Episode 10: My Employees Are Freaking Out

William, Dana, and Laura and their businesses are having very different coronavirus experiences. While Dana and William are expecting little in the way of revenue, Laura’s online yarn business is thriving. But they’re all facing challenges in managing their employees: “It's been amazing to see just how hard folks are working. Are they concerned about a layoff? I'm sure they are. I would be too.” Plus: finding ways to stay connected to customers even while the business is closed.

Guests:

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

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

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

William Vanderbloemen: “I mean, obviously, if [churches] aren’t meeting, they’re not hiring. If they’re not hiring, they’re not hiring me.”

Dana White: “They’re not understanding why they’re not getting paid throughout the pandemic. Some of the comments have judged me as a business owner. ‘If you were a real business owner, you’d be able to support us through this time.’”

Laura Zander: “Our Reno business and the online business, I mean, I hate to say it, but our numbers are really high. They’re really good right now.”

Full Episode Transcript:

Loren Feldman:
Welcome, everyone to another coronavirus, special edition of the 21 Hats Podcast. If you hear a little buzzing in the background, I’m not in my usual podcast studio and that background buzz is being donated generously by the leaf blowers in my neighbor’s yard.

Laura Zander:
They’re at least six feet or six feet away from you though, right?

Loren Feldman:
From me, but not from each other which is a little concerning…

Laura Zander:
With a blower.

Loren Feldman:
Yes, exactly.

William Vanderbloemen:
Loren, I feel your pain. We’ve gone remote at our work and I have lost track of how many people’s children I’ve seen run across the background in diapers and the dogs bark or all the things.

Loren Feldman:
I’m so glad this is audio.

Loren Feldman:
Let’s get a quick update from each of you. I want to hear how you’re doing, where you stand with your businesses. Dana, we last spoke with you two weeks ago when you were still focused on what you needed to do to keep your hair salons open in Detroit. I gather that’s no longer possible.

Dana White:
So the governor did issue an executive order for pretty much all non-essential businesses to close. So we are closed. I closed about two or three days before she required us to close.

Loren Feldman:
Why did you do that? What prompted it?

Dana White:
I was concerned that there might be somebody who comes into the salon and might infect my staff. No matter how clean we were in the salon, we couldn’t control that. The other thing was the volume. On our busy days, wee were seeing about half the volume that we normally would on a busy day. So when I looked at the numbers, and I thought about my staff, I went ahead and decided to lay off everybody. My network told me that this is coming, and I wanted my staff to be able to file for unemployment before the mad rush.

Loren Feldman:
Laura, when we spoke last week, you had just gone through a tough layoff at the company you bought in Texas but your online yarn sales were holding up pretty well.

Laura Zander:
Kind of same thing. We did a layoff. We’re in much better shape. I think that we’re going to be able to afford—especially with the paid leave acts—we’ll be able to afford to keep everybody and pay them full-time, even if they aren’t able to work full-time down in Texas. Our Reno business and the online business, I mean, I hate to say it, but our numbers are really high. They’re really good right now. Both of our states, both Nevada and Texas, are in counties that are in lockdowns as well. But both of our businesses are excluded from those lockdowns…

Loren Feldman:
Because you’re distribution businesses?

Laura Zander:
Yes, in Nevada, manufacturing, distribution, and storage is excluded. Those are essential businesses. And then in Texas, if you are supplying online sales, then it’s excluded. So as long as you’re closed to the public and you’re employing the health health regulations…

We’re still operating. I mean, we have a half staff in Texas so that we can keep people as far away from each other as possible. They’re way more than six feet apart from each other. But yeah, we’re actually doing okay. If you go look at Google Trends, you’ll see that up there with toilet paper is how to knit. We’re getting more and more new customers. In fact, we’re launching on April 1st—typically they call it a knit-along when a whole bunch of people get together and they knit on the same project at the same time—we’ve been planning for about two years to do a shit-along where we have custom toilet paper made—

Loren Feldman:
You love telling us about that, Laura. You bring this up every opportunity you get.

Laura Zander:
You know what, I had this idea forever ago. I’m not jumping on the toilet paper bandwagon. But anyway, so we’re launching our shit-along next week. There’s a yarn called Comfort that we’re going to be using, so we’re really excited.

Loren Feldman:
That’s great. William, this is your first time with us in a while. How have things been going for you and your business? Is it operating?

William Vanderbloemen:
Well, that’s always the question, isn’t it?

Loren Feldman:
No, it’s not. You have a great business.

William Vanderbloemen:
You know, it’s interesting. It has been a while. We were very harried in January, in February, absolutely the best start to the year we’ve ever had, which was a real blessing.

Loren Feldman:
And why was that? What was going on?

William Vanderbloemen:
I think some of the things we’ve talked about in previous episodes where we set up to scale, we have a new CEO in place, our systems are taught rather than caught. That flywheel finally hit a point where it was turning, if that makes sense.

Laura Zander:
It’s not that January 1st, everybody decides for their New Year’s resolution to go to church?

William Vanderbloemen:
That happens every year. Everyone’s gonna lose 10 pounds and balance their checkbook and hire that new staff person. That’s a very normal surge for us. I’m talking January, February over previous January and Februarys—much, much higher. We were bemoaning the fact that we might not have a March that was 20 or 25 percent better than last March. And boy, I’d like to eat my words.

Loren Feldman:
So what happened?

William Vanderbloemen:
We’re in very uncharted territory, Loren, for a couple reasons. And I want to learn from you all on this one. One, we’ve never been through a downturn in charitable giving. So we started in the Great Recession.I’m the idiot who quit a stable job and started a new small business that was a new idea for churches in the middle of the worst recession we had ever seen. We came through that, and in a lot of ways, it was helpful, because we started small when there was little business and we could learn our trade. But I don’t know the corollary if giving drops by 10 percent, then our business drops by 10 percent. I don’t know that corollary at all.

Then compounding that ignorance, the way I think you tell the future is by looking at the past. It’s pretty repetitive. You look to the past and say, “When has this happened before?” Everybody says, “We’re in uncharted ground.” There has never in human history been a time when people of faith—all faiths, everywhere—have been restricted from gathering for a number of weeks. That’s never ever ever happened. There’s no real way to know. I mean, obviously, if they’re not meeting, they’re not hiring. If they’re not hiring, they’re not hiring me.

So we know that, and we can withstand a blizzard easy. We’re built to withstand a winter. I don’t quite know what happens if it’s really an Ice Age. If you follow the former preacher with metaphors—those are kind of the three phases we’re looking at. And I think it looks more like winter to us.

Loren Feldman:
So now you have no revenue coming in at all, essentially?

William Vanderbloemen:
That’s right. Well, we’ve got revenue coming in, because we built things, but we have no sales coming in. In May and in June, we’ll feel that. But what that means is—we’ve decided because we have been careful with our cash—we’ve said, “Okay, serve your clients as best you can.” But even the searches we’re doing right now, most people are like, “Let’s wait till we can interview the guy face to face.” So everything has sort of hit pause and now we’ve taken time to say, “All right, here’s where we’re going to plant seed, and the fruit will come later.” And so we’ve spent…

Laura Zander:
I was just going to say, how interesting that they want to interview face to face when—and I know that’s an isolated case—but there’s the potential that the new church is more online and more digital than ever.

William Vanderbloemen:
That’s the trendy thing to say, but I think you’re dead wrong.

Laura Zander:
Interesting.

William Vanderbloemen:
Not to get all scriptural on you, but whether you’re Jewish or Christian, the creation narrative in Genesis starts with, “God creates the heavens and the Earth. He creates light, and he says, ‘That’s really good.’ It’s a benediction. ‘This is good.’ And then he creates the Earth and he says, ‘It’s good.’ And he goes through several things. He gets to creating us, humans, and looks at us and says, ‘That’s very good.’”

So there are all these benedictions: good, good, good, good, good. The first malediction, the first curse in the Jewish and Christian scriptures, the first thing God says, “This is not good.” He says, “It is not good for you all to be alone.

There’s a thing in the people who we work with [where] you can’t replicate physical human connection. And I don’t know if you guys have noticed it, but there are more people walking up and down our sidewalks at the beginning and end of the day right now. People are just dying to see each other, even from six feet away, whether it’s writing the messages on the sidewalk in chalk for people or…

Virtual has been awesome, and in a lot of ways, I’m so thankful that this didn’t hit until the church was ready to go online and giving could happen digitally and all those things, but it’s really a Bandaid. It’s just a bridge. I predict that when this is over, there will be a storm surge of attendance at religious gatherings.

Laura Zander:
See, that is so interesting. I don’t mean to sound sacrilegious, but our industry, the knitting industry, is a religion in its own right, if you will. We all worship together, we kind of get together. It’s meditative, blah, blah, blah. But what we’re seeing, because our industry is very community and in-person focused as well—it’s just knitting clubs, knitting groups, knitting guilds, all these events, all that kind of stuff—we’re seeing this new model of the hybrid really taking hold, where we’re using digital, Instagram Live and all of these digital technologies. We don’t think they’re going to go away.

We think that it’s going to end up—because so many of the small businesses and the small gathering places we think are going to go away—that it’s going to have to end up being a mix of you have to have a good digital presence and a good digital personality. Plus, you have to be somebody who is warm and welcoming in person. So, in our industry, I do see the resurgence of people flocking to the shops, you know, to our churches, if you will. But we think that there are some really innovative, interesting things that are going to be happening digital-wise, because, as we all know, this isn’t going to go away. I mean, the virus stuff is here to stay.

William Vanderbloemen:
So, first of all, I totally agree with you. There will be some things in our clients’ work that will go digital. I think a lot of committee meetings, I think of a lot of small group stuff, I think of the cost-effectiveness of doing a children’s ministry online rather than having 1,000 volunteers, and letting people do it in their homes, which connects families. So there are a lot of cool events that’ll come, but the baseline of gathering together, like the oldest word for church is the “gathering.” That’s just not going to stop.

So for us, it bifurcates. There are the really big churches, and it’s thousands of people gathering. Well, they’re gonna have a whole different mindset than the normal church. The normal church in America is 100 people who get together, and they just don’t have the data. This is not a massive business. This is eight or nine families that all have cousins related to one another, and it’d be like telling them to do family dinner online, which we tried doing last week. Better than nothing, but it’s still just a bridge.

Loren Feldman:
So Wiliam, where do you stand? Is your business still operating? Did you have to lay people off? What’s going on?

William Vanderbloemen:
Not clear yet. The CARES act, I guess is the right word for it, that they’re still debating in the house, that the Senate passed, has a big effect on us. I know, reading the update this morning, there’s a lot of consensus that maybe it’s not enough, but it’s certainly a help. We built cash reserves for crises. Frankly, I don’t know. I’ve sat and beat myself up, Loren, over and over and over. “William, why didn’t you build five years of cash reserves or ten years or some ridiculous pile of money?” And it’s because…

Laura Zander:
Because you’re not Richard Branson. [Laughter]

Dana White:
I totally beat myself up over this.

William Vanderbloemen:
But I sit and beat myself up and say, why didn’t I see this coming? Well, we have all of these, “If William’s plane went down, this is how it works, and it’s going to work fine. If we lost three consultants, this is how it would work. If there were a PR nightmare, this is how it would work.” We never foresaw, “What if churches couldn’t meet for six, eight weeks?” So we’re flying blind, Loren. I don’t know.

I do know that on the other side of this, there’s gonna be a massive need for a different kind of leader. At the large church, it’s going to have to be somebody who can preach from their iPhone with their kids hanging off their neck like Jimmy Fallon is doing right now and command a room. That’s going to be different. And there are going to have to be online kids’ pastors, and nobody knows how to hire for that.

And in our school practice, schools move slightly faster than glaciers. Barely, right? So they have been the last to the party on online education unless you go to University of Phoenix or one of the newer kids, and all these old established schools that hire us are having to find a new kind of headmaster who can think through a digital lens. So I think our business is very bullish once we get through this chasm. I just don’t know how long the chasm is. So we’re trying to figure that out, and does that mean layoffs or furloughs or all kinds of creative things? Fortunately, the help that the government is providing is offering some help. Like everybody, I wish it were more, but it is some help.

Loren Feldman:
Dana, I think I heard you start to say you’ve been beating yourself up over not planning for something like this. What were you thinking?

Dana White:
Why didn’t I have three months of cash reserve ready to go? Why didn’t I work harder? Why didn’t I make more money? Why was I tired? If I woulda, coulda, shoulda. For like three or four days after the executive order was passed, it was: to open or not to open? To stay open or not stay open? And after speaking with my mentor—the business community here in Metro Detroit has been amazing—speaking with other Goldman Sachs alum, they said, “You’re asking the wrong question. The question isn’t to open or not be open. You’re gonna stay open. The question is, who is Paralee Boyd once you reopen. And how do you keep and engage your customers while they’re away?” So that’s what I’ve been working on.

It’s, you know, doing the work. We, similarly to William, we don’t have any revenue. We can’t operate and not be within six feet of our customers. So if we can’t be within six feet of our customers, we have to close. It’s a matter of, how long does this go and how do you keep your customers engaged? A lot of people said, “Well, Dana, why don’t you do gift cards online?” My guests don’t want to pay two, three weeks in advance for their service. They want to get their service, pay and go. What I’m working on now is, who is Paralee Boyd when we reopen? I’m focused more on looking forward. Because I know we’re going to be jammed. We’ve had customers email us and say, “I hope you guys are going to be ready.”

Loren Feldman:
Have you thought about things you might be able to do to help during this period? Everybody I know is a little bit concerned about how quickly their hair is growing and what they’re going to do about that before their next Zoom call.

William Vanderbloemen:
My favorite tweet so far is, “I guess we’re two weeks from finding out what everybody’s hair color really is.”

