It’s time to move out of the frat house and move into a real house.” We’ve had to do some of that. I started with some relatives. I started with some friends. It’s grown, and now we’re at a different spot. So I think just by our growth and evolution, my relationship with them is different.

I think that the pandemic has put in strong relief for me some real dilemmas. As one leader told me, he said, “I don’t get paid for all the things in my job description. I get paid to make about four decisions a year that no one else wants to make.” Right? That is what I felt like this year, and some have been really painful for people. You ask if I feel more aware of fear or anxiety around our office? I think I feel more aware that I’m not feeling that fear and anxiety and other people are—that I’m like, “Look, guys, we’re not under persecution. We’re not living in a place where we’re in prison.”

Jay Goltz:
How about World War II? My parents lived through World War II.

William Vanderbloemen:
I know. Well, take church, for example. A lot of pastors who have decided to start meeting again. They’re like, “We’re not living in a place where it’s illegal. We’re not living in a place where you’re going to get crucified. Like, let’s get on with it.” And as the leader of the organization, I have felt a little insensitive. I don’t know whether that insensitivity is, I’m out of touch with reality, or if the insensitivity is the thing inside me as a leader/founder who’s called to make the hard decision.

Like, we are going to reopen our office. I’ve faced enormous resistance to that and I can still feel it. But it was the right thing to do, and we did it carefully, and it’s working out. But it’s one of those, “get paid to make four or five decisions no one else wants to make.” That’s a big rabbit trail, Loren, but it does lead back to, “Can you be friends?” To some extent, yes. But the nature of that relationship, I think, has changed as I have had to make decisions that not everybody else wants to make. Does that make sense? I’m figuring it out as I go.

Jay Goltz:
I’ve been through that whole transition from being by myself to having 110 people, and I can tell you, I think you can. But I think it’s just like being a parent. You can be friends with your kids, but you have to be the parent first. I think you need to be the boss first. I’ve got key people with me over 20 years. I never have to make that call. They know it, I know it. I never have to pull the boss card out, and if you’ve got the right kind of people working for you, they don’t make you, because they’re all with you together. I can honestly tell you, I can’t think of one situation in 20 years with any of these four people where I ever said to myself, “Boy, they shouldn’t have done that,” or whatever. They’re totally with me.

But yeah, it’s a tricky balance and there are some people you absolutely can’t be friends with at all. That’s for sure. There’s work-withs, and there’s work-fors. The people work-with you are with you, and there’s people who are work-fors who are valuable, but they need to be managed. I would like to shift the conversation, becauseI feel like we’re in a little bit of a CEO—

Paul Downs:
Wait a minute. I want to answer the question.

Jay Goltz:
Oh, go ahead.

Paul Downs:
No. [Laughter] I don’t think you can be friends with your employees.

Loren Feldman:
Why not?

Paul Downs:
Because it’s a different relationship. First of all, it’s got direction to it. You’re the boss. You sign the paychecks. You have the ability to say, “You know what, I don’t ever want to see you in this building again,” for any reason, and there’s nothing they can do about it. I wish we actually had a better word for the employees who have been with us for whatever length of time that you have a great feeling for and that, in a different context, you might be friends with, and that you enjoy seeing every day. I mean, I’ve got a lot of employees like that, but I wouldn’t call them friends. We just need a better word. Because it’s a different relationship.

Jay Goltz:
I think you have to define what a friend is—that you care about them, they care for you, you look out for each other, you help each other when you need it. I think in most categories, other than, “Well, I can fire you any day,” I think [if] it walks like a duck, [if] it sounds like a duck…

Paul Downs:
I’m not responsible for paying my friends. There’s too much that’s unique to an employee relationship. You can call it friends if you feel like that, but it’s just a bad word for it.

Loren Feldman:
But there’s another aspect to it that I’m curious about. I know you well enough to know that you don’t live an extravagant life, but I’m wondering, is part of this that you think about what your employees see of your life? Would you be hesitant to show up at work in a flashy new car?

Paul Downs:
I don’t really care what my employees see about my life. There’s nothing very shameful in it.

Jay Goltz:
Wait, wait, wait. Is that to suggest that it’s shameful if you did have a nice house and a big car? That would be shameful? Because I’m always sensitive to this.

Paul Downs:
Jay, do you have a nice house and a big car?

Jay Goltz:
Yes, I do, and I’m not shameful about it. It’s okay. No, I absolutely hear what you’re saying.

Paul Downs:
No, I’m kidding.

