Episode 50: So You Bet the House?

This week, Stephanie Stuckey tells Paul Downs and Jay Goltz, both of whom have manufacturing operations, about her decision to buy a manufacturing plant and bring production of Stuckey’s snacks in-house. We talk about her conflicted concerns about a minimum wage hike, what it takes to build a strong culture in a repetitive-task environment, why she paid above book value for the company she bought, and how she managed to finance the purchase of a business that is four times the size of Stuckey’s. She’s very happy with the SBA loan she got, but it was not an easy process: “I had to take out an additional life insurance policy and list the bank. I was just waiting for them to call me and tell me my firstborn son has to be collateral as well.”

Guests:

Stephanie Stuckey is CEO of Stuckey’s Corporation.

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:

Stephanie Stuckey: “If we want this company to grow more, we have to improve our margins and, frankly, improve our product.”

Stephanie Stuckey: “I had to take out an additional life insurance policy and list the bank. I was just waiting for them to call me and tell me my firstborn son has to be collateral as well.”

Stephanie Stuckey: “I read the Harvard Business Review’s book on mergers and acquisitions and would literally underline parts and reread them before I went into the negotiation.”

Paul Downs: “I think a partnership can be really, really strong—if each partner brings a different thing to the table and they don’t kill each other.”

Full Episode Transcript:

Loren Feldman:
Welcome Paul, Jay, and Stephanie. We’re gonna talk manufacturing today, and I’d like to start with you, Stephanie. A little more than a year ago, you bought back the Stuckey’s roadstop business that your grandfather founded, and you recently decided to buy a manufacturing facility so that you can start making Stuckey’s pecan snacks—let me make sure I got that right: “PEE-can” snacks—in-house. Tell us about that. Why did you decide to do that?

Stephanie Stuckey:
Well, first of all, let me say, I pronounce it however the buyer pronounces it. So if whoever I’m selling to says “puh-kaan,” I’m going to say “puh-kaan,” but I naturally say “pee-can” because I’m from middle Georgia.

Loren Feldman:
All right, let’s talk manufacturing.

Stephanie Stuckey:
Onto manufacturing! So what we purchased—what Stuckey’s bought two weeks ago—was actually two manufacturing facilities. One is a shelling plant, so it takes the pecans in-shell, cleans them, shells them, sorts them, processes them, and then as part of that shelling process, there are a lot of pieces. What most people want to buy, if you want a snack pecan, it’s a half. There are a lot of pieces produced in that process as a byproduct, and so the company that we just purchased in Wrens, Georgia started making those pieces into candy as a way to become more profitable, because the secondary market for the pieces was not very strong, and so it’s a perfect fit for Stuckey’s.

We sell raw pecans, we sell pecan snacks, and we sell candies, which feature the pecan. The facility also does a full line of snack products and healthy snacks, so everything from simply roasted and salted to habanero chili, lime, pepper—all the flavors. That’s the trend in snacks these days, is that you have a fusion of flavors, and then you also have a lot of international: teriyaki mix or Mexican mix. We’re working on all that, and we’re being diet-friendly, keto-friendly. We have the decadent, sweet stuff as well. We got everything covered.

Loren Feldman:
What have you been doing all along? How have you been making Stuckey’s snacks to this point?

Stephanie Stuckey:
Outsourcing them, and a lot of retailers do that. They have their product made for them, even products that are branded. You can have the product made to your specification. It’s called private labeling or white labeling, depending on the process, but you have the product outsourced. Stuckey’s was founded by my grandfather in 1937, but he sold the company in 1964, and along with it, he sold the Stuckey’s original candy plant. We have been out of the candy-making business since 1964—since before I was born.

The reason we wanted to make this move—the main reason—is it allows us to be vertically integrated and we can drive down the cost. If we manufacture in-house and we already have a distribution center, and we distribute in-house to the retail operations that we don’t own, but we franchise, then our business model is a lot more vertically integrated and we can drive down cost. It also gives us the capacity now: We can private-label for other companies, so if we want to sell Stuckey’s pecan snacks to Whole Foods, for example, and they want to have a 360 product for pecans, we can make that for them, and we can private label it for Whole Foods now. We could not do that before, because we didn’t make our own product.

Jay Goltz:
Can you just give us some perspective of what a machine costs to do that? I don’t know whether these are half a million dollar machines, $40,000 machines. What does a factory look like that does this? Are these machines a zillion dollars?

Stephanie Stuckey:
No, but I do not know the full cost. The range is usually… we’re looking at five figures. But this is the candy end of it, I’m more familiar with. The pecan-shelling equipment, I wouldn’t even begin to know, honestly. The reason I’m also hesitant is this facility we purchased was founded in 1935, so actually two years before Stuckey’s. My grandfather did business with Atwell Pecan Company, so there’s a long history there. They have equipment that’s pretty old, but it’s been maintained, and they keep adding new parts. I don’t know what the cost would be to buy a new one at this point. I also know we buy a lot of used equipment, and then just repair it and have people who repair on-site. So we have, I wouldn’t say a machine shop per se, but we do have a workshop there on-site and repair a lot of our own machinery.

Jay Goltz:
And what happened to that factory you bought? I mean, did it just shrink over the years because of import? I mean, give us a flavor of: Why did this company that’s been around for 90 years all of a sudden just sell?

Stephanie Stuckey:
This is not uncommon with family companies, right? You get down to the third generation, and there’s not a successor who wants to run the company. And that’s what happened.

Jay Goltz:
So it wasn’t the market?

Stephanie Stuckey:
It wasn’t the market at all, no. I’m learning this business, but it’s fascinating to me—the world of mergers and acquisitions. I definitely took a crash course in it this past year. I read the Harvard Business Review’s book on mergers and acquisitions and would literally underline parts and reread them before I went into the negotiation, so I would try to know what I was doing. But it was a lot. It was a process. We were not like a lot of the mergers and acquisitions where companies for sale are publicized. This was a very specific product that uniquely is aligned with Stuckey’s that we have a long-standing history with, and it’s a family business just like we’re a family business. It was very personal.

That was the interesting part to me with family business sales and mergers. There’s this whole component that gets emotional. And it came down, at the very end, where we really had negotiated to the point where we just weren’t going to negotiate any further. And we said, “That’s it.” And I realized it wasn’t the terms, at that point. It was letting go of a business that had been in a family for a very long time. It was not publicly broadcast. We knew because our families had done business together for a long time.

My grandfather’s old candy plant—I wish I could revive that. There are a lot of reasons why we can’t, the main reason being it’s in terrible condition. But it also happens to be on a railroad right of way, and the railroad’s Norfolk Southern, and I am not going to get into legal battles with Norfolk Southern about our old factory being on their right of way. We had to walk away from that, but the facility still has a lot of the old Stuckey’s candy equipment in there. I was there two days ago looking at the equipment, and we’re going to try to bring some of that original equipment to our facility in Wrens, GA and repurpose it. The cool thing is a lot of this equipment is the same equipment that was used in the 1950’s.

Loren Feldman:
Stephanie, I just want to be clear on exactly what you’ve purchased here. You’re talking about the original plant that your grandfather used. I assume you bought that when you bought the company?

Stephanie Stuckey:
No, no, no, I didn’t.

Loren Feldman:
You just bought that now?

Stephanie Stuckey:
I didn’t buy it. I bought a completely different plant. I bought a facility in Wrens, Georgia.

Loren Feldman:
So the one you’re referring to that’s in the railroad right of way…

Stephanie Stuckey:
That’s our original Stuckey’s candy plant that is shuttered.

Loren Feldman:
And do you own it?

Stephanie Stuckey:
No, my grandfather sold it in 1964.

Loren Feldman:
But you’re gonna go in and take equipment out of it?

Stephanie Stuckey:
The guy who bought it is wanting to get rid of the equipment.

Loren Feldman:
I see.

Stephanie Stuckey:
Yeah, sorry for the confusion. There are a lot of moving parts here. We have not made our own candy, or our own snacks, since 1964. And that facility in Eastman, Georgia—that was built by my grandfather—has been out of family hands ever since then.

Paul Downs:
I have some questions. First of all, are there a lot of these pecan-processing facilities? Is this just something where there are zillions of them and this happened to be one that was on the market? Or is it very unique?

Stephanie Stuckey:
There are a lot of pecan-shelling facilities. I don’t know how many have the pecan-shelling plus the candy-making component as well. I don’t know the exact number. My business partner would know that. He’s a pecan farmer. I think that is less common, that you do both.

Paul Downs:
The reason I’m asking is, I have recently been involved in the acquisition of a furniture-making business—not as any of the principles, but just sort of watching this happen. There are lots of furniture-making companies, and the way this particular deal went down is that the person who wanted to buy had been doing business with the person who wanted to sell.

Stephanie Stuckey:
Yes.

Paul Downs:
And the business itself had basically no value because it had not been profitable. But there ended up being money changing hands, because a business, whether it’s profitable or not, it was running, it had employees, it had customers, it had a culture. It was something that you could take over, and you didn’t just start with an empty room and a bunch of dead machines. Because I think that one of the things that doesn’t show up on book value in companies is the value of having employees who have some idea of… they know what they’re doing.

Jay Goltz:
Potential. You’re buying potential.

Paul Downs:
You’re buying capabilities. Even if the current business model isn’t working, there’s still the opportunity to shift it. So I guess the second question would be: Did you have the business appraised? How did you do it? And did you end up paying the book value?

Stephanie Stuckey:
Yes, we had the business appraised. But it’s hard. Like you said, you’re buying a lot of things that don’t necessarily appear on the books, and my business partner and I looked at the option of: What if we just built a new—not necessarily taking over that Eastman candy plant that had originally been my grandfather’s, because it’s in such bad shape—but what if we just built a big warehouse somewhere and filled it with candy equipment and made our own candy plant? But it was exactly the issue that you raised. It’s also a culture, its employees, its people with the knowledge and experience.

We also purchased their client base. They have some 800 customers that we’re transitioning and taking over all of that. We did an asset purchase where we’re physically buying the equipment, and we met with all of the high-level management team to make sure that they would stay on board, and we would have that transition. The appraisal was largely the value of the real estate, the value of the buildings. The machinery, we did as best we could. It is hard to get a good evaluation sometimes of this candy equipment. It’s a niche market, but there are people who do just candy equipment. We were fortunate that some of the equipment—especially the candy facility, [which] was brand new—had just been purchased.

We think we got a good deal. Did we get book value? We paid above because we looked at the brand value, the customer base, a lot of what is very important to us that you don’t necessarily see on the books. And I will say—because I know Loren’s probably going to ask me how much I paid for it—I’m willing to disclose that, but the seller did want us to keep that confidential, and I have to respect that.

Paul Downs:
Can you talk about a ratio of the sale price to the annual revenues?

Stephanie Stuckey:
Oh my gosh, I don’t know it off the top of my head, and I’m not good without a calculator. I will say we purchased a profitable company, and their gross is in the $8 million range. Stuckey’s grossed a little over $2 million last year, so our hope is that we’re going to hit $10 million this year. I hope I haven’t disclosed something I’m not supposed to disclose. The one other thing I think is so critical here to stress—something not on the books—is how uniquely well-aligned this business was with what Stuckey’s does, and it filled a gap in our business model.

If we want this company to grow more, we have to improve our margins and, frankly, improve our product. I’m gonna have a moment of vulnerability here, but we are known in large part not just for road trips and being this roadside oasis, but Stuckey’s is also known for pecan log rolls and our pecans. And the quality has gone down over the years. This is our trademark, iconic product. I’m very particular because it’s my family name up there, but our core product, the pecan log roll, has suffered in quality, and I just think we had to get the basics right.

If your company doesn’t have your core product be something that is absolutely the best… And especially now, with changing consumer tastes where people are being more health-conscious in their food choices, when they do decide to be indulgent and have a sugary sweet treat, it has to be absolutely delicious. I just felt so strongly we had to get that piece right, and when I went to the candy plant in Wrens, Georgia, and I had a sample of their product and I tasted their pecan log roll, I said, “We gotta do this.” You can’t put the taste of a pecan log roll on a balance sheet, but that was critical for me.

Jay Goltz:
So is the major issue about quality being more selective with the pecans that you’re picking and discarding the ones that aren’t up to snuff?

Stephanie Stuckey:
Yes.

Jay Goltz:
So it’s about being more selective with the pecans that go in there.

Stephanie Stuckey:
In part. It also is critical, in my opinion, that the pecan-processing facility is right on-site. You can’t get pecans any fresher than that. It’s like catching a fish and grilling it right there on the dock and eating it fresh. The pecans are the absolute best quality. We’re processing them, shelling them, and then they’re literally going to the next warehouse. The two warehouses are separate, but they’re right next to one another. It’s going right next door to the candy plant.

And here’s the other thing—and I know it sounds hokey, but I promise it’s true—you can taste the difference if candy is made by hand. In this facility, there are workers on the production line who are hand-rolling the pecan log rolls. The turtles—they are squeezing that chocolate out, and they’re pressing those pecans, and it tastes amazing.

Loren Feldman:
They’ve been making a competitive product, right?

Stephanie Stuckey:
Yes. Right.

Loren Feldman:
Are you going to rebrand it as Stuckey’s? Or are you going to continue to make a competitor?

Stephanie Stuckey:
We’re going to brand it Stuckey’s. And here’s the positive: We’re not buying a brand that has household name recognition. The Orchards Group is the candy side of it—sorry, the Orchards Gourmet. Even I got the name wrong! Atwell Pecan Processing is the pecan side to it. There’s actually a third business that we bought, all under the same umbrella, which is called Thames, like the River Thames. I don’t know what the origins of that are, but it’s a fundraising business. And so we have bought all of these existing accounts that buy wholesale bulk pecans for fundraising, such as Lions Clubs, Shriners, Boy Scouts, Girl Scouts, churches, schools, and a lot of these clients have been clients of Atwell for decades, so this is just a really good customer base.

There are a handful, actually, that are large accounts, but the vast number of them are smaller accounts, which I like because we’re diversified. It’s not as if one of these customers might, for whatever reason, quit buying from us, and then suddenly, we’re in desperation mode because we’ve lost a huge client. We don’t have a client like that. It’s a good balanced mix of customers. It’s been a well-run business that’s a stable part of that community. I just think it was a win-win for us.

Jay Goltz:
I’m gonna guess, what are there 50, 60 employees?

Stephanie Stuckey:
Actually, 100 during peak pecan season. We talked about culture—I do think that there are some culture issues that we need to address. To the extent that manufacturing still has a labor-intensive workforce with unique human hands to make the factory run, you have to deal with the culture issue. I’d be fascinated with some feedback from the others on: How do you create a good culture in a work environment that is repetitive? You’re working in a factory. You’re looking at a conveyor belt for eight-hour shifts of pecans and picking shells out by hand, all day long.

Jay Goltz:
I’ve got this picture of Lucy on the candy line.

Stephanie Stuckey:
Right! I swear to God, if you walk through the factory, there is actually a conveyor belt where the pralines come along and where the fudge comes along, and you have to make sure you’re putting the little pecan half in the top of the divinity button. Absolutely, there could totally be a Lucy and Ethel moment.

Jay Goltz:
I have to tell you, in my other life, I spend a lot of time working with a guy who is pioneering getting jobs for people on the autism spectrum. We started something called Autism Workforce. I’m telling you, this sounds like a perfect application.

Stephanie Stuckey:
Wow.

Jay Goltz:
A lot of these kids, they love repetitive work. They thrive in that environment, and he has successfully placed people into jobs. We started with Hart Schaffner Marx in Chicago. Every kid stayed there, zero turnover. Now that’s going to change eventually, but he’s got researchers from universities looking at it. We figured out how to align the company with the worker and adjust the work environment—just adjust it, not completely overhaul it—just make some simple adjustments, and it works. These kids get jobs, and they’re loyal, and they’re hardworking. You talk about corporate culture—he had a lady retire from Hart Schaffner Marx send him a handwritten note telling them how life-changing it was for her to be able to work with these kids and how she felt great coming to work every day. It would make you cry if you read it. It’s socially good and good for business at the same time. I will be happy to hook you up with him, because I know for a fact: 80% of adults on the spectrum aren’t working and they’re ready, willing, and able.

Stephanie Stuckey:
That’s terrific. The challenge also for Stuckey’s—and I think other manufacturers face this because of the high price of real estate in urban centers—many of these facilities are located in rural communities, so getting a strong workforce in some of these small towns that may have a population of 2,000 is also a challenge.

Loren Feldman:
Paul, did you have any thoughts on Stephanie’s question?

Paul Downs:
I have many. Let’s start with the numbers. You said $8 million. You’ve got 100 employees. Is that 100 full-time equivalents, or at peak during some point of the year, you have 100?

Stephanie Stuckey:
120 peak period, and then the core base is actually 20 management-level, supervisor-level. And then peak pecan season—which is August through… it’s wrapping up right now, so maybe the end of February—is going to be 120. Then year-round in the facilities round total, we’re right around 80-ish. And if my business partner were on the phone, he may be correcting me. He is the one day-to-day running the plant. He has moved to right outside of Wrens. He’s moved to Augusta and he’s running the facility.

Paul Downs:
In any case, let’s say it’s 80. You’ve got $100,000 in production per employee, and that’s low. And so it kind of implies that the wage rate is also relatively low. What is the hourly wage for a line employee—the one who’s doing Lucy’s job, let’s say?

Stephanie Stuckey:
It varies because they have a pay-increase scale. I’m gonna get this wrong. I want to say it is $8 to $12, but it could be as low as $7.25.

Paul Downs:
Okay, so I presume you’re horrified at all this $15 minimum wage talk.

Stephanie Stuckey:
I’m conflicted because… I don’t want to get political, but I’m a former state representative, and I was elected as a Democrat. I remain a Democrat, so I tend to support Democratic policies. I certainly want to have people earning a living wage. But the challenge is, for a mid-sized business like Stuckey’s, when you raise the minimum wage and we’re operating on tight budgets, then something has to give.

And so it’s: Do we lay off employees? Do we switch to more integrated processes? Become more efficient? Maybe get some technology in place that can replace some workforce? Or do we raise our prices? Do we do a mix of all that? I’m following that minimum wage debate as best I can while trying to work 12-hour days. What I’m hearing is it’s a four-year phase-in, so hopefully this isn’t going to happen to us overnight. But we’re going to have to think through it. It will affect our cost of doing business, and it will likely affect our price structure, and so I hope that people who support the minimum wage increase also support paying more for product, because we will likely see an increase in product costs.

Paul Downs:
Yeah, I agree.

Jay Goltz:
I have to stop you for one second.

Paul Downs:
Wait, I’m not done, Jay.

Jay Goltz:
No, I have to make a correction here that’s very important, that I hear all the time. You’ve conflated the words “living wage” and “minimum wage,” and they are two different things.

Stephanie Stuckey:
You’re right. Thank you. Yes, I’m sorry about that. You’re absolutely right.

Jay Goltz:
It happens all the time, and you know, that $15 an hour isn’t going to support a family of six. But that’s all.

Paul Downs:
Next question: What’s the average age on the production line?

Stephanie Stuckey:
I don’t know. I can only say from looking at the employees that I would guess late 20’s through 30’s.

Paul Downs:
And average tenure? Is there a lot of turnover?

Stephanie Stuckey:
Gosh, I wish I knew better answers, and I’m sorry if I sound ignorant, but my partner is largely running the company day-to-day. I don’t know the turnover. He has told me that turnover is a problem, especially with the newer employees, but there are employees who have been there for many years, and there’s a reward structure. You do get paid more over time.

Paul Downs:
The reason I’m asking these questions is because all this stuff is, in my mind, the foundation of a company culture. I don’t think it’s actually possible to make every kind of business meaningful, but you can make the reason people work meaningful. In other words, remove some of the negatives and just identify, “Okay, you get to support your family. You get to live in this place. You get to go fishing on Saturday.” That’s what happens when we have a successful business.

Loren Feldman:
Stephanie, I want to go back, you’ve mentioned a partner a couple of times, and I think it’s something that we should probably know more about. Correct me if I’m wrong on this, but it sounds like in this transaction, Stuckey’s is clearly the big brand. But you bought a much bigger company. I think maybe four times the size by revenue, if I heard you right. I’m wondering if that was difficult to finance and I’m wondering if that’s where the partner comes in.

Stephanie Stuckey:
The partner came in to help me run the plant, and he’s got the business acumen, and most importantly, the pecan background. My partner is R.G. Lamar, and he is well-known in the Georgia pecan community. He’s served on the Georgia pecan commission. He’s done trade missions with the Georgia Department of Ag. to Taiwan several times to promote export of our product. We just sold several container loads of pecans to the Taiwanese. We’re hopefully going to be selling some to the Chinese. Let’s hope some tariff relief is on the horizon. He has expertise in the pecan business and manufacturing. He had a lot of relationships that helped broker this deal.

Now, with regard to the financing, what I can say is, yes, on the books, the company that we bought is more profitable, but Stuckey’s has the brand recognition, and we’re a name. We’re the parent company. That’s what’s not on the books, is that we have a brand that has some very real value that we think, now that we’ve got the capacity to produce in-house, we can really start turning things around. It’s gonna make a big difference for us.

Jay Goltz:
You said a bunch of things that, together, might give you some relief on the minimum wage, in that you’re vertically integrated. You’ve got a strong brand name. You’re not selling to Walmart, where your margins are just going to be razor thin because it’s so competitive. The fact of the matter is, when you look at what you’re paying for labor as a percentage of the retail price, which in some cases you’re going to be selling retail, you should be able to absorb some of that increase, because there’s a big difference between where it’s being made and the multiple.

Stephanie Stuckey:
That’s right.

Jay Goltz:
You should be able to make up some here, make up some there. Maybe you’ll lose a couple of contract customers that are totally about price. But at the end of the day, given that you do have this strong brand name, that means margins, and you should be able to navigate this, I think.

Stephanie Stuckey:
I hope so, and I think another important point with a minimum wage increase, if it does go into effect, is that we’re all going to be impacted. It’s across the board. Everyone’s going to have to be managing how they deal with their pricing as a result of this. It’s hopefully somewhat of an equalizer. This is an unknown for me, and I turn to others on the panel for their feedback, but how does that impact employee morale and their ability to perform? If they’re making more, are they going to perform better? Is there going to be a correlation with productivity, if you pay workers more?

Jay Goltz:
I think the bigger issue is, you’re going to have a better selection of employees to hire. That’s what’s going to change, that there are going to be people who are going to take a job working for you who wouldn’t have taken a job at seven and a quarter. You’ll have a better selection of candidates. I think that’s the biggest impact.

Stephanie Stuckey:
Here’s the concern I have—now I’m getting very personal—but I have an 18-year-old son. I would love for him to get a summer job. Is it going to be harder for kids like my son or young men like my son to get employment?

Jay Goltz:
Absolutely, that’s where it’s coming from. Why hire a kid who’s gonna need more direction, when you can hire an adult for the same money? That’s absolutely gonna be one of the unfortunate… it’s gonna come from somewhere.

Loren Feldman:
I’m still curious about the partner. And, Paul, I’d like to throw this at you. You’ve had an experience with a partner that was certainly mixed. I’m wondering if you have any questions for Stephanie about this relationship.

Paul Downs:
It sounds like he’s a better partner than my partner would be, in terms of knowing the industry. I mean, the story of my partnership is really long, but let’s just say the person who made an offer to me didn’t know anything about furniture manufacturing, and I didn’t know anything about furniture manufacturing. That’s not a recipe for success. We didn’t have the brand. We didn’t have the community connections. We didn’t have any of the pieces that Stephanie described. I think a partnership can be really, really strong—if each partner brings a different thing to the table and they don’t kill each other.

Loren Feldman:
How’s that going so far, Stephanie?

Stephanie Stuckey:
It’s going great. We have compatible skill-sets. I am doing the marketing, the branding, and sales. And R.G. is managing the manufacturing, the integration. He’s supervising our budget because we have to do a whole new budget now that we’ve merged with three companies. He’s doing the export business as well. He also has experience with grocery channels, and what we call “alternate channels,” and is helping me navigate some of those waters as I’m pitching sales to larger retailers. But we are not pitching to Walmart for the very reasons that you articulated.

Jay Goltz:
Is he first-generation?

Stephanie Stuckey:
No, he’s a second-generation pecan farmer, and he and his father managed the Stuckey’s pecan orchard for decades. That’s another thing that we have: family connections.

Loren Feldman:
So you’ve known him for a while.

Stephanie Stuckey:
Our families have known each other for a long time. Here’s another thing. He’s—I don’t know the exact age—I think he’s 15 years younger than me. That’s a bit of my succession-planning. I still want to see if I can get someone on the Stuckey’s side of the equation to step up to the plate at some point and be the successor to the Stuckey’s side. But he’s younger than me, and I think that’s a really healthy dynamic. We’re not both dealing with retirement issues at the same time.

Paul Downs:
Getting back, I would think that this issue of, “Is a minimum wage going to price out the young,” what it’ll do is it’ll price out anybody who presents a problem. I don’t think that smart employers are going to look at it as young versus old. They’re gonna look at whether someone checks the basic boxes of being a good employee.

Stephanie Stuckey:
Isn’t that true already?

Paul Downs:
No. It depends on the unemployment rate, honestly.

Stephanie Stuckey:
Good point.

Paul Downs:
Employers will make more or less of an investment depending on what alternatives they have. And if they absolutely need a warm body, they need a warm body.

Stephanie Stuckey:
The other interesting factor to me is, throughout Stuckey’s, we have employees with criminal records, and I think it’s a great opportunity. I used to be a criminal defense attorney, so I’m a big believer in giving people a second chance. But I’m interested in how this minimum wage increase might impact that population. I have not read the details of the bill, but it would be nice if—I know that there are some government incentives at the state and national level if you hire people who have a criminal record. I hope that there might be some thought to increasing those benefits, because I would hate to see those individuals—that population—having a harder time getting a job. Actually, some of the best workers we’ve had have criminal records.

Loren Feldman:
I think there is a credit included in the legislation that passed in December that does give you a credit for hiring people from various populations, and the one you describe is among them.

Paul Downs:
I know of several woodworking businesses that—one in particular—hire exclusively ex-offenders. I’ve talked to the owner of that one about the issue of establishing a company culture, and one sort of interesting fact popped up in that conversation, which is that even though you would think that that’s a very motivated population, he still has about a 35-percent failure rate on hires. A pretty high proportion wash out very quickly.

The second thing, on autism, I’m going to preface this by saying I have an autistic son who struggles to work, and so I’m extremely sympathetic to Jay’s idea, just that there may not be a concentration of autistic people anywhere near what you need to staff a factory. It’s a nice plan, and I hope you do it.

Jay Goltz:
Even if it’s just five, great. That’s five more. That’s all.

Stephanie Stuckey:
Right? I think it’s terrific. The facility we bought is right outside of Augusta, Georgia, so there’s a pretty good population center. It’s like a 20-minute drive. There might be an opportunity to tap into that community there.

Paul Downs:
Then good. Great.

Loren Feldman:
Stephanie, I want to take a step back and take the larger view of this for a second. You took a big leap when you bought the company in 2019. This seems like an even bigger leap. You’re even further invested, taking bigger risks, but of course, bigger rewards.

Stephanie Stuckey:
Absolutely!

Loren Feldman:
What are you most worried about? What concerns you the most?

Stephanie Stuckey:
You know, there’s one thing I meant to mention earlier, when we were talking about the risk from the initial purchase of Stuckey’s. This is a multiple of that amount of money to purchase this manufacturing facility. I did mean to bring up how we financed it, and it was through an SBA loan. We did a 7(a) loan. And I think it is important—so many people with the Cares Act talk about the PPP, which of course is a benefit that has been a huge boost to businesses, but these loans for acquisition of facilities are also benefiting from the Cares Act round two. The first six months of our payments, the SBA is going to pay up to $9,000 of our mortgage payments. That’s a boost that’s not always mentioned in the news.

Loren Feldman:
Nice.

Stephanie Stuckey:
What keeps me up, or what worries me about this, I guess, obviously, it’s a financial investment. The SBA loan, it’s a great thing if you can get it—that’s a whole other episode: Trying to get financing on a big acquisition for a small business. Because it typically requires you having good credit, which my business partner and I are fortunate to have, but you also have to have collateral. The SBA loans do require you to put up personal collateral.

Loren Feldman:
So you bet the house?

Stephanie Stuckey:
My house is collateral now, yup.

Jay Goltz:
Welcome to entrepreneurship! I’m glad there’s some honesty out there, because that’s the way it works. Because I gotta tell you, especially now with the banks, it’s about collateral, collateral, and collateral.

Stephanie Stuckey:
It’s incredible. Not only did I have to put my house up as collateral, but then I had to make sure that the home insurance policy listed the bank. I had to take out an additional life insurance policy and list the bank. I was just waiting for them to call me and tell me my firstborn son has to be collateral as well. It was just phenomenal. Of course, everything gets reduced in value. Even though my home might be worth a million dollars, they’re gonna appraise it much lower for purposes of the collateral.

Jay Goltz:
The fact that you pulled it off, more power to you. Good for you.

Stephanie Stuckey:
It took six months of doing nothing but filling out paperwork and almost daily conversations with our bank. And then the dirty secret of these SBA loans—and they are good if you can get them—but you have to have a loan processor who gets a percentage. And so you have to not only get all the documentation together yourself and have daily conversations—I had the bank vice president on speed dial. I had his personal cell. He was home with COVID, and I was calling him.

Jay Goltz:
Let me ask you this: Did you have experiences with bankers, where you went through this for a month, two months, three months and finally they said no?

Stephanie Stuckey:
I did have a mini-experience like that, but it was only for a couple of weeks. But it is fascinating how conservative they are and what loans they will give out. Because to your point, I had one bank I was trying to get money from early in taking on Stuckey’s, and it was just to get some working capital basically. They backed out because they said, “Well you own and operate locations that sell gas. We don’t work with them because the oil prices are way too volatile, and we won’t do business with Stuckey’s.” And I said, “We don’t own any of our stores. We franchise them all.” I said, “We don’t even operate them. The licensees operate them. We do not own, we do not operate gas stations,” and they said, “We’re still not gonna do it.”

Loren Feldman:
Stephanie, how many banks did you have to talk to?

Stephanie Stuckey:
For the SBA loan? Just one. Now, I will give a shout out to small banks, local banks, because we went through Planters Bank in Hawkinsville, Georgia and my business partner had a long-standing relationship with them.

Loren Feldman:
Stephanie, I hate to do this. This was a great conversation. I appreciate your openness and all that you’ve shared. But I’m going to have to close the conversation. I had all kinds of other stuff that I was hoping to get to. We’re just going to have to save it for another episode. My thanks to Paul Downs, Jay Goltz, and Stephanie Stuckey. Thanks for sharing, everybody.

Episode 49: How Do We Get Out of This Cage?

This week, Karen, William, and Laura cover a lot of ground: For one thing, what do you do when the to-do list seems endless, you’re already working 24/7, and you just can’t get ahead? For another, what do you do when employees decide they want to work remotely from random parts of the country? Does that work? Is it a bureaucratic nightmare? Meanwhile, Laura is confronting several big, interrelated issues. Her co-founder and husband, Doug, is ready to step back from the business. That’s a little tricky because the company operates off a 19-year-old platform that Doug built, and only he knows how to make it work. They’ve been trying to hire tech people for Doug to train, but they’ve been through 15 people in 10 years—and they know they’re doing something wrong. Do they need to hire a recruiter? Is it time to junk Doug’s platform and go with Shopify? If they do that, will they forfeit 19 years of SEO value? All of which has left Laura feeling trapped. “That’s this cage that we’re in,” she tells us. “What the hell do you do?”

Guests:

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

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Laura Zander: “That’s this cage that we’re in. What the hell do you do?”

Laura Zander: “We’ve tried hiring college students. We’ve tried hiring $150,000-a-year people from Stanford. We’ve tried everything in between.”

William Vanderbloemen: “It has to do with Founder’s Syndrome. Can founders really let go? Everyone says they can, and a staggering percentage cannot.”

Karen Clark Cole: “You don’t think about it as dumping your crap on somebody else. You have to think about it as empowering others to take on new responsibilities.”

Full Episode Transcript:

Loren Feldman:
Welcome, Karen, William, and Laura. Laura, I’d like to start with you. I understand you have an important job opening. If I’m not mistaken, you’re looking to replace your husband.

Laura Zander:
Yeah, I am. God, if there’s a rich single man out there who would like an 11-year-old kid…

Karen Clark Cole:
I get him first.

Loren Feldman:
William, in your experience, how long does a husband search usually take?

William Vanderbloemen:
Well, if you’re willing to go the mail-order route, we can get it done pretty quick.

Laura Zander:
Perfect, perfect.

Loren Feldman:
In all seriousness, your husband is your co-founder, and I guess, kind of the Chief Technology Officer at Jimmy Beans Wool. Is that right?

Laura Zander:
Yeah, he’s the Everything Technology Officer. But yes, we’ve been in business 19 years. He started full-time 17 years ago, and he has built pretty much every piece of software that we use.

Karen Clark Cole:
From scratch, Laura?

Laura Zander:
From scratch, yeah. So it’s all zeros and ones. It’s all like ASP.NET, JavaScript, VB.

Karen Clark Cole:
I just have to ask: Are there no systems out there you could have used? You had to make them?

Laura Zander:
Not 19 years ago, no.

Karen Clark Cole:
Oh, wow.

Laura Zander:
No, and that was actually our big, huge competitive advantage. I mean, sure, we probably could have spent $200,000 at the time. I mean, there was no Shopify. We started years before Facebook started.

Loren Feldman:
And also, you guys were both coders who made your living doing this.

Laura Zander:
Yes, so we started it with an inventory management system that linked to a website, which was the e-commerce [site]. Plus we had a point-of-sale system because we had a retail store. We had this platform that Doug built and then just expanded and expanded it. We’re in the yarn industry, and so we have all these interesting little things. It’s not apparel where you sell one t-shirt and one size. You sell two hanks of yarn if somebody is going to make a scarf. You sell three hanks of the same color if somebody is going to make this.

There are some complexities inherent to the industry that we’re in that make it so that you can’t just buy off-the-shelf software. Or you could, and then you could customize it, and that’s something that we need to think about. Now we have this 19-year-old legacy system that Doug has built, added on to. He’s invented some things, if you will, before things were available, like subscriptions. I don’t know what that subscription platform is, but he built a subscription platform for us before you could go buy one somewhere so that we could run subscriptions.

All of that said, he has built it, he maintains it. He maintains AWS for us. He maintains our phone system. He has two college-aged women who help him and he is training and teaching. Over the last 10 years, maybe 12 years, we’ve tried hiring. We’ve tried hiring college students. We’ve tried hiring $150,000-a-year people from Stanford. We’ve tried everything in-between. We’ve probably hired 15 people over the last 10 years.

Loren Feldman:
Wow.

Karen Clark Cole:
All to try to replace Doug, or to do different things?

Laura Zander:
He’s a bright guy, and he’s a creative. He designs our house. He’s an architect. He was a technical architect in the Bay Area before we started this. In an ideal world, he would have a team underneath him with somebody who managed the team, and he could do the new creations, and he could create new technologies. That’s what he’s uniquely talented at. Or he could just walk away. If we found somebody to replace him today, he’d get on his mountain bike and ride into the sunset and be very happy.

Loren Feldman:
I think you told us previously that his dream is to be a house husband.

Laura Zander:
His dream his whole life was to be a stay-at-home dad with no kids, and then I got pregnant. So we have the kid. [Laughter] But one of our employees, at one point, described it very well—Doug has built a cage around himself, and we need to figure out how to get him out of that cage, because the system can’t survive without him.

Loren Feldman:
What’s gone wrong with those 15 hires? Is there a common thread?

Laura Zander:
That’s a great question, and I wish that I understood. It’s a really great question. I don’t know if it’s our expectations. Obviously, it’s that we didn’t hire well. That’s a big part of it. I do get feedback. Doug is really, really, really—

Karen Clark Cole:
Are all of them no longer with you, Laura? Sorry to interrupt.

Laura Zander:
Well, I mean, we have two right now. For a couple years, he had a team of two women who worked for him who he trained from the ground up. They were a magical duo. They worked really, really well together. The one woman—she was a college student—could have replaced him at some point. But she wanted to go to a bigger company, so she left after a couple years, and she went to Hamilton Robotics or some place like that. She wanted to work on spaceships. So, there’s that.