Dana White:
My guests’ hair color is not the biggest thing. For us, it’s a matter of just doing it, because my guests come to me to do their hair. Whereas other people do their hair everyday at home, sometimes my guests come to me to get their hair done. What I’m thinking about doing, and maybe the time will allow for this, is doing hair care kits at home, which they can pick up or we can ship. But again, that takes time. I’ve got the trial kits coming to me right now from Texas and seeing what that looks like. Does it work? Because I’ve got to try it on myself first. And then if it works out, great. Then we can start doing that, depending on how long this goes. If it goes until April 13th, we don’t have enough time. I don’t have enough time to do that. But if it goes as long as as people say it’s going to go, I will have time for that.

Again, the focus for me is looking forward, saying who is Paralee Boyd? Are we a company that ships and does videos on hair care at home? Are we a company that modifies their processes and adds new treatments and services for when we reopen? Time will tell.

Loren Feldman:
Can you do both?

Dana White:
So we can, but again, I’m the type of business [where] I don’t want you to do your hair at home, because we can do it better in the salon. I might change the narrative from doing your hair at home to, “Hey, you’re traveling, this is what you can do when you’re away. But when you come back, come to us.” I don’t want to do, “Hey everybody, don’t come to us anymore. Here’s what you could do at home.” I’d rather say, “Hey, if you’re going on a trip and can’t get to us, here’s what you can do.” So that might be the avenue once we reopen.

William Vanderbloemen:
Dana, that’s exactly what we’re faced with. So, like for us—I don’t want to over spiritualize things, but—the worship service is the echo of heaven for people who believe, whether that’s a Muslim, Christian, Jewish person. And it’s discombobulated, and it’s human, so it’s not perfect, but it’s the echo. Well now with online, we’re having to do the echo of the echo. That’s kind of how we’re finding it. This is the best thing possible for now, but it in no way replaces the fundamental need for the service itself.

Dana White:
Exactly. Yep, that’s my thing. And I’ve had guests say to me, “I would do my hair at home, but you guys do it better.” And that’s it.

William Vanderbloemen:
That’s it.

Dana White:
I mean, you can do it, but having a stylist stand behind you and do your hair is very different than you raising your arms up and having to do your hair, in the back.

Loren Feldman:
And that will always be the case, but maybe there’s an opportunity to just help people get through this period. You know, here are some tricks, just for now.

Dana White:
Agreed. But time may not allow for it, right? So if I had known in January that on March 15th, the governor was going to shut it down, I would have had kits and bags and brushes and everything, videos posted, and everything ready. But if it goes to where the executive order said till April 13th, I don’t have time.

Loren Feldman:
I wouldn’t bet the house on April 13th being the time.

Dana White:
Exactly. So what I’m doing is saying, “Okay, it’s gonna be longer. How can we get these hair care kits out?” And then say, “Okay, if it is going to be longer, how do we take the hair care kits and say, ‘Hair on the go when you can’t get to us?’”

Laura Zander:
Dana, is anybody doing how to make your own hair care kit at home? You know everybody right now is making their own antibacterial soap or their own sprays. Has anybody done a whole how-to using the stuff that you have in your house?

Dana White:
No, no, no, no. You’re talking about black women and their hair. They’re going to go to the store and get shampoo before they try to make something in the home. Hand sanitizer’s different. Two ingredients: aloe vera and alcohol and it evaporates and you’re done. When you’re talking about putting something in your hair, they want to go to a trusted brand that they know.

Laura Zander:
Even during a pandemic?

Dana White:
Absolutely. Some women are going to wear protective styles until it’s time to come out and then come to Paralee Boyd and get their hair done. Again, it’s an understanding that the hair culture for my market is very different. We can’t wash our hair every day. It would break off, be dry and brittle. It would be a mess. The natural oils in our hair help preserve our hair, but you’re not supposed to keep the natural oils in your hair for weeks and weeks and weeks at a time.

If I could get a hair kit together in the next two weeks, I’m okay. It’s not as soon as it would to have been helpful. But even for me, I’m going to the store and buying shampoo. I would never mix anything in my house—and I’m pretty stocked—to put on my hair and risk damaging it for when this is over.

Loren Feldman:
I’d like to talk a little bit about your employees, and how you’re dealing with this, how stressed out they are. Laura, I gather some of your employees may actually have been sick with the coronavirus. What’s it been like with your employees?

Laura Zander:
You know, it’s funny that you asked that because I wanted to ask the same question. That’s one of the things that I’m really struggling with, is that I am not panicking about this, and it’s actually causing me a lot of anxiety that I don’t have anxiety, and I don’t know what’s wrong with me. Some of my employees who are healthy, who are coming in and working, are just freaking out, and I don’t understand what people are freaking out about. Especially for us. They still have their jobs. We are doing really well right now. Nobody’s sick.

Back in January, we went to a big trade show with probably about 15,000 people in one hotel in New York. I’m venturing that about a third of the people got really ill for a week or two with some sort of flu. We didn’t know what it was at the time. And then we brought it back to the office and then everybody at the office was sick. We kind of collectively think that this has already run through our office a few months ago. We don’t really have anybody who’s ill right now.

I was going to ask Dana and William what their experiences are. One of the things I’m trying to work on is developing some empathy because I kind of thrive in chaos and in crisis. It’s what I grew up in, and it’s my comfort zone. I’m having a little trouble not getting frustrated with people for freaking out.

Dana White:
I have a question, Laura. Would you be less comfortable if your sales were 90% down?

Laura Zander:
I definitely would. In Texas, that business is losing money every single day. Absolutely.

Dana White:
But overall, if it’s not just Texas, if just looking at the numbers, you saw, “Whoa, 90 percent.” I think that’s my point. I think you have a comfort of funding. You’re making money. There’s some revenue coming in. And I think that’s part of the reason why you’re not panicking. I think you’re spot on, you’re not panicking because you know yourself, and I think you thrive not in chaos, but I think you thrive in productive chaos.

Laura Zander:
Totally. Yes. But that’s my question: we are doing okay. Nobody’s going to lose their job. In fact, we’re actually understaffed right now. I’m having trouble identifying with the panic that some of my employees are having when things are comfortable for them.

Loren Feldman:
William, what’s your situation? How stressed are your employees?

William Vanderbloemen:
Well, it’s hard to tell virtually, isn’t it? That’s the trick, right? Right now, most of our team members either are very active in their church, or have been on a church staff. They’ve all gone into crisis mode and have probably given me the most productive week we’ve had in years. It’s been amazing to see just how hard folks are working. Are they concerned about a layoff? I’m sure they are. I would be too.

I think what I’m having to do as a leader is, on the one hand—and I think we’re going to see this in our clients’ needs. They’re going to need a senior leader who is better at the soft skills than ever because the need for empathy, the need for a pastoral sense is going to be needed from every CEO in the world—not just people who are pastors for a living. On the one hand, I need to be pastoral and compassionate. On the other hand, I’m eternally optimistic. Every glass is half full. I have to be careful not to be Pollyannaish with them so that if something sudden were to happen, or if we were to cross a line where we’ve got to make some really sudden changes, they’re not caught off guard saying, “Wait, we never saw this coming.”

Laura Zander:
Same page. I’m on exactly the same page, William.

Dana White:
I’m not. My staff is freaking out, and several of them have threatened to quit.

Loren Feldman:
They’re furloughed, but they’re threatening to quit, you’re saying, for good?

Dana White:
Yes.

Loren Feldman:
And why?

Dana White:
Because they’re not understanding why they’re not getting paid throughout the pandemic. They don’t understand. My managers do, and that’s really hard. Some of the comments have judged me as a business owner. “If you were a real business owner, you’d be able to support us through this time. If you knew how to manage money better, you’d be able to support us through this time.”

Loren Feldman:
There are good answers to those questions, Dana. Are you struggling with that? Or do you feel comfortable with the answers you’ve given?

Dana White:
I feel comfortable with the answers I’ve given because they’re honest answers. There’s nothing I’m hiding, and there’s nothing… that’s our culture, right? There’s nothing that I’m hiding, and there’s nothing that I’m not willing to share. I’m not taking it personally. I understand that they’re uncomfortable—extremely uncomfortable. I have my managers who support me because I’ve explained to them and shared with them step by step what I’m doing and why I’m doing it. But my concern is that, when we open, we will be short-staffed. My guests have said, “I hope you’re ready when it’s time to open because you’re going to be swamped.” My managers have told me they don’t really…

Loren Feldman:
…understand how the business works.

Dana White:
Well, it’s that. And they don’t want to leave Paralee Boyd. Like they literally were saying to me the day before I made the decision, “We support you. We love working here.” We did a check-in three days before, and everybody chimed in, “Love working here, love working with Dana. Love it, love it, love it, love it, love it.” And then this hit, and now, “I want to quit, I want to quit, I want to quit.” It’s panic.

Loren Feldman:
Dana, are you up on the stimulus package that William was referring to? It hasn’t completely passed yet. It hasn’t been signed. But there may be help in that package for your business and for your employees. Do you know what you need to know?

Dana White:
Yes, but the concern with that is the timeline. My staff wants money today, and they want guarantees today. So a loan, disaster relief, takes longer than today. My managers are doing a great job managing their demand. I’m doing all I can to get paperwork and everything I need to submit. So I don’t want to respond to a knee-jerk reaction and get a loan, and all of a sudden, “Oh no!” Because I was panicking too, I signed up for something that probably didn’t work out for me in the back-end. So it’s about having these conversations with your accountants to make sure you know to extrapolate what this looks like over the next year.

Loren Feldman:
Wiliam, do you have any thoughts on that? I know you did a Facebook Live. You’ve studied the package, and you’re trying to help other businesses and other organizations understand what’s in it. Do you have any advice for someone who’s asking the question: What do I do until I can apply for those loans and actually get them, which could take who knows how long?

William Vanderbloemen:
Yeah, well, all the guidance that we’ve gotten—and I’m not the expert on this. Our COO combed through all 880 pages, and he’s a Harvard MBA, and all the things that I’m not, so he’s the one that should answer the questions. But everything we’re seeing is that despite the bureaucracy that is undoubtedly coming, the message from the SBA to local lenders is very clear: Get money in people’s hands quickly. In fact, I went ahead and reached out to our banker before the thing passed, and they already had things to us. I think it’s gonna be quicker than the ordinary bureaucratic sit-on-hold forever kind of thing. The reason we took great interest in it [is] it started with a personal interest of, if I’m going to have to pay the backend tax of this $2 trillion thing later, I might as well enjoy the front-end now. So how can this help our business? But on about Saturday or Sunday of last week, nonprofits and 501(c)(3)s and churches were all added into the bill—they were previously not included.

Well, this is a lifeline to the normal-sized church of 100 where payroll’s 65 percent of their overhead. We did a Facebook Live. And if you go to Facebook and just type in Vanderbloemen—and you can spell it however you want—then you’ll find a link there. We set up a separate website to pool resources on Covid, and it’s everything from how to do remote meetings to this SBA bill. It’s churchcovid19.com, and there you’ll find an hour-long, detailed presentation on, how do you calculate what you’re actually going to get from the government? How do you go about applying for it? It’s very granular. If you’re the semi-ADD CEO, find someone else on your staff to watch it. But Loren, this week, we’ve had five times the traffic on our website of any other week ever. And it all goes back to that Facebook Live event, because you can search all over for, “What does this bill mean?” And you’ll find a 600-word blog post here or there with a sentence or two for small businesses, but nobody’s really dug into it yet. I’m sure there’ll be others, but as we did our Facebook Live, nobody else had done it, and it really caught on. That’s where I’d point people.

Laura Zander:
I’m going to go watch that today.

Loren Feldman:
You can also find the link in today’s 21 Hats Morning report. If you haven’t subscribed to that you can do so at 21hats.com.

William Vanderbloemen:
And Loren, sorry, you told us to talk over each other, so I will.

Loren Feldman:
Go!

Laura Zander:
I’ve been trying!

William Vanderbloemen:
I was talking to my COO today, and he said he’s shocked how many accountants, lawyers, and CFOs are calling him asking him for more guidance, because apparently he got it right. And the stuff that’s coming out now from Inc. and from E&Y all is very congruent with what we put out there. So we’re not lawyers, we’re not accountants, but I think it would be helpful.

Laura Zander:
Well, you have a direct line to God. So…

Dana White:
Hey, hey, right. That does it, that does it. Laura, did you have a question for me? We were talking earlier. I thought you might have.

Laura Zander:
You know, I was just gonna ask if you’ve done a GoFundMe or anything? You know, we’ve seen that with some of the smaller shops—the retail stores that have had to close in our industry. They’re just putting up a, “Hey, give me some money.”

Dana White:
Yeah, I’ve seen them, and their numbers are dismal. I’ve seen a couple of them here. They’re asking for $1,000, they’ve got $25, $100.

Loren Feldman:
But Dana, you feel confident that you’re on top of the stimulus package and know what you need to do there.

Dana White:
Yes, you know, this has not been a downtime.

Loren Feldman:
Are you doing it all yourself? Are you getting help?

Dana White:
I’m doing it all myself. So it’s webinar after Facebook Live after conference call after… And I have to say, the Detroit community has been amazing about getting the information out, getting the answers to your question as quickly as possible. I applied for the Detroit stabilization grant on a Friday. Was awarded $2,500 on Wednesday. So they’re not wasting any time. Landlords are really stepping up. Some of them are, some of them aren’t.

Loren Feldman:
I saw Dan Gilbert and Bedrock are putting off rent payments. Are you in a Bedrock property?

Dana White:
I am not, but my landlord in Midtown is amazing. I’m not too concerned about their compassion or what they’ll be willing to work out with me during this time. The response time here for people has been really good.