Jay Goltz:
I absolutely hear what you’re saying. Maybe you’re right that you can’t call it a friend, simply because, at the end of the day, you’re responsible for paying them. There’s some truth to that. There’s a piece of it that is not the same as being a friend, and I can’t argue with that.

Paul Downs:
Yeah, I mean, there’s another sense of responsibility for my employees too, which is that I owe them some kind of future. I don’t manage that with my friends. Like my friends have to take care of their own career, their own future, their own opportunities, their own decisions about this and that, what resources they devote to this. Employees, I’m choosing their health insurance. I’m choosing where they go to work every day.

Jay Goltz:
What’s your longest-term employee? How long?

Paul Downs:
Twenty-three years.

Jay Goltz:
Okay, I want to throw out there, just as an example. I hire a 17-year-old kid, my third employee, and here it is 42 years later, and he’s 57 years old. He’s like my little brother, and if anything happened to him, I would be devastated. There was a time one time his wife called me at night, he didn’t come home one night. I thought, “Oh my god, he might be dead somewhere.” And I was putting my pants on, and I was teary-eyed thinking about it. He’s as close a friend… so yeah, I hear what you’re saying, but this isn’t just an employee, either.

Paul Downs:
I think we just need a better word for it. Because that’s still not a friendship. It’s more like a vassal or something. You have this liege-lord responsibility for the serfs you own.

Jay Goltz:
No, there’s something to what you’re saying.

Paul Downs:
I’m just saying that it’s not what we call a friendship. It’s different, and we just need better words for it.

Jay Goltz:
Here’s a question mark. So the person retires. Am I gonna see him? Am I gonna call him every six months? No, so I’m not arguing with you.

Loren Feldman:
William, I think you suggested that your thinking on this has evolved. Is that because you’ve lost friends—people who were friends, who were working at the company, and for one reason or another stopped being friends?

William Vanderbloemen:
Oh sure. I had to part ways with my brother-in-law, who was our first employee.

Jay Goltz:
Everybody’s first employee is their brother-in-law. Didn’t you know that?

William Vanderbloemen:
Yeah, right. Exactly. And we still do family dinner every week. Loren, I think I had a kind of utopian view of being the cool owner and buddies with everyone, and it just doesn’t work. I’m not on the place on the spectrum where it’s like officers don’t eat with enlisted men. That’s not me. But the idea that we can all just be cool and get along and have fun? No, not really.

Jay Goltz:
If I had to pick one—there’s no question—if I had to pick a side, I’d say no. There’s no question. I would not want to mislead anybody, because I’ve lived exactly what you’ve lived through—all of us have. I by no means would want to give the impression of what you’re talking about, the utopian role. Yeah, you’re absolutely right. If I had to pick, “Can you be friends with your employees?” I’d have to say no, for sure.

William Vanderbloemen:
I think where I am now, Jay, is rather than being buddies with my employees, I’d love it if they like me, but I really want them to respect me.

Loren Feldman:
I spoke to a pretty good friend of mine this week, who’s an entrepreneur, and I hadn’t been in touch with him in a couple of months. Turns out, he got COVID. He spent a couple of weeks in an ICU and had it pretty bad, and it was an interesting experience for him, in terms of running a business from an ICU. I’m curious if any of the three of you have thought about that. Do you know what would happen if you were incapacitated for a period of time?

William Vanderbloemen:
Yes.

Loren Feldman:
Tell us.

William Vanderbloemen:
It’s written down in a drawer here. It’s our emergency succession plan. We insist that everyone in our company have a plan for what happens if they can’t be here for a while. When you write the book on succession, you kind of have to have a plan yourself.

Jay Goltz:
Can you copy that and send it to me so I can use it?

William Vanderbloemen:
Well, wouldn’t that be great if there were a cookie cutter for succession? There is no cookie cutter.

Paul Downs:
Yeah, I’ve gotta say, it would depend on what the nature of it was. But if I was unconscious for a month, that would be pretty bad for the business. I don’t even have a plan for that. Because there’s so much—

William Vanderbloemen:
Well, then you need one, Paul. We have one if the president becomes incapacitated. I mean, you need one.

Paul Downs:
It’s mostly about check-signing authority.

Jay Goltz:
Do you not think some of your employees already think there’s times when you’re unconscious for a month? You don’t think that? I’m sure mine do. [Laughter]

Paul Downs:
I don’t think that in my case, because I’m here sniffing around every day.

Loren Feldman:
William, what’s the first step? How does someone like Paul go about putting a plan like that in place?