I think part of it is us just not hiring very well and probably not training or not communicating. I don’t know. The feedback I’m getting is that he’s extremely, extremely patient and extremely good at teaching people. But what happens is, when you hire somebody who’s 100 grand or 150 grand, he has really high expectations and gets frustrated really easily when those expectations are not met. We hired a guy who had been a CTO or a director of engineering at a local Reno company. He came in, and the guy made mistakes all over the place, and Doug just has no tolerance for that. He’s a very good programmer. So the guy made mistakes, wouldn’t own up to them, didn’t have the skill-set that we thought he had. And that’s why, I think part of it is the hiring and the expectations.

Loren Feldman:
So what approach are you taking now? What exactly are you looking for? And how are you trying to find it?

Laura Zander:
I am a little paralyzed right this second. I have so much on my plate with the Texas business and trying to get that going, that I’ve actually just been kind of ruminating on it for the last couple of weeks.

Karen Clark Cole:
But even then—William, tell me if I’m totally wrong here—you find somebody and it’s not guaranteed they’re going to work out.

Laura Zander:
Exactly, exactly.

William Vanderbloemen:
Well, if you hire the right search firm, they guarantee their work for at least a year, if not two.

Laura Zander:
Yeah.

Karen Clark Cole:
Laura, have you tried try-before-you-buy? We’ve done this in the past with three of our current C-level positions. One of them had a consulting firm that we worked with for several years and then actually bought them so that she could come in-house. Another one was our chief cultural officer and our chief financial officer. He had just finished a big gig and was out consulting as a consulting CFO, and so we worked with him for probably a year. We didn’t really need a full-time one at the time, and so it was good for all of us, and then we just realized, “Hey, this is working out great.” And then he came in as an employee. And then another one, our COO actually came through an acquisition, but he was only on for the transition at the beginning, because his role wasn’t in the new company. So he went away for six months, and then he actually came back, and we meanwhile had to fire somebody in that position. Then he filled it and it’s been great.

The try-before-you-buy—for a decent amount of time, one or two or three years—has worked the best for us out of all those different types of things. I think if you’re hiring somebody who has a lot of experience for a lot of money, you should expect everything from them.

Loren Feldman:
Karen, can you do that with a position like this? I mean, the people who have these skills are in such high demand right now.

Karen Clark Cole:
For a CTO position?

Loren Feldman:
Yeah.

Karen Clark Cole:
Yeah, I think so. There are loads of people who are out there doing contract work, because it is in such high demand. Finding that fit is not super easy either, but at least there’s less heartache and less expenses when you can just say, “This is a six-month contract.” Then you try it, and then you’re done, and then there’s no commitment. You don’t have to fire anybody. There’s no big, cultural downfall after they leave. If you’re really trying to find the best fit, that’s kind of—in my opinion—the only way to do it. When somebody is at that high of a level in the company, they really have a big impact.

William Vanderbloemen:
So I completely disagree with you, Karen.

Karen Clark Cole:
[Laughter] Good.

William Vanderbloemen:
One hundred percent.

Karen Clark Cole:
I’m just telling you what’s worked well for us.

William Vanderbloemen:
Okay, well, then let me let me edit the comment. I don’t disagree that that’s your experience. I don’t think it’s repeatable for everybody. In fact, I’d say more often than not, it’s not repeatable, particularly in this sector. It’s the hottest sector there is right now. The supply/demand of people who are out there who can do the work versus people who are realizing they need this kind of work done—there’s just a huge gap. The people who are good at it know it, and so the ones who do contract labor don’t want to chain themselves to one company because they can move and float around. In my experience, the people who have decided that the gig economy and the contract labor way is their way, they do great work, but they make horrible permanent employees. In my experience, this is why I started our business—to try and reduce the heartache.

Karen Clark Cole:
Do you think that’s just this field in particular, William? The tech job?

William Vanderbloemen:
No, no, I think it’s all things. Hiring is a venture into the unknown. People don’t really think that way unless you point it out, but I’ve never had anybody disagree with me. When you add a new person to your team, you’re taking a great gamble, even if you know them personally. Adding a person changes the equation, right?

Laura Zander:
It’s an arranged marriage, right?

William Vanderbloemen:
Right, so when you think about a venture into the unknown, what is the most primal human fear? It’s the unknown. You get a three-year-old, what do they want at night? “Can you leave the light on in the hall? I don’t like the unknown.” As a pastor in my previous career, I’ve buried a lot of people, and even the ones who were solid in their faith were scared of death, because it’s the unknown.

When you’re going into hiring, whether you realize it or not, you’re venturing into the unknown. The human propensity is always to look for some known entity during this venture. And that turns into, “My friend told me about a guy who’d be great.” Or, “I used a contract person for a while, and they’d be awesome.” And whether people realize it or not, having something that you quote “know” mitigates this innate fear that’s in hiring and this venture into the unknown. I think, a whole lot of times, you just need a third set of eyes. You need some professional opinion. You need someone who can turn on a light for you, and I think that goes across all sectors.

Now, within the job market, I don’t know a sector that’s hurting more—except maybe chief nursing officers. There’s a staggering need for that, and not a great supply chain coming. But this sort of role that your husband’s played… the supply/demand is just way off. You’ve got to have somebody help you. The real question, Laura, the hard question—love you—but if you asked me to do the search, I’d say, “You know, I’m gonna have to sit down with you and your husband for a long time and visit before I decide whether or not I’ll do the search.”

Laura Zander:
I’m so aware of that.

Loren Feldman:
Why is that? What do you want to know?

William Vanderbloemen:
Well, just imagine a superstar singer, a woman who seems to keep dating and breaking up and writing songs about how awful the boyfriend was, and they keep getting with the wrong guy. Eventually you’ve got to go, “Hmm, maybe it’s not the guy.”

Laura Zander:
One hundred percent. Absolutely, one hundred percent. And that’s why I’m a little paralyzed. I don’t know if paralyzed is the right word, but…

William Vanderbloemen:
And Laura, just to put a finer point on it so people think I’m not just the crabby guy on the call today—it has nothing to do with you as a person. It has to do with Founder’s Syndrome. Can founders really let go? And that’s a very real question to ask. Everyone says they can, and a staggering percentage cannot. We’ve just learned to ask some real careful questions, and we’ve told some folks, “I just don’t think we’re the best fit for you.”

Laura Zander:
That’s a really, really great point. It’s been very interesting and illuminating—educational, I guess—for me, because Doug and I, when we started, let’s say we had three people. When he started full-time, we probably had two employees or something like that. I have grown my team to 80 people. He has grown his team to two people. I have watched myself go through this Founder Syndrome, think I’m letting go, but realize now that, five years ago, I wasn’t letting go. Because now I have let go in some areas, and I’m like, “Oh, that’s what it feels like. Okay, maybe they’re not doing it the way I would have done it if I did it.” I’m constantly checking myself on that, and so now I’m able to kind of watch him and see where he is and is not letting things go. And so 100 percent, absolutely, totally agree. That’s this cage that we’re in. What the hell do you do? Like, if he dies, we get a couple million bucks. And I’m like, “Maybe then I can pay somebody a million bucks a year even if they don’t want to do it forever…”

Loren Feldman:
This podcast just became evidence.

Laura Zander:
Yeah, well, what’s the out? What are our options? Do I believe that there is one person in the U.S., or maybe two or three, who would like to live in Tahoe and would like to build a team and would like to work—that all of these things kind of come together? Sure. There might be two people in the whole country.

Loren Feldman:
Why do you say that? I have a hard time believing that. It seems to me, under the right circumstances, going to work for a growing company in an attractive area, having the opportunity to build your own thing and take charge, that seems like an interesting challenge that you ought to be able to find more than one or two people interested in taking on. Am I wrong?

Laura Zander:
Maybe?

Loren Feldman:
Karen? William?

Karen Clark Cole:
No, I agree with you. I think it sounds good. I’ll do it. [Laughter]

Laura Zander:
Maybe, maybe. I just think about Google’s down the street and Facebook’s down the street. We’re kind of sandwiched between San Francisco and Portland and Seattle. I get the lifestyle of living in Tahoe and having some freedom. I had always thought maybe if you’ve got a couple small kids and you want to slow down, and you want to have more of a “lifestyle job,” as opposed to going and working for one of these big things…

Karen Clark Cole:
What about a young whippersnapper out of college? She’s super smart, but doesn’t have the high salary and the high experience. Is that a bad idea William, Laura?

Laura Zander:
We would love that. But how do you find somebody like that who doesn’t go to San Francisco when that’s just a couple miles away?

Loren Feldman:
Also, isn’t that person going to be a little ways away from really being able to take over from Doug? I mean, what’s his timeline?

Laura Zander:
Maybe. If he found somebody smart enough… Again, we did have somebody. He did find somebody who was just in college, just started computer science, and she was a genius.
They communicated really well. It worked really well. She just didn’t want to work for a yarn company for the rest of her life.

Karen Clark Cole:
Can you just go hire that? I always like it when I get a persona around the kind of person we’re trying to find.

Laura Zander:
Yes, and that’s what we did.

Karen Clark Cole:
And what if your expectation is not, “It’s a lifelong commitment,” but it’s more of a two- and three-year commitment?

Laura Zander:
Totally, and we hired two of them in December. One of them is still with us. One of them didn’t work out, didn’t know as much, didn’t have the level that we had expected. He’s very much into, “I will teach you,” and just finding somebody who is intelligent and is curious. We’ve tried that a few times.

Loren Feldman:
William, getting back to your thoughts about whether this is a search you would be willing to take on. I’m curious if you have any suggestions for how Laura and Doug would think about what’s gone wrong in the past, why they’ve been through so many people, and what they need to do differently to put themselves in a position to hire the right person.

William Vanderbloemen:
This is so armchair quarterback, which is dangerous stuff. I don’t know the situation, and there are no cookie-cutter answers for high-level hiring. There just aren’t. You’re talking about extremely talented people who have founded a company and done amazing work. You’re talking about a growing organization that’s changing every day, and you’re talking about trying to find a unicorn.

Laura’s right. The geographic piece is not a small piece in the puzzle, so I don’t want to come off as, “Here are the six easy steps to solving Laura’s problem.” Because there are not. I think you’re asking the right questions, Laura, and the questions that I’m impressed with [are], “What does he want to do? Is he ready to let go?” If you haven’t read The Founder’s Syndrome, you should get a copy of it, read it, and then just take a long, long look in the mirror.

And then Loren, I’m gonna sound like, “All I have is a hammer, so everything looks like a nail,” but I think they need to hire an executive search firm—not a placement firm, not a headhunter—a high-level, go ahead and invest the money. If you tell Doug, “Doug, for this dollar figure, we can solve this problem for good,” I don’t think you’d blink. Now, finding the right firm is what I think you need to be really careful about, because there’s no barrier for entry into search. You just hang a shingle and say, “I do search.” And it could be snake oil salesmen. It could be the best in the world. I tried to equip Laura with some questions to ask as she’s looking at firms that specialize in tech.

Loren Feldman:
What are those questions?

William Vanderbloemen:1
What’s your fee structure? If it sounds too good to be true, it is. If it sounds expensive, that’s not necessarily a bad thing. Is it, “You only have to pay me when I find your person”? Oh, that sounds good. Most of the economy works on a pay-upon-delivery transaction. But what you want in this search is a partner who is interested in making sure this gets solved—not a competitor.

So if it’s, “You only have to pay me when I find your guy or gal or whatever,” what happens when you, Laura, run across a great 21 Hats listener who says, “I’d like to be considered,” and you put the name that you found in front of your search consultant? I don’t care how good they are. The human heart is a deceiver above all things. If it’s me and I only get paid if I find your person, and you bring me somebody who I did not find, I’m going to have a bias against them. I can’t not. No one’s that objective.

I’d say it needs to be a retained fee, and I think they need to guarantee their work. Our guarantee would be, “This person is going to be here in 12 months, and if they’re not, we’ll come back and do the whole thing again for free. And there’s no expiration date on that. The second time? Do it again. Third time? Do it again.” That needs to be: no questions asked. We do it if the person dies. We do it if they decide they don’t want to be there anymore, or if you fire them or whatever. If they have that kind of guarantee, then they’re serious about their work. It doesn’t mean they’re perfect, but they’re serious about their work.

Loren Feldman:
How does that strike you, Laura?

Laura Zander:
That sounds amazing. William, I like the way that you put it, that, “Okay, if we could solve this problem by investing whatever that dollar value is, would we solve it?” So, yeah, that reframes it.

Karen Clark Cole:
How important is it that they’re actually in Tahoe, Reno, versus just coming occasionally and working remotely? Because that may help also, right?

Laura Zander:
Yeah, that’s a great point. I don’t think that it’s critical. I think that, maybe five years ago, we thought it was.

Loren Feldman:
Five months ago.

Laura Zander:
Yeah. I don’t think it’s critical. The other thing that we haven’t even talked about is: Maybe this isn’t the right solution. Maybe the solution is that we need to—and we did try this a couple years ago—maybe we just need to go to a new platform. Maybe we need to move everything to Shopify, and then hire a firm that can manage our site.

Loren Feldman:
That’s an interesting question.

Karen Clark Cole:
Yeah, that’s going up a level.

Laura Zander:
Yeah.

Loren Feldman:
I know a lot of people are very happy with Shopify.

Laura Zander:
Yeah, I mean, we use it on the Madelinetosh side, and then we have a staff who can manage the site themselves. But Doug’s issue with that, or his concern is: We’ve got 19 years of rankings and pages, and the system that he built is pretty phenomenal. It’s very intricate, very, very good, and very specific to what we’re doing. Is that a competitive advantage of ours? And it is, in some ways. If we have the people to manage it, it’s a competitive advantage. It’s not a competitive advantage in that we’re beholden to basically one person to manage it all.

Loren Feldman:
The key question there is whether you can preserve the SEO value you’ve developed over 19 years when you move to a new platform, and I would think it would be fairly easy to get an answer to that question.

Laura Zander:
And I think the answer—my understanding, and it may be different—the last time we talked about it, the answer is no.

Loren Feldman:
Wow.

Laura Zander:
So, that’s very risky.

Loren Feldman:
That’s a big cost.

Laura Zander:
Yeah, again, we’re in a cage. What do you do? We’ve lost money the last few years, so we didn’t even have the money to be able to afford somebody for $200,000 a year, or a recruiter, or whatever. We’ve made some adjustments, and now we should be able to do that, which changes things, but it’s a little scary. What if you hire somebody super huge, and all of a sudden, everything tanks?

Loren Feldman:
I’m getting the sense we’re not going to solve this problem today.

Laura Zander:
Dammit!

Loren Feldman:
I think it may be something we come back to. We tried, Laura.

Laura Zander:
It’s really helpful.

Loren Feldman:
I’d like to pick up on something that Karen raised, which is the issue of working remotely. Karen, how are you thinking about that these days? How’s it working with Blink?

Karen Clark Cole:
I know what I think, which is different than a lot of our employees apparently.

Loren Feldman:
How so?

Karen Clark Cole:
I think we’re all going to come back to the offices in some capacity, so the heads-down work will happen at home a lot more than before, which I think is great—for me included. But then we’ll come to the offices for collaboration, for client meetings. Our business is a little bit unique, in that we have physical research labs in our actual offices. These are places where end users come in and they test hardware and software, and we observe them, and then we do analysis and come up with recommendations for how our clients can improve the product or the service. That requires actual physical space.

Loren Feldman:
I want to hear about the part where you and your employees look at this differently.

Karen Clark Cole:
Yeah, I’m getting to that. We’ve been spending a lot of time and energy and actual real money hiring consultants to come up with ideas to make the space map to what I just described. But what’s come up at the same time recently is employees wanting, “Oh, I don’t need to be in this really expensive city anymore to do my job. I can go be in Hawaii for months on end, or I can go to Reno, or to the middle of some remote place and still do my work, as long as I have an Internet connection.”

And so I think what that’s done is, it’s allowed people to see the world differently, which I think is really cool. But what they’re doing now is asking us, “Hey, I’m thinking about going home to Minnesota. And I know we don’t have an office there, but we’ve proven that we can all work remotely. Can I move?” My answer immediately is, “No, we don’t have an office there, so we can’t support you.” You can go to any of the states where we have offices—and there’s four of them—which I think it’s fabulous to offer that to an employee. At least, when we first started doing that, it was a real benefit.

Loren Feldman:
They just have to move to the same state? It doesn’t matter if they’re in the same city?

Karen Clark Cole:
Well, they need to be connected to an office. This is my view of it. So in San Francisco, for example, a lot of people in recent months have moved out of the city. They can still come in, but it’ll be a much longer commute, and so as long as they’re willing to come in a couple of days a week, or as needed, then it’s fine. They can spend less time in the office. That’s okay. But now we’re getting people requesting to move to not only different cities where we have offices, but different states, and in one case, a different country. And I have a list of about 30 problems with that. [Laughter]

The reason why it should be considered is—there’s two on my list—star employees who have busted it and done excellent work for years who are really dedicated. Those people are hard to find, as we’ve just talked about, and so we don’t want to lose them. But the cons are so extreme and go all the way through to things like, “Okay, so if we let somebody live in a state where we don’t have an office, then we have to set up a whole new filing system.” We’ve got to do a business license, gotta have state taxes, city taxes, unemployment. We have to learn new HR regulations. We have to learn new business regulations in those states and those cities. Unemployment insurance to pay, we have to set up a policy in that state. There are filings for quarterly annual taxes, state taxes, city taxes—it goes on and on.

The problem with it is it’s just a constant flurry of paperwork that needs to be read, figured out when it’s happening, and then dealt with. And I kind of think, “Okay, well, this is a product of success, in that if our employees think that we’re so big that we can handle this, no problem, that’s kind of good. But at the same time, we’re really not big enough to manage that level of complexity in our finance side.” Larger companies have a whole team dedicated to handling this multi-state employment thing, and we just don’t have that. We have one person who deals with the five or the four states that we’re in currently, and that’s a lot of work. And it sort of comes down to, while that’s a nice idea, we’re just not that big of a company at this stage. So, maybe in the future.

Laura Zander:
Just out of curiosity, have you ever asked anybody, “Okay, how much of a pay cut are you willing to take if you want to move to Minnesota? The cost of living is 37 percent less, so are you willing to take a 37-percent pay cut?”

Karen Clark Cole:
No, I hadn’t even thought of that. Good one. I’ll add that to my list.

Laura Zander:
Number 31, yeah.

Loren Feldman:
Karen, where’s your head? Are you thinking of drawing a line in the sand on this one?

Karen Clark Cole:
I already have, and then I’m continually getting pushback. I had a meeting with my executives, we made a decision, which was loosening it a little bit, which is to say, “Okay, it’s not ideal, but if it’s a star employee, X amount of tenure, and we don’t want to lose them, as long as they’re in a state where we’re already doing business—we don’t have to do any of that long list—then we can consider it, and so that was a change already.

Because for us, we can’t go virtual. We have to have these physical spaces because of our research labs. Clients love coming to our offices. They are beautiful. We have spent boatloads of money making them a cultural attraction. I don’t want to run a virtual company. I’m just not interested in doing that, at this stage in my career. And the problem is our neighbors—the Facebooks and the Twitters, and the Microsofts—Twitter’s just said, “You never have to come back.” Microsoft: “Not for a year.” Facebook: “You don’t ever have to come.” So we’re up against that.

Loren Feldman:
William, have you seen this kind of issue either at your place or your clients?

William Vanderbloemen:
Everywhere, everywhere, and I have run a virtual company. I’ve run a completely on-site, must-live-here, work-here, show-up-here, company. Now I run something in-between, and part of that is COVID, but I will probably be some form of hybrid going forward. I think that Karen’s hitting on such a good point: The kind of work that a company is doing sort of sets the standard for how much of it has to be done under the same roof. I’d love to see Ford Motor Company put a car together with virtual offices. Not gonna happen, right? We use basically a bank of virtual receptionists, and you’re assigned a team of five or six that learn enough about your business to be able to navigate incoming calls and make us sound like we have this full-time receptionist sitting at the desk all the time without having to pay for it. That can totally be done virtually! It’s completely virtual work. And by the way, if you’re interviewing people who are going to be completely virtual, you can do the interviewing virtually. But if you’re going to have them under your roof, you’d better get face-to-face with them before you hire them.

Loren Feldman:
Have you dealt with people who want to live in different states or different countries?

William Vanderbloemen:
Yes.

Loren Feldman:
And how have you responded?

William Vanderbloemen:
I haven’t dealt with the country piece yet for my business, but people who want to live in different places. I have a relative who’s a partner at a very well-thought-of management consulting firm. Years ago, she told me, “We advise our clients to leave 10 percent of your workforce available for living wherever, because you will find— every now and then—the person who is just amazing but cannot move.” And for us, one of those was a guy who had started a church, grown it to a really nice size in Eldorado Hills—not too far from you, Laura—and he was ready to step away from that, but he had a lot of gas left in the tank, and all of his grandchildren lived on the block he lived on. He was not leaving there. Like, that was not an option. But he was good enough and exactly what we needed at the time enough that we said, “Okay, that works.”

I’m learning to steer away from all the categorical imperatives of “always” and “must” and “never,” and go a little more case-by-case. It does come with a cost, though, and it’s exactly what Karen said. He was an employee in the state of California, and that’s a whole different host of issues and taxes than working in Texas. I don’t love it, but I’m learning that, if you’re gonna die on that hill, you might win the battle and lose the war.

Loren Feldman:
Have you found any useful hacks for dealing with that bureaucratic piece of having people in different states?

William Vanderbloemen:
No. I mean, at the time, we were using Insperity, which used to be “administaff”—kind of the largest PEO company that there is. That’s supposed to be why you’re paying them an upcharge, is to make that stuff go away. But no, it was always a nightmare.

Loren Feldman:
Karen, have you actually lost people yet over this issue?

Karen Clark Cole:
No, not yet. But we will lose them. I think that’s the reality.

Laura Zander:
Interesting, but if you were a retailer, let’s say, and it’s just so obvious that you have to be in person, you would lose them if they left anyway, right? I mean, if somebody is going to move, they’re gonna move.

William Vanderbloemen:
Good point. Totally agree with you, Laura. And Karen, I don’t know your business, but our central nervous system is still a show-up-at-the-office-and-be-here and you-must-live-in-Houston. What I’ve discovered for where I am right now, is that central nervous system is way more productive if they’re in the same building. Maybe I’ll lose a person here or there, but the productivity I gain by keeping people together outweighs the loss of the one person.

Karen Clark Cole:
Yeah, and for us, it’s the collaborative nature of it—coming together and brainstorming. And the clients want to come and be with us. I’m like, “Yeah, we can make an exception,” but then all of a sudden, the exception becomes the rule. And then everybody wants to do it, and then, “Why did that person get to and not me?” That’s what I’m afraid of.

Laura Zander:
That’s exhausting.

Karen Clark Cole:
Because I don’t want to have a ghost town. We have a problem already, in that our offices are too big for the reality of the future, which is people in the office less often. We have to grow quickly to fill those offices because there’s a cultural shift when you have an empty office. It’s bad for the culture. If it’s full and buzzing, that’s good. You get energy from that. I’m already worried about that part of it. And then they’re also wildly expensive to have these offices, and so we need them full of billing people. All of a sudden, nobody wants to work in the office, so why don’t we close the office? But then our whole business blows up. So, it’s complicated.

Loren Feldman:
So that’s two problems that we haven’t solved today. I’d like to try for one more in the little bit of time we have left. I’ve got a question for you guys, and that is this: What do you do, personally, when your to-do list just seems endless? You have that feeling that you could work 24 hours a day, seven days a week, and you still wouldn’t finish the list, and the days fly by. Especially during the pandemic, if you’re working from home, it’s hard to know when to turn it off. It’s hard to stop. It just keeps going. I’m asking for a friend. Can anybody relate to this?

Laura Zander:
Yeah, I can. I’ll tell you what my experience has been this last year, and it’s that I work 24/7. I know that the list, although it feels like it’s endless, it’s not. I’m actually in a period right now, for the first time in about probably 16 months, where I can breathe, and I’m taking walks with the dogs.

Loren Feldman:
How’d you get there? What changed?

Laura Zander:
I worked 24/7 until the work was done.

Loren Feldman:
That’s not what I wanted to hear.

Laura Zander:
I built the house, and now we can stand under it, and the rain is off of us, and I can take a little bit of a break. There’s still lots of stuff to do, but none of it is as urgent as it was. I just had to get through it.

Loren Feldman:
Karen, William, I suspect you’re in different places in the evolution of your businesses, but have there been times in the past when you felt that way?

William Vanderbloemen:
How about all of the last 12 months? Loren, back when we partnered together at Forbes, I think one of the most popular columns I ever wrote was, “There Is No Work-Life Balance.” For me, it’s been a myth. “I’m just going to turn it off at five.” I’ve got a pastor friend who’s like, “I just don’t take any calls after 4pm. That is sacred time. And if the number one donor in our church called me at 4:01pm, I wouldn’t return the call.” Well, the dirty little secret nobody knows is he is the number one donor in the church, so he’s not going to call himself.

I think most of us, it’s just praying for wisdom to know when you have to get things done, and when you don’t. Because there are seasons where you’re in the middle of building a house and a rainstorm’s coming, and you’d better get the roof. You’ve gotta get it done. It’s just got to happen. And then you’ve got to have the discernment to know when to shut it off.

For me, a lot of what I’m trying to learn lately is the proactive, rather than the reactive. You start businesses all proactive, and then it gets busy, and it’s all reactive. “Business is coming in. We’ve got to deal with it.” I’m moving to a different stage, as you mentioned in the question, Loren. I can’t remember—one of you probably knows—management consulting was basically born by a guy giving business advice to a great bank, and told the owner of the bank: “You and your management team, write down six things you want to accomplish this day that will help the business move forward. Just six, no more, no less. Just mark those off the list, and do it every workday, and watch what happens.” It is amazing what that small discipline will do. Before anything else, either at the end of the day today for tomorrow, or at the very beginning of tomorrow before I see my phone, if I’ll do that exercise, I find that I have a better handle on my proactive throttle of when to turn it off and on.

Loren Feldman:
How about you Karen. How do you think about it?

Karen Clark Cole:
Well, first off, when you said you’re in a different phase in your business than Laura, as if it’s all gone away, it’s always the same. There’s always more to do than you have time to do. Particularly, we all have kids, so if you’re a parent, and then you’ve got—in my case—130 extra kids in the company, it feels like it never ends. But for me, there are the three main buckets, which is constantly prioritizing and reprioritizing, like every day. My job is to be constantly evaluating those priorities and what’s at the top, and it’s always changing, and that’s the fluidity of the business. At work, I do that, but in my life as well. It’s just constantly like, “Okay, what is at the top?” Where will there be repercussions if it doesn’t get done? Which leads to outsourcing.

I try to offload and outsource anything possible, and that is a real shift to get to that stage. I know that, for small business owners, they have a really hard time with this in the business. You need to start doing it in the business and then apply it to your whole life. I’m always asking myself and the people who are reporting to me, “What can somebody else do? And what’s the best use of your time?” I make sure whatever I’m doing that only I can do, and if I think somebody else can do it—maybe not the way I would, but that’s okay, it can still get done—you don’t think about it as dumping your crap on somebody else. You have to think about it as empowering others to take on new responsibilities.

It may be something that they are really good at, like wired for it. They’re super-efficient, and they love it, versus me. I’m not wired for it. I hate the level of detail, like email, for example, kills me. And so if somebody else can do that for me and actually enjoy it and get satisfaction and feel responsibility for doing that, and I can pay them for it, and then I can go free up my time to do the heavy lifting that only I can do, in terms of running the company, that’s a good solution for everybody. But it takes a really long time to get to the point where you’re willing to hand stuff off.

Then I added this new thing recently that’s been working great with working at home, because it’s hard to know when the day ends, because there’s not people leaving to clue me in, like, “Oh, it’s the end of the day. People are leaving.” That kind of is a trigger for me. I put a hold on my calendar for Monday to Friday that says, “Stop working, start dinner, get out of the office.” It’s actually helped, because I have an hour reminder. So I’m like, “Okay, I’ve got one hour left, I’m going to go go go.”

Loren Feldman:
Well, I’d really like to keep talking with you guys, but I’ve got this to-do list that I gotta get to right now. As always, my thanks to Karen Clark Cole, William Vanderbloemen, and Laura Zander. Thanks for sharing everybody.

Episode 48: I Want Clean Hands

This week, Paul, Jay, and Dana give quick PPP updates—and then dive into a discussion of what a $15 federal minimum wage would mean for smaller businesses. Will it lift people out of poverty? Will it put businesses out of business? Will it hurt entry-level employees? “I'm listening to you, Jay,” Dana tells us, “and I'm thinking about the coffee shop owners I know who have to close.” To which Jay responds, “They say they have to close, but did they try raising their prices 5 percent first?” We also tackle a listener-submitted question about the best way to avoid unemployment claims, which can require forceful management. “There's no way around it,” Paul tells us. “You gotta be hard at some moments, as a boss. You just have to be.”

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:

Jay Goltz: “I’m a retail pariah. ‘Oh, you’re a retailer?’ They can’t get away from me fast enough.”

Jay Goltz: “Wait, wait. They say they have to close, but did they try raising their prices 5 percent first?”

Paul Downs: “There’s no way around it. You gotta be hard at some moments, as a boss. You just have to be, and you have to do hard things.”

Dana White: “I’m listening to you, Jay, and I’m thinking about the coffee shop owners I know who have to close.”

Full Episode Transcript:

Loren Feldman:
Welcome Dana, Paul, and Jay. I hope you guys are doing well. Let’s start. I’d like to do a quick PPP update. How about you, Paul? Last time you were here, you told us that you were getting your application in, and you were very much hoping for a quick turnaround. How’d that go?

Paul Downs:
It went as advertised. Very quick turnaround. I had to have one conversation with a guy from the bank, and he said, “You’re good,” and the money appeared the next day. Very simple.

Loren Feldman:
Nice. And you were hoping to get it quickly because your phone wasn’t ringing. Has that changed at all? Have sales picked up at all?

Paul Downs:
We did scrape it out in the last week of January and hit our target for January: $358,000. We just made a nice sale today. So far, the sales are coming in. The phone calls are still way behind where they were in 2019, but I don’t know what to do about that. It’s possible that the people who aren’t calling are the ones who never would have bought anyway. It’s a 25-percent drop in the number of calls, but maybe we don’t care about some of that. We’ll see.

Loren Feldman:
Dana, how about you? I think last week, you told us that you had sent your application off to the bank. Any progress?

Dana White:
None.

Loren Feldman:
What’s going on?

Dana White:
I don’t know. I go on twice a day to their little portal, check the application status, and it still says “under review.” I’m with PNC, so…

Loren Feldman:
Is that the bank that helped you on the first round?

Dana White:
No, PNC was a little slow to shoot, and everybody was nervous the first round, like, “Oh, I want to get it in because they may run out of money.” Goldman Sachs provided an opportunity for Goldman Sachs alumni of the 10,000 Small Businesses program to go through them to apply. So I did, and I received it. Now that everything seems a little bit more ordered, I went ahead and did my application through my bank. Last Tuesday I did it, and so nothing as of today.

Loren Feldman:
Are you at all concerned about money running out this time?

Dana White:
Yes and no. I’m not asking for a lot, and they put restrictions on who can apply. I’m getting nervous now because I’d like my application to get submitted to the SBA, but I’m not as nervous as I was the first time. I know more now and I think the businesses and banks are working smarter this time. But we’ll see, you never know.

Paul Downs:
For what it’s worth, my bank is PNC, too. But I had gotten the first round of PPP through them and they gave me the impression that that helped get the second one through quicker. Now, the person who called me was a senior vice president in charge of agricultural operations in Tennessee. I don’t know why. I said, “Why are you calling me?” And he’s like, “Well, it’s just all hands on deck. We get given a list of names, and we call them.” I wouldn’t necessarily despair that they haven’t contacted you. I think that, similar to the spring, this is actually kind of tricky for banks to process a huge number of applications at one time.

Dana White:
Okay. Another friend of mine who went the same route as I did, his PNC approval came back very quickly. He filed, I think this Tuesday, and it’s going to closing tomorrow.

Loren Feldman:
Jay, last time we talked, you said that you didn’t think you were going to apply this time because you didn’t think you needed it. Is that still where you are?

Jay Goltz:
No, that’s not where I’m at. It turns out that I am qualified, I do need it, and the bank—to their credit—has been very on top of it. He’s the one who called us and said, “Your numbers all qualify. You should do it.” And I did it, and it worked.

Loren Feldman:
You’ve talked to us many times about your efforts to get a new loan that would give you a mortgage on a building that has no mortgage on it. And every time you’ve told us about it, you’ve concluded with some optimism that you think maybe this week it’s going to come through.

Jay Goltz:
Yeah.

Loren Feldman:
Are you feeling less confident about that? It sounds like you are.

Jay Goltz:
No, I’ve got one bank left who wants to do the deal.

Loren Feldman:
So I assume this is part of the reason you decided to go ahead and apply for the PPP?

Jay Goltz:
Absolutely.

Loren Feldman:
Let me ask you about that, because I suspect there are a lot of businesses in the same situation that you are, meaning you had a rough time in the spring when the pandemic hit, when you had to shut down. But business came back and when we spoke about this last time, you said you might not need it, because business had come back and you weren’t sure this was intended for you. How are you feeling about that now?

Jay Goltz:
A) it was intended for me, because my numbers were off. I fit right into the thing.

Loren Feldman:
You definitely qualify, right.

Jay Goltz:
And B) here’s the part that I wasn’t thinking about. I’ve had a credit line for the last 30 years. I no longer have a credit line at the bank.

Loren Feldman:
Why is that?

Jay Goltz:
Because I’m a retail pariah, that’s why. Because, “Oh, you’re a retailer?” They can’t get away from me fast enough.

Loren Feldman:
They took away your credit line?

Jay Goltz:
Yeah. I don’t know if you’d call it “took away” or “didn’t renew it.”

Loren Feldman:
Had you been using the credit line?

Jay Goltz:
Yes, absolutely. I use it every single year. I lose a good amount of money in January, February, March, April. Business is slower, and then I make it up. I’m in a retail cycle. And I use the credit line as it’s supposed to be: I borrow from it, and then I pay it back at the end of the year. It’s been the same way for 30 years. Now all of a sudden… well, part of it is my bank got bought by the bigger bank. It’s a different deal. The bank I used to be with made their living lending money to small businesses. That was their niche. Now, the bigger bank bought them out, and they’ve got other niches. They’ve got banks on every corner. They’ve got big corporate business.

Loren Feldman:
I want to ask you about another aspect of the PPP, which is this: In the legislation that renewed it and gave us round two, there was also a change to the Employee Retention Tax Credit. William went off about this last week on the show, talking about how it’s very complicated, requires a lot of math and hours of analysis. But in the end, he found it was going to have, in his words, a “pretty incredible” impact for him. Have any of you looked at the Employee Retention Tax Credit? Do you qualify? And does it look incredible to you?

Paul Downs:
I did. I took a brief glance at it, and it looked like we qualified because we were shut down by state action on March 18th of last year and didn’t open up until April 28th. But during that time, the employees who I had who could work from home, continued to work from home, and I continued to pay them. So that, as far as I could tell, was payroll that qualified under the terms of this. I didn’t work out the math of how much it was exactly, but let’s just say it’s 10,000 bucks, for the sake of argument. The difficulty was in trying to figure out how to actually get it.

I read through the Treasury Department webpage about it, and they refer to a particular form that you could fill out. But there was no mechanism by which you submitted the form. It wasn’t clear who you sent it to or how you did it. It just started to look like, “Oh my god, here we go down some other rabbit hole.” And that particular morning, I didn’t feel like entering that. So, I set it aside, and that’s where I’m at, at the moment.

Ten thousand dollars is nothing to sneeze at, and maybe it’s $20,000, maybe it’s $5,000. It’s nothing to sneeze at, but it’s not a game-changer for me right now. So after the encouragement received in the Morning Report and from William, I’m going to go back and take another look at it, but it did appear to be extremely complicated to actually get it somehow.