I literally just got an email saying, “Hey, the state of Michigan now has a small business grant and loan program organized by county. The application just went live about five minutes ago. So, Dana, apply for that.” There’s just been so much information about how you can get through this.

My biggest things are my loans and my people and my rent. I don’t want to take out another loan in addition to the loan I have. I want to consolidate and move forward, and I don’t know if that’s an option for me now. It’s just about doing the homework and finding out: What is the best situation that works for Paralee Boyd going forward? I’m really worried about making a decision that will hurt me in the long run—even though the loan, I don’t think it will. It’s just one more thing, and I would rather weigh my options carefully and then pull the trigger.

Loren Feldman:
I don’t think anybody would argue with that. And obviously, we will continue to track the decisions that all of you make in the weeks to come. We’re out of time. Needless to say, we will be discussing all of this lots more. Thank you for your time today. My thanks to Dana White, William Vanderbloemen, and Laura Zander. Be careful out there, everybody.

Laura Zander:
Thank you.

Episode 9: Where Can I Save Some Cash?

Karen, Jay, and Laura talk about painful layoffs, maintaining morale, and hunkering down during COVID-19: “We've been having a meeting for the last two or three days about, ‘Okay, we have X number of dollars in inventory. Can we pull a couple hundred thousand dollars out of inventory in case we end up being cash flow negative for the next two months?’” Plus: finding ways to help other struggling businesses and looking for opportunities to emerge from this stronger.

Guests:

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

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

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Jay Goltz: “If someone goes out to a bar and is completely irresponsible, and then comes to work the next day and might infect my employees, I think I have every right to say, ‘You know what? Go home—maybe permanently.’”

Laura Zander: “Our suppliers are going to have a lot of excess inventory because nobody’s buying, so there are going to be opportunities to buy things at a great price and get some extra margin that could last us for a little while.”

Karen Clark Cole: “Our IT guy set up a channel. It’s connected with Slack, but it’s a live Zoom, basically, and it’s called The Water Cooler. Anyone can log into this Zoom address at any time and just see who’s there.”

Full Episode Transcript:

Loren Feldman:
Let’s get started. Let’s go around the room. I’d like to get a quick update. Obviously, your health is the first concern. But we also want to hear, assuming your health is okay, how your businesses are doing. Karen, how are things with you? Last week when we spoke, it sounded like your business was holding up pretty well. Is that still the case?

Karen Clark Cole:
Yeah, we are in a really fortunate place in that we can largely work remotely. Out of probably 40 projects, we’ve just had one that’s been cancelled, and that’s because it was in-person in-home research that couldn’t be changed to remote. A couple of other studies, we’ve changed to be remote sessions, and then we’ve had a lot of studies on hold waiting until we can put a new date out there. That will have a delayed impact on the revenue.

But we are incredibly fortunate. All of our employees feel that way as well. There have been a lot of adjustments, dealing with working from home, and for us, I’m sure most people are feeling the personal confusion around being confined. That’s sort of the harder part, I think.

Loren Feldman:
Karen, you guys obviously had experience previously with working remotely. Now that it’s enforced across the board, have you learned anything? Have you figured anything out that’s made it easier, better?

Karen Clark Cole:
Yeah, for sure. We’re actually publishing an article with all kinds of tips and the user experience around being remote. So, how to not only do it, but try to do it in a way that’s better for yourself and the people that you’re interacting with. Lots of fine tunings, and then lots of really creative ways that our employees are figuring this out and how to have a connection.

Loren Feldman:
Can you give us a couple examples of what’s helping with working remotely, what’s helping your employees?

Karen Clark Cole:
We use Slack and we use Zoom. Slack is how we communicate off of email. Our IT guy set up a channel. It’s connected with Slack, but it’s a live Zoom, basically, and it’s called The Water Cooler. Anyone can log into this Zoom address at any time and just see who’s there. I thought that was brilliant. If you’re feeling like you want to see some of your colleagues, you just open up this ID number and you might see somebody. Or you might not, just like if you were going out to get a drink.

Jay Goltz:
What if they’re naked?

Karen Clark Cole:
Well, then they won’t join. Or maybe they will. [Laughter]

Jay Goltz:
I’m just thinking out loud here.

Laura Zander:
Jay… Do you have an HR person?

Jay Goltz:
No, I just think they’re at home. God knows what they’re doing. I don’t know if I want to see.

Karen Clark Cole:
They have to decide to join. That’s the idea.

The other thing is we’re doing a lunch competition every day. People are posting pictures of their lunches, which are really amazing. And all of a sudden, they’re making me feel like I should pay more attention to my lunch.

Then we’re doing things like a happy hour. We’re doing a company happy hour this afternoon, so everyone’s gonna log on with their drink. Then we’re gonna go around the room and say what room we’re in and what we’re drinking and we’ll see how that goes.

Laura Zander:
God bless technology companies.

Karen Clark Cole:
Yeah, but now I’m concerned because I hear the internet’s going down.

Laura Zander:
We’re having so much trouble.

Karen Clark Cole:
We’re worried about that because a lot of companies are asking employees to turn off their video because they’re having bandwidth issues. A lot of it’s related to VPN bandwidth for sure, but it’s still gonna be an issue.

Laura Zander:
Got it.

Loren Feldman:
Jay, how about you? I spoke to you earlier in the week. At that point, I think you were kind of surprised. People were still coming in to get pictures framed and business wasn’t too bad. Is that still the case?

Jay Goltz:
The last week has been a year. It’s kind of surreal. Monday, people are still coming in. Apparently the hierarchy of man is: toilet paper’s one, and getting your pictures framed might be up there at number two, because people are still coming in. Not a lot, but some people.

Monday, we have a meeting. We talk about, “We need to take immediate action.” So Tuesday, I sent out an email to everyone saying we’re cutting hours. And then we made a list of people. I’ve got 115 people. I’ve gotta make a cut, so we cut about eight people. My manager made the announcement and it’s turning into Lord of the Flies. “Oh my god, how can you do that to so-and-so? I would have cut my own salary to save them.”

But the interesting part is, by Wednesday, he went and talked to each manager—there’s five of them—and talked about why the person was let go—who was a very nice guy, been with me for 19 years. Everybody loves him. I love him. But for the last couple of years, he hasn’t been doing it. Slowly but surely, every one of them said, “Yeah, now that you mention it, he really didn’t do this or that. Yeah, that was a good decision.” So we went from, “Oh my god, how could you fire him?” to “Good call” all within 48 hours.

The customer side, there are still customers coming in. My wholesale business from around the country—we sell to other frame shops—they’re ordering frames. I feel like if they’re doing business, I want to support them. So for the moment, the factory’s running, the showroom’s open. I was disappointed last night. Everybody kept saying, “Oh, the mayor is going to go on TV. She’s shutting business down.” Didn’t even mention it. Like at least say, “We’re still reviewing whether we’re gonna be asking for businesses to close. We’re monitoring it.”

Karen Clark Cole:
Don’t you think it’s coming though?

Jay Goltz:
Probably? I’m not sure. I just don’t know. Maybe. Just before we got on here, I heard that New York’s been shut down. It hasn’t been that bad here yet. I certainly won’t be surprised if that happens, but it makes you feel bad that the mayor doesn’t think there are 20,000 business owners watching every word she’s saying and doesn’t think maybe she should mention what’s going on with it.

So yeah, I’m prepared. That could happen. I’m getting to the point though, “Am I better off being open or closed?” because if I’m closed, all of a sudden the payroll stops because I can’t afford to pay everybody. I’m gonna let them use their vacation pay and such. It’s a balancing act, but I’m watching it day to day. This isn’t like September 11. This isn’t like ‘08. It’s worse in some ways. I think in the long run, it will bounce back faster, but it’s a whole new experience, that’s for sure.

Loren Feldman:
Jay, you also have a home furnishing store, along with selling picture frames. Are people coming in to buy home furnishings?

Jay Goltz:
Not a lot, but we did $10,000 yesterday. I mean, not a lot.

Laura Zander:
What?!

Jay Goltz:
Yeah, I’ve got two or three people working there. Everybody’s staying away from each other. We’re cleaning everything. But you know, it’s America. People want to go out.

My manager this morning said she got a call in framing from a guy in Rockford, which is about 90 miles from Chicago. And he’s coming in for some framing. She says, “I don’t understand.” I go, “Oh, well, I got that one figured out. He’s married.” [Laughter] There you go, I see. I figured it out. She laughed.

There are people who are locked in there with their husbands and wives now for three, four, or five days. At some point, not only do they want to get their framing done, but they want to drive as far away from home to get it done so it takes a little longer.

Loren Feldman:
Don’t you think there are also people who have these projects sitting around that they haven’t gotten around to and all of a sudden they have the time to do it, right?

Laura Zander:
Totally.

Jay Goltz:
And they’re home. I’d like to stay open as long as I can without endangering people. So everybody who’s over 60 except for me is staying home. I’ve got lots of people staying home who can, but many people can’t. I don’t know. I’m just playing it day by day. I absolutely accept we could be shut down tomorrow. I mean, who knows?

Loren Feldman:
Laura, we haven’t spoken to you in a few weeks. You have a kind of a far flung empire these days. You’ve got your main operation in Nevada, but you recently bought a company in Texas. You made acquisitions in Vietnam and China even. What’s going on with you?

Laura Zander:
On one side of things, we’re in the same boat as Jay and Karen and things are going actually better than we expected. Like Jay and his business, we have a lot of people who are staying at home right now and they all want to knit.

Loren Feldman:
That makes sense.

Laura Zander:
Yeah, our numbers online are really good. We closed our store earlier this week. We have an Economic Development Authority that sends us recaps of everything. And they actually sent a note out two days ago and said, “Look, all non-essential businesses are asked to be closed.” And the first two businesses that they listed—because we’re in Nevada—number one, strip clubs, number two, brothels. Apparently those are non-essential.

Jay Goltz:
To some people.

Laura Zander:
The strip clubs, the brothels, and the casinos—that was number three—those all need to be closed. But they said if you are doing business online, and if you are In a business like ours, that we ask that you stay open, and you continue to do fulfillment. Because we’re in a very heavy fulfillment area. That’s the primary business around here.

Karen Clark Cole:
What about for both of you—you and Jay—the people [who are in] close proximity in the warehouses?

Laura Zander:
That’s a great question. It’s optional. If you want to come to work, of course. Everybody who’s in the office, they’re all working from home, with the exception of one or two, but everybody has individual offices. There’s very little cross-contamination. Obviously, we’re cleaning things down. We closed the retail store to the public. We’re just doing pick-ups. It’s like a drug deal. We just leave the stuff outside for people and there’s no human contact.

Then for the fulfillment side, everybody has their own computer that’s marked, their own mouse, their own keyboard, so there’s no touching somebody else’s computer. Then it’s a 20,000-square-foot spot with only four people right now. We’ve got a really, really skeleton crew. They’re like, “You’re gonna pull from these two rows, you’ll pull from these two rows, you’ll pull from these two rows.”

Karen Clark Cole:
How did you figure out how to do all that?

Laura Zander:
That’s kind of how we’ve done stuff the whole time. It’s more efficient. That’s how Amazon does it too. If you get to know the rows that you pull from and the brands that you pull from. We’ve done that in the past, if we’ve needed to do high volume and we’ve had low staffing.

On that side of things, we have a couple of people who have self-quarantined, a couple of older people. Some of them we’ve put on leave of absence. Some of them have asked to be let go so they can file for unemployment, and then they’ll just come back when they are more comfortable. We’re just taking it [on a] case by case basis. We’re really, really lucky and it’s taken us years and years to get here. But we have a great staff.

Loren Feldman:
Lucky in what sense, Laura?

Laura Zander:
Our staff is unbelievable. We want to make sure that every single person is taken care of. We have the flexibility right now to be able to take it on a case by case basis, and cater to each person’s needs, whether it’s to work from home, even though they normally don’t have a work-from-home job, we’re trying to find some stuff for them to do.

Jay Goltz:
I have to interrupt you and say, that’s not lucky. Kudos to you for running a good business and having good people there and hiring and keeping the right people and treating them properly. Because I’ve gotta tell you, I’ve had some that will bring tears to your eyes. I’ve had people walk up to me, “Jay, we’re gonna get through this one okay, tell me whatever you need me to do.”

I have wonderful, wonderful, dedicated people around me who are totally with me. And then you’ve got the one-off. I hate to pick on the millennials, and I really don’t usually, but this one kid says—he’s the delivery guy—and they said to him, “Listen, would you like to learn how to do UPS so you can do some more things?” He goes, “Well, if I’m properly compensated for it.”

Laura Zander:
Totally. 100%.

Jay Goltz:
Oh, that went over really big with them. My guy who has been with me for 40 years, it’s his future son-in-law, and he says, “You know what, I really want to fire him.”

I’ve had everything from that to most of the people, I’m telling you, it’s just a beautiful thing. It’s a testimony to, when things get bad like this, it’s a stress test on your business, and you find out who you really are.

Loren Feldman:
On that note, I have to ask you one thing. You described the person who’d been with you for 19 years who you had to let go. He sounds exactly like the kind of person you’ve been telling us on this podcast for weeks who you can’t afford to keep around, somebody who may have been really good, who people like, who’s really loyal—exactly the kind of person you have suggested shouldn’t be kept on. Why was he still there?

Jay Goltz:
First of all, you met him. You know who it is. This guy was my buddy during ‘08. He walked up behind me after I bought my big warehouse, and I can remember it like yesterday. I’m standing in this 85,000-square-foot building I bought in the middle of the crunch because I knew I had to get my overhead down. He put his hand on my shoulder and said, “It’s okay. It’ll be okay.”