William Vanderbloemen:
Well, I think it’s actually the easiest first step toward a real succession plan, which all of us are just interim owners or interim leaders, right?

Jay Goltz:
Nope, not necessarily right. Some of us think if we drop dead, maybe the business will be over, and maybe that’s okay.

William Vanderbloemen:
No, that still makes you an interim. Either it ends, or the world ends, or someone’s going to follow you, whether you sell to another company or another leader comes in or you let your kid run it or whatever.

Jay Goltz:
People shut businesses down, 70 percent.

William Vanderbloemen:
That’s right. Fair point, fair point. So if you want to end by closing, then that’s one way. Otherwise, there needs to be a plan for the future, and the easiest task to get that going is to say, “Well, what would happen if I couldn’t be here for six months, or three months?” And so we tell people, “Identify the key deliverables that you are doing that no one else can do right now.” Check-signing authority is a great example of one of a long list. Where would you then delegate that out, if you had to? And you say, “Well, I can’t delegate that.” Then I guess the option is, close the business.

Jay Goltz:
You know, that’s funny. You bring up check-signing, because I didn’t sign checks for years, and now I’m signing them every single week. You know what, I screwed up. I should have stayed signing the checks.

William Vanderbloemen:
Totally agree. Made the same mistake.

Loren Feldman:
Why, Jay? Why was it a mistake to stop?

Jay Goltz:
Because I probably have a thousand checks a month going out. I’ve got all these little vendors, and because once in a while, you see a check and you think, “Wow, we’re spending a lot of money for blankety blank.”

Loren Feldman:
Paul, is this giving you pause? Is there a way that you could divide up your duties and make a plan?

Paul Downs:
I could. The financial things are probably the trickiest because there are a number of duties. We’re only a 20-person company, so there are a number of things like insurance renewals and various licensing and state interaction issues and buying health insurance, and there’s stuff that I just do. I could make a plan. It would be almost like, my wife and I talk about paying the bills. I pay the bills every month, and the plan is, she should pay the bills. But to let her pay the bills while I watch for six months would drive me insane. I’m sort of trying to figure out how I would do that similar thing in the business. William, do you actually let someone take the wheel for a while and do it and execute the plan?

William Vanderbloemen:
I do. In many iterations of our business, I would not have been able to say that. One time I thought I was doing that, and the competency that I thought was there was not, so I had to take things back over. But yeah, they actually execute the plan. My job right now—and it’ll probably change over the years—is kind of like, if we’re an old sailboat, an old three-masted explorer ship, I’m in the crow’s nest looking for the next horizon. Then I look down to the guy at the wheel and say, “I see where we need to go.” And he says, “I know how to get there.” That’s the most pedestrian way to describe how it’s set up right now.

Jay Goltz:
I will tell you an answer and I’m not being flip when I say this at all. For people who own businesses who have a spouse who’s not involved, and they’re worried, “What happens if I drop dead? What’s going to happen to the business?” I’m a big proponent of, “Have a good life insurance policy,” because at the end of the day, I don’t care what your plan is and who you think is taking over. We’ve all seen it. I think we’ve all seen it. I certainly have seen it. It might not work, and I don’t want to leave my wife hanging out there. Life insurance is still pretty cheap. It is cheap.

Just to give an example. I’m 64 years old. I’m about to take out a million-dollar mortgage on something. I can buy a 10-year policy for 3,900 bucks for a million dollars, so it’s still not expensive even at my age. People are probably under-insured who own businesses, because at the end of the day, it would sure be nice to know that if all your plans didn’t work out, nobody’s going to starve.

Paul Downs:
Well, I’ve got life insurance, and if I died, that would actually not be nearly as big a problem as if I was in a coma.

Jay Goltz:
Right.

Paul Downs:
Maybe the plan would be if I’m in a coma, just put the pillow over my face.

Jay Goltz:
That’s a given. Don’t you have that deal with somebody? That’s a given.

Paul Downs:
Then you’ve got a couple of million bucks to play with to shut the business down and then retire. I just don’t have anybody who I believe is capable of doing all the things that I do.

William Vanderbloemen:
Then that’s your problem.

Jay Goltz:
No, I’m saying he doesn’t have a problem. He’s at the size business that the owner is running the business. No, I don’t think that is a problem. It’s not worth having that person. It would cost him too much.

Loren Feldman:
Is Jay right about that, Paul?

Paul Downs:
Yeah, I think he is. The cost of having and training someone would probably be… there’s probably some form of insurance policy I could buy. I’m gonna think about it, because at least leaving a playbook, like here’s what I actually have to do during the course of the year: in January, you better do this, and in February, you better do that.