Loren Feldman:
Interesting. Jay or Dana, did either of you?

Jay Goltz:
I didn’t even know about it until the Morning Report came up with it. I have a full-time CFO—MBA, CFO, been here for 20-some years—he didn’t know about it. He looked into it. He’s on a webinar as we speak finding out more about it, but he said there’s controversy as to exactly how it works. It’s the same story again: The rules are unclear. He’s trying to navigate it, but I feel bad for someone who doesn’t—literally, that’s all he does. He’s a full-time CFO. He’s working on it. He thinks that we qualify. And he thinks it’ll be worth the trouble, but he’s on a webinar right now to try—”try” being the operative word—to try to figure out exactly how it works.

Loren Feldman:
Dana, have you given it any thought?

Dana White:
I have, and I’m meeting with my bookkeeper-slash-accountant just to see if it’s even worth it, or if I qualify. I think our biggest thing for Paralee Boyd is forgiveness. We’re trying to look more into forgiveness than whatever tax credits come after that.

Loren Feldman:
I want to ask you guys about another topic that’s in the news right now. There’s a lot of talk once again about the never-ending debate about the $15 minimum wage. Every story you read suggests it’s either going to lift millions of people out of poverty or destroy thousands of businesses, or maybe both. Are any of you concerned about this?

Paul Downs:
Not me. Well, not for my primary business, because the lowest wage we’re paying right now is $18.50 plus benefits, and it just doesn’t make any difference. However, I’m on the board of a non-profit, which operates in the food service space. It would have more of an effect there. Just to do some quick math, what’s the difference between a $10-an-hour person and a $15-an-hour person? If I get it right in my head, it’s about 10,000 bucks a year. So however many employees you have times plus-10,000, I think that is a powerful incentive to look for ways to increase productivity, as opposed to just continue the same model.

Your question, “Will it raise people out of poverty?” Yes, it will—the ones who are worth it. And will it drive automation? Absolutely. There is a difference between the least productive employees and better employees, and a lot of times, cheaper employees are just more trouble than they’re worth. I could see it certainly driving the evisceration of that entry level job and sort of raising the bar of what is the basic requirement to enter the workforce.

Jay Goltz:
Let me put some math to that, because you just gave a good example of where I think there’s a misconception. Let’s talk about the one you just talked about: food service. So what do they sell? Are they selling hamburgers?

Paul Downs:
It’s a bakery.

Jay Goltz:
Okay, a bakery, fair enough. How much do they pay in labor? I’m going to guess: 30 percent?

Paul Downs:
Yeah, it’s somewhere between 30 and 50.

Jay Goltz:
Fair enough. Let’s say 40. Now, if you raise it from 10 to 15, that’s a 50 percent increase, but everybody’s not going to get the 50 percent increase because many employees aren’t making the 10. It’s going to compress the difference between the experienced person and the new one. But everybody’s not going to be going up 50 percent. So can we agree maybe the labor costs are going to go up 25 percent?

Paul Downs:
I wouldn’t think about it that way, Jay. I think that the actual dollar amounts are a little more revealing.

Jay Goltz:
This is math. Let me just finish them. My point is—

Paul Downs:
You can write math to do one thing. You can write it to do another thing. In our case, we’ve got budgets of around a quarter million for this enterprise. So if I’ve got four employees, and I’m adding an extra 10,000 bucks, that is a pretty significant bump in our costs.

Jay Goltz:
As I said, this isn’t an opinion. This is math. So my question is: Here’s the math. If your sales are $800,000 a year, it would require raising prices by 5 percent in order to cover that. The argument is: If everybody has to do it, then perhaps everyone instead of paying $10 for that cake, they’re going to pay $10.50 now. I don’t know that that’s going to drive people out of business.

I think it’s a false argument. I think the argument is, “If this goes through, I’m going to have to raise my prices. And if I raise my prices, people won’t pay that price.” I don’t think you know that until you try it. And if everybody needs to raise the cake from $10 to $10.50, I’m not sure it’s gonna ruin the business. I think the statistics of everywhere that’s done it has proven out that, in fact, most people don’t go broke over it, unless they don’t pass it along.

Dana White:
Wow.

Jay Goltz:
It’s math.

Paul Downs:
I don’t disagree with that analysis, but—

Dana White:
It has to scale though. I’m listening to you, Jay, and I’m thinking about the coffee shop owners I know who have to close.

Jay Goltz:
Wait, wait. They say they have to close, but did they try raising their prices 5 percent first?

Dana White:
But they don’t have the volume. They’ve done the raising prices scale model. How much do we need to raise our prices just to make ends meet? How much do we have to raise our prices to come just below that and not pay ourselves or bring more family on? I think, yeah, if you have an $800,000 a year business, sure. What they’re finding is, it’s going to happen that we’re going to have one, maybe two, employees. And this has to become a family-run business where the younger part of the family isn’t getting a salary, because they’re living at home with mom and dad. Right?

Jay Goltz:
Except that’s illogical. It doesn’t matter what the size of the business is. It still comes down to: If it’s a smaller business, there are less dollars you’re paying out. It’s still simple math. So if they’re charging $3 for the cup of coffee, and they raised it to $3.50, that should more than cover the extra expense.

Dana White:
But not if they’re only selling three or four cups a day.

Jay Goltz:
If they’re only selling three or four cups a day, they don’t have any employees. It’s a bad argument. It’s math.

Paul Downs:
All right, Jay. You’ve proven that it’s going to be no problem for everybody in the economy, and I hope you’re right. But there are a couple of other things—

Jay Goltz:
No, I haven’t proven anything. I’ve proven that people who say they will go out of business because of it—unless they’ve gone ahead and raised their prices and then have gone out of business—it’s all a theory. If they’re that small, it’s not going to add up that much to the business. The miracle of adding 10 or 20 or 30 cents to the product would cover the costs of the increase.

Dana White:
I disagree completely. I don’t think the raising of prices will solve for small businesses that don’t have the volume, that don’t have the family. They have to grow their business so they can bring on a manager. The long-term of this will hurt my business. It may not hurt my business in the first year, but a lot of them don’t want to be mega coffee shops. They want to be small, local coffee shops. They don’t want to have to work 96 to 100 hours.

Jay Goltz:
You’re conflating all these things into a simple minimum wage raise. They have a business problem then, if they can’t figure out how to hire a manager. This has nothing to do with the minimum wage.

Dana White:
They can’t afford to hire a manager, though.

Jay Goltz:
They can’t afford to hire a manager because they’re not making enough money because they don’t have a successful business. This has nothing to do with minimum wage. Everything gets thrown at the minimum wage like—

Dana White:
But you’re defining “successful” differently than they are. They want to stay small.

Jay Goltz:
No, I’m saying “math.” If you have to raise a minimum wage employee up, it’s simple math. I think they did a thing with Target and Walmart and found out if they raised their prices 1 percent, they could pay everybody more money. It depends on what your margins are, what your labor costs are.

Dana White:
That’s Walmart, though.

Jay Goltz:
I got it, but it’s still math. My point is, this isn’t an opinion. It’s math. If you raise the minimum wage, it all turns into a mathematical amount of money that’s a percentage of your gross sales. And in many cases, a minimal increase in your pricing—meaning three, four, or five percent—will make up for the minimum wage raise, and the rest of this is a whole other issue.

Loren Feldman:
I want to give Paul a chance to respond to what Jay said, but first, Dana: Are you concerned about the impact of this on your business?

Dana White:
Not anymore. I was.

Loren Feldman:
Why not? What changed?

Dana White:
Because my operations manager and I worked it out. While Biden was on television, she texted me and said, “You know, we’re gonna have to work this out.” And I said, “Okay,” and so we did.

Loren Feldman:
How’d you work it out? What did you do?

Dana White:
We no longer are hiring shampoo assistants unless it’s on the busier days.

Paul Downs:
There you go.

Dana White:
All of our stylists will do both, but they get a higher commission. I’m fortunate that, in my industry, I can pay hourly and do commission and pay them the higher of the two. It just so happens that when I pay them the higher the two, it’s of the commission. So if they don’t hit a certain number of heads, then they get the hourly. But the hourly works out to be less than the commission, because if they see three or four heads an hour at $12 a head, well, that’s how much they’re making per hour.

But again, it’s the volume. The math works because we have the volume. The second we go down to our slow season and we’re not marketing, or we go back to the numbers that we used to have before we grew, yeah, people paying one or two or three people in a shift $15 an hour to sit because we don’t have the volume, and then I raise my prices? Okay, I raise my prices, and then we still don’t have the volume. Then I have to start letting people go.

Jay Goltz:
Well, that’s a problem if you’re paying people sitting around doing nothing, and the business model—

Dana White:
By nothing, I mean hair.

Jay Goltz:
I got it. But I’m just saying—and Paul’s totally right—this is going to make it hard for a younger person or for someone with no skills. There’s no question. I’m not arguing that at all. He’s correct. If you’re going to pay $15 an hour, you might as well get a grown-up and not hire some kid who you’re going to have to put more time into. You’re 100 percent right on that, and I would also say there’s a huge problem with this, in that telling Jay in Chicago to pay $15 an hour—which I have to anyway because it’s Chicago—and telling some guy in Biloxi, Mississippi to pay $15 an hour, that’s not right.

I mean, the cost of living is dramatically different. It’s also not right that I pay health insurance. I pay vacations. Me paying $15 is very different than someone paying $15 who only hires part-time people and doesn’t give any benefits: no health insurance, no vacation time, blah, blah, blah. It’s not right. Trust me, there’s no question.

Dana White:
That’s what I’m saying. I’m with you there.

Loren Feldman:
Part of the problem there is that if you leave it to Mississippi, it’ll never get raised. But Paul, have you finished your critique of Jay’s critique.

Paul Downs:
I mean, Jay sort of slipped it in as if it were an asterisk or a footnote, but those are pretty critical points he just raised. And Dana just said it herself: She’s going to cut out some of the lower skilled positions in her company, because basically, that job isn’t worth $15 an hour.

Loren Feldman:
So Paul, is the concern that you’re raising the loss of jobs, or the threat to the business?

Paul Downs:
Here’s my concern. And I will say that I am actually in favor of minimum wages, in the absence of something like universal basic income. If you don’t have minimum wage, it’s a race to the bottom, and the people who suffer in those kinds of games are the ones who are least equipped to get themselves out of those situations. It sets up exploitation. Setting a $15 minimum wage so that someone can make a decent living from working 40 hours a week, I’ve got nothing against that. I’m all for it. But there will be knock-on effects, and the fact that it’s been tried in a bunch of high-cost urban areas, and there wasn’t a huge difference because—as Jay correctly pointed out—you could do a relatively modest price raise and absorb the extra costs. Okay, roll it out to every town and city in America, and you’re going to see a lot of operations that formerly were viable slip over the edge.

I think Dana is right that it is a cost. You’re going to see the dynamics within companies—something which is utterly invisible to economists—play out. So you give the worst worker a raise to 15 bucks an hour, and your former mid-level and good workers were making 16 an hour. Now what do you do? The price of labor will go up across the board.

Loren Feldman:
Does that apply to you, Paul? You said before, when you talked about your own business, you’re not paying anybody at the minimum wage, but will there be pressure on the wages for your employees?

Paul Downs:
Within Paul Downs Cabinetmakers, I don’t think it’ll have any effect at all, because we’re already a high-skilled, high-pay operation, and that’s not the world we live in. With the bakery I run, it’s going to raise a couple of people. Let’s say it’s gonna cost us 40 grand, but it’s the new hires who are going to be more difficult. Because when you hire someone new, you have to start paying them from the minute they show up, and you also have to train them, and you have to manage them. Those things are expensive. Particularly a $10-an-hour employee requires more management than an $18-an-hour employee. There are going to be a lot of businesses that don’t have systems set up to manage employees at that cost level, and so you’re increasing the cost of the labor and of the management.

Jay Goltz:
What you describe, I am that company. I do have people who are making $17 an hour, and I am going to have to make some adjustments. What this is doing is, it’s bringing down the difference between the new employee and the one who’s been doing it for 10 years. There might have been a $5 spread per hour. Now it’s going to be three or two. It has affected that, and I’m by no means suggesting this is a perfect model, that they should make it $15 everywhere. Not at all. I think it’s clumsily done and needs to be done more surgically. I think it should probably be left to the states because I don’t think you can—

Loren Feldman:
Even if the states don’t do anything?

Paul Downs:
Yeah, we have that now. States compete just like businesses compete.

Jay Goltz:
Then how about this? How about taking the state where their minimum wage is seven, what about making them do 10? I mean, what’s with the—they’re gonna go from seven to 15?

Loren Feldman:
It’s not seven to 15. The legislation hasn’t been written, as far as I know, but I think what they’re talking about is phasing this in over four years.

Jay Goltz:
Okay, whatever they do, treating Illinois the same as they treat whatever the lowest income state in the country is, is not right. It’s just not right. There needs to be some wiggle room there. Do you realize why all these big stores now have part-time people? They figured out how to get out of paying health insurance, which is why many studies have been made—how many people who work at Walmart are getting government subsidies? It’s that they figured out how to get around it.

Loren Feldman:
I don’t think we’re going to settle this today. Let’s move on to something else.

Jay Goltz:
Wait, just to be clear. My guess is, if we all sat down and laid this all out, we’d all be on the same page. The only point I’m trying to make is, before someone screams, “Oh my God, if the minimum wage goes up, I’m gonna go out of business,” I’d like to hear their math. Look, Dana figured out how to make it work. I believe there are many other companies that can figure out how to make it work—many.

Loren Feldman:
Let’s go to a question that was submitted by a listener. It comes from a woman who’s submitted a previous question that we’ve dealt with—Liz Picarazzi of Citibin—who sent me a whole bunch of really good questions. She wants to know how you guys handle bogus lawsuits and unemployment claims.

Jay Goltz:
Those are two completely separate things.

Dana White:
Those are two different topics.

Jay Goltz:
Pick one, Loren. Just pick one of them.

Loren Feldman:
Unemployment claims.

Jay Goltz:
Want to hear my four keys? My unemployment rate 20 years ago got up to the maximum—maybe 30 years ago—up to 7.2 percent of the first X amount of income.

Loren Feldman:
I think we have to define what that is. When people hear “unemployment rate,” they think you’re talking about the national unemployment rate.

Jay Goltz:
All right, here: Today in Illinois, you pay a percentage, somewhere between—I don’t have it in front of me—1 percent or half a percent, up to 7.2 percent of the first—whatever it is—$14,000 of income. I’m close. That’s Illinois only, which means that if you get up to 7.2 percent, you’re going to pay $1,000 a year per employee for unemployment. Whereas if you’re at the bottom, you’re going to pay next to nothing. It’s going to be hundreds of dollars. Okay, so I got my rate from 7.2 down to .6 or something over the years. How did I do that, you ask? Good question! First of all…

Loren Feldman:
We don’t even need to be here, Jay.

Jay Goltz:
Well, you want the answer or not, Loren? Number one, I’m much more careful who I hire. We’re much more careful doing the interview process, the reference checking, the whole thing. Number two, at 30 days, you own their unemployment. Generally speaking, if someone gets un-hired within 30 days, you’re not responsible for their unemployment. They could have worked at U.S. Steel over 40 years; you hire them, they’re there for 40 days, you own their entire unemployment. It’s unbelievable. So number two is, at 28 days, we sit down and think, “Is this person working out or not?” And answers like, “Well, they’re really trying hard,” or, “Well, we’ve had worse, right?”—we don’t take chances with it now. Almost always, you can usually tell by 28 days if this was a good hire. If not, you tell them it’s a probationary period, we un-hire them. It doesn’t happen very often, but that certainly helped.

Number three, we manage properly. We make people productive and work hard, and if they’re not working, and if there’s a problem, we sit down and we have candid conversations: “We’ve told you three times about this. We’re concerned you’re not the right person for this job. I don’t know if you knew what you were getting into.” And then sometimes they figure it out on their own and they leave on their own, which is better for them and better for us. They look for another job, they leave.

Lastly, we document. We have good policies: Coming in on time, it’s all laid out, we treat everyone the same. And if we have to contest it, we usually win. Because of this methodology, I very seldom have an unemployment claim now because the first three things take care of it. And when we do have an unemployment claim, we usually win because it’s a slam dunk. We warned them, we told them, they violated the policy. And as a result, I’m telling you, fact: my unemployment rate is down to the minimum. I’ve had one claim in three years that got through: one.

Loren Feldman:
And how much money does that save you a year?

Jay Goltz:
I gave you the math. I have 125 employees. If it were at its max, it would cost me about $1,000 a year each. That would be $125,000 in unemployment insurance I’d be paying if I were still at the max.

Loren Feldman:
And you think you’re somewhere in the neighborhood of…?

Jay Goltz:
Oh, it can’t be more than $10,000.

Loren Feldman:
Interesting.

Jay Goltz:
This is kind of the irony to it: If someone’s got a super low unemployment rate, like the minimum, it means one of two things. Either they’ve gotten to be good managers, they’re careful when they hire, and blah, blah, blah, or they never fire anybody because they’re terrible managers. Pick one. If they’re terrible managers, they’re probably gonna be out of business eventually. So the unemployment rate is a grade of: How is your management? Because if you have a high unemployment rate, you’re doing something wrong. No one knows better than I did, because I was doing everything wrong. I was a revolving door.

Loren Feldman:
Dana, what’s your experience been with bogus unemployment claims?

Jay Goltz:
Well, they’re not actually bogus. They’re unemployment claims.

Loren Feldman:
Well, some of them are bogus, right?

Dana White:
Some of them are angry. Some of them are emotional. And some of them are, “I don’t know what to do, so this is what I’m going to do.” So we just document. We document thoroughly. Sometimes with video, sometimes with audio, always written out documentation. That’s how we’ve been able to keep our unemployment low. And then we train. We’ve hired better, meaning the attitude. Everybody coming through the door has a cosmetology license, but they may not have the attitude to work at Paralee Boyd. We know that the people who come in Paralee Boyd, who want to make Paralee Boyd what they think it should be, versus what it is—we know very quickly that these aren’t the people who are going to work out. And then, like Jay, we let them go within a certain amount of time. Not a lot. We don’t get a lot of that.

Paul Downs:
I find that my rates go up after I lay people off. And there have been times when I laid people off because I just needed to, and then the claims come in. I think that the critical thing to understand, right out the gate, is that the states have different rules. You really need to understand: What are the rules for your state?

So I know Liz is in New York. I have a hard time imagining that New York has an employer-friendly system. But knowing things like: What are the days of the grace period that you can get rid of? What are the criteria for deciding for or against you? I’ve only had one contested claim, and it turned out in the process of that, I had a lot of conversations with the adjudicator. You can’t fire someone because they can’t do the job in Pennsylvania and expect to avoid the unemployment claim.

Jay Goltz:
Yes, I think that’s everywhere, just so everyone knows.

Paul Downs:
Yes, do all the warning. Do all the documentation. That’s all good. But really understand what the state sees unemployment for. And then the other thing is that I think that there’s as much impact from the general economy as anything you do yourself. The unemployment claim is going to be big if the person lingers on unemployment. So if you get rid of somebody in a time when unemployment is high, you’re going to end up paying out a lot in claims.

I just went back and looked at all my rates from 2009 to this year, and they were high in 2010, ‘11, ‘12, because I had to lay off 22 people. I ended up paying out those amounts over the next few years, and then now it’s down to 1.8 percent. It’s more to do with not having laid anybody off. And then, when I got rid of a couple of low performers in the last few years, they immediately went out and got another job. They just weren’t making claims.

There’s a bigger context than just what you do. I mean, yes, absolutely, do what you can to understand the system and avoid it. But a big part of your ongoing costs is going to be determined by things that are out of your control,

Jay Goltz:
Which, to your point, those weren’t bogus claims. That’s what unemployment is for. You had to lay people off. That’s what unemployment is for. It worked.

Paul Downs:
Right, but you end up paying for it.

Jay Goltz:
Yes, but I’m saying, that’s what unemployment is for.

Loren Feldman:
I wonder if this is what Liz was referring to. Aren’t there times when you just want to fight whether the former employee should collect unemployment or not? Is that the “bogus”?

Jay Goltz:
No, either, it’s legitimate—

Paul Downs:
No, no, I disagree. There are definitely times. I had an employee who I fired because he wasn’t showing up for work, and I did all the stuff documenting it, writing it down. We had the final meeting where his transgressions were to be reviewed, and I filmed it. And what happened was, I sat down, handed him a document, “Here’s your problem. Here’s the policy violation.” Started reading it to him, and he threw it in my face and jumped up, basically, “Screw you. I’m out of here.”

But he was smart. He said, “You can fire me if you want, but I’m not listening to this garbage,” and then he just left. And so then I did go and fire him, and then, of course, he claimed unemployment. I sent this movie in to the adjudicator, and I said, “Check this out. Like, how in the world is this not a quit?” And he said, “Well, it’s not a quit. He didn’t say he was quitting. He said, ‘Fire me.’ And you did. So it’s a fire.” But the guy took pity on me. He told me exactly how to play it so the claim would be denied, and it was. It basically was the guy had demonstrated that he couldn’t be managed, and that instead of me saying that he had quit, I should just say, “He couldn’t be managed.”

Jay Goltz:
That is a critical piece in this.

Paul Downs:
It wasn’t a question of competence, or whether he could do his job or not. And it wasn’t a question of who quit or who got fired. It was he had demonstrated very clearly that he could not be managed, and that was a legitimate reason for me to get rid of him.

Jay Goltz:
You hit on the key piece, which is, there are maybe half a dozen reasons why someone’s not eligible for unemployment. One of them is, they didn’t follow the agreed-upon rules. One is attendance. There are reasons.

Paul Downs:
Jay, before you say that in a blanket way, we should emphasize that these rules differ from state to state.

Jay Goltz:
Yes, yes.

Paul Downs:
What you say about Illinois and what I say about Pennsylvania may be really different in Alabama—or New York, for that matter.

Jay Goltz:
I’m 100 percent with you on this. You need to know the rules. And if you follow the rules, and you have to fire someone for those rules, you will win unemployment. But, at least in Illinois, you can’t say, “Oh, they weren’t doing a good job.” That’s not a reason they don’t get unemployment.

Loren Feldman:
I want to follow up on one aspect of what Paul just said: Do we all think it’s a good idea to videotape a session where you are letting an employee go?

Dana White:
I think it’s a bad idea because there shouldn’t be enough discourse to videotape. Termination should be quick and you should always have somebody there with you. Some of the times, we’ve even had a quick sign off, a quick two- or three-sentence paragraph saying, “Yes, I’m being terminated on this day,” and done, but videotaping it?

Jay Goltz:
I haven’t found it necessary, and I find it to be just too adversarial. Personally—this is just my own personal thing—I don’t like the idea of we’re turning this into a court case right off. We’re going to videotape. I’m not comfortable with that. I have found that, by documenting it, it’s worked fine.

Loren Feldman:
Paul, what do you think? Have you continued to do that?

Paul Downs:
I haven’t, but I find the threat of it to be extremely useful. I did that one, and it actually was really helpful to me in the situation where I was trying to get the adjudicator to see what happened. I mean, the one thing about video is there’s no argument about what happened. But since then, what I’ve done is prepare documentation and have a witness. And what I tell the person I’m about to fire or discipline when they come in is, “Hey, I’m gonna do you a favor. I’m not gonna turn on a camera here.” What it does is, it lets them know it could be even worse.

They’re about to have probably the worst moment, or one of the worst moments of their adult lives, and I’m going to tell them that there is a further level of humiliation that I could subject them to, and I’m not going to do it. That has worked out well for me since then, in that I’ve discharged six or eight people for cause, and I haven’t had any unemployment claims from that because I try to always leave them with a sense that, “It’s not working out, but I don’t bear you any ill will.”

Dana White:
So by telling them, “Hey, I’m gonna do you a favor by not recording you right now,” I see the bully and I see the buddy, right? Let me help you help yourself.

Paul Downs:
There’s no way around it. You gotta be hard at some moments, as a boss. You just have to be, and you have to do hard things. They are humiliating, and they are dreadful for the person you’re doing them to, and that’s just part of the job. But there are ways to do it that make it worse or ways to do it that make it better. I’m not a hard person, but I will do a hard thing. If I feel like that employee’s continued employment is threatening the health of the rest of the team, that’s what makes me act. But I try to always pull back a little bit as the punch lands and try to make it as good as it could be.

Jay Goltz:
Well, let me give you my version of that. Clearly, you have to fire some people, and clearly, they’re usually not going to be happy about it. My approach has been: I want to have clean hands, which means they’ve been talked to about it before, they were given an opportunity to fix whatever the problem was, they’re given an opportunity to go look for another job, because you said, “Listen, I’m starting to get concerned you’re the wrong person for this job.” They’ve had all that opportunity.

When it comes the time that they have to get fired, I want clean hands. And if they go—which has happened—“I can’t believe you’re doing this!” I’ll say, “I can’t believe you’re surprised. We just had a conversation two weeks ago when I told you exactly where we’re at. And listen, Bob”—if their name is Bob—”you don’t have to agree with me. Maybe you’re right. All I know is, this isn’t working out for us here. Today is your last day. I wish you well.”

Paul Downs:
I think that one of the critical things is not the meeting that involves the firing, but the one before that. I bring out the full documentation. It’s all the same things you would do to fire someone with an escape valve at the end, so there is the written part, there is the witness, there is the policy violation. The person has to sign an agreement that they’ve been in the meeting, they understood what happened. But I always say, “I’ve laid out what I want to change in this document we’re both reviewing. I want you to stop doing X and I want you to start doing Y. And if you do that, we’ll forget about this. It’ll be in your record, but I’m not gonna hold it against you.” It’s a real warning.

Jay Goltz:
You have just described having clean hands. You have just described what I was talking about.

Paul Downs:
Good employees change direction. Bad ones continue down the road, and then you fire them. But they’re not surprised.

Loren Feldman:
I just want to make clear, you guys are all performing at a very high level. I am never letting any of you go—except for right now, because we’re out of time. My thanks to Paul Downs, Jay Goltz, and Dana White.

Episode 47: Optimism in D Minor

This week, William tells Karen and Dana that he’s cautiously optimistic about 2021 because his clients are cautiously optimistic and because he’s expecting lots of turnover as the pandemic recedes. William explains how he uses a “Frankenstein” customer relations system to track what his clients read on his website and to sense when those clients are getting ready to make a hire. The system then prompts the Vanderbloemen team to give the client a call. We also talk about why Karen is tired of being a best-kept secret and how Dana handles customers who have to be fired. Plus: there’s a new tax credit you should know about that William calls “pretty incredible” but that seems to be getting lost in the PPP shuffle.

Guests:

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

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

William Vanderbloemen: “When you help people receive free money from the government to keep their business afloat, they trust you. And then they want to hear more from you.”

Dana White: “I’m a little emotional because, a year ago, I thought COVID was gonna take us out. A hair salon?”

Karen Clark Cole: “Building a marketing team for us just didn’t make sense, because we don’t really know how to do that properly.”

Full Episode Transcript:

Loren Feldman:
Thanks for joining me today. Karen and William, we haven’t talked to you yet this year. Let’s start with you guys. Karen, how about you? How’s business? What’s going on?

Karen Clark Cole:
I love this time of year because the numbers all go to zero, and we just start over. So on one hand, it’s exciting. On the other hand, it’s like, “Oh, God, we gotta do it again.” But so far, so good. Everybody’s gotten used to being remote, so it’s less of a constant conversation. But we are starting to think about: What are we going to do with our spaces when people can start coming back later this year?

We’re not anticipating anybody’s doing anything until probably after the summer, and we have a lot of beautiful office spaces. Well, not a lot, we have four. So it’s just sort of rethinking workspace. We’re starting to actually do some prototyping, do some space planning—that kind of thing. But it everything seems less of a panic than it did last summer and through the end of last year, when we were just trying to make the year come out in the black, which we did. Everything was just focused on that. Now, I feel like we have a little bit of breathing room to start thinking, “Okay, what’s this year going to look like?”

Loren Feldman:
Do you think most people are going to come back into the office? Or are you anticipating more of a hybrid solution?

Karen Clark Cole:
We’ve done a lot of asking our employees, and it’s going to be hybrid for sure. I think that’s good. I like it. We’ve proven that we can do work from anywhere. What we’re asking is, “Okay, so knowing that you can still do that, what’s missing?” And it’s the coming together to collaborate, just to see each other. We are human beings, after all, and we do like being around other humans. That part is really missing. We’re trying to create a space that facilitates collaboration and coming together for gatherings or meetings. Certainly we want to see our clients. But I think what’s going to happen is the heads-down work will continue to happen at home.

Loren Feldman:
How about you, William? How’s your year starting off?

William Vanderbloemen:
We’ve had a great out-of-the-gates few weeks. I’ve said, for a number of months now—and people are starting to latch on to my prediction—that this year will be a year of massive job turnover.

Loren Feldman:
Are you seeing that at your place?

William Vanderbloemen:
Yeah, some. Not any this year yet. We had some last year. What I read are the tea leaves of like—usually in January you’ll have people call me and say, “I know you aren’t a job-placement service, but I’m a high-capacity person, and I’m thinking of making a change for the first time in forever.” I’m like, “Well, it’s January. Everybody wants to change in January.” Last year it happened in November and December. I’ve never seen that before. So you know, that’s a tremor. All of that is to say, when there’s huge turnover, that usually signals a really good year for us.

Loren Feldman:
William, we should specify. When you say, “when there’s huge turnover, that’s a good year for you,” you mean among your clients—not necessarily among your employees?

William Vanderbloemen:
Yeah, yeah, yeah, exactly. Turnover, as a market, means there are people moving around, and that’s kind of why we exist.

Karen Clark Cole:
So William, can you just tell us, at a high level, why you think this is the year for that?

William Vanderbloemen:
First and foremost, there’s just a latency in the market. And what I mean by that is, yeah, people left their jobs in 2020, maybe because of downsizing, but a lot of the voluntary natural turnover that would happen in a year didn’t happen in 2020 because people didn’t want to move during all this mess, or they couldn’t move. You’ve got a build up. There’s been a dam in the river for a year, and now it’s going to let loose, right?

So, that’s one. We’ve got a number of people moving back toward family of origin. If you’re in New York City, it’s like—people are leaving quickly, like the Titanic. You’ve got geographic reshuffling, that’s happening. A whole lot of people, during 2020, their job became something that’s entirely different than what they signed up for. It’s just made them say, “I understand the incremental change, but this is too much too fast. And I’ve got to find a new way.”

Those are a few reasons. We outline a ton of them. But it looks like a year of heavy turnover, so Loren, January, may well beat last January, which was an all-time record for us, and we’ll see where it goes and how long it takes for us to get past the pandemic into whatever is new, as normal. But it feels like employers are starting to be able to see or sense a finish line, and that has created optimism about hiring.

Loren Feldman:
It’s an interesting time because we do have the optimism of the vaccines coming online. At the same time, cases have been up, and there are the new variants that have people nervous. Your clients are on the front lines of this. What’s winning: optimism or pessimism?

William Vanderbloemen:
Optimism, and I don’t just say that because I’m an optimist. It’s not optimism that’s pollyannaish. It’s optimism in D minor. What do I mean by that? It’s like, look, here’s the thing: Even the most cautious doctors who I talk to—and the Texas Medical Center is arguably the best medical center in the world, and it’s two miles from my house—are like, “Yeah, the vaccine’s gonna get out. It’s taking longer than we would like, but it’s gonna get out.”

And oh, by the way, there are so many undiagnosed cases that have happened that we’re gonna get to a place where this will run its course one way or the other, and it’s not going to be in ‘22. It’s going to happen this year. That’s sad, because a lot of people are going to get sick, and that means a lot of people are gonna be very sick. Probably the death numbers are going to keep going up.

I think my clients, what really dragged on them in 2020 was they all felt like the Greek mythology guy, Sisyphus, who just rolls the rock up the hill, and it rolls back down on him, and he has to roll up the hill for all of eternity. That was 2020. It was like, “Well, let’s flatten the curve.” And then 30 days later, “Well, let’s flatten it again.” And there’s never a sign of a terminal point, and I think even if it were a worst-case scenario, clients that I’m talking to are sensing there is a terminal point. A lot of our clients are churches and schools, and they’re looking toward fall of ‘21 and the back-to-school push as a time when things should be a lot less clamped down and maybe back to whatever normal looks like. So optimism is winning, but not without a very sober sad reality that we’re not through this at all.

Karen Clark Cole:
So if we’re not even through it, like what you’ve just said, then why in January are people looking to turn over their jobs? It seems a little premature, isn’t it? Is it just like New Year’s resolution—that’s what happens?

William Vanderbloemen:
I think so. People are gonna balance the checkbook. They’re gonna lose 10 pounds. They’re gonna get right with God, whatever the thing is that happens in January. But beyond that, January means we’re in a new budget year, which means we of quote, “have new money”—which, as a business owner, I have no idea what that means. I have the same money in my checking account today as I did December 31st.

But it’s a new budget year, so we get things done. There’s planning for hiring. If you do it right, it’s not a two-week venture. It’s like, “Okay, we’re gonna need this person in place by the fall. So let’s back that out and say we probably ought to get going in the spring, which means we ought to talk about it now.” And that sounds like a terribly long time, but most of the hiring that we do is not for rank-and-file workers. It’s for executive level or leadership positions, and those you tend to see people taking a lot more time hiring.

Loren Feldman:
Dana, how are you doing?

Dana White:
I’m doing well. Paralee is doing well. We’ve had some challenges in the past week or so. My admin team is dealing with some personal issues: multiple deaths, health issues. Yeah, it’s pretty sad.

Loren Feldman:
Oh, gosh. Are you talking about COVID deaths?

Dana White:
No, not at all, thank goodness, but still death. My operations manager, she had two deaths within her family: one was an elderly family member and the other one was in reaction to the elderly family member passing. And then my manager, she has been in and out of the hospital, they just checked her back in—admitted her rather—to the hospital this morning. What I’m proud of is the fact that they are taking care of themselves, supporting their family, and using their work with Paralee Boyd to help take care of themselves.

We’ve talked to a lot of salons, a lot of businesses, and we are so blessed, to not only be open, but see our numbers increase. When I think about where I was a year ago, in March, when we were worried, we didn’t know what was going to happen—and I’m a little emotional because I’ve learned so much about myself—believing that when I put my mind to something, I can do it, without asking permission. I was scared on—I think it was a call with Karen—and Loren, you said, “So, Dana, what are you going to do?” And I said, “I just don’t know.” And I had a choice, and Jay put it out there: “What are you gonna do?” And I chose. And to see the results…

Loren Feldman:
What did you choose?

Dana White:
I chose to bear down! I chose Paralee.

Karen Clark Cole:
To survive.

Dana White:
Yeah, and I’ll choose her. I will choose my business every day and twice on Sunday. I started the product line. Yes, it’s slow-going, but it’s going! We’re not closing, we’re hiring! I chose not to climb the mountain, but to get on the Peloton and ride. Still get my workout in, but it doesn’t mean I have to ascend. I don’t have to scale Mount Kilimanjaro. But I can still build without moving. And I’ve learned the value of being still, getting my resources together, getting my PPP, winning Demo Day—which was awesome—applying for grants and loans, getting the work done.

And in January, 2021, I’m still here and getting ready to market and grow the business. So yeah, I’m a little emotional because, a year ago, I thought COVID was gonna take us out. A hair salon? It’s standing over somebody, shampooing their hair. I’m not a restaurant where I can load up your food in the back of your trunk or your car—and to see my numbers. Guys, January, we had a slow week last week. Great googly moogly, it was the worst. But overall, when I talk to other salons that are doing 5,000 this month, 6,000 this month, and to see us maintain steady double digits? I’m like, “Whoa, I chose! I chose Paralee!”

Loren Feldman:
Good for you. You mentioned Demo Day—I don’t think we ever really tied that up. I think the last time we talked about that, you were still deciding how you were going to take the money from them, whether it would be a convertible loan that they could convert to equity or you could just take it as a straight loan, I think was the discussion. Did you make a decision on that?