This is a guy I was tight with. He was a nine out of 10 employee for 17 years. For the last two years, he’s just been… not good. He was making 60 grand a year, and I just can’t carry it. Like I said, after the other employees digested it, every single one of them had a story to tell, “Oh, yeah, now that you mention it, he really didn’t get this done last week.”

It was probably getting near the end anyway. He actually walked into my manager’s office a few weeks ago and says, “Are you firing me today?” My manager said, “Well, no, not yet.” He knew there were problems. I will absolutely help him get another job. I gave him severance pay, it’ll all be okay. But I’ve gotta tell you, when it gets down to the crunch time now. I’ve got to worry about the other people, and I’ve got to worry about keeping every other single person in business and eating.

I can tell you, the key to this whole thing is we’re in the cockpit. We’re the pilots. You’ve got to look at the controls. You’ve got to see where you’re going. The people who are behind you shrieking, “Oh, we’re gonna die!” You turn around.

Laura Zander:
You go, “Shut the fuck up!” [Laughter]

Jay Goltz:
There you go. I knew this would be like throwing catnip in front of you, Laura. I knew you’d figure that out.

Loren Feldman:
Let’s go back to you, Laura. When we last saw you, I think it was when we were in Seattle. None of us saw where this was going exactly. But I think you were already seeing the problems in China. Where do things stand in China for you now?

Laura Zander:
Whether it’s luck or premonition or whatever, we knew this was going to happen, so we pushed really hard and got all of our stuff from China in early January before China got shut down. We actually bought like a six to nine month supply of everything that we needed. We’re super stocked. We’re doing really well.

My friend Lin Lee, my partner over there, they’re just starting to dig out. Now they’re looking for work. Orders are not coming into the factories there. I’ve told you that most of the people who we work with there, they’re all small family-run businesses, and so they’re suffering. Now, we’re just starting to try to think through, “Okay, is there more stuff that we can start to put into production?” but we’re good from a supply standpoint.

Loren Feldman:
Good for you.

Laura Zander:
I’ve talked to Lin Lee very, very frequently every other day or so. I’ve been acutely aware of the fact that her 10-year-old son has been homeschooled and been at home for two months so far. And that everything’s been locked down.

Karen Clark Cole:
Can you tell us, how does she feel? Does she feel like they’re coming out on the other side of it?

Laura Zander:
Oh, absolutely. If this trajectory is anything like what they’ve experienced in China, it’s about a two-month shutdown, is what I’m expecting. I’m assuming that Huck is not going to go back to school this year—my son.

But she said it’s leveling off there. There are no new cases. The virus is dying. It’s attacked all the hosts that it can attack and it sounds like it’s starting to just kind of peter out. The weather probably has something to do with that as well.

Jay Goltz:
Chicago is keeping the schools closed until April 20th at the moment. That’s what she said.

Laura Zander:
Again, just based on what I’ve experienced through Lin Lee and watching what she’s been watching, she just sent us masks. She’s sending us toilet paper now.

Loren Feldman:
Wow.

Laura Zander:
She’s shipping me everything that we need. Oh, so tangent, sidelight: I’ve wanted to do a Jimmy Beans toilet paper line for a really long time.

Karen Clark Cole:
That’s right. You told us!

Laura Zander:
Yes, I told you I wanted to do a “shit-along” instead of a knit-along where you’ve got toilet paper that has knitting instructions on it. My team has got their tails between their legs right now because they’re just like, “We should have listened to you. Then we would have had tons of toilet paper.” I’m like, “I told you guys. I knew we were gonna need knitting toilet paper.”

Jay Goltz:
You are a visionary. You’d go right up there with Steve Jobs. Really. [Laughter]

Loren Feldman:
So are you working on it now?

Laura Zander:
Nah, it’s too late now. We missed the boat.

Jay Goltz:
Meanwhile, I had an interesting thing. My cleaning lady comes today. She’s been my cleaning lady for 25 years, speaks broken English. She says to me, “How are you?” I said, “I’m okay.” And she looks at me and just smiles. She goes, “I’m okay this time.” And I knew exactly what she was talking about.

It means that in ‘08, she had bought a condo, she lost it. She was freaked out [about] where she was going to live. And she came to me and she said—and it’s not like I’m close friends, I see her once a week for two minutes when I’m walking out the door—she said, “Jay, can you loan me $2,000? I’m really in a bad [place]. And I said, “Absolutely.” And I gave her the money and she cried. I mean, she was so thankful. And I understood what she meant. The last nightmare was a nightmare. This time, she’s okay. I felt good. She’s still got jobs and things are okay.

Laura Zander:
Yeah, there’s a parallel here. Dana and I were talking about this on the phone yesterday in terms of how apparently entrepreneurs do well in chaos, because I was like, “I’m not scared and I know I should be, and that actually scares me—the fact that I’m not freaking out.”

Loren Feldman:
You’re freaking out because you’re not freaking out?

Laura Zander:
Yeah, exactly. I know I should be a lot more scared, but—

Jay Goltz:
No, you shouldn’t be.

Laura Zander:
We’ve got this. We’ve totally got this.

Jay Goltz:
You’re a superhero. This just brings it out, these times. There are people who haven’t been in business that long, who have never been through one of these crises, and they don’t get it.

I talked to a PR person yesterday, she said at nine o’clock in the morning on Monday, she had 16 clients. And by noon, she had two. She spent the whole day crying. I said, “Dig in and find some more business.” The part that’s a little bothersome to me is she lives in a beautiful house in the suburbs with her lawyer husband, and part of me wants to say, again, “Shut the—”

It’s like, really? There are people who are worried about whether they’re going to have dinner on the table tonight and it’s a little hard for me to feel sorry for someone who’s living really nice and they’ll be okay for a few months. It’ll be just fine. There are people who truly are in almost life and death situations with taking care of themselves. Now’s not the time. There are no pity parties in entrepreneurship, sorry.

Loren Feldman:
Laura, you told us about your situation in China. What’s going on in Texas?

Laura Zander:
Well, so Texas is a different story. As you know, what I inherited or adopted or purchased, whatever word you want to use—

Loren Feldman:
This was a big supplier of yours that you bought a few months ago.

Laura Zander:
Yes, a big supplier of ours. It’s a manufacturer. We hand dye yarn down there. Their sales have been going down for about four years very steadily, five years. The business had just not been shepherded, I suppose. We’ve been dealing with all kinds of crazy stuff over there in general.

Now what we’re dealing with, long story short, in the knitting industry—as I’m sure you all know—it’s very seasonal. The busiest months are really January, February, March. That’s the knitting season.

Loren Feldman:
It could be different this year.

Laura Zander:
Yeah, there’s a light knitting season in October, November, December. But all of our shops, all of the wholesale accounts, they do their buying in September and October, and the previous owners had cut off all of the supply chain to the shops in September and said, “We can’t supply you anymore.” When we came into the business, we didn’t have very many orders. And all of these shops ended up going elsewhere and finding other products to fill their shelves, which they should have. It absolutely makes sense. So we’re getting hit with low sales as a result of that, and then we throw this pandemic in, and most of our shops are having to close, so they’re canceling their orders.

Loren Feldman:
By most of your shops, you mean the people who buy yarn from you, your clients.

Laura Zander:
Yes, they have a retail shop. Our wholesale customers are pausing their orders. We have a bunch of people and we don’t have enough work for everybody. So this morning, we had to do a layoff of about 25% of the staff and 25% of the production crew.

Jay Goltz:
Layoff or fire them? I mean, are you bringing them back? Or did you just get rid of the people who were barely holding on to begin with?

Laura Zander:
Jay!

Jay Goltz:
I’m just asking.

Laura Zander:
We did a permanent layoff.

Jay Goltz:
Okay.

Laura Zander:
We had to burn the forest down. So we burn the forest down and the sturdy trees are still there. And then we are hoping as we grow the business again to bring in some new talent as it grows. How’s that for cryptic?

Jay Goltz:
That’s how the sausage is made. That is reality, sorry.

Laura Zander:
It is, yeah.

Jay Goltz:
The best employees are the ones that are held onto, and sorry, but that’s the way it goes.

Laura Zander:
We kept the eights, nines, and the 10’s. We felt like it was the right thing to do for a couple reasons. One, this right-sizes the business to what we have right now so that everybody can work full-time and get a full-time paycheck. Two, we wanted to get out in front of the unemployment line before things are too bad. Because in the next month or two, I’m assuming things are going to get a little worse in terms of layoffs and unemployment. I wanted these people to be able to go out and get something, get ahead of the curve, get unemployment as quickly as they possibly can, or find something else, because there are some people hiring right now.

Jay Goltz:
It’s not fun. It’s horrible. But welcome to running a business. It’s not always pretty. That’s what our job is, and those who think that they can run it like a not-for-profit…

Laura Zander:
I said that at Jimmy Beans, we’re in a great spot or a lucky spot or whatever, but it took 17 years of running it like a not-for-profit and not making these hard decisions to get to the point. I had to make these hard decisions over and over and over to get comfortable with them after avoiding them for the first few years, so now we’re in a better spot.

Now it’s a little bit easier. Like your housekeeper said, “This time, it’s not as bad,” because I know that I’m going to come out of this okay, and I know that intellectually we’re doing the right thing for the other people—for all the eights, nines, and 10’s who really give their heart and soul and are on the bus. This is what needs to happen. I want to take care of the people who really, really give it their all.

Loren Feldman:
I’m curious. Are you still doing much marketing right now to sell online?

Laura Zander:
Yeah, we’re about to really pump it up. In fact, everybody who’s at Jimmy Beans who is working from home, like Jay said, it’s amazing to see what they’re doing. They’re working 12, 14 hours a day right now just pushing and pushing and pushing.

Loren Feldman:
Karen, Jay, are you guys marketing right now?

Karen Clark Cole:
Yeah, absolutely. We need to stay in business and keep going as best we can.

Loren Feldman:
Any change from what you normally do, Karen? Doing more, doing less, different?

Karen Clark Cole:
No, probably the same. It’s not marketing, but something that we’re promoting is trying to help our clients figure out the remote working thing, because we’ve been doing it for a long time. We’ve got great tools, we’ve got great process, we’ve got great methods. And so we’re really trying to help our clients so that they can continue to work and that we can work with them, just sort of offer ways to help them figure all of this out. That’s something that we are promoting so that our clients can keep going. We’re leading the way with a big meeting. We’ll get it all set up. We’ll tell them, “Here’s how we’re going to do it, here’s how it’s going to go,” and they’ve been really appreciative. It’s been great.

Loren Feldman:
Jay, I think I heard you sigh you after I asked the marketing question.

Jay Goltz:
Oh, I have absolutely shut off. If this were an airplane cockpit, I’m looking at the control. Cash drain. That’s all I’m focusing on right now. I cut off all marketing efforts at the moment.

I have an outsourced marketing woman I’ve been using for a few years. I haven’t cut her off. All of her other clients are hotels, so she’s literally been completely shut down. They’ve all suspended paying her, so I’m her only source of revenue. She’s been very good for me and I like her, and I’m not cutting her off. I’m gonna keep her on.

But as far as everything else, I’m not gonna make Google any richer this week because I cut that stuff off, the pay-per-click. I’m watching cash. I can shut it off for a month, it’ll be fine.

I’ve gotta tell you, it sounds odd, but they’re still lending money. I’ve got a building that has no mortgage on it. I’m getting a mortgage on the building. I think I’m going to pull this off. And if I pull this off, I’m good to go. That’s all I’m spending my time on now. I’m working on all cash flow items. I suspended the marketing until I get the cash back.

Laura Zander:
I know that you’re not as much retail as we are, but to me, I feel like I’m in a race car right now. I need to switch gears and I’m about to press on the gas, because there’s this lull, and I can feel it.

From a cash standpoint, we’ve been having a meeting for the last two or three days about, “Okay, we have X number of dollars in inventory. Can we pull a couple hundred thousand dollars out of inventory in case we end up being cash flow negative for the next two months?” And I’m talking about my Reno, Nevada business—the e-commerce and the retail store.

We have money, it’s in inventory. Can we pull that money out of inventory? And then we need to put our foot on the gas in terms of marketing. A lot of our marketing is actually salaried marketing. It’s more creative marketing and less spending. But the last thing in the world I want to do is cut our advertising and marketing budget right now. In fact, I think that this is the time to press on the gas. Unfortunately, and this is gonna sound really cold-hearted, but the opportunities that are about to open up, like, holy shit!

Loren Feldman:
What are you referring to, Laura?

Jay Goltz:
She’s referring to people going out of business. That’s what she’s talking about.

Laura Zander:
Oh, hey, easy! No, no, no, no, no, no, no, no, I’m thinking about—

Jay Goltz:
Oh, no, of course not!

Loren Feldman:
Let her answer, Jay!

Jay Goltz:
I’m getting ahead of this one. Capitalism 101.

Laura Zander:
If there were no shutdown, I’d be on a flight right now to kick your ass. [Laughter] The opportunities in terms of our suppliers are going to have a lot of excess inventory because nobody’s buying, so there are going to be opportunities to buy things at a great price and get some extra margin that could last us for a little while. And yes, there are going to be opportunities, in that the bottom 10% of our competition, if you will, are going to drop out, whether it’s because they’re not running a great business or it’s just too stressful, is part of what I think. We’re just going to out-grid them.

Jay Goltz:
Hmm… so you just said in a nice way, “Yeah, it’s capitalism. Those of us who run good companies and have wonderful lives and give great service, we’re gonna get a little payback for the years and years and years we’ve been investing in that, and the companies that have people who work for them who don’t like them, who don’t run a good business—it’s going to cull the herd out here.