William Vanderbloemen:
There you go.

Paul Downs:
That would be a start.

William Vanderbloemen:
Yes.

Jay Goltz:
At the end of the day, if you got run over by a bus, the only way that probably would be working is if your wife could sell the business for decent money, because I don’t think one of your employees is going to step up and take over the business unless you think your wife can, which certainly happens.

Paul Downs:
My wife has many virtues, but I don’t think she’s gonna be running this business.

Jay Goltz:
Which means this instruction plan should be how to sell the business.

Paul Downs:
Well, I would be very curious if William, you are willing to share it, to see what yours looks like. Is it more about day-to-day operations? Or more about some grand airline thing? You pull it, and you see how the slides go out the airplane, like, how do we get out?

William Vanderbloemen:
It’s a little bit of both, and it’s evolved every year. I used to have one in place where this person would take over everything external, like sales and marketing, and this person would take over operations and execution of work. Now it goes much more to the COO, and then there’s a, “What if he isn’t around?” For a while, it was Adrian would run everything. But then, what if we’re in the same airplane, and we both go down? So I could share it, but it’s not helpful. The worst thing you can do is copy someone else’s succession plan. It just doesn’t work. Especially if you’re the founder.

Paul Downs:
How about this? If my father dies, he designated my brother as executor. Does anybody know of a situation where you have a person who’s actually not in the company day-to-day, but is just willing to step in as a leader? And you say, “Okay, call this guy.” I mean, is that a thing? Do you pay people for that?

William Vanderbloemen:
Yes. Well, for me, it is a thing. But it’s like, if you remember when Reagan got shot, and Al Haig said, “I’m in charge.” Right? So it’s about fifth down the food chain of things that happen. If this and this and this are not in place, then you actually call my brother who’s executor of our estate, and he then takes over.

Jay Goltz:
I think it is naive—and the math would back me up on this—to think that if any of us dropped dead, we can leave an instruction sheet and then someone’s just going to run our businesses for us. I think the math says it: 66 percent of businesses don’t get to the second generation. I think what we do is a little more complicated than that, and my guess is our spouses would sell the business.

William Vanderbloemen:
Well, I agree with your statistics. I disagree with your diagnosis for my business. My annual review is a one-question, pass-fail, review: This year, did you make yourself less necessary to the growth and running of this business? And there’s only one right answer. Every single year, I remove my essential presence a little bit more.

Jay Goltz:
Me too, and I do very little day-to-day stuff. My question is, so if you disappear tomorrow, that business is still around in 10 years doing fine?

William Vanderbloemen:
I don’t know if the business is around 10 years from now one way or the other.

Jay Goltz:
Yeah, well, that’s kind of my point.

William Vanderbloemen:
I think it has as good a chance as it does with me.

Jay Goltz:
Well, I think you underestimate yourself tremendously. I think you’re being humble. You’re being extremely humble, and I don’t believe that for a second because I’ve been on this thing with you many times. You’re very smart and you’re very intuitive, and you’ve made really great decisions. I suggest to you that thinking one of the people who works for you is just going to step in and all of a sudden, do what you do—you just said it yourself: You make four decisions a year that no one else wants to make.

Paul Downs:
But Jay, so what? He has the plan. Are you suggesting he take the plan and throw it away?

Jay Goltz:
No, not at all. Give it a good shot, but I’m suggesting, as important a plan would be to your wife, if something happens to me, here’s the thinking. And I’ve done this, I do have a sheet. I’ve told my three kids—I have three adult sons—I made it clear to all of them: “Here are some ideas as to what to do. But when I’m gone, do what you’ve got to do. And if you decide the business is shot, and it’s done, don’t torture yourself with, ‘Oh my God, Dad’s turning in his grave.’ It’ll be fine. Do what you got to do.”

If they decide that they don’t want to run it, and they can’t sell it, closing the business would not be the end of the world. Torturing my kids, which I’ve seen—I’ve been in business groups for years with these people who took over the family business—I wouldn’t wish that on my worst enemy where the kid gets hung around the neck with a business they never wanted to be in. It is a horrible thing to do to your children or your wife. I don’t want to do that. I think a succession plan is great. I just think the other plan should be: “Here’s some other options. Here’s how you should sell the business. Here’s who I would talk to to sell the business.” I think that’s smart.

Loren Feldman:
We’re out of time here today. This was a really interesting conversation. As always, thank you Paul Downs, Jay Goltz, and William Vanderbloemen.