Dana White:
I did. I have taken $50,000 of that Demo Day money as a loan—an interest-free loan—for marketing. And in the event that I do decide to partner with a VC or an investor, I can take that loan and convert it with the rest of my money and turn it into a convertible note.

Karen Clark Cole:
You gave them no equity?

Dana White:
I gave them no equity.

Karen Clark Cole:
Oh, good! Yay!

Dana White:
If I want to later, I can. But for right now, I think I learned that the VC world is touch and go. I know that I have a great product. I have a really great business. COVID has taught me that. And it’s only as great as the people who I work with, and the decisions that I make, the work I put into it. Again, I choose Paralee. I’m going to start selling products on Amazon and selling products online through our website. We’re updating that to handle the volume.

I’d been advised to hang on to the $200,000 winnings, and a VC would come along and then give me money, and then I’d put my $200,000 with it. I think that’s a tall ask in the time of COVID. So I decided to shave off $50,000 of it, as we spoke about in our last episode. Well, that $50,000 is coming from a no-interest loan from Demo Day, and I’m putting it into a year of marketing.

Loren Feldman:
Are you planning on focusing that marketing on the salon, or on the products, or on both?

Dana White:
Both. We’re gonna start with products and then we’re going to move into butts in seats, because we’re still getting a lot of people in the salon who’ve never heard of us before—a lot of new customers who’ve just never heard of us before.

Loren Feldman:
How are they finding you?

Dana White:
Word of mouth. Word of mouth is what kept us above water for eight years. I can do better, and so it’s time to have an ongoing marketing budget starting with this $50,000, and I will grow it. I’m nervous, of course, because wow, that’s a lot of money. But I hear that if marketing didn’t work, nobody would do it.

Loren Feldman:
It’s a lot of money, but it’s also not really a lot of money for marketing, right?

Karen Clark Cole:
You want to look at that as a percentage of your revenue, mostly.

Dana White:
Right. For a small business, yeah, it is. 4,000-plus dollars a month? Yeah, that’s a lot for a small business like mine. But I’m fortunate enough to have the ability to do it thanks to Detroit Demo Day. I can do it. And I believe it’s gonna put us on the path to increase our revenue to invest more in marketing and grow the company even more.

Loren Feldman:
Karen, you’ve talked in the past about your marketing, and I think you’ve expressed a sense that you’re something of an undiscovered gem—that not enough people know about you. Although you do have a ton of big, well-known clients.

Karen Clark Cole:
We do, but we’re still—I describe it as the “best kept secret,” which is bad.

Loren Feldman:
So what are you doing about it?

Karen Clark Cole:
Well, I’m sort of laughing to myself, listening to Dana: “If marketing didn’t work, no one would do it.” It’s so funny how it’s so hard to spend that money. I mean, you’re talking about it being a lot of money. It’s always a lot of money, no matter what. It’s like getting a new roof. It’s painful to spend, to me.

Dana White:
Yes! [Laughter]

Karen Clark Cole:
But you have to, and so, as a result, I’ll tell you, if you don’t do it now, 20 years later, you’ll be the best kept secret. Luckily, referrals and repeat work and word of mouth is an amazing engine. I think all of us see that. You do great work, and you get referrals, and you can keep going, and you can grow your business, and 20 years later, you’ll be $30 million in revenue. I mean, that’s what happened to us with hardly any marketing.

Now, though, we really want to break out of the—literally 90 percent of our business is repeat referral work. Imagine. You can do that all the way up to millions and millions of dollars. Now we want to keep those customers coming and coming back and coming back, because that means we’re doing great work. But we want to change that percentage, at least I do. I want to see that percentage more like 70 percent repeat. Imagine if the other part were new business and new clients because of the efforts of our marketing work. We’re really focused on that now.

My strategy is always to fire bullets all over the place and see what works, and then we put our money in one spot. In the last year, year and a half, we’ve been trying lots of little things—all outsourcing. We had this realization probably three years ago that building a marketing team for us just didn’t make sense, because we don’t really know how to do that properly. It would be so expensive to hire someone who does know how to do it properly that we thought, we’re just going to put our money, give it to the consultants who come knowing what to do.

So we put money in lots of different little types of marketing, like for example, analyst relations. We’re trying to have better connections with analysts and Gartner and Forrester and in newspapers with reporters. We hired small groups who are really good at that. They’re helping us get traction there. And then a small group, which is great at SEO, and a small group, which is great at actually writing for those audiences.

We’ve gotten smarter about what’s working for us. For example, we had hired a content company that was just sort of generating blog posts, and it just wasn’t working for us. However, the analyst one was really working well, so we put more money there and took away money there. We’re constantly just moving the pieces. I’m excited to see it’s working, but you know, it took us 20 years to figure that out.

Loren Feldman:
When you say it’s working, you’re referring to your outreach to analysts and journalists?

Karen Clark Cole:
Yeah, we’re getting great traction. We’re in a Gartner report now, and so we’re getting great traction, which is exactly what we wanted.

Loren Feldman:
Are you talking about traction in terms of people writing about you? Or actual clients coming in the door?

Karen Clark Cole:
Both. Our percentage is going down a little bit. So when the volume increases, but the mix of that is more new clients, then I’ll know that we did it. It’s really working.

Loren Feldman:
William, you’ve spoken in the past about your content marketing efforts, about how you make everyone at the company—and I think you mean everyone—blog. And that’s your marketing. Any changes with you?

William Vanderbloemen:
You know, if you do any kind of marketing or sales at all, people talk about the funnel, right? There’s the top of the funnel where you attract people to pay attention to you and then you move down the funnel where they’re engaging with you. Toward the bottom of the funnel, they’re saying, “Well, what would it look like to hire you?” So you get top middle, bottom of the funnel. And we think through that, with our inbound marketing, blogging is top of the funnel. But I think we’ve discovered something new I’m calling the very top of the funnel, the “V tofu”—we talk about the top of the funnel being the tofu—and so I don’t know if that’s like vegan tofu extra special or what. And what do I mean by that?

Loren Feldman:
You’re opening a restaurant?

William Vanderbloemen:
Yeah, right. When churches and schools shut down in March, and it got clear that no one was going to gather for Easter, which is unbelievable, it got real clear no one’s gonna be hiring for a while. And I started looking at the PPP program for our own use, but then when churches and schools and faith-based organizations got included as qualified entities to receive PPP, we just said, “Well, we could keep our money and just cut our costs. Or we could keep working hard and spend all our salaries, resourcing other entities about how to get their PPP.” And Loren, we’ve directly counseled over a quarter million people now. Our email list is three times the size it was a year ago.

Loren Feldman:
Are you doing that again for the second round?

William Vanderbloemen:
Yeah, not as much, because the people who are paying attention to the second round, generally speaking, are people who paid attention to the first round and have their ducks in a row. And so what does that mean? That means there are people that may never ever, ever, ever come back to us for content, but now they’re on our list. They’re not even really at the top of the funnel, where they’re reading a blog we wrote about staffing. They’re doing PPP, which really has nothing to do with a talent solution that lasts. It’s a very temporary thing.

But this very top of the funnel now has us asking questions. Well, what are the next tops of the funnels? What are the things that we need to be the expert on if no one else is going to be, and just as good will, serve people and offer free content that really is not directly connected with what we do? Time will tell whether that pays off.

Karen Clark Cole:
How do you connect your PPP advising to talent searching?

William Vanderbloemen:
It wasn’t some master plan. What we found out on the back-end was we’re advising people about how to keep their staff intact and how to keep their personnel budget above water. We have an incredibly OCD database. If you come on our website, and eventually we have your email address, I can look backward at every time you’ve been on our website. We score you every time you’re on it. We can tell what you’re reading. There’s a little bell that dings when you hit a certain score that says, “It looks like they’re about ready to hire somebody. You should call them.”

While the PPP advice won’t score people very highly to begin with, it will be the beginning of a longer-term relationship. When you help people receive free money from the government to keep their business afloat, they trust you. Then they want to hear more from you. And sooner or later, they will have a staffing need.

Karen Clark Cole:
I have to ask: What CRM system are you using that’s so good that you love?

William Vanderbloemen:
It’s a Frankenstein. So if you think of it like Lego blocks, the base platform is Salesforce. And then I think the current owner of what we use is called Bullhorn, which is one of the bigger ones. And then we custom-built a snap-on on top of that for faith-based, because there’s some categorization and tagging that needs to happen there that’s very particular. Then running right alongside it—I wish they could run together, but I haven’t figured this out yet—HubSpot is really the key to the marketing piece, and they talk to each other fairly well. But it’s a Frankenstein. I wish there were one solution. The CEO of HubSpot is like, “Don’t use us as your CRM. It’s too complex. Just use us for the marketing.” We’re a weird little company, and for the moment we’re in, we have a nice-looking Frankenstein.

Karen Clark Cole:
Nice.

Loren Feldman:
So long as we’re talking about PPP, have all three of you applied for round two? Dana, I think you mentioned it.

Dana White:
Yes, I applied—what was it, Tuesday? I went through my bank and put my application in, and it’s under review.

Loren Feldman:
So, a much smoother process this time?

Dana White:
A smoother process, but more detailed. My accountant, bookkeeper, financial manager, she went through the application with me. I did the first one by myself, but this one, when it came to the records that they wanted us to have—and just making sure I did it right—I just did it with her on the phone. It took me 20 minutes, maybe. I got it done and got it in.

Loren Feldman:
So your bank has filed the application and you’re waiting to hear?

Dana White:
No, it’s under review as of yesterday. I haven’t checked it today. They review it to see if they need any more information from you, and then if they don’t, then they just send it on to the SBA. The people in my region have been getting approvals within days. I mean, literally putting it in on a Thursday, getting money in their account on Tuesday.

Loren Feldman:
How about you, Karen?

Karen Clark Cole:
No, we’re not applying this round.

Loren Feldman:
Is that because you don’t feel you need it?

Karen Clark Cole:
Right, yeah.

Loren Feldman:
Would you have qualified? Could you have applied?

Karen Clark Cole:
That’s a good question. Probably… Well, it’s a good question. I’m not sure, actually. But we are still waiting to find out what the status is on our last one. We don’t need it, and we don’t want to go through that again, necessarily. Because we still don’t know if our last one is going to be forgiven or not. We’ve been going through a lot of hoops to figure that out.

Loren Feldman:
How about you, William?

William Vanderbloemen:
We got our first round, and it was very, very smooth. We’ve used the same bank forever, and we use it for all of our banking, and I think that helped. I understand that it’s been forgiven. I’ve gotten that through word of mouth but not gotten the final form in the mail. So this go-around, our application was more complicated—not because the government made it more complicated, but just because our bank had serious technical issues that were a pretty major glitch. It was a mess, and I was, frankly, a little concerned that the money would run out, because it’s less money this go-around. But we’ve done all we can do on our end.

Loren Feldman:
Have you learned anything this go-around that you’ve been sharing with all your followers?

William Vanderbloemen:
Yeah, the employee retention tax credit, which is this tiny, little niche thing. I don’t know if that’s language that any of you are familiar with, but it’s a tiny little piece of this giant bill that was passed in early January. It’s a pretty incredible tax break, if you happen to qualify for it, and there’s a lot of math involved. I had our finance director spend two full days working on it for us to make sure we were compliant and right.

But basically, I think the spirit behind it is, if you were able to keep your people last year, even if you took PPP, and you’re retaining your employees, we want to offer you an income tax credit that’s equivalent to some portion of their salary. Loren, I know you’ve put this in the Morning Report before, but I would just encourage people that, if they haven’t looked into that, it’s worth a look. It’s not easy. But, man, if you work it, there is help to be had.

Loren Feldman:
Is there one particular aspect to it that decides whether you qualify or not? Can you point us in the right direction of who this works for?

William Vanderbloemen:
Yeah, you have a good finance director who can figure that out for you. [Laughter] I mean, honestly, I plugged the Morning Report. But you put it out there last week, I think, maybe? I forget.

Loren Feldman:
I think it was the beginning of last week.

William Vanderbloemen:
Yeah, maybe on Tuesday. We had a holiday Monday.

Loren Feldman:
Is that where you learned about it, William?

William Vanderbloemen:
That’s where I learned about it. And I’m like, “Really?” So I pored that over to my accountant, and she said, “Oh, yeah, we ought to look at that.” She’s wonderful. I would recommend her to everybody, but had I not read the Morning Report, I was like, “How would we have found this out otherwise?” And it’s like, “Oh, well, you know…” But the reality is reading the Morning Report pointed me in the direction, and I went down the rabbit hole.

Loren Feldman:
Thank you, William.

William Vanderbloemen:
No, no, no. I didn’t get paid for that. I don’t even get a holiday basket from Loren.

Karen Clark Cole:
Neither did I.

Loren Feldman:
It was a rough year.

William Vanderbloemen:
I read about it, I went down the rabbit hole, and it looked like, “Oh my gosh, we have to be able to qualify for this.” I know enough about our numbers at a high level, and then it really did require somebody who knows accounting to get in there and roll up their sleeves and spend some hours, but it was enough of a tax break. All I needed to know from my accountant was, I said, “Kristen, if this is a $2,000 savings, I don’t need to pay Renee two days of salary to figure that out. We’ll just let it go.” And she said, “No, no, no, no, no, if this is right, it’s a much bigger savings.” And that’s when I said, “Fine.” And we called Rene and said, “Hey, look, whatever you’re doing, push it to the side. Get after this, and let’s get it done.” And, you know, we’ve got all our paperwork in, and we’ll see where it goes.

Loren Feldman:
All right, in the time we have left, I’d love to run a question by all three of you that I got from a reader. We’ve been trying to do this every episode. For those of you listening, if you have a question for the 21 Hats team—it can be about your business or about their businesses—just send it to me: [email protected] The question this week comes from a listener who preferred to remain anonymous who asked: How do you decide when it’s time to fire a customer? Have any of the three of you been in that situation?

Dana White:
Yes! Oh, man. Yes.

Loren Feldman:
Do tell.

Dana White:
Oh, yeah. Wow, you took me back. On the top of my mind, there are a few customers who I have needed to fire. What does that mean? When you have a customer who comes in and disrupts the synergy of your business, when you have a customer who feels that their dollar is important—so important that they can change your business model—“I know you don’t do it like this, but because I’m paying for it, you’re going to do it like this.”

When you have a customer who feels like their service of is the same as in servitude to, then you know you have to fire a customer and ask them not to come back. Then sometimes, during that conversation, you see the change, and then you give them one more chance, and you realize that, “Yeah, this is just who they are, and we are not the business for you.” It’s the entitlement. I’ve had several customers we’ve had to pull aside. When everybody’s tense, and they’re not doing their best work because they know there’s a customer in their chair who’s gonna read us the riot act on every little thing, then we probably suggest that this is not the salon for you.

Loren Feldman:
Have you had to do it with someone who was a loyal customer? Was it painful?

Dana White:
Yep, weekly customer. It wasn’t painful, because once you left, I noticed that my staff needed to recover. We had a mother who had a mixed daughter, and her daughter had thick and curly hair, and she was screaming at her child, “This is why your effing hair is the death of me.” And her daughter would just scream and cry in the chair: “I’m sorry, Mommy. I’m sorry.” Yeah, no. We tried to work with her. We tried to give her tips, and then she got mad at us. Once they would leave, my staff needed to recover, which affected the customers who were there after who didn’t know what just took place in the salon. So no, we had no problem saying goodbye to her.

Loren Feldman:
It’s probably a little bit different with a B2B customer, such as you, Karen, would have. Have you been in that situation?

Karen Clark Cole:
Yeah. Luckily, not as often as you might think over the years, but how we work with our clients is very collaborative. They become part of our team, or we become part of their team, so the way we work together is really important. And in a handful of cases—there have been clients who—because of their behavior, their attitude, or their unwillingness to collaborate—have not allowed us to do our best work, or in some cases, even be successful in the work that we’re doing.

And then, in the worst-case scenario, it’s similar to Dana, in that the recovery of our employees, it’s not worth it. There may be a toxic environment in either the client’s company—the way they are as an organization—or that team not functioning well together. And we don’t tolerate that at all within our company.

Loren Feldman:
Have you had a tough one where you had to walk away from a big client?

Karen Clark Cole:
Oh, it’s all money, yeah. It’s all real revenue, and every dollar counts. It’s never what we want to do. But it’s never hard once you realize what’s happening. The decision is usually quite easy.

Loren Feldman:
I guess that’s true if it’s really toxic behavior that you’re talking about. How do you look at it if it’s kind of in that gray area?

Karen Clark Cole:
It takes longer, but it usually becomes clear if it’s repeatedly happening. We’ll try to get through the project and do our work. Usually, what happens is we finish it, and then we won’t work with them again. We finish it off, we survive, we heal our wounds, and then we vow to not work with them again.

Loren Feldman:
How about you, William?

William Vanderbloemen:
We had to add a paragraph or a clause into our contract. “You hire us to find your person, we’re going to stay with you until it’s done.” Well, almost all the time, that works out really well. But every now and then, you get into the situation where it’s like, “Oh my gosh.” I didn’t have a cancellation clause in my contract. Every clause in our contract has a story with a name behind it. And I won’t name names, but I can see the person in my mind’s eye who is the reason we wrote the cancellation clause in the contract.

We try and make sure people have plenty of time to read and understand what the contract says. We don’t try and force the thing. What we sell is a fairly large widget, in terms of purchase price. It’s not a four-figure thing or three-figure thing. That’s one thing that we’ve done to try and improve that situation.

But I think the far more important lesson I had to learn was not to sell to everyone. I love sales. I just love it. I’d sell you this phone I’m talking to you on and tell you it won’t get muddy and the connection will stay clear. I just love it. I feel it as a challenge, like, “I can make this work.” So I’ve found that that propensity inside me has led me to sell to people when there were warning signs going off. They may be nice people, but may not be a fit. We’ve developed some pretty careful criteria. So when you ask the question, “When have you had to fire a client?” I would say the most common time that we do that now is before they ever become a client. And we still mess up some.

Loren Feldman:
What are you looking for? What tells you you don’t want to work with this person?

William Vanderbloemen:
What do they say, “You can do it fast, cheap, or good”? We are not cheap. We’re not super expensive. I don’t mind what we charge. In fact, my friends in corporate search firms are like, “How do you make a living?” But if you call us to talk about a position you need filled, or whatever the issue is, and your leading questions are, “How much is this going to cost? How cheap can we get this done?” I’ll tell you right away: It’s probably not gonna work out. If your leading pain point is the price, there’s a very high probability we’re not going to get along, and I don’t want that.

Loren Feldman:
So you flat out tell them. You tell them, “You asked about price, so I don’t want to work with you.”

William Vanderbloemen:
Absolutely. You led with price. You should always ask about price, but if your first question is, “How much does this cost?” Or even better, “How cheap can we do this?” Then, no, this isn’t gonna work. And oddly, many times, I’ve had to slow a sales cycle down to see if it’s the right client. Because what I’ve learned—it’s a really counterintuitive thing—but if it’s a first-time connection, and they are, “Let’s go,” and don’t bother to look at the details of things, I don’t know why, but it tends to lead to a bad result. We’ve gotten to where we’re a little picky about that too, and we say, “I want you to slow down. I want you to take a little time. Make sure you know what you’re getting into.” And sometimes that’ll slow them down enough to actually ask questions.

Sometimes people will hear, “Vanderbloemen is the best at what they do, so let’s hire them. Just get them. I’ll sign it.” And then they don’t understand that we’re retained. We’re not a contingency-based firm. You don’t pay us when we find your guy. You pay us on a schedule. That’s very different. That’s the way most exec search firms work, but there are a lot of recruiting firms that don’t. I would say if people are too fast, that sets off an alarm bell.

Loren Feldman:
Last question, really quickly. We’re having this conversation at the very end of January. Did each of you set New Year’s resolutions, and are you still sticking with them? Dana?

Dana White:
Absolutely not. I survived 2020—and I bought a planner for 2020, which is pretty much empty up until May. So no, I didn’t set any New Year’s resolution. I felt like, for 2021, I needed to see a trailer first. You know, let me see what’s coming before I set any goals. I think I learned it’s day-by-day, hour-by-hour for me and just to keep going in the moment.

Loren Feldman:
Karen?

Karen Clark Cole:
No, not that I didn’t want to—I just sort of didn’t get there.

Loren Feldman:
William?

William Vanderbloemen:
I didn’t set any New Year’s resolutions. Back in March or April, when the world shut down, it got real clear to me that, from a fitness and health standpoint, this was going to go one way or the other for William. Either I was going to shut down and gain the COVID 19, or I was finally going to get serious about getting some habits in place, and that went really well. Now that we’re headed toward the shutdown being over, I just like to keep doing what I’ve been doing.

Loren Feldman:
My thanks to Karen Clark Cole, William Vanderbloemen, and Dana White. As always, guys, thanks for sharing.

Episode 46: “A Fabulous Conversation About Marketing”

This week, we introduce Stephanie Stuckey, a new regular on the podcast who tells Dana White and Laura Zander about the iconic road stop business her grandfather founded: when it peaked, what went wrong, why she bought it back, and how she plans to rejuvenate it. Along the way, we discuss whether small businesses should outsource their marketing, how hard it is to find an agency that really listens, and what it should cost to hire a marketing firm. Plus: Stephanie offers a tutorial on how to engage followers—and get free consulting—on LinkedIn.

Guests:

Stephanie Stuckey is CEO of Stuckey’s Corporation.

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

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Laura Zander: “I will offer as much advice as you would like in exchange for pecan rolls. I’m just throwing it out there.”

Dana White: “I’ve been open for eight years. I’m not happy with the growth, COVID aside. It’s time to bite the bullet, invest the money.”

Stephanie Stuckey: “There’s really not a lot of marketing firms out there that cater to small businesses.”

Stephanie Stuckey: “I try when I share things not to just hit the share button, but to have a teaser to say, ‘We had a fabulous discussion about marketing.’”

Full Episode Transcript:

Loren Feldman:
Welcome Dana and Laura, and our newest regular on The 21 Hats Podcast team, Stephanie Stuckey. Great to have you here, Stephanie.

Stephanie Stuckey:
Thanks for having me.

Loren Feldman:
Our pleasure. Let’s start with you, Stephanie. You’re the granddaughter of the founder of the Stuckey’s road stop business, a brand and a business that is remembered fondly by so many people, even though it fell on hard times after your family sold it. But you bought the business back in 2019. Why don’t you start by telling us: what kind of shape was it in when you bought it?

Stephanie Stuckey:
Not good.

Loren Feldman:
Tell us more!

Stephanie Stuckey:
Stuckey’s had been losing money consistently since 2016 when I purchased the company, and we were in the red. What I bought was something that you could not see on the books, and I think that is what took a family member to appreciate and understand the value of the brand. I bought a brand. I didn’t buy an asset that was really worth a lot.

Loren Feldman:
People think of the road stop locations. What were the assets that you did, in fact, buy?

Stephanie Stuckey:
Yeah, and just some background, because I think there’s a certain era that really remembers Stuckey’s, and it would have been people who maybe in the 1950’s, 60’s, 70’s, early 80’s would road trip and pull over and see our stores. That’s what we are best known for. We had roadside locations. At our peak, we had 368 stores in almost 40 states. We were known for our products. Specifically, we started as the pecan stand on the side of the road. So to this day, we continue to be known for pecan-based products.

Laura Zander:
Can I just interrupt real quick and say you are now my new best friend for pronouncing that word correctly?

Stephanie Stuckey:
Yeah, right?!

Laura Zander:
Everybody is like “puh-cahn, puh-cahn.” I’m like, “It’s pea-can.” We even asked Google, and Google thinks it’s “puh-cahn.” I am so stoked that you’re here and that you are on my side. I used to go to Stuckey’s all the time, and that’s where I learned how to say it the right way.

Stephanie Stuckey:
My grandfather would say, “Pea-cans when you pick them; puh-cahns when you sell them.” It was however the seller would want to pronounce them, and he sold pecans to the Northerners a lot—he would say “Yankees.”

So what assets were there? We had 67 locations. None of them are company-owned. They’re all independently franchised operations. Only 20 of those are standalone stores. The remainder will be what we call Stuckey’s Express, or store-within-a-store. You’ll see a co-branded Stuckey’s section. For example, we’re in a few pilot locations. Just like you would see a Dunkin’s or a Subway, you might see a Stuckey’s mini-section.

We had 20 standalone stores, 47 stores-within-a-store, 67 franchise locations that were paying a monthly franchise fee. We had a distribution center in Eastman, Georgia. We had three sales reps. We had a skeleton crew that had been running the company for a decade since my dad’s retirement, so the main team was a vice president and a CFO and three sales reps. Those are some of the assets that I purchased.

Loren Feldman:
That’s like five employees you’re talking about.

Stephanie Stuckey:
We have two people [who] run the warehouse, and we have three pickers—warehouse pickers—and a couple seasonal workers. So really, a round number: 10. Small.

Loren Feldman:
You sell lots of snacks—pea-can snacks. Did I get that right?

Stephanie Stuckey:
Yes, and we’ve been outsourcing our product for decades. That’s something I think a lot of companies don’t talk about. But many well-known brands, they don’t actually manufacture their product in-house. They outsource that. That doesn’t mean that it’s not a quality product and it’s not made to their specifications, using their recipes, etc., living up to their standards. But that is kind of a secret of many products, that they don’t self-produce. Having said that, we’re in the process of acquiring our manufacturing capacity, so we’re going to change that around. But I didn’t acquire any manufacturing at the time.

Laura Zander:
I’m curious. When was the peak? When was it doing the best that it was doing? I mean, that’s a huge drop, right?

Stephanie Stuckey:
Good question. Quite a few things happened. The peak, I would say, is the mid-1970’s. My grandfather sold the company in 1964, right before I was born, and he remained involved with the company and was head of the Stuckey’s division of the company that bought Stuckey’s for about 10 years. And then the CEO that brought my grandfather on died unexpectedly of a heart attack. My grandfather was pushed out. Then that company got bought out by another company. Then people were driving the roads less because there was an Arab oil embargo. Then the Airline Deregulation Act passed, and people were flying more because flying was affordable. External and internal factors that all combined, that had us on this rapid trajectory of going downhill. That’s 80 years of history in a few minutes, right?

Loren Feldman:
Stephanie, you don’t really have a background doing this kind of thing. You’ve had an interesting career. Tell us quickly about your background and how this feels to you, taking over a business as CEO.

Stephanie Stuckey:
Had I not been given this opportunity to buy the company from my dad’s former partners, who were actively selling, I would never have stepped up to the plate and been a CEO. I would have never thought I had the capacity to do that. But when you look back on your life’s experiences, and think about the skills that you gain throughout the different careers you may have had or the different positions that can help inform a new career, even if it’s doing something different.

They’re similar skill-sets, and the number one skill-set I would stress is what Warren Buffett always talks about, which is emotional intelligence. That only comes with maturity and being able to handle very stressful situations in a way that’s even-keeled. So much of being a successful entrepreneur or a business leader or leader in life is being able to effectively manage interpersonal relationships. I’d say that’s easily half of what I do every day, is making sure that the team is working together well and we’re maximizing each other’s skill-sets.

For my background, I’m a lawyer by training. I practiced law for many years. I was a litigator, I was a criminal defense trial lawyer. I was in the Georgia State Legislature. I had a career in public service for 14 years. I headed up an environmental non-profit for three years and then I got tapped as head of sustainability for the city of Atlanta by Mayor Kasim Reed. I was doing that and then I left. I was heading up sustainability for a non-profit based in Atlanta and teaching as an adjunct at the University of Georgia School of Law, when I had this career move to take over my family’s business.

Laura Zander:
And you think that your resume is not impressive enough? Are you kidding me? [Laughter]

Stephanie Stuckey:
I didn’t think I could be a CEO! I mean, I was in the non-profit space, right?

Laura Zander:
Yeah, but it’s just three letters. You can put any three letters behind your name if you want to, if you own the company.

Stephanie Stuckey:
Right, if you own the company, by the way, you can make yourself CEO.

Laura Zander:
Exactly.

Dana White:
Yeah, exactly.

Stephanie Stuckey:
I’m going to change my title to chief candymaker soon.

Laura Zander:
Perfect. I love it. Pea-can maker.

Stephanie Stuckey:
That’s the title I want.

Dana White:
For me, I was a labor relations specialist. I’m not a hairstylist. And I think you’re spot-on when you say a lot of it has to do with your emotional maturity. I’ve worked in the Middle East. I’ve worked in New York City. The skill-set to be able to talk to people, to be able to work with workers, understanding what they need and how to support them, you can translate that to anything. I too had a brief stint in politics.

Stephanie Stuckey:
Oh, really?

Dana White:
I was in a presidential campaign years and years and years ago. But that rallying the troops, that getting everybody on the same page, that being consistent with your message—that all translates in business to culture, vision, processes, order. I don’t have an engineering background, so the fact that I’m drawn to this Lean manufacturing business is new, but even my experience being a waitress has helped me develop this brand. My question for you, Stephanie, is: You said the 70’s was the peak?

Stephanie Stuckey:
Yeah.

Dana White:
At what point did Stuckey’s not evolve? What happened in Stuckey’s that didn’t keep up with the changes?

Stephanie Stuckey:
They lost a visionary founder, and I know I’m biased about that, because he was my grandfather, but it plays out looking at the history and talking to non-family members about what happened. He was involved with the company even after he sold it, like I said, as head of the Stuckey’s division of the company that bought Stuckey’s. It’s based out of St. Louis, and part of their portfolio at the time was Whitman’s Chocolate Samplers. Definitely had an aligned brand in their portfolio and it really was a good fit.

The new CEO was in finance and did not understand a brand. He didn’t understand marketing and he certainly didn’t get what was special about Stuckey’s, that we were a road trip experience. We weren’t just selling a product and we weren’t just numbers on a book. My grandfather was ousted, and then that company got bought out by a Chicago railroad conglomerate, and at that point, it just became a rapid downward slide.

Dana White:
I think that’s important. Business owners are always trying to keep their head above water, and a lot of us right now just barely have our noses above water. I’m fortunate. My mouth is above water. My chin is a little under the surface. Yes, it’s a money-making opportunity, but you really need somebody who’s in line with the vision.

Laura Zander:
Our largest competitor just sold and announced it two days ago. They just got a buyer, and the buyer was the second largest competitor, which is VC-funded. They’ve raised—I don’t know—50 or 60 million bucks. There’s no heart and soul to the VC-funded company, so we’re just waiting for them to exit. They’ve been acquiring all these kinds of assets and small businesses within the yarn industry over the last two years or three years.

My little tribe of local yarn shop owners have all been discussing, “What does this mean that our competitor sold?” And it was a second-generation business, and it’s been around for 45 years. And we’re like, “Well, there goes the heart and soul.” They’ll stick around probably for a year—that’s what I’m assuming the contract is—and then all of those sales are going to end up being distributed across the rest of us. So for us, it’s actually a really good thing, because we’re assuming that it’s going to follow that same kind of trajectory that you just explained, and that you just experienced, because there’s no heart and soul. There’s no drive.

Loren Feldman:
Do you know why they sold?

Laura Zander:
I don’t know, specifically. I’m going to assume… they’re a little bit older. They’re probably 10-15 years older than Doug and I are. Probably just tired and ready to retire and be done. And it goes back to like, what do you do about succession planning? It’s really making us look—or me look—inward. Can I do this until I’m 60, 70? You know, not all of us are Jay Goltz, and not all of us necessarily want to do this for the rest of our lives. So what do you do? How do you not lose the soul? Or do you care? Do you just end up shutting it down? Like, where does it go?

Stephanie Stuckey:
That’s a good question, because I think so often people feel this stress—especially if you’re in a family business, like me. I’m 3G, or third-generation. There’s this pressure: It has to go to the fourth generation. But—and I’m not suggesting this for Stuckey’s—sometimes I think it’s okay just to say, “It ends here. It’s been a great business. We had a great run. We’re shutting it down.” And how much better would it be to close in a very decisive way, instead of having them die this slow and pathetic death? You drive by and see these shuttered Stuckey’s stores that are now porn shops.

Dana White:
Oh, wow.

Stephanie Stuckey:
Which is the reality for some of our old stores. If it hadn’t gotten back in the family business, that’s how it would have died.

Laura Zander:
Oh my God. Talk about the polar opposite.

Loren Feldman:
Stephanie, are you comfortable telling us what this investment in Stuckey’s means to you? I mean, if you’re comfortable sharing what you paid for it, we’d be interested to hear that, but what I’m really interested in is: Are you putting your heart and soul into this? What does it mean to you to turn this business around?

Stephanie Stuckey:
It’s very personal to me. It’s my name up there on those billboards, and on those stores and on the candy label. I do have a really strong emotional connection to this brand, and it’s more than just my personal experiences with it. It’s what I know it’s capable of. That whole experience of taking to the open road, which I think is such an American experience, because we have this country that is huge with highways that connect us. There’s this wanderlust in all of us, and Stuckey’s is part of something so much bigger than just me. It’s getting excited about making pecan log rolls. It’s getting in your car. It’s exploring backroads. It’s going to the alligator petting zoos—or maybe not petting…

Laura Zander:
Yes, no. I took Huck to one!

Stephanie Stuckey:
It’s Goofy Golf, and South of the Border, and Wall Drug that is so uniquely American. You don’t see places like that anywhere else in the world, and it’s everyone’s vacation. You don’t have to have a lot of money to get in your car and experience these things, and Stuckey’s is part of that. We fill a unique niche.

Laura Zander:
One hundred percent.

Stephanie Stuckey:
And Stuckey’s got away from offering that. We’ve lost that magic because we were out of family hands, and I’m trying to get it back to that. My father, he did a great job. He saved the brand. Had he not taken it on, it would have gone under, but he was also running five other companies at that point. He made Stuckey’s part of his portfolio to keep it going, but he didn’t really have the… he doesn’t have the same vision I do for the company. Having said that, he’s still very much alive and supports what I’m doing and the direction I’m going in.

My vision for the company is getting it back to this unique experience. I’m working right now on getting photo booths in the stores that would be branded Stuckey’s—the old-timey photo booths where the reels come out, but you can also get a digital version of your photo, too—I’m working on bringing back that sense of having a fun experience when you pull over, and it’s not just getting gas and using the restroom and getting a bag of Cheetos. It’s having a unique experience that relates to the place where you are. And I’m not telling how much I bought it for. Sorry.

Loren Feldman:
That’s okay.

Stephanie Stuckey:
I think people might be shocked. I don’t know, they might think it was too low, or they might think it was too high. I negotiated down, I’ll say that.

Dana White:
I have to say, I know a little bit about Stuckey’s, and one of the things that’s sad but true is Stuckey’s had no segregated bathrooms on the road.

Stephanie Stuckey:
That’s right.

Dana White:
In a time where, in the South, bathrooms were segregated. You guys were in the Green Book.

Stephanie Stuckey:
We were in the Green Book.

Dana White:
Yup, you were in the Green Book. We could go to a Stuckey’s. So you know, I’m excited for you. I hear that you get it. Obviously, as a girl who has a personal connection to the brand, you just don’t want anybody to take it over. You were called to take it over and grow it, especially that wanderlust factor. Especially now, right? People aren’t getting on planes, and who knows when they’ll get back on planes the way they used to. I was listening to you, and I’m like, “Wow, such rich marketing material.”

Laura Zander:
Oh my God. I know.

Dana White:
And even with—I don’t know how your marketing team would feel about it—but even them touching on—

Stephanie Stuckey:
The marketing team! [laughter]

Dana White:
Stephanie, it could be you. I just hired a marketing team, and we could talk about that in another episode, but—

Loren Feldman:
Or we can talk about it in this one. I would like to hear Stephanie talk about her marketing plans and hear what you, Dana and Laura, think about it.

Dana White:
I’m listening to her, and there’s such a wealth of ways to reach so many customers to reconnect them with Stuckey’s. Not segregating their bathroom. In a time like this, showing who you are is who you’ve always been. That’s, wow… That phrase was $29.95. You can have that.

Laura Zander:
No kidding. That was a good one. That’s a T-shirt.

Loren Feldman:
Stephanie, one of the things that caught my eye is that your website, unlike most websites, has a guest book where people can leave their memories, what they’ve experienced with your brand through the years. How do you build on that? Do you have a marketing plan?