Laura Zander:
It is, it’s going to cull the herd.

Karen Clark Cole:
You are being totally insensitive. There are a whole lot of companies that just can’t keep people staffed right now—the restaurants. It goes on and on and on. It’s awful the amount of people who are great who don’t have jobs.

Jay Goltz:
I’m not talking about the restaurants. I’m talking about knitting and picture framing. The restaurant thing is horrendous. Laura, I also have millions of dollars worth of inventory, but you’ve got to sell it to get cash out of it. I don’t have any advertising that I do that is that effective at all that I can know that if I spent X dollars, it’s gonna make a difference.

Laura Zander:
Got it. And we do. We’ve got the digital advertising and the digital marketing. I feel like we do a relatively good job. If we can amp that up, we can pull some cash out of inventory.

Loren Feldman:
I have a question. Laura and Jay, you’re both continuing operations at a time when a lot of the country is starting to go into complete lockdown. We talked a little bit about spacing and warehouses and being careful and all of that, but one thing you’ve never really had to think about before that maybe you do now is what your employees do when they’re not at work.

I’m curious if you’ve given any thought to, is it possible you have anybody who’s being irresponsible? We’ve all seen these pictures of kids who are on the beaches in Florida or whatever. Are you guys paying attention to that, thinking about that?

Jay Goltz:
We had a management meeting on Monday talking about how we can control that. Somebody said, “Well, we have no right to tell anybody what to do on their personal time.” I said, “You know what, that might have been true a month ago, but I’ve gotta tell you, if you know that one of your employees is out at the bars…”

The big thing in Chicago was St. Patrick’s Day. The mayor was pissed. Everybody was pissed. The bars were loaded, loaded! St. Patrick’s Day. I make the argument, “I think I have a right to do whatever I want. They’re endangering the rest of my employees. They have a right to go out. That doesn’t mean I have to employ them, though.”

If someone goes out to a bar and is completely irresponsible, and then comes to work the next day and might infect my employees, I think I have every right to say, “You know what? Go home, maybe permanently.” This has gone beyond business. We’re getting into, like I said, Lord of the Flies. We’re getting into life and death issues here. I don’t need to expose the rest of my employees to that.

Loren Feldman:
Laura, how are you thinking about it?

Laura Zander:
Similar, but different. In Nevada, well, in both of them, we’re talking about 24-hour shifts. We’re just working on minimizing and making sure that there’s incredible distance between each person. So even today is paycheck day. We had the whole staff off this week down in Texas. So for paycheck day, we had everybody come down and they scheduled a time so that no two people are in there getting their paycheck at the same time. The woman who’s giving the paychecks out, she’s got gloves on, it’s across the desk. We’re trying to be very, very deliberate.

Even in our factory, it’s going to be skeleton crew going forward, where there’s only one person per kitchen, there’s no cross-contamination, they have their own bathroom. Because I’m very, very aware that we have a group of people where we don’t know what they’re doing at home. We don’t know if they’re carrying things or crossing things. All we can do is try to maintain a very, very lean skeleton crew that, again, reduces or eliminates contact with other people.

Jay Goltz:
This is where it gets tricky, though. So the non-business owner or the government official can sit on their thrones and look at us and say, “You are irresponsible! No one needs knitting and no one needs picture framing, and you people are irresponsible. Everybody should be hunkered down.” And that’s great when you don’t own the business and you’ve got your paycheck from the government every month or you work for a university or whatever little ivory tower they’re in.

But when you have to make payroll every week and give people money, there’s a little balancing of shutting down is a pretty drastic thing and it’s going to affect people. We’re doing everything possible to keep people away from each other and doing the same things, but it’s just not black and white that, “Oh, everybody should just shut down and sit home for a couple of months—

Loren Feldman:
There is another side to that, Jay.

Laura Zander:
Amazon’s hiring 100,000 people. So what about all those people?

Jay Goltz:
Right.

Laura Zander:
They’re not doing the social distancing that we’re doing in both of our facilities. If you walked into our spot right now, it’s a ghost town. You wouldn’t even know. They are so separated. It’s like a hospital. It’s very clinical. People are driving to work. They’ve got their one little area that they’re doing work in.

Karen Clark Cole:
I’d be surprised if they weren’t doing some sort of social distancing. I mean, they’re taking that really seriously. They were one of the first companies that we work with to have everyone start working from home and just cancel everything.

Laura Zander:
Yeah, but I mean, in a fulfillment center, have you been in one of their warehouses?

Karen Clark Cole:
No, but I’m guessing they have to be different now.

Laura Zander:
Well, but how are you gonna flip that overnight? Even if they knew two months ago… Yes, I’m sure that they’re doing everything that they can do, but the sheer volume and the sheer number of people who they have, I really doubt that they’re doing a better job than we are, just from a volume standpoint. We’re talking about two people. I’ve got two people, or four people, in 20,000 square feet. That’s more space than people have at their house.

Loren Feldman:
The other piece of this conversation is when you look at what’s happened in Italy, what happened in China, you talked about how your subsidiary in China is starting to come back, come out on the other side. Well, that happened because they took drastic measures to shut everything down. I would like to think that there are authorities here who are looking at this and assessing the risks, especially considering that we got a late start, and we didn’t have the testing ready when we should have. So at some point, when hospitals start to fill up, or preferably before that happens, somebody should probably be looking at the question, “Do we do it across the board?” Maybe even Amazon should have to shut down.

Jay Goltz:
I think the part you missed is her suppliers coming out. There are another four that are not coming out, that will never come out. It’s just not black and white. In theory, yeah, sounds great. Everyone should shut down, lock themselves in their house—

Loren Feldman:
Well, it doesn’t sound that great, Jay.

Jay Goltz:
No, that’s a good theory. But for people who are trying to keep their businesses alive, you don’t have the luxury of—

Loren Feldman:
If we’re talking about a pandemic that is filling up hospitals across the country, then you need the government to step in. And yes, there absolutely should be protection for businesses like yours and there should be something done to help all kinds of businesses, including those restaurants you were talking about, so that they can come out on the other side. But we also have to do what we can do to keep those hospitals from filling up.

Jay Goltz:
Clearly, clearly.

Loren Feldman:
But I am curious what you guys think the government should be doing. There’s a lot of talk right now about bailouts. There’s talk about injecting cash into the economy through various systems. The first things that were talked about were bailing out the airlines, bailing out the cruise industry, both of which kind of amazed me. I’m curious what you guys think.

Karen Clark Cole:
People need cash to pay rent and buy groceries.

Laura Zander:
Yeah, I don’t really understand… I’m with Karen 100%.

Jay Goltz:
And we’re not supposed to be the ones to front the cash.

Loren Feldman:
Jay, how would you feel if the government bails out the cruise industry?

Jay Goltz:
Let’s talk about the airline industry, that when they bailed them out, they’ve made billions of dollars. They did stock buybacks, and the airline industry made billions and billions of dollars. Now all of a sudden, no, they’re not on the top of my list. All those poor CEOs who made $800 million last year. We need to help them out.

Laura Zander:
Our landlords at both of our locations—I just got an email—just cut our rent by half for the next couple of months.

Karen Clark Cole:
No kidding.

Laura Zander:
I’ve been talking with our employees as well about, “Okay, reach out to Waste Management. Reach out to these guys, reach out to these guys, talk to your landlord.” There are either publicly funded companies or there are people who have done really well and are willing to cut expenses if they can.

Ideologically, yes, there’s the government side of it, but then there’s also the responsible side of the people who have done well, and who aren’t going to be quite as affected. As Jay had said, from a business owner’s standpoint, I feel like my job is even, to lose money over the next couple of months to make sure that our employees get paid, and that they still have a full-time job. But maybe the responsibility of some of the landlords is to cut rent. I’ve heard that they were going to delay evictions and delay all of this kind of stuff.

Loren Feldman:
Laura, that’s a great point that a lot of employees may not realize that they have more room to maneuver there. Karen, I’m curious, is that something you’re addressing with your employees: reaching out to them to encourage them to think about things that they can do?

Karen Clark Cole:
Not specifically around rent, but that’s a good idea. But I just sent a big long email out yesterday talking about health and wellbeing and making sure that people are taking care of themselves and their mental health, when it can be really challenging. For some people, you think about working from home all of a sudden, your kids are at home all of a sudden, everybody’s here. For some people, it might be good, but for others, it might be overstimulation, because all of a sudden, there are kids all around them, and they’re trying to work and you’ve still got to get your job done. And then for other people, the social isolation is really, really difficult. It goes on and on and on.

We’ve been sort of guiding and helping people. My head of HR is an expert in this kind of brain development and how people react differently to different stresses and what they do under pressure. So we’re trying to help them on that side, but we haven’t talked about—partly for us, it’s less of a concern about paying rent because our employees are all getting paid. It’s less of a concern there.

Jay Goltz:
Here’s a small thing people can do. Some people pay their charge bill every single month with automatic pay. Now’s the time to maybe go on there—I just did it myself—flick it off, like maybe don’t pay your charge bill this month. Just pay the minimum and just leave yourself a little wiggle room there so that you’ve got some cash left just in case things don’t come back fast enough, you get laid off, whatever.

Laura Zander:
That’s a great point. Where could the government step in? Can we defer interest charges for a little while? Can you call your credit card company and say, “Look, it’s a little tough. Can you defer my interest and/or can you wipe my interest out? Can you give me 90 days terms basically on my credit card?”

Jay Goltz:
Here’s a tip. This is real life. I just did it yesterday. I have a Bank of America credit card. I barely use it. It’s got a very high limit on it. If I take a cash advance, check this out. They will give you, for a 3% transaction fee, you could get money—like tens of thousands of dollars—a 3% transaction fee, and you don’t have to pay it back until September of 2021. Which means that the effective interest rate, if you count the fee as an interest rate, is like 2.25%. So I could cover my living expenses by just using the one credit card and I stop pulling salary out of the company. It gives me a little more breathing room. Like I said, I’m spending all of my time now looking at, “Where can I save some cash?” There’s some money, poof: 2.25% interest.

Loren Feldman:
That’s a good tip. We need to wrap this up. I think we hit on some really useful information here. Going back to the beginning, one of the things I want to highlight is what you said, Karen, about the Zoom channel that you can turn on, that it’s just there if employees want to stop by and see who’s there and connect with someone. Anything else come to mind? Any takeaways for each of you from this conversation?

Jay Goltz:
You know what I’m going to do when I hang up here, I’m going to call my guy who runs the wholesale part and tell him to give me 20 names of frame store owners who are still ordering. I’m just going to call him. I’ve never talked to him. And just say, “Hey, how are you doing? Thanks for the order. I just want you to know we’re going to be here,” and give him a little encouragement, because I understand that these frame store owners might in fact be one-person businesses or two-people businesses, and I think they’d appreciate getting a phone call. That’s what I’m gonna do.

Karen Clark Cole:
That’s a nice idea, Jay.

Jay Goltz:
I got that from Laura talking about the knitting stores. I thought about, they’re in a similar situation.

Laura Zander:
Well, you know Jay, one thing that we’re going to do—over the years, in our Texas facility where we do have the retail stores as customers, we would dye a color or create a color and then we would donate a percentage back to a fund for malaria, or when Australia had the fires, we would donate 25%. So, what we’ve decided to do is we’re going to donate to our customers, instead of donating to something else, so we’ve created a special set of products. We’re giving them a big discount on it, we’re going to give them terms if they need it. Basically, we’re going to send you a bunch of yarn. And then we’ll help you sell it online. We’re going to try to raise money for our shops. Doing stuff like that, and we want to send care packages out to the shops that are struggling and just let them know that we’re thinking about them.

Jay Goltz:
Great.

Loren Feldman:
That’s a great note to end on. That’s gonna have to do it. We are out of time.

Jay Goltz:
Give me five seconds. Five seconds.

Loren Feldman:
Go ahead, Jay.

Jay Goltz:
To all the business owners out there: your employees are looking to you for strength. You cannot afford the luxury of going out there looking like your dog just died. You need to go out there and tell people, “We’re okay. We’re forging on here,” because they’re looking at you.

Loren Feldman:
Even if it’s not true?

Jay Goltz:
Yeah, absolutely. You don’t know what’s true or what’s [not] true. There’s just no point in saying, “I don’t know if we’re going to make it or not.” There just is no point in saying that. I’m not saying lie to anybody. Say, “Look, we’re digging in here. We’re going to get through this.”

It’s called being a fearless leader. Sorry, there’s no room for—they don’t need any more grief. They need to at least look at their boss and feel like someone’s on the helm. That’s what they need. That’s what the boss does. Am I wrong, Laura? Am I wrong, Karen? Am I wrong?

Laura Zander:
I don’t know…

Karen Clark Cole:
I think it’s okay to be human. But yeah, we’ve got to hold up, for sure.

Jay Goltz:
Yeah, I’m not saying look oblivious. I’m saying, give them some hope. That’s the point. Hope versus despair.

Laura Zander:
Yeah, I mean, the reality is, we are going to be okay, and it is gonna be great.

Jay Goltz:
See what I’m talking about? I would just give you—no, I wouldn’t give you a hug. [Laughter]

Loren Feldman:
No more hugs.

Jay Goltz:
I’d give you a high five across the room. There you go.

Karen Clark Cole:
I think it’s interesting. We are gonna get through it and how is it going to be different on the other side? That’s what I’m really fascinated with, particularly as everyone gets comfortable or not comfortable working remotely. Is it all of a sudden, one day, we start going back to restaurants, or is it going to be gradual for the brave?

Loren Feldman:
I can’t wait ‘til we can start talking about what it’s like on the other side, but I have a feeling that’s a little ways away for now.