Stephanie Stuckey:
I do have a marketing plan. I wrote it myself, and I have had the benefit of a lot of freelancers who support me, but on a very limited basis. And I’ve had it vetted with others to get their feedback, but I have a marketing plan. I have a very small team—I guess I can say I have a marketing team. I have two graphic designers who I use freelance, and I have a wonderful guy who helps me draft some of the narratives that I e-blast. And then I have a young man who helps me post on Instagram, especially.

I’m very challenged with video content. I’m interested, Dana, Laura, if y’all use video, because that’s more of a challenge for me. I’m trying to figure that out. But the marketing team is just me coordinating freelancers on an hourly basis. I just hired someone to help me structure a Pinterest site and get that up and running as well.

Laura Zander:
I will offer as much advice as you would like in exchange for pecan rolls. I’m just throwing it out there. I’ll be on your board, and I’ll drive. As long as there’s food there during the day, I’d be stoked. And maybe a T-shirt.

Stephanie Stuckey:
Excellent.

Dana White:
I’ve been open eight years, and I’ve done so much with doing very little marketing. And so this year, I’ve decided to make an investment into marketing. I literally just had a meeting with the firm that I’m going to bring on to do all the marketing outside of graphic design. I too freelance for graphic design, someone I’ve been working with starting in 2020. I’m a nervous wreck. I’m a nervous wreck because I’m feeling like the investment is trying, even though with the little marketing I’ve done, we have some idea of what works. But this is a huge investment for me and I want to make sure that the money I put in, I get back.

I’ve talked to some of their other clients. I’ve talked to a friend of mine who’s a soon-to-be-client and a friend of mine who’s already a client of theirs. They came highly recommended. My challenge with finding a marketing team through an agency of record is, I’m a different kind of business. People want to box me. And the second you do that, I’m losing—

Loren Feldman:
What do you mean, Dana, that you’re a different kind of business? What about your business are you referring to?

Dana White:
Most marketing firms that I interview want to make me a salon. I’m getting ready to cut a check, and you’re still talking about appointments. It’s so obvious—I’m walk-in only. I was in a meeting: “So Dana, if I come and make an appointment…” I’m like, “You can’t make an appointment.” “Oh, right, it’s Sunday. You’re closed today.” No, we’re seven-days-a-week.

Laura Zander:
They don’t listen.

Dana White:
They’re not listening, and so then a lot of their marketing ideas for me were appointment-based. If you’d even done any homework—which I know they have—if you paid attention to the website, if you had done any homework, you’d realize that you have to approach Paralee Boyd a little differently and listen to the owner when she tells you how to market to the people she wants to be her customers. And they’re like, “Well, no, maybe we should market to these people…”

Loren Feldman:
How do you respond to that, Dana? Do you correct them? Or do you head for the exit?

Dana White:
I correct and head. I correct them and I leave, right? I’m a little nervous. I think they’re beyond qualified. They’re going to do a great job. But the proof is in the pudding. And when do I pivot? When do I say, “Okay, I’ve put in enough money. It’s not coming back.” I like their ideas thus far. We’ve done a little bit of marketing that’s data-driven. I’ve given them the results so we kind of see what works. But I’m nervous as I’m getting ready to cut this check every month. Oh my goodness…

Stephanie Stuckey:
I can totally relate to that.

Laura Zander:
How big is the check?

Dana White:
The check is $50,000.

Laura Zander:
[Gasp]

Stephanie Stuckey:
Yeah, that’s consistent with quotes I’ve gotten. And the quote I’ve gotten is, “What if I just hired you to do several months’ worth of work and really help put a good structure in place for us?” And the quotes I’ve been getting for that have been $40,000. I’ve gotten quotes for $100,000. You will see charges like that. I think, quite often, maybe they think we have more money than we do, or we’re willing to spend money we don’t have. Or maybe large corporations pay a lot of money and so they’re used to that. There’s really not a lot of marketing firms out there that cater to small businesses.

Dana White:
I’m so excited that you said that. That was part of my selection criteria. I said this in our very first meeting with every marketing person: “Don’t give me a proposal based on who you think I am. Give me a proposal based on what I need. Give me a proposal that says, ‘I want to be in a relationship with Paralee Boyd and Dana White, and in five years, I want to be her agency of record.’” If you give me a quote that says X amount of dollars, then I’m saying, “You don’t want to be in a relationship with me. And I finally found a marketing firm that gets it, that’s comfortable marketing to my market, that gets Paralee Boyd. I’m excited to see it, but it’s still $50,000 for the year. It’s still a lot of money.

Loren Feldman:
What did they promise you for that $50,000?

Dana White:
I’ve spoken with a customer of theirs who said, “These are the returns on the investment that I’ve gotten, and this is what I’ve reinvested in them, and I don’t look back.” They have promised me a lot in their statements of work—something that they’ve already started to do: “Dana, this is what we’re going to do.”

And they’re smart. They shouldn’t promise me an ROI of such and such and such and such. No. What they promised me is to deliver and work hard, and that’s all I can ask for, to an extent. Six months in at $24,000 and nobody’s coming in the door? Okay, let’s talk.

Laura Zander:
Do you even have metrics for number of impressions and number of products?

Dana White:
Yep. All of that.

Laura Zander:
Okay, you do. Can I ask, at 50 grand for the year, obviously, you thought about, “I could just hire one person, and they would do this full-time for me who was in-house and who lives and breathes the brand and isn’t doing anything else.” Why choose an agency, as opposed to having a full-time employee?

Dana White:
Their network. Who they could call and negotiate a rate with at a radio station. The individuals who I had looked at wanted to work with Paralee Boyd. They over-promised. There were questions that I was asking that they hadn’t had the answers to. It was obvious that I had thought more about this than they had.

I’m at a point—especially because of this show—where I’m done hand-holding. I’ve been open for eight years. I’m not happy with the growth, COVID aside. It’s time to bite the bullet, invest the money. That’s why I hired the operations manager, and that’s why I chose a firm.

Stephanie Stuckey:
The challenge also with hiring in-house is, obviously, all the expenses associated with that. A $50,000 salary is not just $50,000. You have to provide health insurance. You have to pay Social Security. You have to pay taxes. It gets very expensive very fast, so the actual cost to the company would be more than $50,000. Most people coming out of college, I’m amazed at the salaries that they expect. I wish that there were more firms that would cater to a smaller startup and provide really boutique services. But the firms I found—even the smaller ones that I thought would offer more reasonable rates—are quoting me six figures.

Dana White:
Mm mm. No.

Stephanie Stuckey:
And that’s when I come in, saying, “I can’t afford six figures.”

Dana White:
Exactly. I can’t.

Stephanie Stuckey:
I’m nowhere near there. There is such need out there for marketing with smaller firms, where if you could pick up a 10k-20k client, and you could pick up 10 of those clients and provide good quality work—and have somewhat of a gig economy model where you’re utilizing some workforce that you can coordinate their services—I think there’s a model there. It’s beyond my capacity, because I’m not a marketing guru.

What I do know is the Stuckey’s brand, and so I know how to message the Stuckey’s brand, which is what I’m doing. But there’s a need out there. The other thing with the firm is all the software, right? There’s a lot of software and equipment.

Dana White:
I also chose a firm, to answer your question, because of where I intend to go, and I didn’t want to outgrow someone who can’t market for me in Atlanta, Chicago, New York, and do product as well.

Loren Feldman:
Laura, Stephanie had asked about video, and you asked about doing this work in-house. You kind of built Jimmy Beans Wool by doing your own marketing. A lot of it was creating videos showing your customers what they could do with your yarn. That was some time back. Do you think that model still works? Is that still possible?

Laura Zander:
I think it’s probably more possible and more relevant now than it’s ever been. In fact, that’s what our focus is going to be for 2021: in-house, low production value. Especially in our industry, and I would venture that the Stuckey’s brand is a little similar and that their customers—

Loren Feldman:
How so?

Laura Zander:
You’re talking about a kind of working class road trip, Americana. I would assume—and Stephanie, please correct me—people are put off by corporate America. They’re put off by shiny objects. You want it to be real and a little down and dirty and a little flawed, because otherwise you just look at it and you feel like crap about yourself. So, anyway…

Stephanie Stuckey:
That makes sense.

Laura Zander:
I get the capacity thing. And that makes sense to me, Dana—in terms of, if you’re doing ad buys, and that’s a big part of your strategy, that totally makes sense to have somebody outside. It also happens that I really enjoy marketing, and that is an area of learning that I am digging into that just excites me. But it sounds—Stephanie—to me like you’re the same way and that you’ve got a brand. And that’s what we have always focused on.

We’re not as focused on creating non-appointment walk-ins or foot traffic. We have been focused less on direct ROI stuff and more brand-building, getting the word out there, causing some noise, creating some noise, and in some ways, kind of just saturating the market so that people in our industry—in your example, if they’re going to go on a road trip, there’s no way they can’t know about Stuckey’s, because you pop up everywhere.

Dana White:
But aren’t I doing the same thing, though? When I’m listening to you, I’m like, “No, Laura, I want to do that, too.” Right? I want women to say to themselves, “If I have to get my hair done today, I’m going to Paralee Boyd.”

Laura Zander:
Yeah, I am going to venture… I would think that hair is just slightly different, in that you do want your hair to be perfect.

Dana White:
It’s not touching everybody. I have a niche market.

Laura Zander:
You do have a niche, and I mean, yes, we want the pecan roll to be perfect. I don’t want to get salmonella or get sick because of something. So there’s that on the food. And yes, I want my yarn to be good. But when it comes to beauty, beauty needs to be clean, in my mind. I don’t want to see a down-and-dirty salon ad.

I want to know that the tools are clean. I want to know that when I come out of there, my hair is gonna look like frickin’… I don’t know, somebody amazing. Lady Gaga. I would say that, in your situation, you might need it to be a little cleaner, and you might need it to be a little more professional and slick than Stephanie and I.

But again, that’s just my gut kind of intuition as a consumer. I think Stephanie could—and I know you know this, and you’re obviously very intelligent and super way more accomplished than I’ll ever be…

Stephanie Stuckey:
Doubt it!

Loren Feldman:
Stephanie, you’ll learn that Laura’s always talking down her business, despite having a very successful, impressive business.

Laura Zander:
Yeah, yeah, yeah. If I were doing that well, I wouldn’t be so stressed out all the time. Stephanie, if you need a succession plan—and I’m serious, like board of directors, whatever—you have such a freaking goldmine. And I know, you know this, and that’s why you made this move…

Loren Feldman:
She has a huge following on LinkedIn, to that point.

Laura Zander:
My gosh, like the Americana, the nostalgia. I’m reading Ready Player One with my son right now, and it’s all about the 80’s and going back, and we’re trying to capture this innocence. You’ve got my generation. I’m 46, and I grew up going to Stuckey’s. That was the highlight of the trip—didn’t matter where you went. And to be able to capture that…

Stephanie Stuckey:
It’s been fun. And it’s a great point, Loren, about LinkedIn. When I first started, I was posting on LinkedIn once a week. I was posting on Facebook daily, Twitter daily, Instagram daily. I quickly learned that LinkedIn is where I’m having the most interaction, and for me interaction is not just a thumbs up.

Loren Feldman:
That’s so surprising. I don’t think of LinkedIn that way. How do you explain that?

Dana White:
Oh, no, that’s you. Sorry, if I can just interject, my marketing team is all over LinkedIn. FYI: they said, “Dana, that’s a huge market for you.”

Stephanie Stuckey:
LinkedIn was the biggest surprise. I get so much engagement on LinkedIn. It’s the comments. And it’s not just “Well done” or “Kudos,” “I like that.” It’s “I really like this because…”

Today, for example, I can’t afford marketing research, so I’m deciding between two billboard designs, and I was really headset on one billboard design. And the owner of the store wants another billboard design. And I’m like, “All right, I’m just gonna put this up on LinkedIn. I’m going to ask people for their feedback, and everyone’s going to agree with me. And then I’m going to go show this to the store owner and say, ‘All right, see, I’m right.’”

Well, I posted it, I said, “I want your feedback.” I’ve already gotten a lot of feedback, and it’s been mixed. A lot of people like the way he likes the billboard. That’s just one example. But the feedback I’m getting is not just, “I like the top one.” It’s, “I like the top one because the logo stands out more.”

Laura Zander:
God, what a great way to grow this brand by having your community involved in all of these decisions.

Dana White:
This is exciting.

Stephanie Stuckey:
And I’m getting free consulting. Oh, this is my favorite: I put up display concepts. I’ve been working on this display. Because we’re so small, and we have limited budget, and we don’t own our own stores, part of my growth strategy is we get retail partners that sell our product, but they don’t pay us a franchise, like an Ace Hardware. So I’m working on these displays that look like a mini-Stuckey’s store with a blue roof and a little Stuckey’s sign. You get the experience of a road trip from the display, even though you may be at your local Ace Hardware store.

I got the inspiration for this display, shamelessly, from a Krispy Kreme display that I’d taken a photo of, and I showed it to this guy who makes displays. I was like, “This is my inspiration. Can you mock up something?” And so I had a prototype, and I put the prototype on LinkedIn. I said, “Can you all give me feedback? What do you think of this?” Got tons of great comments. This one guy messaged me and said, “I really like this. I have some valuable feedback. I’d love to have a phone call with you. It looks a lot like the display that I created for Krispy Kreme when I was their marketing director.” And he showed me a photo, and I was like, “Busted.” He’s now helping me, by the way.

Loren Feldman:
That’s great.

Stephanie Stuckey:
Yeah, at a very reasonable rate, because he said, “I love your brand.” He’s no longer working for Krispy Kreme. He just took time off for family reasons, and he’s like, “This is a fun project, I’m interested in helping you,” and he’s amazing. And I found that through LinkedIn—through a LinkedIn comment. I didn’t even say I was hiring.

Laura Zander:
Do you enjoy building these displays and designing or helping design and lead the billboard? Is this fun for you?

Stephanie Stuckey:
Well, I’m doing it more out of necessity. No, I don’t have the capacity to do all of this. Our exec team meetings are four people. We don’t necessarily have those layers of processes and structure that a big firm has. But that doesn’t mean that we don’t need more structure and more processes. And so, there’s some learning that can really help inform how we run things at Stuckey’s.

We were a really big corporation at one point with a thousand employees, so I’ve been pulling through our archives and finding old materials and actually, some of our paperwork is pretty helpful in how Stuckey’s had been run, and some of it I’m saving. I’m like, “Okay, well, when we really grow the brand some more, I’m going to pull this old document out, and this is a good org chart for a hundred people.”

Loren Feldman:
I see a Stuckey’s museum coming, Stephanie.

Laura Zander:
Yeahhhh!

Dana White:
Oh, that would be outstanding. A Stuckey’s museum! Wow.

Stephanie Stuckey:
I collect a ton of Stuckey’s archival materials. I am the number one Stuckey’s buyer on eBay. I shouldn’t say what my eBay tag is. I think I’m outed. They definitely start raising the rates when I’m bidding. But I’ve collected a ton of stuff, and I live in a duplex. Half of my house I rent out on Airbnb, and I’ve Stuckeyed it up, and it’s full of Stuckey’s memorabilia. I actually advertise it as “Take a Stuckey’s stop.” Every room has Stuckeye’s stuff on the wall, Stuckey’s pillows, Stuckeye’s old candy boxes decorating the shelves.

Loren Feldman:
You need a museum.

Dana White:
Yeah, that would be outstanding.

Stephanie Stuckey:
It fills up a two-bedroom house right now—a two-bedroom, two-bath house with old Stuckey’s signs and paintings filling the entire place.

Loren Feldman:
Guys, this has been great. I have a feeling we could talk all day, but I gotta let you go. I have one last question: Will each of you commit to sharing this podcast [episode] when I publish it on Tuesday on LinkedIn?

Dana White:
Absolutely.

Dana White:
I’d be more than happy to share with my 100 followers. [Laughter]

Stephanie Stuckey:
Exactly, but that brings two more followers. And the other thing is, I try when I share things not to just hit the share button, but to have a teaser to say, “We had a fabulous discussion about marketing today.” Or, “We talked about how important it is to network and look at these resources.” Or, “What’s a reasonable budget for a marketing firm? And what should you take into account when you’re looking to hire a marketing firm, if you’re a small business?”

Loren Feldman:
I’m writing it all down. My thanks to Stephanie Stuckey, Dana White, and Laura Zander. As always, thank you all for sharing. This was great.

Episode 45: I Will Be Here

This week, Paul Downs and Jay Goltz talk about their New Year’s resolutions. Here’s Paul’s: “My New Year's resolution is that we will be open on December 31st, 2021. And I don't know whether I'll have the same number of employees, but we will be open. I will be here.” And here’s Jay’s: “My New Year's resolution is: I'm not gonna do anything stupid this year. So far, so good.” Paul and Jay also talk about Paul’s disappearing backlog, each of their plans for PPP Round II, Jay’s efforts to lure one of his sons into his business, and—responding to a listener question—how they handle business and personal expenses. “I think we have to stop recording right here,” says Paul.

Guests:

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

Paul Downs is founder of Paul Downs Cabinetmakers.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Paul Downs: “My New Year’s resolution is that we will be open on December 31st, 2021. And I don’t know whether I’ll have the same number of employees, but we will be open. I will be here.”

Paul Downs: “Everybody’s like, ‘Well, the vaccine’s here,’ and that’s great. But if you look at the case counts, they’re still going up a lot.”

Jay Goltz: “I’m very conscious of the fact that nobody wants the boss’ kid coming in and questioning: ‘What are you up to?’”

Jay Goltz: “My New Year’s resolution is: I’m not gonna do anything stupid this year. So far, so good.”

Full Episode Transcript:

Loren Feldman:
Welcome, Paul and Jay. Paul, this is the first time we’ve spoken to you this year. How are you doing?

Paul Downs:
I’m doing okay. I think that long-time listeners will recognize a pattern in which I’ve predicted imminent doom for my company every time I’ve been on since May, and I have a feeling that we’re actually a little bit closer to that right now—mostly because, for the first time in months, our backlog has shrunk below seven weeks. That’s kind of a danger area. If we have a backlog that’s less than, say, four weeks of work lined up, it actually becomes very difficult to operate.

It’s not unusual for us to see a slowdown in income, in sales, at the end of a year and at the very beginning of a new year, because it seems like the world takes their attention away from the concept—and this is really hard to believe, but it’s true—they stop thinking about custom conference tables for a number of weeks at the end of December. And it really takes them a little while to get that going again. Then, usually, we see at the end of January that the world is placing the proper amount of weight to the concept of buying a custom conference table, and then we’re back up and running.

Every year we go through this, and I kind of sweat out whether the orders are going to come in and where they’re coming from. Last year, we entered the year with about an 18-week backlog, so that if we knocked a few weeks off that, that’s fine. But entering the year with a seven-week backlog, knocking three weeks off of that by the end of the month, that would be bad.

Jay Goltz:
Wait, can you walk us through why, if it gets down to four, why is it a problem if it did get down to four, but then it went back up? Why is it a problem, unless it hits zero?

Paul Downs:
Well, there are a couple of ways to answer that. The first thing is, it’s an indication that sales are collapsing, so that’s absolutely a red flag right there. Second of all, the process to design and build is somewhat lengthy, in that we have to engineer the pieces we build and then we have to show the client, “Hey, this is what we’re about to make for you.” We want to make sure that we’ve got the right woods and the right stains and everything has been approved. There’s usually a several week period during which we’re getting approvals from a client.

Jay Goltz:
All right.

Paul Downs:
Between those two things, a shrinking backlog is bad, and then the bright line is about four weeks.

Loren Feldman:
Are there any other metrics that you look at?

Paul Downs:
Yes, I look at hundreds of metrics. I’m Mr. Metrics. What we saw last last year was that the overall number of calls that we got over the course of the whole year was down about 24 percent. In 2019, we did 1,100 calls and emails, and last year was 840. And the last time we had 840 was before 2012. We’ve worked and worked and worked to grow the number of leads, and then it utterly collapsed.

Jay Goltz:
I’m gonna start calling you a couple times a week, just so we can help with that number.

Paul Downs:
Well, the calls have to turn into sales, too.

Jay Goltz:
Oh, oh.

Loren Feldman:
Jay, if you want to help, there is a way to help.

Jay Goltz:
I think that custom-made conference tables are important, and I think that civilization is only skin-deep. And then I just think that if we stop buying custom-made conference tables, it is the beginning of the end of civilization as we know it.

Paul Downs:
A lot of civilization does happen around a conference table.

Jay Goltz:
Absolutely.

Loren Feldman:
Paul, I was thinking that you were going to tell us that things were looking up, in part, because I’ve read about other industries, like travel, where people are seeing the vaccines come online and starting to plan ahead. With a purchase that takes time, like buying a custom-built table, I thought maybe people would be planning for the summer or beyond at this point. But you’re not seeing that?

Paul Downs:
It’s really hard to tell because the normal pattern is that you see some kind of collapse of inquiries at the end of December anyway. We are booking new calls. As a matter of fact, the rate at which we’re booking just for these first two weeks of the year is pretty healthy, but it’s not enough data to really say everything’s okay. The reality is, there are a lot of people who are not back at the office in offices that may or may not be opening anytime soon. I think that a year from now, offices will be open. If we make it through this year, we’ll probably be okay.

Jay Goltz:
I think it’s still early. I do think you’ll be okay, but it is a little early. People are not planning on getting back to the office until June, July, August. I know it’s frustrating and scary, but I do think the cavalry is coming. It’s just a little early.

Paul Downs:
Well, I hope you’re right. I’m actually very pleased that Congress passed another round of PPP, because it looks like we qualify for it—although there are still a lot of questions about some of the criteria, like the 25-percent drop in a quarter. The way the law is written, it says “in a quarter” with a small “Q,” and that doesn’t clarify for me whether it means any three-month period in the year, because any three months of the year is a quarter of the year.

Loren Feldman:
I’ve read that it doesn’t, Paul. I’ve read that it’s gotta be first quarter, second quarter.

Paul Downs:
Okay. We appear to qualify in any way you count it. Then I have to think about, “Well, what do we do to prove our revenues over the course of a month?” I looked through everything that we file with the government, and there’s only one filing we make that says anything about our revenues, other than the year-end tax statements. Those aren’t broken down by quarter. So we’re going on sales tax filings that we do to the state of Pennsylvania, and we’re able to cross that bar of having that 25-percent drop. I’m hoping we qualify for that and that money will arrive sometime around the same time I run out of work—if we run out of work—and I’ll be able to buy some breathing room that way.

Loren Feldman:
Do you know how the amount is calculated? Do you expect to get the same amount you got last time?

Paul Downs:
If they’re basing the calculation on 2019, which is what we did the first time, I presume you’d end up with the same number. If we base it on 2020, I didn’t really have much change in staff over the course of the year, so I’m guessing it’s going to be pretty close to the same number, which in my case was about $347,000. It’s enough. It’s enough. That’s about as much as we spent in all ways in a normal month. That would give me a couple of months, probably eight weeks, of just paying people while we can reload our backlog.

We’ll see. I really don’t know what will happen. Everybody’s like, “Well, the vaccine’s here,” and that’s great. But if you look at the case counts, they’re still going up a lot. I’m pessimistic in certain ways, and I feel very much that this could go either way for the next six months.

Loren Feldman:
Yeah, I talked to a business owner yesterday who had to make a call on office space that hasn’t been used since March, and he decided to give up his space, put everything in storage, and not plan on going back into the office any time this year. I’m sure that has an impact on you.

Paul Downs:
I think it does. We’re still seeing projects—big projects for big clients. I don’t know whether I’m supposed to say this, but we’re working on getting the job for the new Federal Reserve Bank meeting room in Washington. [We’ve done] that level of client in the past—World Bank and what have you. That’s the kind of governmental or giant corporate institution where they just don’t anticipate that they’re not going to be having meetings. We just got an inquiry from a very large hedge fund.

I think that the big, big money clients are going to continue with that idea. But there are going to be a bunch of smaller companies or people who are just on the fence. In a different year, they would have gone forward with it. In this next year, I think they maybe won’t. That does move the needle on my business.

Jay Goltz:
One question is: Have you considered slowing down your production so that you don’t use up your backlog—so that you tell your employees, “Listen, for the sake of us long-term, we’re gonna start working four days a week and at least stretch out the work so that you can get another month or two out of it.”

Paul Downs:
That’s a possibility. The biggest difficulty is that the company is 23 people. Half of them work on the shop floor, and they’re fairly easy to say, “Show up or don’t show up,” and you can dial up and down their numbers. The rest of the staff are salaried, highly-skilled employees. It’s harder to turn them on and off. I don’t want to make any permanent changes in staffing at the moment, and given that the government is supposedly going to give me money in order to pay their wages, I would try to pay people, even if we had nothing to do. But in reality, with a factory, you always want to run it as fast as you can so that you’re getting the jobs done as quickly as possible, so that you’re working at the best possible rate. I’ve found in the past that when we slow down, it means everything gets so inefficient, and people get discouraged.

Jay Goltz:
No, I hear you. I’ve got the same thing. But you’re thinking about it at least.

Paul Downs:
If our business declined by 50 percent, which I don’t think it will, it would be a $2 million business. I had a $2 billion business for many years, so I know how many people that should be and I know how much money I make out of it. I’ve sort of been through that phase in the same shop, and I know what it would look like. I just don’t want to do it if we can possibly avoid it.

Jay Goltz:
No, I can understand that. You’re going through triage, which makes sense.

Paul Downs:
I have a plan in place to dial back, and the order in which I would lay people off, and all of that. That’s very unpleasant to think about, but if we get there, we get there. The backlog acts as a shock absorber on that so that we started off 2020 with 16-17 weeks, and we ended it with seven weeks. We were able to run the shop more or less at full speed. Our accrued revenues weren’t much different in 2020 than they were in 2019. The cash revenues were a little lower, and what was really worrying was the number of new contracts, because that did drop, but you see that show up just in the loss of backlog more than anything else.

Loren Feldman:
Do you know what the timeline is for you and the PPP? Do you know when you can file and when you can…

Paul Downs:
I don’t. My bank is a large bank, and they sent an email last week saying they’re getting the second round application process ready. I currently am in the middle of the forgiveness application and I haven’t done what I need to to have it sent to the SBA because I was really unsure about whether you want to have that cleared out before you apply for the second round or not. I just don’t know the answer to that.

My bank is big and ponderous, and it took them a while to get the initial application portal up, and then it took them a long while to get the forgiveness application up on their website. Then I tried to do that process—I think I did it over Thanksgiving weekend—and they asked for just this huge amount of documentation. I think I had to upload something like 65 different PDFs. I took reports I got out of paychecks and put those numbers into the portal and then hit submit, blah, blah, blah, blah, blah.

Then they started coming back and kind of arguing with me about the numbers and what was acceptable. “Oh, we’re not going to count your electricity costs, because your landlord sent you a bill for that because they pay the main account.” It’s just a lot of nonsense. We got all tangled up in it, and it never got resolved because then when the second PPP round came up, it was like, “Oh, this might actually happen.” I didn’t know what to do. So I was just like, “Well, I’m just not going to do anything. I’m going to wait.”

Loren Feldman:
Paul, you don’t have any reason to believe that not having applied for forgiveness would get in the way of your getting a round two loan, do you?

Paul Downs:
No, but we’re in a world where—

Loren Feldman:
Anything’s possible.

Paul Downs:
The PPP thing is just so off the likely experience of the United States business owner that I’m worried that… I’m not so worried that Congress wouldn’t give out the money, but I am worried that my bank will balk in some weird way. So I suppose I could go with a different bank, but you know, they’re my bank. I kind of would rather stick with them if I can.

Loren Feldman:
Jay, are you thinking about applying for another PPP [loan]?

Jay Goltz:
I don’t think so. Luckily, I’m on the other end of the spectrum here. My customers are mostly consumers at home, and we’ve been doing okay. I’m in a way better situation than I thought I’d be at this point, so I don’t think I need the money. I certainly would like to see it go to people like Paul and the restaurant owners. I probably could get some, but I don’t think I’m gonna mess. The first round certainly was critical, so I believe we’re getting total forgiveness, but I don’t think I’m going for the second round.

Loren Feldman:
But you have had some dealings with banks lately, haven’t you?

Jay Goltz:
You know once in a while you go to clean up your old emails? I realized I’ve been dealing with this since April. Nine months later, I’ve been trying to find a new bank to take out my old bank, which is a big bank that bought out my little bank. I’m right back to where I never wanted to be in the first place—dealing with the big bank.

I’m trying to find a new bank to take over the mortgage on a building and give me some extra cash for another building that I don’t have a mortgage on. I have literally—I have kept track of this—I have talked to seven banks. I have talked to three more [where] the deal was too big, so I’m not even going to count those. I’ve talked to seven different banks, and they’re all hiding under the table. As soon as they hear “retail,” it’s like you’re saying, “I’ve got leprosy. Can I come over for lunch?”

These are banks, some of them I’ve known. One of them is my ex-banker. He’s at a bank near my house. He actually said to me, “Yeah, we’re not doing any loans to retailers, or anyone in hospitality,” which I find so incredibly offensive. Like oh, you’re in a category, so you just aren’t going to give any money to them? That’s where the banks are at.

I do have two, and I’ve got a third one who said he was definitely interested. I’ve had two claiming they’re going to give me an offer. One came through yesterday. I’m waiting for the details, but he said he got it cleared by everybody. The other one I’m still waiting to hear from, so I do believe I’m gonna pull it off. I’ve always felt confident I would, because—

Loren Feldman:
I know that, Jay, because you’ve told me that every week since, I think, March.

Jay Goltz:
I know. You know that old phrase “bankers’ hours”? Well, now I think it’s like “bankers’ months.” A month goes by, and it’s like, “Oh, I’ve been traveling.” Oh, okay. “Oh, it’s a holiday.” Okay. I mean, weeks go by and every week I think, “Wow, for sure I’ll hear [back].” They’re on their own schedule. But one absolutely committed yesterday that he got it approved by everybody, and he’s gonna send me a term sheet. And the other one, we’re still waiting to hear from.

Loren Feldman:
Wait, when you say “absolutely committed,” you mean he told you on the phone—

Jay Goltz:
Phone?! No one’s talking on the phone. They’re too busy to talk on the phone. I get emails—an email that said he got it cleared by the top loan officer. If he can get it cleared by the top credit officer—and I thought I would have loved if he didn’t say “if.” I wish he would have said, “I need to get it…”

Loren Feldman:
So “absolutely committed” may not be exactly right?

Jay Goltz:
Now he got the top credit guy to sign off. So he said, “I’ve gotten green lights from everyone. They want to do the loan.” He’s sending me the rate sheet, or whatever it’s called. I’m waiting for that, but I don’t think it’s going to be a problem. I do believe I got a loan. I’ll be able to buy out the other bank and go back to where I want it to be, which is be at a smaller bank. I believe I’ve got it covered. Then the other bank is still, I think, probably going to give me a proposal. I believe I’ve gotten through this. Part of it is—

Loren Feldman:
The whole point of this, Jay, was—you’ve talked about this before—you’ve told us that you really think you should have done this before the crisis hit.

Jay Goltz:
There’s no question I absolutely should have done it.

Loren Feldman:
But your goal is—it’s not that you need the money today. You’d like to have the security of having available cash.

Jay Goltz:
Absolutely. I wasn’t paying enough attention to—you know the phrase “dry powder”? “Oh, I’ve got dry powder. I don’t have a mortgage on that building.” That was stupid. A paid-off building is not dry powder. It’s dry powder in a keg that’s nailed shut and you don’t have a hammer. You can’t get to the money. The key is, cash is cash. I want to take some money out and then just go stick it in an account and know it’s there.

The fact of the matter is, though, in the nine months since I’ve been trying to do this, I’m in way better shape now. I’ve proven to them business is fine. I’ve paid off a lot of loans. I’m in good shape. Now, if I were in the same shape I was nine months ago, I don’t know if anybody would go near me. But I think—not think—I’m going to pull this off. I’m going to take some money out and then be settled. I’m not getting aggressive. I’m not taking out an 80-percent loan. I’m only taking out a 60-percent mortgage, which is very conservative. The banks like that. I’ll have some cash sitting there on the sidelines if I need it.

Loren Feldman:
Dry powder.

Jay Goltz:
Cash is dry powder. Anything else is not dry powder. A paid-off building is not dry powder. That’s the lesson I’ve learned [for] myself, and I should have known better. So I should be in good shape.

Loren Feldman:
Jay, give us another quick update. You had talked to us about your succession plans and your attempts to lure a son into the business. What’s the status?

Jay Goltz:
Well, I have three sons, and I was concerned for a while that maybe I’d run out of kids to do this. I have been having serious talks with my eight-year-old grandson, which have been going well. He’s interested. But that’s too far off. So my third son, who has been doing real estate, he decided this is a good opportunity, and he’s very into it. He has now come in full-time. I’m starting to have him get familiar with—not operationally, not being a manager anywhere—but start to understand the finances and the pricing and the costs and the electric bill and the buildings, and he’s taking over the buildings. I’m starting to indoctrinate him into the whole thing, which is going to take years, but I think this will be good.

I talked to all the managers and explained to them that I’m gonna be 65 years old in April, and I need to do something. Well, you know what? I want to be careful with that word. It’s not that I “need” to do something. It’s that I want to do something because, as I’ve said before, if I drop dead tomorrow—God forbid—there’s plenty of insurance. My family will be fine. But I do want to do better than that. I’ve got 120 employees. I want to try to keep the company going as well as possible, and it would be best if one of my kids had a handle on this whole thing. He’s here. The other one is here, also, but he’s been dealing with the internet for the home store. I think between the two of them, I should be in good shape.

Paul Downs:
I have a question about this, which is that this idea that the son takes over the family business goes back to caveman times, and it seems very counter in a lot of ways to how you would evaluate who you want to do what jobs in a business. In other words, if you didn’t know anybody’s last name, or couldn’t see the faces of all the people who work for you, which one would you choose to be your successor, if any of them? And then you put the kid in that position. My question, I guess, is: Do the other employees just kind of shrug? Like, that’s the way it is, and that’s the way it always has been? Or do they have in their mind a more egalitarian model of how leadership acts and how succession should be managed?

Jay Goltz:
That’s a fair question, and I have two answers. One is, he’s not operationally taking over the company. He’s not going to become the president. He’s going to be an owner and understand the finances just like a board of directors or an owner of a company would. I don’t know that any of the people who work for me really would be any more qualified at that level, but even if they were, the fact is, the family owns this company. So it is what it is.

Let’s say, theoretically, you had someone who was perfectly capable of running everything. They don’t own the company, and they could just decide to leave one day, and then where are you? It is the nature of a family business. And then if anyone listening is saying, “Oh, well, why not just bring somebody in?” I’m not planning on retiring anytime soon, so the idea of bringing in a third party, what do I tell them? “Oh, you’ll take over when I drop dead.” That could be tomorrow, that could be in 20 years. That’s not a viable option, so I believe this is the most viable, best option.

The other thing is, they’ve done lots of studies. They say most people who sell their companies regret it. I have absolutely no desire to sell this company, so I’m not. That’s off the table. I think I’m going to be working for another 20 years. Who knows? This is the best of all the options. My kid is smart, and he’s got a good education. I believe he’s fully capable of understanding and overseeing things.

So those are the three options: Sell it? Not doing it. Bring somebody else in? That would be a disaster. And decide who’s going to run the company here? Well, there are people who are running the company. That’s not going to change. It’s about the oversight of the company.

Loren Feldman:
Have you done anything to kind of smooth his path? It’s easy to imagine people who’ve been working with you for years, or even decades, feeling a little awkward about having your kid come in and start looking over their shoulder and asking questions. What’s that process been like?

Jay Goltz:
Yes. Well, I’ve typed a document telling everyone, “This is good for two reasons.” There are lots of things that I don’t pay enough attention to that he will be able to. Like, we haven’t redone our pricing in years, down to all my pricing formulas are 30 years old. I have not spent enough time on that. There are some things he can do some catch-up on.

Loren Feldman:
You haven’t redone your pricing in years?

Jay Goltz:
No, I redo the pricing, but it hasn’t been done from ground level, like “Let’s do time studies.” It hasn’t been done thoroughly enough from the cost to the price, so there are pricing issues. There are inventory issues. We’ve never spent enough time—I’ve never spent enough time—coming up with inventory levels and reorder points and all.

There’s some stuff that he can fine-tune in the company that I think will have some tremendous benefit. That’s the first half, and the second half is if I disappeared one day. It’s for everyone’s best interest that he’s here because—listen, I got COVID. I had no symptoms whatsoever. I just happened to take a test as an employee was near me. They got it. I was perfectly fine. But it did make me think, “What would happen if I disappeared tomorrow?” and one of my employees actually said to me he was concerned about that.

It’s in everyone’s best interest that there’s a backup plan if Jay disappears one day. I told everyone, “Don’t take anything personally.” And certainly I’ve been coaching him: Don’t go making any assumptions. Just ask some questions. So yeah, I am smoothing the way or navigating or whatever word you want to say. I’m very conscious of the fact that nobody wants the boss’ kid coming in and questioning: “What are you up to?” I am working to try to keep that drama-free or problem-free.

Loren Feldman:
Okay, I got a question from a reader that I want to run by both of you. It actually comes from a woman who owns a business in Brooklyn called Citibin. Her name is Liz Picarazzi. Her question is, she’s curious how you guys handle expenses that are partially personal, like car, phone, or travel. How do you decide what to put on the business?

Jay Goltz:
Personally or for employees?

Loren Feldman:
For you personally.

Paul Downs:
I think we have to stop recording right here.

Jay Goltz:
All right, well, I’ll say something that can be recorded. I made a decision many, many years ago that I want to know that, if I get audited, I can think, “No problem, squeaky clean.” I don’t mess around with anything. Like the car: I have a company car. We charge me for some personal mileage on it every year at the end of the year, and I don’t mess around with anything. If it’s a business expense, I put it on the business. I don’t even go out to lunch, and if I go out to lunch, I pay for it personally. I don’t play games with that stuff. I don’t think it’s worth the anxiety. I don’t think it’s worth it.

Loren Feldman:
Do you know where the line is drawn? I think it is possible to put some of these personal expenses on the business without breaking the law. Isn’t that right?

Jay Goltz:
Not much. It’s pretty cut and dried. These days, if you go to lunch locally… like, if you go out of town, it’s 100-percent deductible. If you take someone to lunch locally, it’s only 50 percent deductible. I don’t even do that. I don’t go to lunch that often. It’s just not worth it. I can’t think of any expense that I think, “Oh, is this personal? Or is this business?” It’s pretty black and white in my mind. If I go to a trade show, I write it off. If I go on vacation, it’s a vacation. I don’t think there are many gray areas.

Loren Feldman:
Paul?

Paul Downs:
Hmmm.

Jay Goltz:
He wants to call his lawyer before he answers.

Paul Downs:
No, I think that I don’t do exactly what Jay does, and I don’t do anything egregious. There is a gray area on certain expenses. You’re driving to Washington to meet a client, and you want to stop and get a burger on the way. Which is it?

Jay Goltz:
Well, that’s clearly a business expense. How’s that gray? You’re going to a client. How is that gray?

Paul Downs:
Okay.

Jay Goltz:
Give me a better one.

Paul Downs:
Let me just say that my approach has been not to get caught up in every penny in every possible situation and just take the time to put them in one bucket or another and document it so that there’s a set of things that happen at the boundary that could go either way. I’ve got a bunch of credit cards in my pocket, and in general, I try to only use the right one for the right purchase. But there are times when you do it differently. And it goes both ways, which I think is really a critical part of it, which is that I may have an employee walk into my office: “Oh, I need something.” That could be a business expense or not. I just pull it out of my wallet and give it to him.

I think what I want to say about it is that there’s actually very wide discretion given to business owners to take action or not take action in a really wide range of activities. This is one good example. You get to run your business the way you want, and the reality is is that there aren’t that many people who are going to come snooping around, as long as it’s not egregious. Just the sheer math and the likelihood of getting audited and this becoming an issue is in the favor of taking whatever actions you want. I think that I’ve heard of cases that are really egregious—stuff that I would never do—that people do for years. People who have boats. Some guy who wrote off a new motor for his boat as an R&D expense and told the Vistage group about it, and we all chuckled about it. You know, a golf course…

Jay Goltz:
That one I do know about because I once said to a business broker guy, he said, “When we do our statements, we take out stuff like golf club memberships.” And I go, “Wait a second, that’s not deductible.” He goes, “Oh, people find ways of burying it.” Okay. I just think that that’s crazy. And I think if you have a bunch of people in your accounting office, they all know you’re… I just think it’s bad business.

Paul Downs:
But Jay, the number of people who are currently serving federal time for writing off or trying to write off their golf club membership compared to the number of people who actually do it is probably less than a 10th of 1 percent.

Jay Goltz:
No argument there. But my argument is simply, when the notice comes from the IRS that you’re getting audited, the question is: Does it add to your anxiety level? And my answer is: Yeah. Listen, I have an accounting degree. I remember the professor saying, “If you’re going to mess around in your taxes, mess with the expenses, not with the gross. You go to jail when you mess with your receipts, not with expenses. They’ll just disallow it.” Okay. I still can’t think of one expense that I’m just pushing through. I just don’t do it.

Loren Feldman:
Who bought your phone? Your business or you?

Jay Goltz:
Oh, my business, but I use the phone for business all day long.

Paul Downs:
Do you take a personal call on it? That’s a pretty good example.

Jay Goltz:
Except that doesn’t add to the expense. There’s no incremental expense to taking a personal call on it.

Paul Downs:
If you wanted to get down to it, the percentage of minutes you use doing personal conversations should be prorated against the monthly costs of the phone and the deduction altered, right?

Loren Feldman:
I wonder how many people are doing that.

Paul Downs:
Yeah, like zero. Like who would do that? It’s stupid. It’s a waste of time, particularly given the expected value of the time to manage that compared to the expected cost: the likelihood that you will get audited and that that will come up. There’s a lot of stuff like that. It just ain’t gonna happen. And if it does, if you were in that IRS office, you’d be like, “Eh, you got me. Here’s a check.”

Jay Goltz:
Let’s get back to your friend with the boat motor. I think that’s stupid. If he’s in Vistage, I have to believe it’s a pretty big company, which means he’s got six people in the accounting office. Why in the world would he want to let his employees see, “Oh, look it, I bought a motor for my boat.” I don’t think it’s smart.

Paul Downs:
First of all, I don’t remember whether he was talking about himself or somebody he knew. I think that you could draw examples from the current political situation that there are a lot of people who admire someone who gets away with stuff.

Jay Goltz:
Wow.

Paul Downs:
And so, yeah, there’s a group of employees who would be appalled if you do things like that. And there’s another group of employees who are like, “Yeah, that’s living the life, man.” I don’t think it’s a given that everybody on Earth thinks that hoodwinking the government out of a few pennies of taxes is actually a bad thing. I wouldn’t necessarily do it myself, but I’m just telling you, this is the reality.

Jay Goltz:
I don’t think there’s anything great about having people working in your accounting office who think it’s a great thing that the boss is cheating on his taxes. I think that they’re thinking, “Oh, look at what he’s getting away with. I’m paying my taxes.” I don’t think there’s a whole lot of people who would applaud the boss for doing that.

Paul Downs:
You’re making a lot of assumptions about the people. I mean, how many people would—

Jay Goltz:
All it would take is one.

Paul Downs:
That’s all true. But I think that there’s a range of reactions to government looking into people—like all those employees, do they ever pay the lawn boy cash or the babysitter cash, as opposed to withholding Social Security taxes for them? This is prevalent throughout all human organizations, every government, every person in the world for all time. There’s going to be a certain amount of fiddling at the margins. That’s the way it is. I think that when you see how it can take over a society, like Nigeria or something, yeah, it’s really bad. But the idea that you can eliminate it is false, too.

Loren Feldman:
Well, you can eliminate it in your own business.

Paul Downs:
You can eliminate it in your own business, and Jay, I congratulate you for eliminating it in your own business.

Jay Goltz:
It’s not worthy of being congratulated. I’m answering your question. Personally, I don’t think it’s worth screwing around, A) just in case you get audited, and B) I don’t want to set that tone for my employees. I’m giving her an answer from my perspective. I don’t do it. You’re right. Okay, the phone thing. Other than that, maybe there’s another one or two. I go to Costco when I buy paper towels for my house, I put it on my charge card. When I buy it for the company, I stick it on the company’s charge card. That’s my answer.

Paul Downs:
I had a conversation when I was very young with a client of mine who worked for a major financial institution, and he recognized I knew nothing about business. He said, “Well, do you have a company credit card?” And it’s like, “No.” I didn’t even have a company bank account at that point. He helped me get it all set up, and then he said, “Listen kid, there are certain things that you can charge on the company card, like gas for your car, and no one will ever ask a question about it. It just won’t happen.” He told me four or five things. And I was like, “Wow, that’s really helpful. Could you give me a list of all the stuff I could do like that?” Because I was 24 years old. And he’s like, “What, are you crazy? Of course I can’t.” But there’s the answer.
There are things that some people will do, and there’s things that some people won’t do. It’s probably not wise to talk about it, but a really large number of business owners are doing something, somewhere. The idea that you could be 100 percent in compliance would require a ton of just effort in recording and managing it that people won’t do.

Jay Goltz:
I don’t disagree with that. I’m talking 99 percent, but I don’t disagree with that.

Paul Downs:
I think that if you’ve managed to get to 98 percent in your own business, you’re doing fine. I wouldn’t sweat the other 2 percent.

Loren Feldman:
I’ve gotta get you guys out of here. I have one last question for you. We are taping this on January 13th. I’m curious whether either of you made any New Year’s resolutions and whether you’ve managed to keep them thus far. Paul?

Paul Downs:
Yeah, survive. My New Year’s resolution is that we will be open on December 31st 2021. And I don’t know whether I’ll have the same number of employees, but we will be open. I will be here, and we will be ready to get into the following year.

Loren Feldman:
Good answer. Jay?

Jay Goltz:
My New Year’s resolution is—it’s the same one every year—I’m not gonna do anything stupid this year. So far, so good. It’s only the 13th.

Loren Feldman:
How’d that work out last year?

Jay Goltz:
Not bad. This is what I told Laura last week. “You know what? The older I get, I get a little smarter. I learn from my mistakes, and it gets a little easier.” So I feel like I’m doing okay. I’m just thrilled that I’m in decent shape, because it was a scary year. I don’t feel like I’ve had any serious collateral damage. I haven’t lost any employees. I’m just happy to be in business.

Loren Feldman:
Paul Downs and Jay Goltz, thank you both. I appreciate it.

 

Episode 44: How Do I Manage My Managers?

This week, responding to a question from a listener, Jay, Dana, and Laura talk about managing people. Jay offers a four-step plan that starts with making sure you’ve hired the right manager: “Anytime you ever hear anyone complaining about their employees, it's a bad manager.” Laura talks about coming to the realization that her staff is not where she thought it was—and how that’s playing into her recent anxiety attacks: “So now, I’ve got anxiety about my anxiety.” Plus: Dana’s getting married! And Loren wants to know how you know if you have a real business.

Guests:

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

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:

Laura Zander: “So now I’ve got anxiety about my anxiety, and it’s this crazy, vicious cycle. And what is so confusing is that intellectually, consciously, there’s nothing wrong.”

Jay Goltz: “Anytime you ever hear anyone complaining about their employees, it’s a bad manager.”

Jay Goltz: “The most important part of management is hiring the right person in the first place.”

Full Episode Transcript:

Loren Feldman:
Welcome, Jay, Dana, and Laura to our first podcast taping of 2021, a year that’s already off to a rousing start. Let’s start by catching up a little bit since we did take a few weeks off. Dana, anything new with you?

Dana White:
Yes!

Loren Feldman:
Tell us!

Dana White:
After four and a half amazing years with my boyfriend, on December 24th at 11:50 something at night, he got down on one knee and asked me if I would do the honor of being his wife. I proudly said yes, and I am officially engaged.

Laura Zander:
Congratulations! Welcome to the dark side.

Jay Goltz:
And we’ve all met him, and we all like him.

Dana White:
Yes, I’m so excited. I’ve never been one of those girls who dreamt of her wedding, and like a family member asked me like within hours of being engaged, “So what are your colors?” I have no idea. And then, “When are you getting married?” I’ll get back to you. We are going to have a small ceremony, probably like 30-35 people, and then we’re going to have a brunch for those people after. And then later on that night, we’ll have a huge big reception to which all three of you are completely and totally expected and invited.

Laura Zander:
Is it gonna all be on Zoom?

Dana White:
No, but it’ll be in like 2022.

Jay Goltz:
I’m not coming until you tell me the colors though. I want to make sure I dress right.

Loren Feldman:
I am curious. Are you concerned about marriage having any impact on your business?

Dana White:
My marriage?

Loren Feldman:
Yeah.

Dana White:
Absolutely not. I think maybe we’re—

Loren Feldman:
Jay’s laughing. Why are you laughing, Jay?

Jay Goltz:
I’m just laughing about all the people who are married, who have been in business for a long time, who are thinking about whether their spouse has any effect on their business whatsoever. It kind of makes me laugh.

Dana White:
But he and I have been together for a long time.

Jay Goltz:
Oh, yes. That was a personal laughing at myself—not laughing at you.

Dana White:
He met me, and on our first date, he saw my office and my calendar, and it was full. He knows that Paralee Boyd is extremely, extremely important. And I don’t think he’d want me to be less Paralee Boyd now that I’m married. That would be weird to me. I don’t even know… oof, that’s scary to me. I know there are women who become less ambitious once they get married. I was never doing any of this to get married, so I don’t see myself changing. I think my customers… oh, man, I think my numbers might go up.

Loren Feldman:
How so? Why do you say that?

Dana White:
My business operates in a Midwestern town. I remember opening and getting the questions, “Girl, who’s your husband?” Just everybody assumed I was married and that I had someone helping me do this, and the looks on their faces when I would say, “No.” “You have a boyfriend?” “No.” “Well, who told you to do this?” I mean, those are questions that I’ve gotten. Marriage checks one of the societal boxes of this community, and it’s important to some women here that you are married.

Loren Feldman:
Do you think that’ll make people more likely to come into your shop?

Dana White:
I don’t know if it’ll make people more likely to come into my shop as it will make me an owner who they can relate to: “She’s relatable.” Where I’m at, being the age that I am and not being married, that’s, “Whoa.” It’s not New York, where it doesn’t matter. In Detroit, it matters—especially if you’re Black.

And then you’ve gotta go to the right church. You’ve gotta have the right job. You had to go to the right high school and go to the right college, which is local. A lot of times, that’s Michigan State or U of M or out of state.

Laura Zander:
That is exhausting. That sounds absolutely exhausting.

Dana White:
It is extremely exhausting, but I just now will check one of the boxes. Sadly, it matters though.

Jay Goltz:
Or not sadly. Whatever.

Loren Feldman:
It is what it is?

Jay Goltz:
It is what it is. It’s okay.

Laura Zander:
It is what it is. It’s not like they’re doing it to check the box, right?

Dana White:
Yeah, and I could care [less].

Loren Feldman:
All right, let’s keep going. Laura, how are you doing? Were you able to take a break over the holidays?

Laura Zander:
Yeah, I did take some breaks over the holidays. I’ve actually been home in Reno for three weeks now, so this is the longest stretch that I’ve been home since I think June. I actually don’t have plans to go back to Texas for at least another week or two. I’ve been taking breaks, but I’ve really struggled. My anxiety has just been through the roof.

Loren Feldman:
Why is that?

Laura Zander:
I don’t know, and that’s what’s killing me and driving me nuts. As soon as I got back from Texas the week before Christmas, I’m having trouble breathing. I’m tired, I’m exhausted. Every time I come back, I’ve got really severe allergies, so I always have this period of a couple of days where I’m just like, “Oh my God. I’ve got the Rona. I’ve got it. I must have it, and then I’ve infected everybody.” The guilt. It’s not worrying about myself as much—and I mean that sincerely—as the guilt of, “What if Doug gets it? What if blah, blah, blah?”

Then I go into this spiral of, I’m having trouble breathing, and I’m tired and exhausted. So is it allergies? Is it just genuine exhaustion because I’ve been working my butt off and traveling non-stop? Or am I sick and do I have the Rona? And so then I worry that I’m sick, which makes me more exhausted, which makes me not be able to breathe, which heightens the anxiety. So now I’ve got anxiety about my anxiety, and it’s this crazy, vicious cycle. What sucks, and what is so confusing, is that intellectually, consciously, there’s nothing wrong. There’s nothing stressing me out.

Jay Goltz:
Can we hear from the doctor now? Because I know what you speak of. You’ve been on business adrenaline—like most of us—dealing with multiple issues all year long. All of a sudden, the merry-go-round has stopped for a minute, and your adrenaline’s gone down. And now all of a sudden, you’ve got time to think about stuff. When you’re getting shot at in the foxhole, you’re just thinking about shooting and survival. All of a sudden, the shooting stopped for a minute, and now you’re thinking about, “Oh, I wonder what’s going on at home?” You’ve got a little battle fatigue. It’s been a long year with all kinds of stuff going on, and it’s been a long simmer. We’re all readjusting now.

Laura Zander:
Yeah, exactly. Finally, the other day, I’m like, “Okay, I’m gonna write down when I can’t breathe and when I can breathe.”

Jay Goltz:
And then call me.

Laura Zander:
And then I recognize, I’m like, “Okay, I’m baking a cake. Wow, I can breathe,” because I’m just kind of in the moment. I’m focused on blah, blah, blah. I’m like, “Oh, I’m doing a puzzle. I can breathe.” So it’s not that I can’t breathe. You’re right. It’s those moments of silence.

I try really hard. I meditate every day. But that’s been harder. I’ve tried to do it for years, but I’m not doing a great job at it, and that’s not working. And so I recognize that it’s the—

Loren Feldman:
What do you mean you’re not doing a great job?

Jay Goltz:
Listen to her, Loren! Listen to her. This is what she’s telling you.

Loren Feldman:
Well, I’m asking: Is it just not helping? Or do you think you’re doing something wrong when you’re meditating?

Laura Zander:
I am not finding peace as easily and as frequently as I normally would. It’s more of a struggle right now for me to sit and to just sit with myself sitting. I can feel my heart racing. I can feel the breath catching. The whole point of meditating is to kind of relax into it and to just exist, and I can’t wind down. I need to wind down, and I am not sure how to wind down knowing that, “No, I don’t need to work 40 hours a week right this second. I don’t need to be in the office every second, but I still need to be engaged a little bit.”

Jay Goltz:
You sound like someone who needs to meditate, but you’re telling us you are meditating. To what I understand, it’s not working, so maybe you need to double down on that and figure out—

Laura Zander:
Or maybe it is. Maybe I’d be in much worse shape if I wasn’t.

Jay Goltz:
Wow.

Laura Zander:
One of the things that, now at 46 years old versus at 36 years old, I now am aware that I’m having anxiety, as opposed to just having it. I’m aware that nothing is wrong, but something is wrong, and so I’m trying to fix it. That’s part of where the meditation stuff comes in. It helps me practice being aware of it. Now the trick is, “Okay, I know something’s wrong.” I know, like you said, I’ve got the battle fatigue, the adrenaline just stopped. Now, what do I do? Do you know what I mean?

Jay Goltz:
You’re brought up a very interesting difference between you and me, which is real simple. I’m 18 years older than you, and I can tell you—

Laura Zander:
And you pee standing up.

Jay Goltz:
That too, which is always important. I would say, I realize now part of the reason why I might have been talking just like you 18 years ago, you’re still getting your sea legs to the whole business thing. I realize part of this is, you’re just growing into your job still. You’re doing the self-talk of, “There’s nothing really wrong.” I’ve gotten used to doing it to myself. I’ve had to go, “Okay, there’s nothing wrong here.” So my point is, it’s going to continue to get easier for you. It is.

Laura Zander:
And I recognize how much better it is—or how much easier, I should say, it is—than it was five years ago, or 10 years ago. One of my favorite quotes recently is, “The only way to get through it is to get through it.” I’m just cutting myself some slack. I recognize objectively that I’m having either panic attacks or anxiety attacks constantly. I’ve just got to get through it. I’ve got to try to identify the things that are making it a little better and do more of those and less of the other things.
The big one for me is, I recognize that my tolerance is really low right now. I’m annoyed pretty frequently, and so I really have to be very aware of not reacting impulsively when I’m talking to people, especially because with Slack and texting, it’s so easy to just fire off an impulsive message.

I really am having to consciously stop myself and be like, “Okay, am I responding emotionally because I’m just exhausted, and so I have no patience? Or is this the right way to do it?” Which then, that takes more work too. It’s much easier to just fire off and be like, “God, you’re an idiot! What are you thinking?” But instead, I’ve gotta be like, “Good question. Have you thought of maybe looking this up yourself? There’s this thing called Google that you could type your question into, and it will give you lots of answers.”

Jay Goltz:
Stripping out the sarcasm.

Laura Zander:
Yeah, I know, I know. You know what I mean.

Jay Goltz:
Yeah, I do. I’ve been in a similar situation where the company was growing faster than my brain. It took me 20, maybe 30 years to catch up to it. That’s part of your issue, which isn’t a bad thing. This is growing pains. You just bought another company. You’re growing. You’re doing stuff. Every time you get comfortable where you’re at, you’ve grown it a little bit more. So you will catch up.

Loren Feldman:
Laura, tell us about your business. I know you said everything’s okay, but what are you concerned about? I’m sure there are things you’re concerned about.

Laura Zander:
Oh, absolutely. Some of us have a tendency to look at all the negative stuff—I’ll call it a critical view, so we’re critical thinkers. There are so many things that need to be fixed with the business that we bought in Texas. There’s still so much work to do. But I asked everybody to list out all of the great things that we accomplished this past year. We just spent Tuesday going through the 30 different things that we’re all most proud of, and how far we’ve come is pretty remarkable. It’s really, really amazing. Okay, great. We’re going to put it up on the wall so that I don’t forget, and I still have perspective.

That said, moving on to being critical. Our staff is just not where we want it to be right now. We just did end-of-year bonuses—not huge, but something—and I asked the managers to go through all 35 people and rank them on a one-to-five [basis]. Five meaning irreplaceable, we’d be dead without them. Four is really awesome, but there’s still some room for growth. Three meaning really great, but we’ll be okay if they leave. Two: shape up or ship out. And then one: they need to leave today. Out of 35 people, we had 11 ranked under a three.

Jay Goltz:
Wow.

Laura Zander:
That really shook me up, because we let 11 people go back in March. Really shook me up, which I think is part of the anxiety stuff. It’s like, we just accomplished all this stuff. We have gone over and overboard being generous this year and trying to make everybody’s lives better and blah, blah, blah, trying to make the business better. And to know that there’s still a third of the people who aren’t fully invested…

Loren Feldman:
Laura, you’ve been spending a lot of time down there, and I assume you’ve gotten to know a lot of these people. Were you surprised at some of the people on the list who were threes or below?

Laura Zander:
No, not really. I just didn’t realize, I guess I thought some of the twos… the threes are fine. We’re always gonna have threes. We’re gonna have threes, fours, and fives. Or at least that’s my goal. Jay, you may have other—

Jay Goltz:
I say, out of a 10 scale, 7, 8, 9, 10’s—and not thrilled with the sevens. I’m not sure threes are so hot out of five. That’s a six out of 10. That’s not great. I hope you will aspire to getting it to a little higher than that.

Laura Zander:
That works. But to be fair, we’re just going to start with—

Jay Goltz:
No, for sure. You walked into a situation. I’m not arguing. I think as time goes by, you will upgrade those numbers. You did say something I’m just laughing at because it’s funny. You said, “What are all the things that you’re all most proud of?” So I’m trying to decide: Is it almost like A-L-L most? Or almost proud of? So is it that you’re almost proud of this? Or you’re all most proud of this?

Laura Zander:
That we’re all most proud of.

Jay Goltz:
Excellent. But it was funnier the other way though.

Loren Feldman:
I took it the other way. That is funny.

Jay Goltz:
See! Isn’t that funny?

Laura Zander:
No, no, no, no. So it was like 10 of us. It’s our weekly meeting, and each person came up with the three things that they were most proud of. So together, this is what we were all most proud of.

Jay Goltz:
Every single thing you’re saying is showing you’re really growing as a manager. I would only challenge one word you said—when you said they’re not “invested.” They’re not doing a good job. Whether they’re invested or not. I’ve had people who were invested who couldn’t do a good job. I’ve had people who weren’t invested who did do a good job. It’s really about: Are they doing the job they’re supposed to be doing?

Laura Zander:
Great point.

Jay Goltz:
But other than that, good for you. You’re growing into the manager role that you were destined to be in, and you’re doing everything right. I can totally identify with the anxiety of, “Oh my God, I’ve got 12 things to do!” And part of the reason I don’t have that anxiety anymore is because I’ve caught up to that stuff. And you just bought this company. You’re just working on it. So good for you. You’re making great progress. I love the idea that you sat down and went through all the good stuff you’ve done that you are all most proud of.

Laura Zander:
To me, it’s so important. I have to keep that in perspective. So where we’re at, Loren, is we are, over the next year, our goal is to grow moderately, but to work on efficiency.

Loren Feldman:
Is this just, you’re talking about Madelinetosh in Texas?

Laura Zander:
It is, just the Texas business. The Texas business is very controlled growth, while working on efficiency and working on the foundations. We’ve got to get our QC systems, and to really prep us for scaling, because I know that the business can be double or triple. The demand is out there. That part I’m not as worried about. The tendency of this business has been to just throw bodies at stuff when there’s an increase.

I would like us to work smarter, not harder. I think it’s going to take us six months or a year to change the mentality. I’d like fewer people to make more. I keep telling them, we could probably do 30 percent more business than we’re doing now with the same headcount. That means everybody, if we’re all pushing hard, we should all make a little bit more… or a lot more.

Jay Goltz:
I have to tell you a real life story. This isn’t some parable. This is a real life story. I was buying glue to mount pictures, and it comes in barrels. This guy selling it to me—this was 30 years ago—he was in his 50’s or 60’s, I don’t remember. And I said to him, “How long have you worked for the company?” And he says, “I used to own the company. I sold it to someone else.” I said, “Really? How did that go?” He goes, “Well, here’s what happened. I had 10 employees, and this guy took over, and he’s a real tough guy, running a business. And he said to me, ‘Tell me who your top five people are.’ So I told him, and he fired the other five people. And he gets the same production out with the five people that I was getting out with 10 people.” To your point of, yeah, it happens, and I never forgot that story because it was just so poignant.

Loren Feldman:
So, Laura, along those lines, were there any ones on the list?

Laura Zander:
No ones, no.

Jay Goltz:
There are never ones on the list. Because even the worst manager in the world fires the ones. The ones that kill businesses—out of a scale of 10—it’s the sixes, because the sixes aren’t quite bad enough to fire. And you rationalize it, and you say things like—I’ve said all these things—“Oh, we could do worse.” Or, “Oh, she’s trying really hard.” Or, “Oh, they’ve been here a long time.” The customers don’t care. They want your stuff when they want it and they don’t want to hear about, “Oh, sorry the airplane crashed. The pilot was really trying not to crash it.” “Oh, sorry. Your mother died in the hospital. I was really trying, but I did forget to give her the medication yesterday.” I mean, no one cares!

So this is the growing up of being a manager. And then whenever I do this speech, someone goes, “Oh, you have to get rid of those people. They’re a cancer.” No, they’re not cancer. Maybe they’re just in the wrong job. You don’t have to call them names. For whatever reason—they’re invested, they’re not invested—they’re not working. All that matters is: Are they doing their job or not? And that’s the maturity of a manager, when you finally get to that point, and you’re moving towards that point. You’re doing a good job.

Laura Zander:
Well, I’m very lucky to be able to jump into this and not have been there for 10 years and have the history and the emotional baggage and the emotional ties. It’s given me a totally different perspective to be able to walk in and look at a lot of this so objectively, which has forced me to be more objective in the business in Reno. It’s forced me to take a look back and be like, “Ugh.”

Jay Goltz:
Well, let me tell you the other part you’re missing. You realize you built a relationship with those people to where they gave you the honest truth. Do you know how valuable that is? Obviously, you’ve built a relationship with these key managers that when you asked them to rate these people, they weren’t covering for people and they told you the truth. It’s a beautiful thing that is totally a credit to you. If you were a jerk, they wouldn’t have told you that stuff. They would have lied.

Laura Zander:
I appreciate it. I’ve told them I was so grateful that they were honest with me about it.

Dana White:
Were you able to validate what they said to you with what you’ve seen since you’ve been there?

Laura Zander:
Yeah.

Dana White:
Okay, good.

Loren Feldman:
I was gonna do this last, but it kind of relates to the topic we’re on. We’ve got a reader question that I want to address, and I’m hoping to do this in most, if not all, of our podcast [episodes] going forward. I’ve asked people to send in questions for you guys, either about their own businesses or about your businesses, and I’ve been getting some good ones. Hopefully, I’ll get more. Any of you listening who would like to submit a question, you can send it to me by email: [email protected] Or you can simply reply to your 21 Hats Morning Report.

Today’s question comes from Hap Cameron. He’s owner of Happy Cones, an ice cream shop in Denver: “I have a question I’d love your panel to answer. I’m more in Dana’s position. I started as an ice cream truck six years ago. I opened the shop a year ago, and I’m opening another shop in three months. My question is: How do I manage managers effectively? Bear in mind, I’m not a big tech company. I’m an ice cream shop. I’m still trying to figure out whether to pay managers hourly or salary. Any advice would be greatly appreciated.” Any thoughts for Hap?

Laura Zander:
Let me chime in before the experts do, because it’s something I still struggle with. I would read the book, The E-Myth Revisited. I think that that’s very helpful. That’s all I’ve got. Jay and Dana, you’re better managers than I am.

Dana White:
I don’t know if I’m a better manager. I know that, over my years of being open, I’ve figured it out. And then I’ve been in leadership in other positions. I’ve had the opportunity to manage people before, and my management style is: I give you a long rope and then I see what you do with it. I try to meet with my operations manager regularly to go over the operations. What are the 10 things that are important so I can grow the business—do my job—and then these are the things I delegate to her, all of which I’ve done before.

But I chose, with the help of this show, to pay my operations manager a salary. My day-to-day manager in the salon, she is an hourly employee, but I’m rethinking that. As I expand, I think, what I’m going to have these managers do determines how I will pay them. But I think part of determining how you’re going to manage your managers is based on what you’re going to give them to do. There are certain things that I cannot delegate. I can’t delegate my presence in an incubator. I have to be there, and so there are things that are in the salon that need to happen that I need eyes on. So I delegate that to her and then set up frequent report-outs so we can go over the 10 or 12 things that I need to hear back from her.

I’ve found that, since hiring, I’m not in the weeds with human resources anymore. I’m not into the, “Well, her boyfriend is upset with her.” I’m not in that. I don’t know. I don’t know what’s going on in the personal lives of my staff. And I like that, considering my industry and considering what I’ve learned, in my experience. I know I’ve gotten some backlash from business owners who’ve said, “Well, gosh, you should know. You’re a small company.” Okay, you run an engineering firm. Very different than the culture of a hair salon. I found that having a manager just allows me to work on the grasstops and the stock of Paralee Boyd. The managers dig into the grassroots and report out to me on the things they need in order to keep the business open and to grow it.

Loren Feldman:
Jay, any thoughts on compensating and managing managers?

Jay Goltz:
I’ll give it to you in four steps. Number one—and most people don’t talk about this—the most important part of management is hiring the right person in the first place. So first, I put a lot more energy, or put good energy, into figuring out what kind of person is going to do the best job doing this. Put a great ad together, interview thoroughly, check references, and most entrepreneurs are not real good at it, including me. Why? Because we like people, because we like to talk about our companies, and we’re in a hurry. That’s not a good thing in hiring. Slow down the hiring process and do your best to find someone who has had experience doing something with customers. Ask good questions during the interview, like, “Tell me about a customer experience you’ve had.”

Loren Feldman:
Jay, is that realistic advice for an ice cream shop?

Jay Goltz:
Yeah. Why not? Maybe they haven’t worked in an ice cream shop, no question. But did they have a job before? They’ve never had a job? Okay, maybe they just graduated high school, college, whatever. They’ve never had a job, okay. But most people have had a job before, so I would ask them, “Tell me about dealing with customers.” Because at the end of the day, people are not going to be pissed at you because your chocolate ice cream wasn’t quite as good as the chocolate… No, they’re gonna be pissed because your person wasn’t nice.

Go to Yelp. That’s all you have to do. Just look at Yelp and see the reviews. Usually it’s about, “They’ve got an attitude in there.” Or, “They weren’t nice to me.” Or, “I hate them.” It’s usually not about the product. It’s usually about the people. You want to hire a nice person who’s going to give a wonderful feeling to your ice cream shop.

So you’ve got to figure out what kind of questions do you ask to tease that out? And the one I would ask is: “Tell me about a difficult customer situation you had, and how did you handle it?” And you can tell by just their body language… Do they sigh? Do they say, “Oh, wow, I had one, boy, six months ago…” And then you find out what they learned from it. You find out whether they’ve got an attitude about it, like, “Well, people are jerks sometimes,” versus, “Listen, I understand my number one job is to make sure people are happy—even if they’re not nice to me. I suck it up. It’s not a problem. I don’t take it personally.” I want to see how they handle that, how they process that.

Hiring, number one. Number two: set standards. In an ice cream shop, I’ll give you my top four. Make sure this door opens on time. How many retail stores do you go to that they’re not open when they’re supposed to be open, and you stand out in front waiting? I have a simple solution to that. My employees know our standards are: We open five minutes early, and we don’t lock the door ‘til five minutes after closing. There’s none of that screaming through the door pointing at your wristwatch, “We’re closed.” If we close at six, no one locks the door till 6:05. Easy. Versus getting into the fight with the customer. Setting standards like that. Cleanliness has got to be critical. You shouldn’t walk into your ice cream shop and find dirty napkins lying on the floor. Customer service. If someone’s not happy, how do you handle it? “Oh, no problem. Let me get you something else.” You need to train people on that stuff because some people think they’re doing the company a favor if they fight with customers. They think that’s their job.

Laura Zander:
Is it fair to ask this manager to write up those standards?

Jay Goltz:
No, not at all. Well, ask on the interview to see if they can do it. That certainly would be fine.

Laura Zander:
Could you make that part of their job? Could you say, “Look, part of the reason I’m hiring you is because I want you to create these standards. I want us to agree on them.”

Jay Goltz:
No, absolutely not. You’re no longer the owner. Now it’s like your employee is deciding who your store is. No. I don’t mind asking them, “What do you think? Mary, what do you think the four most important things to being a manager in the store are?” and see if she can come up with it. This ain’t brain surgery. They should come up with it. Customer service, cleanliness, making sure that we’ve got the place staffed properly for the right time. They should be able to come up with this if you want them to be a manager. Okay, so we get through hiring—

Loren Feldman:
Let me interrupt you, Jay, for a second. I want to tell you about a situation that I’m familiar with that I think actually resonates with some of what you’re discussing. I’m curious what your reaction to it will be.

A couple years ago when I was still at Forbes, and Bo Burlingham and I were picking the annual Forbes Small Giants list, we put an ice cream chain on the list. It’s called Amy’s Ice Cream. It’s based in Austin, Texas, and they do a couple of things there that I’d never heard before. One of them is they have no applications for jobs. If somebody comes in and says they want to work there, they hand them a white paper bag—the kind of bag that they put ice cream containers in for customers—and say, “Here, do something with this.” The thinking on that is that they don’t really care what someone does, they care that someone takes the time to actually try to do something. And they feel that sorts out the people who are just looking for a job from the people who really want to work at Amy’s. That’s one thing they do that they claim has been really effective for them.

The other thing is, they hire a lot of college graduates or even college students to work and even to manage the stores. But they rotate everybody through every position in the store, so nobody is assigned one role. They get to do everything. The goal there is to give everybody a great work experience. They know they’re going to go on and do other things and talk to their friends and they want them to tell their friends that this was the best college graduate job or right-out-of-college job anybody could have. What do you think of that Jay?