Jay Goltz:
Let’s not assume the worst. That’s the point.

Loren Feldman:
I want to thank all of you: Karen Clark Cole, Jay Goltz, and Laura Zander. We will be doing this again and again. We will follow you guys as we all try to do our best to get through this in one piece. Thank you, and be careful out there, everybody.

Karen Clark Cole:
Thank you.

Jay Goltz:
Thank you.

Episode 8: I Ain’t Going Down

Karen, Jay, and Dana talk about the contingency plans they’re making as we head into the health and economic crises presented by COVID-19. Can they keep paying hourly workers? Can they keep their locations open? Can they find the resolve to hang on no matter where this goes? “You're gonna get through this. You're gonna do what you need to do. If you need to close the one salon, so be it. And you're going to come out of this whole thing because you're smart, and you're ambitious, and you're responsible, and people like you. You're gonna get through this.” Plus: is now the time to join a business peer group?

Guests:

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

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: “What I’ve learned over all these years is, I’ve got one job, only one job: It’s to keep the business in business. If you forget that, and you start to not react quick enough and you keep paying people for three or four months, you’re gonna go out of business and that’s not going to help anybody.”

Dana White: “I’m sitting here and I’m listening and I’m concerned about the businesses that are not going to survive this. I’m wondering if Paralee Boyd is one of them.”

Karen Clark Cole: “Well, honestly, I’m at a loss for words, because it’s terrifying. For me, it’s less about my individual business, and it’s more about the overall economy and what’s going to happen to my grandma and people who are in high-risk health profiles.”

Full Episode Transcript:

Loren Feldman:
All right, let’s get started. Let’s go around the room, get a quick update from each of you. I want to know where things stand with each of your businesses. What’s happening? What are you thinking about? Karen, why don’t we start with you? You’re at one of the epicenters in Seattle. What’s happening at Blink?

I should point out we are taping this on Friday, March 13th at noon. Things are happening really quickly. Much will happen between now and Tuesday when we publish this. So I just want people to know we’re talking on Friday.

Karen Clark Cole:
On Wednesday, we closed our Seattle office, and on Thursday, we closed the rest of them: Austin, Boston, San Diego, San Francisco. What that means for us though, is it’s less of an impact than it is for other companies because, as consultants, we often work remotely anyway, because our clients are around the country in a lot of cases. And then our research, when we’re talking to our clients’ customers, takes us around the world. So in many cases, we’re doing that in person. It’s better when it’s one-to-one in person, and we’re observing their behaviors, as well as listening. But we are absolutely capable and often do remote work, remote sessions, remote meetings as well.

We have just turned the whole company into remote. Everybody’s working from home. Everybody is still working, with the exception of a few positions that aren’t consultants. We have hosts and we have studio managers—those kind of people. They are still working, they’re being paid. We’ve got them doing other things in more of a support role. As a company, we are in much better shape than many of the local companies in the area.

Loren Feldman:
Do you have business coming in?

Karen Clark Cole:
Our business has not slowed down. Knock on wood, we have had no slowdown so far in any new business. It’s incredible.

Loren Feldman:
That’s very surprising.

Karen Clark Cole:
Yeah, I expect it may happen. The other advantage for us as well though is that a lot of our clients are set up like we are. They’re high-tech companies. They have distributed workforces, and so they are also used to being remote.

Loren Feldman:
Dana, you have some sophisticated tech aspects to your business, but you’re a retail business. People walk into your store, your customers have to sit in a chair, your employees have to touch your customers. What is happening at Paralee Boyd?

Dana White:
Here in Michigan, they just decided to close all of the schools starting Monday, March 16th until April 6th. The first thing we looked at is how many of our staff are parents, and then how do we cover shifts? We’re going to watch what the volume tells us because we’re not appointment-based. We’re walk-in only, so the volume will tell us how to lean.

What we’re seeing as of this morning, since the announcement was made last night, is guests are calling, asking if we’re still open, and we have had a few people come into the salon. What we’re expecting is we’re expecting people to trickle in today, because a lot of people didn’t have to go to work, and again, a lot of parents kept their kids home from school. We’re expecting people to trickle in.

Again, we’re going to reassess our staffing needs once we see what this weekend shakes out to be. And again, as we said in our original coronavirus special on the podcast, I was concerned that my slow season would be extended, and so far it has. I had a meeting with my manager yesterday and I noticed that business has dropped significantly and I panicked. I reached out to people who I felt could kind of help keep me focused via text—

Loren Feldman:
Panicked in what sense? Did you take any actions? Are you panicked in the sense that you just started thinking about things and asking questions?

Dana White:
I panicked early afternoon, and then started thinking about things, and then started to act that night. That’s what we’ve been doing ever since last night is dealing with it. We’re just gonna see where it takes us. We’re updating—not updating—but we’re maintaining our cleanliness standards. Of course, the state of Michigan has cleanliness standards that we have to adhere to, but we’re going to go above and beyond that. In our morning meetings, we’re talking to our staff about what they can do to keep themselves safe. But we’ve already had gallons of alcohol in the salon because we use it constantly anyway, so we’re just now adding to it bleach wipes. Thank goodness we ordered our supply of bleach wipes and hand sanitizer a little over a week ago.

Jay Goltz:
Solid gold.

Dana White:
I know. We have, I think, nine containers of hand sanitizers—the big jumbo ones you get from Sam’s Club, so we’re covered in that aspect, and just communicating to our guests, “You are safe coming to Paralee Boyd. This is how frequently we’re washing the handles of the credit card machine, of the front door, the vestibule door, bathroom handle.” We’re pretty much Lysol-ing—because we’ve got Lysol in our order too—every hour on the public handles.

But everything else we already do. We already alcohol and sanitize the chair after each guest. We already do cleanliness in the morning and cleanliness at night, according to state regulations. We’re just going to reiterate and hopefully our guests will feel comfortable, and we’re going to ask them to stay home if they’re not feeling good. Cabin Fever I think is going to be the biggest cause of the spread of COVID-19. People are home with their kids for three weeks. They’re gonna want to come out, but we’re gonna ask that when you do come out, please come out healthy to public spaces, and don’t come to Paralee Boyd if you’re not feeling 100%.

Loren Feldman:
Dana, at traditional salons where they do take reservations, they have a pretty good feel of how much business they can expect from day to day. You don’t take appointments. Do you have any other way of judging? Is there any way for you to know how much business to expect, or do you just have to be there and see who comes in the door?

Dana White:
We just have to be there and see who comes in the door, and the good thing about that is that business has grown year over year. I think the couple of months that it showed a lack was because we just opened the Midtown location, so there was some cannibalism. Normally, we have a number that we expect and we project based on several years out, but we’ve never had an external factor such as a pandemic effect. Since this is the first time that we’re seeing it, all we can do is watch it, and again, what we do in the salon is take the data. So if something does happen in the future, we can say, “This is what we can expect based on what happened in 2020.”

Loren Feldman:
Jay, how about you? You’ve got a couple of retail operations in Chicago. What’s it looking like?

Jay Goltz:
This whole thing… it gets into your whole life. In business, things are okay so far, but I certainly think it’s going to affect us. We already had meetings on—I’ve got 115 people—how are we going to cut hours? Are we going to furlough? Are we going to lay people off? If people are starving, are we going to lend them money? Yes. So we have a plan for that, and then there’s the “what if somebody gets sick” thing.

For instance, I’m doing some simple stuff. I’ve got a factory where 40 people are eating in the same cafeteria. I’ve got another room there that’s not being used at all. So I said, “Let’s put some tables in that other room and the different departments will eat together.” That way, if one person gets sick somewhere else, they have absolutely no exposure to the other people. At least we can have a firewall there. We’re working on all that.

At the same time, I’ve got some personal stuff. My kid just put an offer in for an expensive house he’s buying, and as the world’s falling apart, he’s starting to freak out, like should he be buying a house at this juncture? And the real estate agents are all freaking out. Everybody’s freaking out, and then the mortgage rates jumped a point. He happened to lock in. But in one day, mortgage rates jumped a point because they’re so overwhelmed with demand that they can’t keep up with it.

There’s just a lot of anxiety. I go to the grocery store last night. It’s a 24-hour grocery store. Shut down. They’re restocking, shut down. Go there at six o’clock in the morning. Mobbed, 50 people on line. It’s like Armageddon’s here. It makes you think about all of this, and I realized, this is no different than September 11. This is going to go away and things are gonna go back to normal—

Loren Feldman:
It is different. I think you’re making the right comparison. That’s the closest model I can think of. But there are differences.

Jay Goltz:
Well, one difference is, let’s go from September 11 to the 2008 meltdown. The banks were messed up, the mortgages were messed up, the whole housing market was a big bubble. There’s no fundamental problem now, but the virus—which is serious—will go away, but the banks are in good shape, the market was solid. There’s no reason to think that the world’s coming to an end with this whole thing.

I realized in talking to the real estate lawyer about this whole thing, it reminded me, I bought my factory building in 2008 when everybody was hiding under the table because I had to make a decision, “I need to get my overhead down,” and my accountant goes, “This is a risky decision.” I said, “It’s less risky than doing nothing.” And the fact is, that was a decision that was an absolute linchpin to me being in good shape for the rest of my career.

There are people right now who are panicking. Panicking is a bad thing in business, and there’s no room for it. I’m not going to start making stupid decisions now because I stood in line at the grocery store for 25 minutes. The fact of the matter is, things are going to go back to normal.

Loren Feldman:
But you don’t know when. Look at what’s happening in Italy. From the latest that I’ve read, we’re kind of on a similar curve to where they were. They too weren’t as prepared as they should have been. And right now in Italy, everything’s closed except for groceries and pharmacies. Have you thought of the possibility that you might have to just shut down?

Jay Goltz:
Yeah, sure. That’s the point. I was gonna say, Dana, people’s hair is growing as we sit here. They’re going to have to get their hair cut eventually. That’s a for sure thing. People still want to frame their pictures and buy furniture.

Loren Feldman:
But they don’t need to.

Jay Goltz:
No, no. You’re not gonna get away with it if you’re trying to fearmonger me again. I remember the last recession, somebody in financial services sent me the front page of one of the major business magazines—I don’t remember which one—of every recession, and every time the stock market dropped, the front page of the magazine was, “Is capitalism over?” The next one, “Are we ever going to recover?”

Loren Feldman:
Okay, okay, okay.

Jay Goltz:
It goes on and on and on and on. The fact of the matter is, we will get through this, life will be fine, and if you own a business, you don’t have the luxury of being like an employee who just has to worry about getting laid off. You can’t just go hiding under the table and go, “Oh my god, when’s it gonna be over? I better stop buying everything and I better start canceling everything.” Because you could put yourself out of business by knee jerking, and I’ve seen this rodeo seven, eight times already.

Loren Feldman:
Not this one. This is different.

Jay Goltz:
It’s worse, except it’s gonna go away. The fact of the matter is, you have to make smart decisions when things get tight, and there’s no upside to panicking, and you just keep making good decisions. In my case, I have a lot of labor in my business, so if I cut back my labor just 10%, it’s hundreds of thousands of dollars. We have a plan for, if business drops off, we will immediately start cutting back hours, and no one’s gonna starve. And then if we gotta cut back, we’ll do what we need to do because—

Karen Clark Cole:
Jay, are you gonna pay people while they’re not working?

Jay Goltz:
Hourly? No. I’m not Google. I can’t afford to. If there were a flood here and people had to work to clean up the flood for days, they would get overtime and they would get paid. It goes both ways. Salaried people, they’re going to take a furlough for whatever, 10%. But the hourly, no, I don’t have that luxury. I wish I made enough money that I could go ahead and pay everybody, but I can’t. And at the end of the day—

Karen Clark Cole:
Would you lay them off so they can get unemployment?

Jay Goltz:
Um…

Karen Clark Cole:
That’s one thing that people are doing here, is they’re actually laying them off so they can get—

Jay Goltz:
No, no, except unemployment is only half the ratio.

Karen Clark Cole:
It’s better than nothing.

Jay Goltz:
No, no. Well, for sure. If I laid them off, they would be eligible for unemployment, but out of 115 people, my guess is, maybe we’ll lay off two people and the rest will be cut back 10%. They’re way better off getting cut back 10% than either A getting laid off or B having the company go broke. Because what I’ve learned over all these years [is] I’ve got one job, only one job: It’s to keep the business in business. If you forget that, and you start to not react quick enough and you keep paying people for three or four months, you’re gonna go out of business and that’s not going to help anybody. I’m getting into survival mode, though I don’t think it’s gonna get that bad. But if it does—

Karen Clark Cole:
It is, Jay. It’s gonna get that bad. I guarantee it.

Jay Goltz:
Really?

Karen Clark Cole:
Yep. I mean, the closest thing is really 100 years ago. None of us have seen it. All you have to do is look at the rest of the world who’s ahead of us.

Jay Goltz:
So there’s no chance—you just said you guarantee it—there’s no chance that this will take a hit for three, four, or five weeks, it’ll get better…

Karen Clark Cole:
All we have to do is look at the rest of the world who’s already ahead of us. We have a lot of good examples.

Jay Goltz:
Like what?

Karen Clark Cole:
Italy, China.

Jay Goltz:
Let’s stop there. Let’s talk about Italy. I buy a lot from Italy. What’s going on in Italy? They shut down some stores. Yes, okay. Is that going to go on for six months?

Karen Clark Cole:
Only two people are allowed to drive in cars right now. Those are some examples.

Jay Goltz:
I know, but how long is that going to go on?