Jay Goltz:
I love the second part. Good karma. Sure, you’ve got young people. Give them a nice experience. I think that’s great. People should leave your company and feel good that they learned something or had a good experience there. The bag thing, I don’t know… If it works for them, I can’t argue. I don’t know that it makes sense to me. But if it works for them, it works for them. I don’t know what to think of that. You’re supposed to do something with the bag?

Loren Feldman:
You’re supposed to draw something, fill something out.

Jay Goltz:
I thought where you were going with that was, “Here’s a paper bag and a pencil. I want you to write down the five things that you think are critical to running a great ice cream place.”

Loren Feldman:
You can do that.

Laura Zander:
I love the bag idea. I think that’s brilliant.

Jay Goltz:
Yeah, sure. The point is, what I figured out—and I’m not that smart, it took me 20 years—is great companies have great hiring processes, period. It’s not an accident. Great companies don’t accidentally end up with great employees. They figured it out because the reality is, out of 10 people coming in for a job, only one of them is going to be a great employee for you.

Laura Zander:
So how do you feel about hiring a recruiter? Doug is ready to look for another software engineer, and we have tried multiple times. We’ve hired four or five people who haven’t worked out, so we obviously aren’t doing a good job at hiring. Is it time for us to get a recruiter for a high-level skilled job?

Jay Goltz:
Maybe in your business, maybe you have to do that, because there’s such a demand. I’ve used a recruiter, but I’m not in a high tech business. I’ve used a recruiter three or four times for management positions, and every one of them ended up being extremely disappointing. That’s been my experience, but I’m not hiring in high tech. My first question to you would be: Show me the ad. I want to see. When you said you’ve tried, okay, but did you put a great ad together that gives them why they should work for you? If you feel like you’ve done a great ad, and you’ve done the best, okay. Maybe in that industry, you have to use a recruiter.

So if you get the hiring thing down, the rest gets much easier. One, go through a process and say to yourself, “I’m going to take a lot of time and do this right. Set standards. Again: cleanliness, on-time, customer service, make sure everyone understands. Three, you’re a manager. You might have to tell them a couple of times. You’ve got to monitor it and make sure things are happening correctly. And included with the coaching, management, positive reinforcement, all that good stuff, this is where the manager has to come out in you.

There will come a point where you need to have the skillset of knowing this ain’t working and then get rid of them. Because that’s where people make the mistake. They rationalize. Anytime you ever hear anyone complaining about their employees, it’s a bad manager. You shouldn’t be complaining about your employees. You should have wonderful employees. That’s your job: find them, keep them. My contention is: hire the right people, train them, coach them, manage them, put standards together. Everything falls in place.

As far as hourly versus salary, I would say unless they really want a salary, I think it’s always safer to start on hourly. That way, if they’re working extra, they’re getting paid. There’s no downside to that. I have had the opposite where you put them on salary, and then they get home and their whoever—girlfriend, boyfriend, husband, wife, mother—“What are you working extra time for? You’re not getting paid for that. You’re working for free.” Some people don’t get the salary thing. I wouldn’t be so quick to throw everybody on salary.

Loren Feldman:
Dana, you just told us you were rethinking that for your manager and thinking about moving towards salary. What are your thoughts?

Dana White:
I’m noticing how many hours she’s working. She’s doing more than your usual manager. She’s more than just an on-site manager.

Laura Zander:
Is she hourly now, or is she salary now?

Dana White:
She’s hourly now. I just kind of talked about making it easier to have your admin team on salary. We don’t have to watch hours, we don’t have to not include her in stuff.

Jay Goltz:
What kind of money are we talking about?

Dana White:
Like $17 an hour.

Laura Zander:
What we did is, when we’ve had that situation and it becomes an administrative burden to clock in and clock out, we took their hourly wage—and I don’t know if it’s the right thing to do, it’s just what we’ve done—especially for people who didn’t really understand the salary and whose wives and moms and whoever would complain about, “You’re working more and not getting paid for it.” We said, “Look, we’re gonna take your hourly rate. We’re gonna salary-atize it, so multiply it times 2,080. And then we’re gonna add 5 percent. Basically, what that’s doing is we are guaranteeing you two and a half hours of overtime every week. We’re just going to prepay you. We’re just going to assume that you’re going to work blah, blah, blah overtime. Plus, you get an extra week of vacation. Plus, you get extra holidays.” We made sure that in a salaried position, there are some extra benefits that you don’t get if you’re hourly. That was kind of how we explained it to people.

Dana White:
Why do you guys know that their families have an issue with them working salary?

Jay Goltz:
Because that’s what comes up: “Hey, where are we going Saturday?” “Oh, I can’t. I’ve got to go to work Saturday.” “Oh, are you getting paid?” “No.”

Dana White:
Do they come to you and say… That’s what I’m saying.

Jay Goltz:
Oh, they usually complain to somebody else. Everything always simmers up to the top. If they don’t get the salary thing, my argument is they don’t need to get it. Just pay them on the clock.

And I don’t disagree with what you’re saying, Laura, with the 5 percent. The problem is, the way you stated it, they’re getting paid for two and a half hours of overtime. Not really, because they get paid time and a half for overtime. I’d tweak that number a little bit because, trust me, they’re aware of the fact they get time and a half when they work overtime. But I don’t think that’s a bad philosophy. And certainly there are some people [where] it’s a great thing to put them on salary. They feel like they’re more part of the management team, and they don’t punch in and out. It’s a great thing.

Except this is like, did you ever go on the tilt-a-whirl, the carnival things, the car that spins around? There are people who get off the tilt-a-whirl, get back in line, and can’t wait to do it again. And there are people who want to throw up and say, “I’m never going on there again.” That’s how salary is. There are some people [where] it’s great. Love it. And there are people who hate it. You’ve got to figure out which is which. Because if you put someone on salary who’s really got an hourly mentality, it’s gonna cause you problems.

Loren Feldman:
All right, we’re almost out of time. I’ve got to ask one more question. I want to squeeze this in quickly, because it’s about me. This question relates directly to what I’m doing. As you know, I’m trying my best to turn 21 Hats into a real business. I’ve got a daily email newsletter and a weekly podcast that you’re participating in right now. But I don’t have any revenue, and I’m hoping to address that situation in the next month or so. Which leads me to this question: When you guys were getting started, when did you know you had a real business? Laura, do you remember?

Laura Zander:
Umm, it’s different when you have a physical store, and you open it up. For me, I guess it was the first time… Susan Conrad was my very first customer. She walked in, and she spent $88. I still remember the credit card that she used, and I was just like, “Holy shit.” And I was just like, “Are you sure? Are you sure? Is that okay?” That seems like a lot for a little baby sweater. Is it gonna be all right? So, yeah, that was, I guess, the first transaction.

Jay Goltz:
I thought you were gonna say you still don’t feel like you have a real business. I was waiting for you to say that.

Loren Feldman:
She knows she has a business. She’s got two!

Laura Zander:
I don’t feel like I have a grown-up business. I don’t feel like we’ve got our shit together.

Jay Goltz:
You’re on the way.

Laura Zander:
I’m always on the way. It’s a frickin’ journey.

Loren Feldman:
Dana, how about you?

Dana White:
When we had volume. I remember it was December 16th, 2012, and I looked around and all of the chairs were full, two of the sinks were full, and there was a lady waiting. And then at the end of that day, when I looked at our receipts, I don’t even remember how much we made that day. But the fact that I realized the vision… I got everybody in and out in under a certain time, and they were all walking in, and they were happy. I said, “Wow, I’ve got something here. It’s closing, and we’re leaving, and we’ve seen over 30 people today. Wow.” And then the next time is, shortly after that, when I pulled up to open the salon at 9 a.m, and it was 8:15 a.m., and there was a line outside already. I said, “Ohhh, here we go.”

Loren Feldman:
That’s great. Jay, do you remember?

Jay Goltz:
I don’t remember a specific moment. But in 1979, for those of you who weren’t alive…

Laura Zander:
Well, that’s ‘cause it was like half a century ago.

Jay Goltz:
Well, it was almost half a century ago. Yes, it was. When I pulled up in my horse and wagon.

Laura Zander:
Everything was in black and white.

Jay Goltz:
Yeah, and in 1979, I made 20-some thousand dollars a year, which was the same amount of money that all the guys that took the accounting jobs were making. I felt pretty good, like, “Wow, I’m framing pictures, and I made as much money as someone that took a job doing accounting.”

Laura Zander:
Awww. I was eating my Cheerios in my kindergarten class right then.

Jay Goltz:
But I will tell you, getting bigger, there is one moment I remember that really made me feel like, “Well, I’ve got a real, decent-size business.” I bought a forklift. I mean, that’s a big deal. I own a forklift. You go to companies with forklifts, they just were there when you showed up there. But like, I bought a forklift. That was a huge thing. You don’t have a forklift unless you have a decent-sized company.

Loren Feldman:
All right, so you’ve told me what I needed to hear. I’ve got to end this podcast [episode] so I can go buy a forklift.

Jay Goltz:
Yes, that’s what you need. For all the heavy lifting you do every day.

Loren Feldman:
My thanks to Jay Goltz, Dana White, and Laura Zander. As always guys, thanks so much for sharing.

 

Episode 43: All It Takes Is One Mistake

This week, in our final podcast taping of the year, Paul Downs, Jay Goltz, and William Vanderbloemen discussed the impact this year has had on their businesses and on themselves. William talked about the positive side of having to get back to a startup mentality: “It's definitely been a silver lining in the middle of a very dark cloud.” Paul talked about hoping he can offer his employees a good place to work for as long as possible: “I can give them probably another 10 years. And then beyond that, I don't know what will happen.” And Jay talked about the cash management mistake he made that could have been fatal: “If I wouldn't have gotten the PPP money, I don't know…”

Guests:

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

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

Paul Downs is founder of Paul Downs Cabinetmakers.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

William Vanderbloemen: “Everybody cut their prices this year. We didn’t. So that’s one thing we did not change.”

Paul Downs: “If I gave people 20 plus years of working in a good place, making a decent dollar, having good colleagues, and doing good work, [isn’t] that good enough?”

Jay Goltz: “I had absolutely no symptoms whatsoever. But I certainly knew that could change and I had to deal with, ‘Yikes, what if I died tomorrow?’”

Full Episode Transcript:

Loren Feldman:
Welcome, Paul, Jay, William, to our last podcast taping of the year, and what a year it’s been! I thought we’d take a look back with three questions I want to ask each of you. One’s about positives you’re taking from this year. One’s about strategies you might be changing as a result of this year. And one’s about how all of this has affected you personally.

Let’s start with looking for silver linings. William, let me start with you. Early on, there was a time, I think in March or April, where you joined our podcast directly from a Zoom layoff that you had conducted, which you went on to describe to us. I’ve gotta imagine that was one of the low points of your year. Happily, in recent weeks, you’ve told us that things have picked up and you’re expecting a very busy year next year. Can you give us a sense of what positives you’re taking away from this?

William Vanderbloemen:
You know, Loren, I am hopelessly optimistic. I probably dysfunctionally look for the positives. For us, as a company, as we hit the 12-and-a-half year mark, or wherever we are, we’re not built for high growth. We don’t do investors. We don’t do debt. We move at the speed of cash, and that is nice. But high growth requires severe agility, right? And if you get into steady growth—which I’ll take all day long—I think our agility can get stifled if we’re not careful. The pandemic actually forced us to live out our core value of ever-increasing agility.

And man, that day, I will not forget, and I don’t want to repeat it. But after those layoffs and restructuring, everybody had to pitch in. All the things that happened, it felt like we were a startup again. All the things that happened as a startup where everybody has a job description of other duties as necessary. Everybody had to just learn as we go, down to shifting our focus.

Since nobody was hiring in March and April, we had to learn what to do when there’s no search to do. We served people helping them get their PPP loans. We set up leadership resources for reopening churches and schools. It just forced us back into startup mode, which had a benefit of reminding me of my need for agility, and also the company as well. Don’t want to live there forever, but it’s definitely been a silver lining in the middle of a very dark cloud.

Loren Feldman:
Paul, when you joined the podcast, you told us you were expecting your sales to collapse. Happily, that didn’t happen. But you’ve also told us several times recently that you still think the worst might be ahead and you’re being very careful going forward. What positives, if any, can you take from this year?

Paul Downs:
Probably the biggest positive surprise for me, as a business owner, was that the government sprang into action in March with the PPP program—basically did the right thing, and executed on it and saved all the squabbling about it until after the benefit had been handed out. I never thought I would see that from the United States government. On a company level, our sales did not utterly collapse, although they have definitely staggered.

I think that the biggest positive is the way I ran my company before this crisis has served me well throughout it. I didn’t have to change direction as a leader, or do anything different with our company culture in order to get people to be committed to doing a good job. My thing has always been to be extremely honest with my people about what I see coming ahead, whether it’s good or bad, so that they’re never surprised. And that has worked out very well.

Loren Feldman:
Jay, how about you? What have you got?

Jay Goltz:
You know what, I’m glad Paul reminded me of the PPP money, because I wouldn’t have thought of it. It absolutely was a game-changer, because I got through the year. I haven’t lost any people and our customers have been supportive and coming in. They say, “Trying times test a man’s soul.” Well, it tests the company’s soul, and I’m extremely appreciative and feel good that we got through this. People have certainly had anxiety and fear and angst, but we managed to get through the year okay. Without the PPP money, I’ve gotta tell you—probably a very different story. But we got through it, and we’re looking forward to a decent next year.

But I have to add on another. You said what “silver lining” from this whole experience? My business isn’t the only thing I’m passionate about. I’m also passionate about helping out entrepreneurship, and I’m an entrepreneur junkie. I have to say that, 15 years ago, I was on the front cover of Inc. Magazine because of the Small Giants book, and I met an editor who was really engaged in small business and was really interested in it and wanted to help. That editor left there and went to the New York Times, and I went with him. I had a great five-year run with him. I couldn’t be more happy to say that, over the last 15 years, he and I have been trying to figure out how to get out there to more people. And this year, that editor—Loren Feldman—owns 21 Hats, and that is the greatest benefit of 2020 I can think of. So, hear! hear! to you, Loren. We finally have a platform, we’re going out there. And for all of you listening, if you’ve gotten anything out of this, I would encourage you to send this to your friends. And that’s all I can say.

Loren Feldman:
I can’t take any more. That’s very nice of you. Thank you.

Jay Goltz:
I’m serious.

Loren Feldman:
People are going to assume I put you up to that.

Jay Goltz:
No, I didn’t warn you it was coming, because you’re my colleague—

Loren Feldman:
It might still get cut. I’ll have to listen to it.

Jay Goltz:
—You’re my co-conspirator, and you’re my friend. If I have to look at what happened this year that is the most significant thing, that’s the most significant thing. Loren Feldman is now the owner of 21 Hats.

Paul Downs:
I’ll second that. I think you’ve put together a great group of business owners, and they provide a set of perspectives that were not seen in the ordinary media. So, congratulations, Loren!

Loren Feldman:
That’s nice of you to say. I have to tell you, I switched platforms for the The 21 Hats Morning Report, and as a result, I have some new tools. I’ve been able to reach out to some of the people who get the report and who listen to the podcast, and I’ve had a bunch of conversations over the last two weeks with some of those people. I’ve gotta tell you guys, you don’t know how many fans you have around the country, who have been listening to every single one of these episodes and hanging on your journeys and rooting for you.

All right, moving on. The next thing I wanted to ask you about is whether anything that has happened this year has caused you to rethink the way you run your business, to change strategy. Paul, how about you?

Paul Downs:
I probably have more reasons to change strategies than the rest of the group, but no. I’ve decided that I’m living and dying with the conference table business. I do worry that it’s a sign of inflexibility settling on my middle-aged mind, but I just don’t have the desire to completely switch direction and try to do something different at this point. I think that we’ll be okay, even if it’s going to be a rough year coming up.

Loren Feldman:
Well, a change of strategy doesn’t have to be complete. Let me ask you about something specific then, because early on when you joined, we talked a lot about your marketing. And you told us some really intriguing things, including the fact that you had stopped your pay-per-click advertising, and that your traffic and your sales didn’t go down. You just pocketed the money—a considerable amount of money—that you’d been spending on that. Has your marketing strategy evolved since we had that conversation?

Paul Downs:
In terms of pay-per-click, not much.

Loren Feldman:
Or any other aspect.

Paul Downs:
Well, probably the one thing that we’re putting some effort into that may not be obvious is to get a GSA contract, because we get so many orders from government buyers now. Often we could make more sales if we could get through the contracting process. I am putting significant resources into that, which involves basically hiring consultants to shepherd our application through the process.

Jay Goltz:
Paul, jargon relief. Tell everyone what GSA stands for. Everyone doesn’t know.

Paul Downs:
Okay, GSA—General Services Administration—this is basically a way to get your products onto an easy-to-buy list for federal purchasers. We do a lot of business with the Department of Defense and basically all of the federal government. There are two paths by which, say a military unit, can make a purchase. One is easy, if the product’s on a GSA contract, and the other one’s more difficult if it’s not. We’ve made a lot of sales on the difficult path, and I want to get on the easy path.

Loren Feldman:
How hard is it to get on the list?

Paul Downs:
We’re gonna find out. There’s a relatively arcane set of procedures, and my understanding is it’s all going to boil down to our application is going to be set in front of a particular person in a federal agency to evaluate it. That person has to like what they see. So, I don’t know. Talk to me in six months.

Jay Goltz:
Very price competitive, yes?

Paul Downs:
Well, yes, you have to be price competitive. But here’s one of the things: furniture is sold in such a strange way—the pricing of it—and I don’t even want to go into it. Let’s just say, it’s a way that makes no sense. But it’s what everybody does. We have used a different way of pricing our work for as long as I’ve been in business, because you would never come up with the way it’s actually done by everybody else if you just sat down to give somebody a price.

Loren Feldman:
Well, it’s not just that it’s furniture though, Paul, right? It’s that it’s custom furniture.

Paul Downs:
Yeah, that makes it more complex too, because generally the GSA doesn’t like the idea of custom things going on a contract, so we had to kind of wash the custom out of our offering. And yeah… let’s not go down this. This will take an hour to explain it, and I’m not even sure whether I’ve got it right.

Loren Feldman:
Okay, although I love talking about pricing. It’s always interesting.

Paul Downs:
Well, you and I can have a nice long chat about how furniture is priced, and it’ll blow your mind.

Loren Feldman:
William, how about you? Have you actually changed strategy as a result of what’s happened this year?

William Vanderbloemen:
We haven’t changed pricing. It’s funny, I’ve been waiting for 20 years. I’ve been putting together the same haggard old Christmas tree limb by limb, because in Houston, you don’t get a real tree. It just costs too much. And finally, this year, there was a Black Friday sale where there was a real discount. Everybody cut their prices this year. We didn’t. So that’s one thing we did not change.

A couple things we did change. And, I’m reminded by my colleagues here, the PPP not only helped us just as a loan, but it almost doubled—and maybe even tripled—our database, because we helped so many organizations. Paul, you say you didn’t think the federal government could ever do anything like that. Totally agree.

So what that taught me was, I’ve learned that we need to be very strategic about something I’m calling “the very top of the funnel,” which means things that we do that might never show up on our software tracking system. You know, PPP loans, things that just get people familiar with us without ever asking for anything. We were much more intentional about that.

During the slowdown, while we were living on the PPP money, we were able to launch a couple things that we’d not had time to launch in the past. We have a couple of new service lines that are ancillary to search, but they’re very, very helpful to our clients and, frankly, tend to be marketing efforts for us that are self-funding.

Loren Feldman:
Explain that.

William Vanderbloemen:
Well, instead of spending a quarter million dollars a year on sponsorships for this, that, or the other [thing], we run compensation reports for people. We could charge more money. We don’t, so we have a very thin margin on it. But, man, people love us for that and end up coming back to us for search. So rather than a business line that’s going to keep margins that make sense as a business on its own, it’s like, “No, this isn’t going to make us a lot of money. But it’s going to do some good, and it’s going to win friends, and it will lead to more business.”

Loren Feldman:
Let me ask you about one of the things you talked about earlier in the year, William, which is: I think you took advantage of the lull to shift direction a little bit and add to your offerings—and not just focus on executive search, but also to set up a way to help your clients with hiring lower-level employees. In fact, I think you started an entirely different company to handle those searches. How did that work out for you?

William Vanderbloemen:
So far, so good. People are happy with the service. We set modest goals, not knowing what to expect. Who can predict what hiring is going to look like this year, particularly in nonprofits? We’ve outperformed all of those goals. Maybe we’re bad at goal-setting. But it’s a small offering that I think will grow in time. Rather than just sit on our hands or moan, our people actually built something new that I think will last.

Loren Feldman:
Do you think it’ll grow to represent a significant portion of your business going forward?

William Vanderbloemen:
I don’t know what “significant” means. Will it end up being 10 percent to 20 percent of the top line? Yeah, easily.

Loren Feldman:
That’s significant.

William Vanderbloemen:
Yeah.

Loren Feldman:
Jay, how about you? Have you changed strategies in any way?

Jay Goltz:
I would say it made me refocus. I’ve learned there are five gauges on our dashboard, or there should be. Obviously profit’s one of them. Too many of these younger companies I read about seem to forget about that. Growth, if you’re into it, for sure. Calculated risk. I realized I don’t really want to take a whole lot more risk. I don’t need to. The business is big enough. I’m leaving the biggest one for last. Are you happy? I’m very happy. I’m happy with my employees. I’m happy with my whole mission. The last one, I kind of always kept an eye on, but I didn’t pay enough attention, and it’s the cash gauge.

The cash gauge got messed up this year, because I kind of knew this, but I didn’t know it well enough. I have a building. I’ve talked about it before. It’s completely got no mortgage on it. It’s worth good money. And I figured, “Well, that’s my dry powder,” as they say. That was a stupid mistake on my part. Having a building that’s paid off is dry powder that’s got a keg that’s nailed shut. I have now talked to seven banks, looking to get a very low leverage mortgage. I believe I’ll be pulling it off soon, but when things go bad, the banks hide under the table. They get more points for not losing money than for getting new business. I should have simply taken on a mortgage a couple years ago and left the money sitting somewhere, and I’m paying the price.

Now, luckily, I got through the year fine, and I’m actually in good shape for cash right now. I’m fine. But I have never had money in the bank and I’ve always had credit. It’s absolutely changed my strategy now. One of the traps of being an entrepreneur, or even just for your own personal finances, is thinking that, if you pay off a mortgage, you’re going to hear wonderful music and life is grand. When you’re in business, paying off a mortgage might not be the smartest thing to do. In my case, it certainly wasn’t. I’ve now recognized I’ve got to pay more attention to the cash thing, because at the end of the day, businesses go broke because they run out of cash.

I believe I’m about to pull this off. I’m going to get a mortgage, put the cash somewhere, not spend it—which is new for me—I’m not going to spend it. I’m just going to leave it sitting there, and that’s a huge change for me after 42 years. I’ve never done that. That one little error of mine, had I not gotten the PPP money, frankly, could have been the end of me. That’s how business works. All it takes is one mistake, and that could have been a fatal mistake.

Loren Feldman:
Do you really believe that?

Jay Goltz:
Absolutely. If I wouldn’t have gotten the PPP money, I don’t know… It would have been extremely difficult. I’m not saying for sure I would have gone broke, but it would have—I can tell you, you know, you were there. You were in the cockpit when the storm started. April 30th, I had some real, “Oh, man!” I was leveraged up on everything, and I had no idea what was coming. I’m happy to report I’m in good shape now, but it didn’t have to go that way. Who knew that people would still be framing pictures during a shutdown, during the surge? Who knew that people would be buying furniture? Who knew?

Loren Feldman:
As I recall, at the beginning of the year, you told us that you felt you’d made a mistake in not paying close enough attention to how much inventory—framing inventory—that your people were buying, and you were way overloaded. I guess that you were probably low on cash at that point and heavy on—

Jay Goltz:
Yeah, that’s exactly why I used up my credit lines. I had a ton of inventory. We buy from Italy and Spain, and we were really heavy in inventory. The irony is, that turned out to be an asset, because no one can get stuff from Italy and Spain now because they’re shut down. I’m the guy who’s got inventory. That’s part of why I’m doing well this year.

I’ve been able to work my inventory down. That’s partially why I’ve got cash now. I’ve worked my inventory down. But the problem really wasn’t that I had too much inventory. The problem is I had too much inventory, and I used up all my cash. If I had cash, having too much inventory isn’t such a terrible thing. You can always work it down. But yes, it absolutely ended up being an asset.

Loren Feldman:
So what’s your inventory strategy going forward going to be?

Jay Goltz:
You know what, I’m putting more controls in place. I’m gonna manage it tighter, but really, it’s the other end of it. I’m gonna make sure I’ve got enough cash and it doesn’t matter as much. And that’s what I’m working on. I don’t mind having a bad inventory turnover. The problem is I’ve had a horrendous inventory turnover. So I’m trying to go from horrendous to bad, and bad will be okay.

Loren Feldman:
What’s a bad inventory turnover?

Jay Goltz:
If I could get to an inventory turnover of two times a year, the accountant people would say, “Oh, that’s not enough. You should get it to three.” Okay, I’m not selling commodities that I can quick order. My youngest son is getting involved in the business now, and he’s looking at the numbers: “Dad, can we just order in smaller quantities?” No, that’s the whole reason why we’re successful. We order from unique, great suppliers overseas. That’s why we have unique, cool, interesting products. If I order the same thing that everyone else can get from a warehouse in wherever, in three days, I’ll be selling the same thing everyone else sells.

It’s part of my whole business model. I have a big, huge warehouse that I bought for cheap. We can easily warehouse it. And as a result, like I said, if I can get it to a two-time turnover, I’m okay with that. The accountants would say, “Oh, no, you’ve got to get it to three.” And the answer is, no, I really don’t have to get it to three. Interest is cheap. I’ve got a warehouse. It’s okay.

Loren Feldman:
All right. My last question for the three of you—and this one’s personal—this has been—

William Vanderbloemen:
Loren, just for reference sake, what have you asked us that’s not personal?

Loren Feldman:
I asked Jay about his inventory? That’s not personal.

Jay Goltz:
Oh, that is personal.

Loren Feldman:
Okay, I stand corrected. All right, you’re right, William. This one’s really personal. This year has been really something. I don’t think we as a country have even begun to process what we’ve been through and are still going through. I mean, in terms of deaths, we’re now experiencing the equivalent of a 9/11 every day. I saw a tweet the other day that listed, I think, the 10 deadliest days in American history. Several of them were historical events that we all know—like 9/11 or Pearl Harbor—but interspersed among those 10 were Monday, Tuesday, and Wednesday.

This is the worst public health crisis in the history of the country, and it comes with a devastating economic crisis that you guys know all too well. I am getting to a question here. To some extent, this question was inspired by something William said last week, when he talked about why he expects lots of employee turnover in 2021. One thing he cited is that people have kind of looked death in the eye and are now questioning some of their assumptions about what they do and why they do it. So that’s the question I want to ask each of you: Has this year of anxiety and uncertainty and disease affected your view of what you do every day. William, you got me thinking about this, how about you?

William Vanderbloemen:
I saw the same meme, because I think the deadliest day, so far, is still the storm in Galveston right here in our backyard in 1900.

Loren Feldman:
Right, right, right.

William Vanderbloemen:
Yeah. This is a horrible pandemic. In fact, my very best friend in the world, other than my wife, has just come off a ventilator finally. He’s diabetic, so I guess that’s a comorbidity, but he’s 55… I don’t want to minimize what people are going through. It’s been in my life, so I understand. And I can’t imagine losing a family member, especially an untimely death. So please hear all those caveats.

Having said that, I’m getting a little weary of the word “unprecedented,” Loren. This is just not unprecedented. The plague wiped out one out of every three people in Europe. That’s a whole different calculus. Frankly, when we came over here, we wiped out about that percentage of the Native Americans who were here. That’s a whole different math. I’ve got church clients, some on the fringes, and they’re like, “We’re being persecuted.” No you’re not. You’re not being burned at the stake.

I think you asked the personal question: How has this impacted me personally? It’s woken me up to just how fortunate and prosperous my life has been. Shame on me for feeling like an eternal victim in the middle of a really bad year, but nothing like what a lot of people have been through in the history of the world. I guess it’s spurred in me a more intentional effort to start every day with gratitude. I think when you were my editor at Forbes, Loren, the most popular thing I ever wrote was how successful people start their day. And if you go study any faith, any non-faith, successful people start their day with a ritual of thankfulness. I had to recover that and had to kind of kick myself in the rear for feeling down about a time where we’ve just been really, really fortunate.

Now, the flip side of that, I will say, I know we’ve got listeners of all kinds of faiths. I happen to be a Christian and we’re moving toward Christmas as we record this. I did my morning run this morning. It was speed work, right? So I’m wearing my AirPods, and I should be listening to Rocky III or some motivational, really cool pump-you-up song. And instead, I found myself listening to Handel’s “Messiah” and running really fast.

Jay Goltz:
Wait. Is he a fighter, Handel Messiah?

William Vanderbloemen:
Exactly.

Loren Feldman:
That’s Rocky VI.

Jay Goltz:
Oh, right, Rocky VI. I just didn’t see that one.

William Vanderbloemen:
Well, it’s not on the top of the motivational lists. It threw Spotify off. They don’t know what to suggest for me now. But the pandemic has pointed me back to my route, and it’s different for different people. I get that. Whatever your faith perspective, maybe this is a year where it’s pointed you back to your source and how you see things going after you’re here. It has for me. That’s sort of taken the pressure off of me watching the Dow every five seconds or seeing what our sales numbers are.

Loren Feldman:
Paul, how about you? How has this hit you?

Paul Downs:
I’m not sure I can top that. Honestly, I think it hasn’t changed me all that much. A lot of it has to do with my particular personal circumstances that allowed me to just skate by a lot of the troubles other people were experiencing. I think, in particular, not having young kids in the house just changes the whole equation. Everybody I know who’s got children and is trying to struggle with schooling and what to do with them, then the situation is intruding in their daily life in a way that just didn’t happen for me.

I’ve always had that perspective that we could be so much worse off on any given day. The electricity never went out, and the financial systems functioned. Jay, you saw actual rioting in the streets, but I didn’t see any where I was. I’ve gotta say that I’m not all that changed. It hasn’t been forced on me. So there you have it. Maybe I’m just a shallow guy, but I’ve been able to slide by without having to really confront any changes in my personal life.

Loren Feldman:
Fair enough. Jay, you spent a couple of weeks in your basement, and you tested positive for COVID. Happily, you were asymptomatic, and you’re fine. Did that have an impact on you?

Jay Goltz:
Yeah, I made friends with a couple of rats in the basement, and that’ll be a lifelong relationship. I had absolutely no symptoms whatsoever, but I certainly knew that could change and I had to deal with, ‘Yikes, what if I died tomorrow?’ At 64, I think I’ve done a good job of planning, and I’ve got life insurance and blah, blah, blah. But I came to realize that the insurance thing will take care of my family. I don’t want to hang this responsibility on myself or any other entrepreneur, but it would be best if I could keep the company running if I dropped dead. It would be best for the employees and best for the customers. So while I don’t want to hang that responsibility on myself, I’m going to do my damnedest to make that happen. So my revelation—

Loren Feldman:
Wait, explain what you mean by that. You’re saying that you don’t feel as though it is your responsibility to keep the company running beyond you, but that if you could do it, you would like to be able to do it?

Jay Goltz:
Yeah, I want to be very clear with this. I think, as entrepreneurs, we have enough responsibility our entire careers, if you call it a career. I’m not going to preach to people that, “Oh no, you have a responsibility to have a succession plan.” I don’t think so. I think it’s a good thing. I think it is a responsible thing. I think it is a great thing. But I just don’t think that it’s fair—and I hate using that word, but I have to—to entrepreneurs to tell them that you’ve taken on all this responsibility your whole career and that now you have to make sure when you’re dead, you still have to take it on.

I don’t think that everyone has to have a succession plan. I think it’s a good thing. I think it’s a responsible thing. I think we should try. But in my case, I wasn’t trying hard enough. And now I realize that one of my kids is interested and old enough now, and is a good number-cruncher. I’m going to be involving him in the business more and have him be able to understand the inner workings of the company that if, God forbid, I drop dead tomorrow, it will be easier to transition, and they’ll have a good shot of keeping the company running. I was kind of working on it, but like I said, not hard enough.

And if that one wouldn’t work, I would try to think of another solution. Because this isn’t anywhere near as simple as people think it is. For those people who aren’t in business, I’ll just give you some of the quick responses: “Why don’t you hire someone, bring them in as CEO?” And do what? Tell them, “Oh, you’ll really be the CEO when I decide to retire. That could be five years from now, two years from now, or 30 years from now.” I mean, that’s just not reasonable. Who’s going to take that job? And I’m not ready. I don’t want to retire. So that’s a problem. “Oh, Jay, why don’t you take one of your employees and groom them?” I don’t know that the people who are doing an excellent job running their part of the business have the education, the mindset, the desire, the whatever, to be the CEO of a company that’s gotten to be a decent size.

This isn’t simple. There’s a reason why only 30 percent of businesses get to the second generation. There are lots of reasons for that. One of them is, sometimes businesses just run out of steam. I watched it with my father’s dime store. I don’t think I’m in that situation, but over a 30-, 40-year period, things do change. Some companies are no longer as viable as they were when they started, so it’s very complicated. I’m working on it.

Loren Feldman:
How are you working on it? Have you taken actual steps?

Jay Goltz:
Yes, my youngest son, who’s now 31, he’s been out there. He’s done well with real estate. He’s going to be working here three days a week and still do some real estate. And I’m going to very methodically and deliberately train him on every piece of the business.

Loren Feldman:
Does he know this?

Jay Goltz:
Yeah, yeah, yeah. He’s totally into it and ready for it and anxious to do it and wants to do it. If he said, “No, I really don’t want to deal with it.” Okay, I’d have to come up with a different plan. But that is my plan for the moment. And I think it’s a good plan.

Loren Feldman:
We’ve talked about some of this before. William, we know you have plans for everything. Paul, I’m curious: do you feel as though you have a responsibility to see that your business goes on beyond you.

Paul Downs:
No, I don’t. I think about this a lot, because I think at the root of it is the desire to take care of the employees. That’s a big motivator for me every day. I sort of achieved all my personal goals in business. I’m not filthy rich, but I’m comfortable enough. I want my people to have a good place to work, and the question is: Can I actually guarantee that in any way? I just don’t think I can. I honestly don’t think I can. I can give them probably another 10 years, and then beyond that, I don’t know what will happen.

Maybe I sell the company, but then it’s a different boss. Maybe I don’t sell the company, and it shuts down. The question really comes down to: If I gave people 20 plus years of working in a good place, making a decent dollar, having good colleagues, and doing good work, isn’t that good enough? There’s always going to be a point when you’re going to lose control, and you just can’t control everything. I think a lot of entrepreneurs don’t want to think about that because the lack of control implied in that could creep back. They’re just control freaks, and I like to control things, but there’s things you can’t control. That’s sort of how I think about it,

Loren Feldman:
William, we do know you have those break-glass-when-necessary plans for anything and everything. Do you feel you have a responsibility to see that the business continues beyond you?

William Vanderbloemen:
I think my responsibility is to make sure that the business doesn’t rise and fall on my existence. If the business goes away, fine, but not because, “Well, William wasn’t here, and we can’t get by without William,” right? If the business continues, if one of the 9 million children I have wants to take it over, and they do a good job with it, then that’s fine, too.

I don’t want to be the lid of our business. Put it that way. I don’t want to be the lid. There should be some plan that this could continue. I mean, we may get disrupted one day. Maybe we aren’t necessary forever. I’m fine with that, too. I just don’t want to be the reason the place has to close.

Jay Goltz:
Dare I say it, I think we’re all on the same page.

Loren Feldman:
Interesting. Coming from different directions, but kind of getting to the same place.

Jay Goltz:
Yeah, but it’s healthy. I just think entrepreneurs have enough responsibilities our whole working life. I don’t think we need to carry it into death.

Paul Downs:
I think there’s one other thing too, which is that it’s easy to believe that the employees are going to be harmed somehow if the company doesn’t go on. I think employees—people—are just more resilient than we think they are. And if they’re not working here, they’re all good people. They’ll find something.