Loren Feldman:
But Jay, think about it this way. Think about all the money that is coming out of the economy when you shut down the NBA, when you shut down major league baseball, Broadway. You know about the town of New Rochelle, which is in Westchester County north of New York City. They’ve shut everything down there. People are on lockdown. Food is being distributed by the National Guard. Who knows where else that’s going to be necessary? Even if this thing blew over in five weeks, as we would all love to have happen, when the economy takes a hit like that, when all of that money comes out of it, it takes a while to get back into gear.

Jay Goltz:
So I guess I’m asking you, what’s your point? Does that mean that because the NBA shut down, my business is going to take a 30% hit for the next four years? You don’t know that. This is what goes on with the hysteria thing. Like, I’m not saying it’s not going to affect me. I’m absolutely sure it will affect me, but I’m not sure it’s going to mean that my business is going to drop 50% for the next two years. There’s just no way to know.

Loren Feldman:
No one said that. My thinking would be that you just need to be considering contingency plans, which it sounds like you already are.

Jay Goltz:
Absolutely. I’ve got my hand on the Eject button. The first week the business is down… First of all, I’m framing pictures. Half the employees are framing pictures. If there are no pictures to frame, why are they here? I’ll cut back hours, but in 42 years, I’ve laid off a handful of people. Even during ‘08, I don’t think I laid anyone off.

Now keep in mind, I’m in the home furnishing market. Housing crashed, home furnishing, everything like that. I took a 30% hit, which has never really recovered. I’ve never come back from that hit. I didn’t lay anyone off. What did I do? I bought a factory building that cost me a third as much as the place I was using for my warehouse and factory, I readjusted the cost, and now I’m in good shape because of it.

Loren Feldman:
So that’s a great point. You’re talking about finding an opportunity in a very difficult situation. Do you see anything like that now? Dana or Karen, let me start with you. Do either of you see an opportunity in this to do something that will put your business in a stronger position?

Dana White:
I spoke with my mentor yesterday, and I literally had my hand over the Send button to send an email about raising prices. And he said, “Don’t you dare right now. Your sales are already down significantly between your salons compared to this time last year. And now’s not the time for those who already aren’t coming to say, ‘Here’s another reason not to come now,’ especially with this virus.” So he said—and I agree with him—“Send out a reassuring message, post a reassuring post, and give them an incentive to come in. Do your special. Let’s continue going on with marketing.”

When my market gets their hair done, it’s a necessity. Part of it is, “I want to feel good.” But the other thing is, “Hair health is very important to me. I’m not just coming in for a haircut. You wash and style my hair. I’m only going to go so long and I’m not necessarily going to do it at home. I just need to know that Paralee Boyd is a safe place for me to go.” For me, we’re going to try doing a little bit of marketing that I hadn’t done before. We’re just going to keep on with that pace, but I’ve got my hand too on the Eject button because, I agree with Jay, my job is to keep the salon open.

I know the SBA is looking to give out money to small businesses that are feeling the sting of this. I’ve got an email coming to me, explaining what that means and what I can do. I will lay people off, but I’m gonna lean out my staff first, if we really stay on this path. With Karen, I believe we will, especially with schools being closed. It’s my hope that it turns around, that people get cabin fever and say, “I’ve got to go get my hair done.” But in the event that they don’t, then we will lean out, and then if we have to shut down because we’ve seen two days and we haven’t seen anybody, then yeah, we need to have that conversation and hopefully put my staff—who are all hourly employees—in a position where they can receive some help. I’m with Jay, I’m not Google.

Loren Feldman:
Karen, we just visited you in Seattle where we taped the podcast and we had a special guest, Brian Canlis, from his family-owned restaurant who is a great example, I think, of somebody who’s trying to find an opportunity in this crisis.

Karen Clark Cole:
Not just an economic opportunity. They’re helping the community.

Loren Feldman:
What he’s done is he shut down his fine dining restaurant, but he’s basically started three other businesses, one of which I think is selling breakfast from a pop-up store in their lot, they’re doing a drive-thru for lunches and dinners, and they also have started a home delivery service, which I think they’re hoping is going to keep their 115 or so employees employed, but also provide a valuable service. That seems to me like somebody who’s really thinking creatively and looking for an opportunity.

Karen Clark Cole:
Yeah, it’s innovative and creative, and the beauty of it is, it’s still in alignment with their mission of trying to turn people towards each other, which I love. Because it’s not just the employees, but it’s also the community. They’re trying to help people who it may be difficult for to get food. It’s upscale. I mean, it’s not like they’re at the food banks. It still is a business.

Loren Feldman:
Karen, you said your business is holding up so far, but do you see opportunities here? Is there something that you can do?

Karen Clark Cole:
Yeah, we’re really focusing on trying to help our clients get set up for remote work, the user experience of working remotely.We’re trying to talk about how we do that so well and have been doing it for quite a while now. We really do have it dialed in, so we’re trying to really promote that so everyone knows, “Don’t worry, we can still do this,” and help them where we can.

Loren Feldman:
Back to you, Jay. You found an opportunity in 2008, 2009—

Jay Goltz:
It certainly was an opportunity, but it was also a strategic move to make sure the business was healthy. I’m not saying, “Oh, make lemonade out of lemons.” I’m talking about, when things go bad, you have to look at your business and figure out what adjustments to make. I looked at the business and I said to myself, “I believe we’ve been living off of cheap money and cheap mortgages for years. I don’t think this business is going to come back to where it was and I need to change my business model.” I was paying $10 a foot for factory space, and the new space was going to cost me $2.75. That’s like the entire bottom line to the company, so I strategically decided, “I’ve gotta take this cheaper space,” and it righted the ship and it got me in a good place.

I’m not sure that this business won’t shut down eventually from this, but I’m also not sure it will. So I’m not going to freak my employees out and go, “Listen, we might be closing down totally.” I think the worst case scenario, I’m hoping, is if everybody has to take one day off a week for a month, they’ll survive. Everyone will be okay. If I have to lend people money to cover their rent, I’ll lend people money to cover their rent. Like I said, I’ve been through seven recessions.

Loren Feldman:
Are you concerned that people are going to just say, “I don’t even want to go outside. I’m not going to leave the house to frame a picture or buy a sofa.”

Jay Goltz:
This might sound weird, but I just don’t have the luxury to worry. I don’t have the luxury to have fear. I own a business and I need to be fearless moving forward. I don’t know that I would use the word “concerned.” Do I have a contingency plan? Yes. But if I started to be concerned about everything, I would have died of a heart attack 20 years ago. I don’t think you can be in business and sit there and worry about everything every day. I don’t think you can do that.

Loren Feldman:
Dana was talking about—we’ve discussed the prices she charges and we’ve all encouraged her to raise her prices. She’s decided now’s not the right time to do that. How do you look at marketing? Are you going to adjust what you spend on marketing right now? Do you do more, do you do less, do the same?

Jay Goltz:
It gets down to cash flow. When things get tight, you go from profits to worrying about cash flow. The stuff that I know is working—the online stuff that I absolutely am sure is bringing in business because I can track it, because when someone comes in, we say, “Where have you heard about us?” and “Oh, I found you online”—I’m going to continue spending the money on the stuff that I’m 100% confident is working because the customers tell us. Remember, I get their name and number when they come in so I know if they’ve been here before. I have a pretty good what’s called “attribution.” I know if they’ve been a repeat customer. I know if they came in from driving by or from the website or from other advertising. Other stuff, putting a full color ad in the local magazine that I’m not sure works or not, no, I’m cutting that out. I don’t know if it’s working. I’m going for the sure bets.

So what am I doing? I’m considering cutting labor if I need to. I’ve cut back travel considerably just because some of the places—we’re not going to Italy now obviously, and China, I send people to China to buy furniture and stuff. We’ve cut back on travel dramatically. I’m looking at the advertising, cutting back on that. And that should be enough to keep going fine.

Like I said, I’m not going to get into the mindset of, “We’ll probably be shut down.” I don’t think that to be true. I’m not going to participate in this hysteria. The people at the grocery store, they’ve got cartfuls of toilet paper, and you say to yourself, “You’re not buying enough food to need that toilet paper long-term!” Everybody’s crazy. The world’s gone mad for a little while. I’m not jumping into that stuff, and I’m telling you when September 11 happened—

Loren Feldman:
Jay, you’re managing to sound hysterical while you’re complaining about everybody else sounding hysterical.

Jay Goltz:
I got it. That’s because I spent an hour in the grocery store this morning, and I’m hearing about how this is gonna be like Italy. And I don’t believe that to be true. It might. But just because Italy got behind the curve and got out of control there doesn’t mean it’s coming here. When Karen says, “I guarantee it’s gonna happen,” I take exception to that. It might happen, no doubt. I don’t believe that that’s a guarantee.

Dana White:
Jay has mentioned before that he lives by four principles, and that’s what I’m hearing. The first one is, it is what it is. Two, deal with it. Three, as business owners, we are on a good and noble mission to help customers, employees, and our families. And then four, when something gets in our way, i.e., this coronavirus, then f.u. It’s not that you don’t care, it’s hey, do your worst. You’re saying to whatever’s in your way, “Do your worst,” but my job is to make sure that my business stays open so that my customers and my employees have a place to come back to, and if that means I have to lay people off, if I have to help people pay rent, that’s one thing. But what I hear is Jay sticking to his four principles of business ownership.

Jay Goltz:
We’ll call it resolve. I’m in my resolve mode. It’s all in Rocky 2 when Rocky had a terrible round, he’s sitting in the corner, he looks up at Mickey, and he just goes, “I ain’t going down no more.” And then he won. I ain’t going down. I’m gonna do what I need to do to fix this, and I ain’t going down, and my employees are going to keep their jobs, and we’re going to forge through this. I’m not going to waste my time and energy going through the news cycle. I could tell you 10 crises that they’ve hyped up that never happened. Believe me, I’m not downplaying. I know this is bad. But the 401k thing was like, “Oh my god, airplanes are gonna be falling out of the sky.”

Loren Feldman:
The 401k thing? Do you mean 911?

Dana White:
Y2K?

Jay Goltz:
Yeah, all right, take that out. Edit that out. [Laughter] Planes will be falling out of the sky. How about the pandemic that never got here. How about that?

Loren Feldman:
I’m here saying we should have a reasonable conversation about potential issues, and it’s almost like I hear you saying even talking about this stuff is getting hysterical and participating in the insanity. Is that what you’re saying?

Jay Goltz:
I heard the phrase, “We’re going to be shut down. It’s happened in Italy. And it’s happening here,” and I’m enthusiastically disagreeing with that.

Karen Clark Cole:
I’m saying if you look at the data, it’s moving. We can see what happened in China. We can see the difference between countries, cities that reacted quickly and what they did with their social distancing. We can see what happened when they didn’t. You can also see that the U.S. has reacted slowly to get started. That doesn’t bode well for us. That means stay home. It’s bad, in terms of what it means for us socially. It’s gonna be really hard for people to do that. And unless we do, it’s going to hit us really hard.

Jay Goltz:
How many cases are there in Seattle right now?

Loren Feldman:
Wait, let’s not go there.

Jay Goltz:
I’m just saying this. You’re in Seattle. It’s bad there, I get it. There are not a lot of cases in Chicago and everybody is doing everything they’re supposed to do. I’m not sure—

Loren Feldman:
Jay, nobody knows how many cases there are in Chicago because we can’t test.

Jay Goltz:
Okay, I’m just suggesting there’s a good possibility that my business is not going to shut down for a month or two. That’s all I’m saying.

Loren Feldman:
Okay.

Jay Goltz:
And believe me, I’m not at all saying this isn’t serious. I talked to a doctor last night at length about it. It’s bad and I get it, but we’re taking all the preventative measures. I believe that there’s a good chance that there will be a downtick in business, but this is not going to be another economy meltdown for the next five years. There’s just no reason to assume that, and frankly, pause very importantly, there’s no upside to me for that. There’s just no upside being a business owner and deciding we might be out of business in six months. I’m certainly not going to tell my employees, “Brace yourself, you might be out of a job next month.”

Loren Feldman:
Let me ask a couple of questions. Dana, have you thought about what you would need to do if one of your employees were to test positive?

Dana White:
Yes. We would look at the guests who they serviced that day. Then we would contact those guests. I’m sure they’d already not be not coming into work if they tested positive. We would also look at the employees who they worked with that day and have them stay at home. What we decided was, if one of our employees did test positive, it would probably mean shutting down that salon after contacting everybody. We’re just not going to take the risk. We would probably shut that salon down.

Karen Clark Cole:
What if you found out that one of your customers has tested positive? Same thing?

Dana White:
It’s similar, but again, we keep our guests in the salon for a short time. We would probably not have the people who are working that day or with that person come in. We’d have them stay at home and let them incubate to see. Then we would look at the time that they were there. We’ve talked about contacting all the people who were in the salon with them the day that they were there, but we are caught between, “Hey, do we tell them and then we’re hysterical?”

Probably we’re going to err on the side of caution and contact everybody who was in the salon with them at the time. But again, we’re seeing lower numbers. If it were a normal Saturday, we’d have to call maybe 10 people. Right now, with our numbers being low, we’d only have to call a couple of people, so we probably would call people who were in the salon with them and the people who work with them. I don’t believe we would shut down the salon because again, we have these cleanliness standards that are put in place by the state and we’re doing so much to keep the salon clean hourly.

Karen Clark Cole:
The problem is it’s airborne, right? So you shouldn’t be any closer than three feet from people.

Jay Goltz:
The reality is, you can’t make a decision today about what might happen in three weeks if it happens, because we have no idea what’s going to be going on in the rest of the city and everything else—

Loren Feldman:
Well, Jay, you might be right about it might be too early for her to think about whether she would have to shut down or not. But she can certainly think about what the protocol would be. Who has to be alerted, that kind of thing.