Loren Feldman:
All right, my thanks to Paul Downs, Jay Goltz, and William Vanderbloemen. Thanks for putting up with my personal questions. Thank you for sharing a very interesting year with me and with our listeners.

 

 

Episode 42: The Great COVID Churn

This week, Paul Downs, William Vanderbloemen, and Laura Zander talk about William’s prediction that 2021 will be a year of employee turnover. His theory, which he says he’s already seeing evidence for, is that pent-up forces that were blocked by the pandemic this year will be unleashed in 2021—especially as vaccines arrive and the economy improves. His advice: Make sure your best people feel appreciated. Or, as he puts it: “Better to keep a good employee—even if it costs you more than you think it should—than to have to call me.” Plus: we establish that no one knows how to manage their PPP loan tax liability, and we discuss whether, when the time comes, businesses should require employees to get vaccinated.

Guests:

Paul Downs is founder of Paul Downs Cabinetmakers.

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

William Vanderbloemen: “Turnover just happens in the job market. There’s healthy turnover, there’s unhealthy, but there’s always turnover—except when there’s a pandemic.”

William Vanderbloemen: “Better to keep a good employee—even if it costs you more than you think it should—than to have to call me.”

Paul Downs: “I’m gonna err on the side of the company survives, because that’s actually the best thing for the employees in the long term anyway.”

Full Episode Transcript:

Loren Feldman:
Welcome, Paul, William, Laura. I’d like to start with you, William. You run a recruiting business, which gives you perspective not just on your own employees but also on those of the client companies you work with. I’m wondering if you’ve drawn any conclusions as to what this crazy year has done to relations between employers and employees and what that might mean going forward.

William Vanderbloemen:
I do think that this year—and the pandemic in particular—has accelerated a lot of things that might have taken a while to change, and it’s also decelerated some things that were going to change and didn’t. A quick way of saying that is: I think you’re gonna see—in fact, I know, because I’m already seeing it—you’re going to see 2021 as a year of—I’m calling it—the great COVID churn. In other words, it’s a year of turnover.

Loren Feldman:
What are you seeing that convinced you of that?

William Vanderbloemen:
You remember in elementary school there were the tests you take, and then there was the teacher’s edition that already had the answers in it? We kind of get the teachers edition on the job market, because we’re already seeing people tell us, “I’m ready to make a move.” It’s December, and who moves in December? You move in January, right? That’s when everybody’s gonna lose 10 pounds and balance their checkbook. But we’re already seeing—instead of January—“Okay, I’m ready to look around.” We’re seeing in December some pretty major moves.

It’s made me stop and say, “What’s really going on here?” A couple things. I’ll try not to ramble, but one, the pandemic put up a dam in the middle of what’s a normal flow of turnover. Turnover just happens in the job market. There’s healthy turnover, there’s unhealthy, but there’s always turnover—except when there’s a pandemic. Obviously, some companies had to lay people off because of the pandemic, so there was some churn there. But a lot of good people who would have made a natural move because of career stage or geographic need or a promotion or try a new thing—a lot of the people who would have made those moves voluntarily hunkered down during the pandemic, and what should be a natural flowing river of healthy transition, it actually got dammed up by the pandemic, so that’s one thing.

And now that the vaccine has been approved in the U.K. and should be here in the U.S. pretty soon, maybe it’ll take until the end of Q2 for everybody who wants a vaccine to receive one… By the end of Q2, I think the fear of moving will have gone away. That’s just to say, we’ve lived with a really uncertain year. And a lot of people who would have made a move have said, “I don’t need any more extra uncertainty in my life right now. So I’m gonna wait and make a move once this clears.”

Laura Zander:
Can I jump in? So where we live, in Reno, it’s a lot of—I don’t know what the statistic is, but there’s not a huge population of people who were actually born in Reno and are from Reno. It’s a lot of people from the East Coast and all around, and people are moving home. They’ve just decided, this is it. I’m done.

William Vanderbloemen:
Laura, I totally agree with you. I would say there are a myriad of reasons why this is going to be the year of turnover. One of them is, people who were waiting to start their own company, people who were waiting to take a job at a competitor, people who were there like, “No, I’m not doing that right now, no more uncertainty,”—now, right after that, there’s a whole lot of other reasons like we’re doing several searches right now for repeat clients where we placed an individual, and it’s only been three, four, or five years, and the individual has moved. And the client has rehired us to refill the spot, which you’d think, “Why would you rehire us if the guy only lasted that long?” And they say, “No, no, no. They did a wonderful job, but the pandemic has made them realize they want to live near their family of origin. They want to go back home.” So that’s only going to accelerate.

Then you add in, I’ve got some dear friends in Park City, which has been a quiet little mountain town forever, and now it is one of these bedroom communities outside of a major city, and Salt Lake’s growing like crazy. Well, Park City’s growing quicker, because—as Loren can relate—Princeton, Stanford, all the places Don and Betty Draper would have lived that everybody said was a dead real estate market, well it’s hopping. Everybody wants out of the city, so people are moving geographically, and that’s going to increase in ‘21. People are moving for family reasons; that’s going to increase in ‘21. People are moving because they would have moved in ‘20 and they put it off, and that’s going to increase in ‘21.

The other thing that’s happened is everyone’s job has completely changed, and a whole lot. I mean, I can’t tell you the number of people who are like, “This isn’t what I signed up for anymore.”

Loren Feldman:
That’s interesting. Laura, are you seeing any of this? Are you experiencing any of this turnover?

Laura Zander:
Well, I’m not directly in our business experiencing the turnover, but from a geographic viewpoint, we’re seeing the exact same thing, because [we’re in] Reno, and then we’re right by Truckee. We’re on the edge of Lake Tahoe, which is where Doug and I moved 20 years ago from the Bay Area. At the time, it was 80 percent second-home owners. We had a population of 14,000 Monday through Friday, and then 100,000 on the weekends. Right now, it’s 100,000 all the time.

So it’s similar to the Park City thing, and it’s really drastically changing the community. And we can’t keep up. The quality of life is so different. But from a turnover/employee standpoint, I have a very different perspective than the employees do. I only see what I want to see, in some ways.

For me, I’m like, “Oh my God, everybody’s so happy. They love their jobs, they love their boss.” But I checked in yesterday, and I’m like, “How much turnover do you think we’re gonna see next year?” And we have one girl who we think wants to start her own business, just as William just said. We have another girl who is going to be moving back to her country of origin in the near future, and this has really ignited that.

Down in Texas, though, we’re seeing kind of the opposite, where people are really hunkered down. I think, partially because of the way that we treated people during this, I don’t know that anybody’s going to go anywhere. They seem very, very happy and grateful, and we think, actually, that 2021 will be the year where we’re one of the best places to work in the city of Fort Worth.

Loren Feldman:
You’re kind of taking the opposite perspective. Things have been so difficult and uncertain that people are just happy to have a job and eager to make it work. Is that what you’re saying?

Laura Zander:
That’s part of it, yes. I would like to think—and again, I know I’m speaking from an ivory tower—that our true colors came out as an employer and how we treated people, and that people are cognizant and realize that they work for a good company, and they work for people who care about them. The grass is just not really that much greener anywhere else. Does that make sense?

Loren Feldman:
It does make sense. Paul, how about you?

Paul Downs:
I recently sat and had the thought that this is the first year since 1988 when I have neither hired nor fired anybody, and so I would vote for, at least in my experience, stability. But in another enterprise that I’m associated with that’s sort of peripheral to the restaurant industry, we made an effort to hire last spring, because we realized a lot of good people were on the street. I think a lot of it has to do with what sector you’re in, that some are going to be churned through involuntarily, more or less, and there’s going to be a lot of moving around, or people moving in and out of different industries. I think that you could throw out any answer, and there’s going to be some sizable group of people who it applies to. 2021 is bound to be just as much of a surprise as 2020, is my feeling.

Laura Zander:
Is there going to be a difference in professionals and the behavior in the turnover of professionals versus warehouse hourly workers? I think that professionals tend to be a little more transient, and they’ll move other places—like William said, out of their city of origin—versus most of the hourly employees who we have. This is where they’re from. They’re never going anywhere. This is where their family already is. They’re just looking for a good, stable job to be at for a long time.

William Vanderbloemen:
Yeah, I think that’s spot on, Laura. We are primarily within what you would call the “professional industry,” so I don’t have nearly as much expertise as you guys on the non-professional. And we may be skewed in our view because we lean so heavily this way. Sidebar just for a second. The reason Billy Graham is Billy Graham—other than a lot of people would say he was a great preacher, or God blessed him or whatever—Billy Graham’s Billy Graham because of World War II. He really broke loose in 1949, and that’s when this mass evangelism movement happened.

Well, why is that? Well, people had just faced death, pretty much square in the eye. And all of a sudden, they’re like, “Wow, life’s short. Wow, I’d better think forward, like past this world,” or whatever you want to say. So just from a forensic study of Billy Graham, I think you’re gonna see, after this pandemic, not quite the same conversation, but people saying, “Life can end quickly. This is more fragile than I thought. I want to do something that matters and not just earn the buck.” So you’re going to see people changing jobs.

Turnover is going to happen because people make values-based decisions for their career that they might not have made if they didn’t have to stare at awful pictures of overloaded ICUs or lose a friend or family member or whatnot. I’ll be quiet after this last one, but there’s also the latter half of the Baby Boomers who are yet to retire. A whole lot of them have said, “I thought I was gonna do 10 more years. But am not, I can’t run at this pace. My company needs a different leader, a digital native, and let’s find a parachute and get me out of here quicker.”

Laura Zander:
It’s a reckoning, a total reckoning, right?

Loren Feldman:
William, if you see this coming, either for your business or those of your clients, what do you do? What do you suggest?

William Vanderbloemen:
That’s a great question. Get to know a good executive search firm.

Paul Downs:
Funny how that came in line one, right there.

William Vanderbloemen:
If you’re me, it’s: How quickly do we staff up? Because I do think we’re going to be incredibly busy next year. But if you’re not me, three pieces of advice: retaining employees, it’s almost like customers. Retaining a good employee is way less expensive than going and finding a new good employee. I would say, make sure your compensation is right. Within our vertical of faith-based schools and churches, we spent the last two years building compensation data and algorithms because that vertical’s horrible about sharing information with each other. We’re already setting a record number of compensation studies that we’re doing for clients, because people are trying to make sure they’re paying their people fairly. We don’t want to lose somebody over a couple thousand dollars.

Point one of getting ready for turnover: make sure you’re paying fairly. Don’t lose somebody over a small amount of money, because replacement costs are way more than a little bit more of a raise. This is a year where it’s really tempting to say, “Well, we don’t know what’s going to happen, so we’re not going to do raises. Or we’re going to lower pay a little bit.” I would say just the opposite: It’s going to be the year of turnover, so spend whatever you can to make sure you’re paying very competitively.

Laura Zander:
We gave raises this year. It’s a pandemic, and so we feel like most of our profits need to go to our employees, because they’re the ones who are on the front lines. It’s not even about retention. It’s about doing the right thing. It’s about recognizing that half of our employees may have somebody, might have a spouse at home, who’s not working right now. And so what can we do to make their lives better?

Paul Downs:
I’ve got a slightly different perspective on that. I think it’s really important to not necessarily just hand out money to employees, because once you do that, you can’t ever get it back. My particular industry is still quite uncertain. It’s just not clear to me who wants to buy big conference tables, and I think it’s important that the company remain healthy. I’m gonna err on the side of the company survives, because that’s actually the best thing for the employees in the long term anyway.

They’re already compensated well over market, and they don’t have any place to go to get more money in my industry. And I do a lot of messaging with my people about, “We work for the company. The company has to be healthy in order for it to take care of us. And sometimes the company takes care of us, and sometimes we take care of it.” I see this as a period during which we take care of it. None of them have had their pay cut, other than a brief period of unemployment that was mandated when we were shut down by the state. I took the PPP money and actually bonused people back in the spring to sort of top up for that period of unemployment. Other than that, everybody’s been working full speed, and they’re going to get all the pay they would normally get.

Laura Zander:
So you did give them a bonus. You did give something back to them.

Paul Downs:
I gave something, but now we’re at the end of the year. If I heard what William was saying, it would be like, now I would put my foot harder on the pedal and pay them more or bonus them more and try to buy loyalty.

Laura Zander:
I don’t know if that’s what he’s saying.

Paul Downs:
Okay, I’ll withdraw that. You’re trying to ensure loyalty.

Laura Zander:
You just did. You already did, because you did already give bonuses out to them.

Loren Feldman:
Paul, it sounds like you’re not terribly concerned that you’re going to experience the COVID churn next year. Is that correct?

Paul Downs:
No, I’m not personally. I mean, I could be surprised. I don’t know. Employees are what they are, but I don’t see it as likely, for me.

Loren Feldman:
Because…

Paul Downs:
Because as I said, we already pay over market. It’s a good place to work. I don’t see people having better alternatives.

Loren Feldman:
Paul, I think you referred to a side hustle earlier in this conversation that you haven’t mentioned to us before. Did you say it was in the restaurant business? What were you talking about?

Paul Downs:
So I have a son who’s autistic, who is now an adult. In the course of dealing with him, I entered into a relationship with a service provider who deals with intellectually disabled adults. They have an employment scheme they’ve been trying to establish as a nonprofit, which is a bakery operation to employ people like my son. It also employs regular people as well, because you can’t have an entire business staffed with autistic people. I’m on the board of the nonprofit that owns two bakeries and a coffee operation, a bunch of little micro businesses. In the course of running that, that’s how I got into the restaurant world.

Loren Feldman:
Interesting. We’re gonna have to talk more about that at some point.

Paul Downs:
If I’d thought about it, I probably would have given a more coherent answer, but that’s how.

Loren Feldman:
William, I’m curious, are there any signs of the churn you’re talking about that aren’t obvious when employees are thinking of leaving, things that owners should be looking for?

William Vanderbloemen:
Well, I’d say in general, shore up your compensation, and that’s not to buy loyalty as much as to make sure you’re not going on the cheap in a year that feels like you could, and then you’d end up losing people over a couple thousand dollars. Second thing is, there are so many Best Places to Work surveys out there, but if you’re not regularly taking one of those—that’s a blind 360 of your company culture—and there’s so many good ones. We have one, it’s totally free: theculturetool.com. Go and take it. There are 10,000 organizations that have taken it. You can measure yourself.

Laura Zander:
You’re so good. What’s the URL again?

William Vanderbloemen:
Theculturetool.com.

Laura Zander:
Okay, is there an 800 number, too?

William Vanderbloemen:
Exactly.

Paul Downs:
Operators standing by. [Laughter]

Laura Zander:
No, I love it. That’s a really great idea.

William Vanderbloemen:
Well, we were tired of the shortcomings of some of the ones we were using, so we just built our own and did it through a bunch of research. But anyway, I would say, Loren, you need to be doing a self check—kind of like going to the doctor—and make sure there’s not a problem in your culture. Because people will leave if the culture is bad and if the manager is bad. But then the third thing I’d say is, just be ready for the thing you weren’t ready for. I’ve already faced—

Loren Feldman:
Isn’t that easier said than done?

William Vanderbloemen:
It’s going to be a year of surprises. I had a mentor a long time ago tell me—and I’ve kept it to this day—“William, you need to keep a vomit list.” I’m like, “What are you talking about?” He said, “Of all your staff people, you need to know right off the top of your head the two or three that, if they came into your office at the end of the day and said, ‘Hey, have you got a minute? I need to talk to you about something,’—which we all know what that talk is. It’s the ‘I’m leaving’ talk. The first thing you do is reach for the trashcan, because you’re gonna vomit. Know who those people are, and take care of them, even if it’s inequitably taking care of them. Take care of them in a way that, if they’re really going to leave, it’s not because you’re not taking care of them, not appreciating them, not paying them enough, not creating a culture for them. And guard against this.” You will lose some people you didn’t think you would lose this year. Paul, I bet you lose somebody.

Laura Zander:
From a personal standpoint, I have never had to practice stoicism and a stoic approach to life more than I have in the last nine months. I think what you’re saying is, for me, that’s my way of getting through it. It is what it is. If I do the right thing, I pay them well enough, I make sure our culture is not toxic and we’re in a good spot. We’re listening. I can’t help it if somebody wants to move back to Chicago, and like you said, wants to move somewhere else or has changed their priorities. Everybody’s changed, and so it just is what it is.

Loren Feldman:
William, have you tried to quantify the cost of turnover? You referred earlier to how it’s more expensive to replace somebody than to keep somebody. Have you tried to put a number on that?

William Vanderbloemen:
Okay, everyone listening to this podcast, I’m not paying Loren to ask me these questions.

Loren Feldman:
Do you have another URL for us?

William Vanderbloemen:
I have blog articles, and you can spell Vanderbloemen however you want to spell it in Google—it’s the only reason we named our company that—so you’ll get there, and look for articles on turnover: “cost of turnover, Vanderbloemen.” And you’ll see, we’ve done really specific studies on what it means. And it’s scary, particularly if you get north of about $75,000 in salary. You lose one of those, and it is well into six figures, the replacement costs.

Loren Feldman:
You’re not saying to pay the new person. You’re saying just to replace them it costs six figures?

William Vanderbloemen:
That’s right, that’s right. You can figure it out yourself: How many meetings are you gonna sit through to hire the next person? How much do you get paid an hour? What are the soft costs on everybody involved? What’s the loss of momentum? What’s the loss of revenue? How long does it actually take, once you’ve got a new person, to get them up and running, where they’re earning their keep? We say it in sales all the time, “Better to keep a happy customer happy than to have to go find a new one.” Well, better to keep a good employee—even if it costs you more than you think it should—than to have to call me.

Paul Downs:
Hey, can I jump in and play the role of Jay? I’m going to just ask the question, whether you think it’s not also likely that the stress on the business in the last year has revealed your weakest performers, and that it may not be bosses cleaning house that contributes to the churn?

William Vanderbloemen:
Hmm, that’s good.

Loren Feldman:
Good impression of Jay.

Paul Downs:
I can try to imitate his particular delivery, too, if you want, but I think that that’s what he would be saying.

Loren Feldman:
Any thoughts about that? Is it possible any of you are sitting there thinking about the churn, and you have certain employees in mind that you hope will move on?

Laura Zander:
No, because we did that, for us, back in April. That gave us the opportunity at the beginning.

William Vanderbloemen:
Same, Loren, and we didn’t just get rid of dead weight. All of our people were good, but when we had to do our layoffs back in early April or late March—I don’t remember the date—I compared notes with my COO and one other leader on our team. Like, if we had to make this percentage of a cut, who do you think should go? And all three of us had the same lists independently drawn up, not one name different. It wasn’t that we had it in for them, or they were bad people, but it was just, “I know who we really cannot lose.” So the people that are shining are shining bright. We’ve had a lot of internal promotions even since this summer. We’ve had a nice little surge of business. I think this is a time where it’s like, “Hey, if you’re working your tail off, it’s going to show like never before.” That’s not the way Jay would say it, but yeah.

Laura Zander:
Same thing. I mean, we’re doing more with less people, and it’s unbelievable. It’s so impressive.

Paul Downs 29:00
In the course of this conversation so far, I’m picking out an assumption that the economy is going to continue to be pretty strong. Do you guys really believe that? I think it could really go either direction.

William Vanderbloemen:
Well, I think if it goes the other direction, you’ll have turnover as well.

Paul Downs:
But that would be more, if I’m going to have turnover, I think it’s much more likely that I’m just going to have to downsize. I’m staffed for $4 million a year and I know what $2 million a year looks like, and I may just have to go there, as opposed to someone just leaving. I mean, that can always happen, but that to me is a different event.

William Vanderbloemen:
What I’ve learned studying the job market as a search person is that churn happens most in the highest highs and the lowest lows of the economy. That’s just historical fact. So if it turns south, churn happens then. Some of it’s forced, some of it’s unforced, but I don’t think there’s any way around it. I’d love to find a way. I don’t know if I’m talking to Jay or Paul. I’d love to find a way to tell you you’re not going to lose anybody next year. But I’d rather tell you to be ready for it.

Paul Downs:
Okay, thank you.

Loren Feldman:
Let’s talk about the PPP issue. Let me see if I can articulate the issue correctly. Please correct me if I get this wrong, but basically, the IRS seems to be saying that if your PPP loan is forgiven, the loan then becomes essentially a grant, which means it’s taxable income. If you can’t deduct against that income, which seems to be the case, some owners are going to wake up and realize that they have to pay tax on more income than they were expecting. Do I have that right? Are any of you concerned about this?

Paul Downs:
That sounds correct, aAnd I think in an earlier iteration of the podcast, I couldn’t put my hand on why that might be a bad thing. Because personally, we got the money, and I still have the money. If it got converted into a grant, and then I had to pay some tax on it, I’m still way ahead by a couple of hundred grand. But if you were not able to operate, and you paid out all of your PPP money to your employees, you might not have any income or any cash to cover the tax bill that’s coming, and it could be quite bad. I think that people who are maybe in the restaurant industry or some of these other industries where it was really impossible to either operate normally or to sort of recover from the hit could be in a very difficult position.

Loren Feldman:
Well, let me let me ask William this, because William, I know you’ve tracked the PPP thing closer than anybody from the very beginning. This shouldn’t be a concern for someone in the restaurant industry if they are losing money. I mean, if you’re losing money, this is not going to be a problem for you, right? The trick is going to be, there are going to be some businesses that think they’re going to lose money, and then when the loan gets converted to a grant, they end up with a profit that they have to pay taxes on that they weren’t expecting. Do I have that right?

William Vanderbloemen:
The short answer is, Loren, I don’t know. I really don’t know anybody who’s studied the PPP more than our team, particularly our COO. We’ve talked to numerous accountants, including our own who works only with family-owned small businesses that are in growth mode. There are smart accountants that completely disagree on this, on how it will play out. My current opinion is that we took PPP money, we spent it on salaries. It will show up on our ledger as it’s exhausted. And my accountant’s current advice—and I’m gonna believe with her for now—is that, if it is taxable income, that we will be able to deduct the payroll money that we spent that income on. It’s just a wash. You just can’t double dip. You can’t not call it income, and then deduct the payroll in another spot in your ledger.

Paul Downs:
I think the way you described it sounds wrong to me. You pay it out to the employees, and no, you’re not allowed to deduct those expenses. And so basically, the forgiven amount just ends up as income without a compensating deduction from the paying to the employees. I was talking to my woodworking business owners group. All those guys were in the same boat that I am, which is they still had the money, because they were able to operate. And I said, “Well, I’m thinking of just taking it as cash and paying the taxes out,” and they’re like, “Oh, no, don’t do that. We’re just gonna buy equipment, because then we get a section 179 deduction that we can take this year that eats up the extra income. So it’s basically like getting a bunch of free equipment from the federal government.” That’s how they’re thinking about it.

Laura Zander:
Can I just interrupt? Six months ago, when we were talking about the PPP stuff, I think Loren would have said, “Paul, aren’t you going to go to jail for just holding on to that money?” Are you worried about getting in trouble?

Paul Downs:
Not at all. First of all, if you look at my books, money is fungible. Which money is it that I have right now? Is it the money that I made by operating profitably over the course of the summer? Or is it the money that the government gave me? They gave me money—

Laura Zander:
You just admitted on a public podcast.

Paul Downs:
I’m not worried about it. All I did was get money, pay my employees, operate normally. I haven’t done anything that’s wrong. Where’s the fraud? What was it?

Loren Feldman:
I think Laura is raising a concern that some expressed early on, that if a business applied for the money—for the loan—they had to need it. And if they didn’t need it, that could be a problem. And I think that’s what she’s referring to—the fact that you haven’t spent the money suggests—

Paul Downs:
I’m not worried about that at all. First of all, they asked me that question on April 15th, or whatever it was, where I was sitting in my office by myself, and all of our customers were shut down. And if you said to anybody, then or even now, “Is a guy selling huge conference tables likely to be in a good position a year from now?” the answer is: no. And it’s still no.

We do business with all kinds of people. A significant amount of my business comes from Midtown, New York, and there’s nobody there right now. I’m still just as concerned about the future as I was in April. And if that was the question: Am I concerned about the future? Am I worried about what’s going on? Yeah, I’ll stand up in a court of law and swear to God that I’m not sure that I’m not going to need that money.

Loren Feldman:
I think that changed over time, too. I think that has receded as an issue as the government has changed the rules. Laura, I’m curious about you. Are you concerned about the deductibility issue and a possible unexpected tax bill?

Laura Zander:
No, because I learned my lesson from being so concerned that I was going to go to jail in our old podcast [episodes] that I’m not going to spend time being anxious about it until the rules actually come through and until we find out. I just can’t do it again. This whole thing has been so emotionally exhausting with the uncertainty of the rules and how’s it gonna play out…

Loren Feldman:
So you’re not even thinking about it. You’re just waiting until you know something definitive?

Laura Zander:
Yeah, I don’t care. It just is what it is. There’s nothing I can do about it, and I’m not going to waste time trying to figure it out because we don’t know. I mean, if William doesn’t know, nobody knows. Once he tells me what the deal is, then we’ll know.

William Vanderbloemen:
We’re keeping our powder dry in case we have to pay a tax bill. But my current hope and understanding is if you received the money, and you spent the money, and it’s within a P&L, then the current understanding that I’m adopting is: you should be fine. But I’m also keeping money set aside in case I’m wrong.

Loren Feldman:
So none of us are CPAs, and I think we’ve kind of gotten three different approaches to dealing with this. And I think that makes the point that we should make, which is: be careful. Anybody thinking about this should not assume that they know everything they need to know. Let’s move on to another happy topic: Has anybody gotten their health insurance bill for next year yet?

William Vanderbloemen:
It’s amazing.

Paul Downs:
In what way?

William Vanderbloemen:
Our benefits guy [said] it’s just across the board. He manages probably 500 small businesses, and he said, “Across the board, rates are coming back lower. Insurance companies are freaking out that people are going to cut benefits, so they’re cutting costs everywhere they can to try and get things down to keep people from leaving benefits plans.”

Loren Feldman:
When you might have expected that, with a pandemic underway, rates would skyrocket.

Paul Downs:
I’ll add a data point to that. All these things are different state to state because states have different insurance regimens. But under Obamacare in general, if an insurance plan doesn’t spend out all the money that they collected in premiums the previous year, they’re supposed to give a refund. A lot of those plans did not spend out because people stopped doing voluntary medical transactions, so we actually got a refund from our insurer back in May.

They’re like, “Holy smokes, people just stopped going to the doctor. We’ve collected all this money in premiums, and we’ve got to give it back.” That could be part of it, that all of those plans are sitting on big pools of cash, and they have to go back to a state insurance regulator every year and justify their rates. They’re going to have a hard time going and saying, “We need to raise our rates.” “Oh, but you didn’t spend all the money you had last year.” We saw a very minor increase in two of the three plans that we offer and a decrease in the bronze level plan. It’s a wash, more or less. But that’s better than it’s been over the last 10 years.

Loren Feldman:
William, that kind of suggests that the same thing that you see happening with employment next year could happen with medical procedures. There could be pent-up demand for all kinds of things that people weren’t going to the doctor for this year.

William Vanderbloemen:
Fascinating. Yeah.

Loren Feldman:
Laura, have you gotten your plan for next year?

Laura Zander:
I haven’t looked at it. But this was the very first year that we had ever offered health insurance, so I don’t have a lot to reference. So I don’t know. I know our home insurance has been quite an issue and quite a problem. We’re having trouble getting our house insured.

Paul Downs:
Is that because you’re in fire country?

Laura Zander:
There was a fire 100 yards from our house. Yeah, that’s probably why.

Paul Downs:
Yeah, that might have something to do with it.

Laura Zander:
Yeah, you think? I don’t have a lot to say on the health insurance stuff. This is a whole new experience for us.

Paul Downs:
I just have a quick question for William. Do you know approximately how much you pay to ensure your people?

William Vanderbloemen:
Not anymore. I used to and now my COO manages all that. I just know if we have a big increase or not.

Paul Downs:
It’s the second biggest bill I pay every year.

William Vanderbloemen:
Yeah, it’s huge. We don’t fully underwrite insurance. We subsidize the premium, but not fully.

Paul Downs:
Right. Even taking that into account—I do the same thing, share costs with my employees. But it’s still the second most expensive thing we buy as a company.

Laura Zander:
Even more expensive than cost of goods?

Paul Downs:
Yeah, like from a single thing. I’ve got COGS [cost of goods sold], and that’s a bunch of stuff. But in terms of writing checks to one company for one thing—

Laura Zander:
Ahhh, yeah. Great point. I don’t think people realize that. It’s for us, six figures, for sure. Well beyond six figures.

Loren Feldman:
You just started doing that last year?

Laura Zander:
We just started doing it this year: 2020.

Loren Feldman:
And has that worked out well for you? Are you happy with the way it went?

Laura Zander:
Yeah, more people took advantage of it than we thought were gonna take advantage of it. It makes me happy to know that people have insurance.

Paul Downs:
I’ll tell you a couple of data points on some of my hourly workers. I take the cost of covering them and their families and divide it by the number of hours worked so that they have some sense of what is insurance in dollars per hour. It ranges from $4 to $10 an hour in total cost.

Laura Zander:
That’s a great way to do it. That’s a great way to drive it home and make it understandable.

Paul Downs:
Yeah, because you’ve got someone who’s making 18 bucks an hour, and we’re picking up the insurance bill. I was like, “Oh, by the way, you’re actually getting paid $28 an hour. Just so you know.”

Laura Zander:
Do you do a 401k as well?

Paul Downs:
We have what’s called a “simple plan,” which is a version of that. That’s available for everybody, and about half of them take advantage of it.

Laura Zander:
Okay, but you don’t throw anything in there?

Paul Downs:
We do. We throw in up to 3 percent of their wages, and they still won’t sign up. I’m like, “Well, okay. I offered you free money. You didn’t take it.” I’m done with that. But health insurance is just super expensive, and I think a lot of people don’t realize how expensive it is.

Loren Feldman:
I’ll do my Jay impersonation. He likes to point out that the minimum wage discussion often ignores health insurance. There’s a huge difference between a company that’s paying minimum wage and no health insurance and one that’s paying something in that arena plus health insurance.

Paul Downs:
Absolutely. And then, speaking of the vomit conversations, one of my very best workers, a guy who doesn’t have great English, came into my office in August: “I’ve got to speak to you.” And I’m like, “Oh my God. You’re not leaving.” Because we really rely on this guy. What he told me was that his 13-year-old daughter had just been diagnosed with stage four esophageal cancer. What he was asking me was, would it be okay if he took some hours off here and there because his wife had had to quit her job, and he needed to watch his other daughter. And I was like, “Well, sure. But beyond that, what can we do to help?”

He didn’t have the English to really answer that question. But thinking about it, what I did was offered to pick up all of his deductibles and any bills he had, because this guy is not prepared to deal with the American medical system. Going through the last few months, he has brought me a few bills, but I was worried that they were getting lost in the mail. You never know what an insurance company will do. I finally persuaded him to give me access to an account we set up with the insurer so we could actually see all the bills. The insurer does not make this easy. You have to download a spreadsheet, and the spreadsheet is in a bad format. You can’t actually sum all the transactions. A lot of things had to happen before I could see the bills.

But his daughter’s already racked up more than half million dollars in bills just since August. He personally would have been on the hook for more than 9,000 bucks so far. Then that clock is gonna reset on January 1st as the new plan year comes in. How does an ordinary person deal with this? I’m spending a fair amount of time and company resources and my own personal resources to make sure this guy doesn’t end up bankrupted by this. I don’t even know what the moral of the story is, but it’s just a sickening situation for anybody who actually has a need for medical care.

Laura Zander:
Well, I think the moral of the story to me, Paul, is that 30 minutes ago, you said, “I’m not giving anybody raises, and I’m not giving anybody bonuses.” But then you’ve just told us five stories of all these things that you do do to make your business one of the best places to work.

Paul Downs:
Well, that’s what I’m saying. Sometimes you can take care of the company, and then the company can take care of you. Everybody in the company is aware of this gentleman’s situation, and they all know that they’re working to help him in this situation. And if it happened to them, hopefully, we’d have the resources on hand to help them, too.

Laura Zander:
That’s really cool.

Paul Downs:
That’s why the company has to be healthy. And that’s why you don’t just hand out money to employees, because as I said, once it’s there, you can’t get it back.

Loren Feldman:
I have one quick question for all of you. We had an item in today’s Morning Report that talked about business owners starting to think about whether they will require employees to be vaccinated once vaccines are available. Real quickly. Have any of you guys thought about this?

Paul Downs:
Boy…

Laura Zander:
I know, I saw that, and I immediately told Doug. I’m like, “Look at this, Loren says that we might be able to require people to get the vaccines!” That’s fascinating.

Paul Downs:
I can easily see both sides of the argument and I think that you might make the case that we require employees to do any number of things to be safe in the workplace and to not endanger themselves or their fellow workers, including all kinds of safety equipment and all kinds of safety procedures. I don’t think that, conceptually, it’s different from requiring people to wear a breathing apparatus when they’re working in a difficult situation. But you’re going to run up against a group of people who just do not want to do anything like that and see that as an imposition.

Loren Feldman:
Do you anticipate that at your place?

Paul Downs:
I’m not sure I would require it. We’re not public-facing. I think that I would probably put it out to my people as a discussion, like: “What do you think we should do here?” In case there’s somebody who strongly objects, then we would at least know who it is.

Loren Feldman:
William, have you thought about it?

William Vanderbloemen:
Yeah, a little bit. I appreciate you putting it in the Morning Report, which I read every single day.

Loren Feldman:
Thank you, William.

Laura Zander:
Every morning, you mean, right?

William Vanderbloemen:
It’s my first thought. [Laughter] Anyway, Loren, I think it’s gonna be a different answer for everybody. I live in Houston, Texas. So the city of Houston, to give you a sense of our spirit here, there’s no zoning allowed in Houston. People don’t know that. It’s not legal, and it’s so Texan. It’s like, “It’s my dirt, and I’ll damn well do what I want with it.” Right?

Loren Feldman:
You can build a skyscraper wherever you want.

William Vanderbloemen:
It’s why if you fly over Houston, you say, “Oh, there’s the skyline. No, there’s the skyline. No, there’s the skyline.” Trying to force Texans to do anything is pretty tough, and you’ve gotta choose your battles carefully. I doubt very seriously I’ll have to force that. I think our people, which is 72 percent millennials, they’re going to line up for it.

Loren Feldman:
What about your church clients? It could be an issue there. Do you see them requiring it?

William Vanderbloemen:
You know, I haven’t seen it. But your article was prescient, and we’re gonna send it out to people because we thought, “Hey, have you considered this? Because are you really going to take your kids to a church where they’re not requiring their people to get vaccinated?” Etc., etc., etc.

Loren Feldman:
Laura, have you thought about it?

Laura Zander:
Well, I’m sure we’re not going to require it. We just won’t. Like William said, we’re in Nevada, and it’s a little bit of a Wild West.

Loren Feldman:
And Texas.

Laura Zander:
Yes, and we’re in Fort Worth, so we probably won’t. And help me understand this. If we only have one or two people who don’t do it, then aren’t they the only ones that are in danger anymore? So if they come in, and they’ve got it, aren’t we all vaccinated, so we’re fine?

Paul Downs:
Probably. Yeah, that sounds right.

Laura Zander:
We have a couple of hippie anti-vaxxers who probably won’t do it. But you know what, fine. Then if you want to get it, go for it. The rest of us will be fine.

Loren Feldman:
I think Paul’s point about the public-facing issue is important there. If it’s just your group, that’s one thing. If it’s in a restaurant, or somewhere where people are coming in, it makes a difference.

Laura Zander:
Yeah, really great point. That’s a really, really good one. So yeah, on the public-facing side, we probably will have to have a strong conversation. I hadn’t really thought about it from that side.

Paul Downs:
I bet I could get most of my people to do it, because if we did, then we’d be able to get rid of the masks, and everybody hates those.

Loren Feldman:
You know, that’s a great way to sell it, isn’t it?

Laura Zander:
Yeah, super smart. Really, really, really good one.

Loren Feldman:
I like that. All right, guys, my thanks to Paul Downs, William Vanderbloemen, and Laura Zander. As always, thank you for sharing.

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.