Jay Goltz:
I’m not saying she shouldn’t be thinking about everything. I’m just going, you can’t come to a conclusion at this point. You should be thinking about it.

Loren Feldman:
Karen, let me ask you: If it does get bad, and it sounds like you do anticipate it will and that your business will fall off too, what concerns you most? Do you have bank loans that a lack of revenue could create a problem for? What would the big issue be for you?

Karen Clark Cole:
No, it’s just gonna be a reduction in work for us. We have to be careful. We can’t have people on the bench for very long. If we have a reduction in incoming work—and we are, we’ve already let all of our contractors go. These are people who we use for ebb and flow. If we have a higher volume than normal, we’d use contractors rather than hiring employees until we know that that’s a new normal. We’ve already swapped, taking the contractors off work, and put any employees who were idle because of some of these postponements on that work. Meanwhile, we have to keep those contractors warm because we believe that when we get back to normal, we’re going to be gangbusters because all of our clients have to make up for the work that’s been postponed because they still have to get their jobs done.

Jay Goltz:
Those people who do that stuff are going to learn a valuable lesson from this, which is, they better have some reserves. Because people like Karen and I who have people who are paid for a contract, they’re gonna lose their contracts. They’re gonna be out of work for a while. That’s the nature of being a gig worker, so maybe some of those people are gonna decide to get regular jobs because there’s a little more stability.

This is going to test out a whole lot of lifestyles. I have a person who does marketing for me. She works three days a week. She works for the hotels. How do you think that’s working right now? I don’t know that anyone’s getting hit worse than hotels.

Karen Clark Cole:
I hope they don’t go get what you call “regular jobs” because we really need them to run our business. [Laughter]

Jay Goltz:
It’s gonna change and maybe you’ll hire some of them, but the point is, all of her hotels are cutting her off 100%. I had a good talk with her because I have a good relationship with her. I said, “You might want to remind some of them”—Karen, what you just said—“that they should keep you warm here because they’re gonna want you back. Instead of cutting you off 100%, maybe convince them it would be a good idea to cut you back 50% because you’re gonna have to go find a client to replace them.” It’s shaking up the whole dynamics of that stuff.

Loren Feldman:
Let me ask you this. One of the reasons we started 21 Hats was, the basic premise is that a lot of business owners feel isolated. They’re not sure who to talk to. They don’t necessarily have a spouse they can talk to. It’s not appropriate often to talk to employees when things are tough. This seems like, with a lot of people freaking out, with a real crisis on hand, this is a time when people want to compare notes with others.

That’s the whole purpose of the podcast we’re having now, but for people who are listening to this and are looking for other ways to reassure themselves, to figure out what other people are doing, I’m curious what experiences the three of you have had with peer groups and whether you think belonging to a group like Vistage or YPO or EO is helpful in a situation like this. Karen, do you belong to any of those peer groups?

Karen Clark Cole:
I don’t currently. I have various ones in the past. I think they’re good. You’ve got to take a grain of salt. To me, it’s all information, and then what I do with it is probably going to be different. I like to run the company eating our own dog food and think about it as a user experience project in itself. Then I’m continually looking internally and talking to the people who are inside the company and talking to our clients and finding out, “More of this, less of that.”

It’s important to hear other people’s perspectives and know what challenges they face. Even on this call, we all have very different businesses and very different perspectives on how we run them and how we think about them. For me, it’s interesting to see, “Oh, wow, not everyone’s just like me.” I think that’s important.

Loren Feldman:
Dana, what about you? Have you belonged to one of these groups?

Dana White:
I have in the past and I’ve kind of created my own little group. It’s been okay. I don’t really lean on them as much anymore because I just wasn’t getting that much from them outside of, I don’t want to say a lot of talk, but you can only go so many times to an organization for help or questions. You get a couple, “I don’t know, I don’t know, I don’t know.” You go, “Oof, okay.” Instead of relying on the group, you just bring people around you who you feel can help advise or bounce things off. I’m not really a part of entrepreneurial help groups or focus groups like that anymore.

Loren Feldman:
Would you like to be right now? Do you feel like it would be useful?

Dana White:
Again, it would have to be an organization where someone’s come to me who’s in a similar part of their growth that I’m in and they are finding answers or being pointed in the directions to pursue their own answers that are helping. It’s like being in the same grade with kids as opposed to hanging out with kids who are in another grade. I’m kind of focused on keeping people around me who are where I want to be, versus keeping people around me who are where I am.

Loren Feldman:
Jay, you’ve belonged to a lot of these groups through the years.

Jay Goltz:
I’ve been in six different groups, some of the big ones, the nationally known ones that cost $15,000, $18,000 a year. I’ve seen about 100 and some businesses close up, because you go through your books together. It’s been an extremely valuable learning experience of seeing the way other businesses work and in getting some perspective on it.

One of the biggest things—and I’m dead serious when I say this—you start to feel smarter. Because if you’re by yourself and you make so many mistakes like I did, you start to think, “Oh my God, everybody’s smarter than me.” And then when you join a group, you find out, “No, not really,” because there’s a lot of other people that are that are—

Loren Feldman:
Who make mistakes too?

Jay Goltz:
No, more than you do. Here’s a little insight, which is why I’m not mentioning any names. This is just fact. If you pay $18,000 a year for a business group thing—and that’s what a lot of them cost—who do you think has got them that kind of money to pay per year? I will tell you, in my experience—and I’ve talked to other people, this is a statistical fact—most of those people in the business groups are second generation, or third. Mostly second. In the last couple of groups I was in, I’ve only been one of, out of 15 people, only three of us started the business, and the perspective of a second-generation business owner compared to someone who started it out of the trunk of their car is very, very, very different. They’ve got so many resources and so much infrastructure in place that it’s just different and then many of them really shouldn’t be running the business, and I’ve seen them go broke. Out of 100, I’ve seen 20 of them go broke.

Loren Feldman:
Jay, what advice would you give to a business owner feeling isolated right now and feeling the need to compare notes with others and think through their approach? Do you have any advice?

Jay Goltz:
Yes, absolutely. I absolutely think it’s a good thing to join a business group and try to find one that’s got some people who you can learn from. Try to find some people who are in a similar situation and some of them are much older and are way past where you’re at. One guy said to me—this guy looked across the table at me. I had just joined, I was about 31 years old, and he was in his 50’s probably, and he just looked at me and he said, “So have you toughened up yet?” That was such a poignant question because that’s what it’s about. When you start in business, you need to toughen up. It’s not easy. It’s not simple. Sometimes you have to do things that are uncomfortable. It just shows you the wisdom of somebody who’s been in it.

Another guy said to me—this is right up there. He was about 50-something, I was probably 30. He said, “Jay, everybody realizes that they have limitations. It usually happens when you’re about 50.” Oh my God. That’s just brilliant. I don’t have the head to build a $200 million company. I don’t. I realized I have limitations. That was a really smart thing. And when I hit 50, just like he said, I realized, “Yeah, I think I figured out how far I can take this with my personality, with my skill-set, with my risk ability.”

I’ve gotten some really great input from people in those kinds of groups and I’ve also seen people do such remarkably stupid things and do it over. I’ve been in groups with people where you’ll say to the guy—always a second-generation, I’m sorry to say—you’ll say, “Bob, you’ve been complaining about your production manager since I joined this group. Why don’t you fire him?” “Yeah, yeah, you’re right. You’re right. It’s time. I’m gonna fire him.” A year later, you come back to his place. His production manager’s still there. “I thought you said your production manager—” “Well, yeah, yeah.” I just watch people do nothing.

Loren Feldman:
I thought you just told people that they should join a business group, Jay. [Laughter]

Jay Goltz:
Even a bad experience in a business group is better than no experience. I mean it. The life cycle for me in those business groups is usually two or three years. I usually get burned out after two or three years, but I always leave with lots of great insights. I absolutely believe people should be exposed to other business owners.

Loren Feldman:
Okay, so we’re all almost out of time. Again, this is Friday the 13th. As we’re heading into a crisis of some considerable dimension, I knew this was going to be a difficult conversation in some ways. I wanted to bring something that I found really inspirational into the discussion. I’m curious if the three of you looked at it the same way.

Jay Goltz:
Is it a prayer?

Loren Feldman:
No, it’s not a prayer.

Jay Goltz:
Good.

Loren Feldman:
It’s an item from the 21 Hats Morning Report this week about a car dealership in Charlotte, North Carolina that figured out they could provide a safe place for people who are homeless and sleeping in their cars to park overnight. The thing kind of built on itself. They wound up starting a GoFundMe that attracted a good bit of money and allowed the car dealer to actually pay security deposits and first month’s rent for some of the people staying on the lot. To me, it was somebody looking at a situation, not waiting for others to act, figuring out what they had to offer, and taking action that made a difference to a significant number of people. What do you guys think? Do you see it the same way?

Karen Clark Cole:
Are they doing that all the time?

Loren Feldman:
They are now, yeah.

Karen Clark Cole:
Oh, good. That’s great.

Jay Goltz:
I think that’s a great story. It just shows that you’ve got to keep thinking about things. As business owners, we have a unique opportunity to do something good for the world, whether it’s providing jobs or making customers happy or using your empty parking lot to help the homeless, as this guy does. We have a unique opportunity to make the world a better place., and that’s a beautiful thing. I would hope that everybody appreciates that. That’s an honor and a privilege to be able to do.

Loren Feldman:
This conversation went in a lot of different directions. I’m wondering if we can pull it together a little bit. What did each of you hear here? What do you suggest somebody take away from this conversation? Dana, did you get anything out of it?

Dana White:
I did. I’m sitting here and I’m listening and I’m concerned about the businesses that are not going to survive this. I’m wondering if Paralee Boyd is one of them. It’s that simple. That’s my takeaway. My takeaway is this is gonna get worse before it gets better, because we’re not as prepared as other countries. I think we’re doing all that we can, but even in doing all that we can, it’s going to hurt businesses when people stay home. Who’s going to survive this? What great businesses are going to have to close?

I know some of the business owners that I’ve talked to last night are worried. “Is there something more that I could have done?” or “Could I have built my business up more two years ago”—because I’ve only been in business for six years—”could I have done more to make it so that when a travesty or a tragedy happened, I would be prepared?” Because I’m not prepared to survive this. That’s a fear. My takeaway from this conversation is, “Dana, can Paralee Boyd survive?” And we’re going to do what we can, but I’ll be honest with you. I don’t know.

Loren Feldman:
Is there anything you’re thinking about, any steps you’re thinking about taking, that you’re debating in your own mind to make sure that you do survive?

Dana White:
Do we shut down my second location? I don’t mean temporarily. These incidents take time to recover. There’s so much that I didn’t do prior to this incident that I don’t know if it could have prepared me for it.

Being optimistic is saying, “People are going to get cabin fever. And as long as they have a safe place to come, which is a clean place, you hope and pray that they’ll come.” I know restaurants are giving out gift cards, so that when people do come back, we can make money. That might be an idea. But if there’s no salon or restaurant to come back to because they had to close, then there goes the gift card, so I don’t know.

Loren Feldman:
Karen, how about you? Are you taking anything away from this conversation?

Karen Clark Cole:
Well, honestly, I’m at a loss for words, because it’s terrifying. For me, it’s less about my individual business, and it’s more about the overall economy and what’s going to happen to my grandma and people who are in high-risk health profiles. And, like Jay’s son, I’ve got a house on the market right now. And I’m like, “I need to sell that house.”

There are all kinds of little things that are happening that are going to pull us together as a country and as a community, I can tell you that. What we do as business owners, people are looking to us. Our employees are looking to us to make the right decisions. I have gotten a lot of feedback from my employees when we closed our offices ahead of the curve: “Thank you for taking care of me.” They are concerned about their health beyond everything else right now. I think we just have to be real and be cautious in how we’re running our companies, in terms of lowering costs and anything that can happen should happen.

Loren Feldman:
How about you, Jay?

Jay Goltz:
I am not going to wring my hands and tell you that I might be out of business in six months. I’m not going there. I’ve been through this many times, and I’m going to do whatever I have to do to stay in business and take care of my employees as well as possible. I’m giving a rally call to everyone who’s listening: we don’t have the luxury as business owners to wring our hands and to worry. No, we’re supposed to fix things and figure out the best course of action to get through this.

Karen Clark Cole:
I think what we have to do though is preserve our businesses so that it’s on hold. Because when this is all done, people need our businesses to be going, not only as employees, but as customers. Just think of it Dana as a pause, and how can you keep that pause going? How can you preserve it so that it can be on pause so that you’re ready to roll when everything gets back? Because it will.

Dana White:
I don’t know if other business owners who may be listening are in a similar situation. You do the work. You embrace the pause, but there are people that I owe money to who aren’t embracing my pause, who don’t care that COVID-19, brimstone, fire, hail. I don’t care. I want my money.

Jay Goltz:
What are they gonna do, kill your cat? That’s what I want to know. You owe them money. So what does that mean? They’re better off if you go broke? Is that how this ends? No, they’re gonna have to work along with you until you pay them back. There’s a perfect example of they’re in this with you, whether they like it or not. They lent you money or whatever. That was all part of the risk of taking business. They’re just going to have to work with you until you figure this out, because it’s in their best interest and in your best interest. There’s a good example of, what are you gonna do? They’re better off if you stay in business. Everyone is better off if you stay in business.

You’re gonna get through this, you’re gonna do what you need to do. If you need to close the one salon, so be it. And you’re going to come out of this whole thing because you’re smart, and you’re ambitious, and you’re responsible, and people like you. You’re gonna get through this. And make sure that you don’t ever, ever, ever have a bad afternoon and start telling your employees what you’re really thinking, because you might as well set the place on fire then.

Dana White:
You’re right.

Jay Goltz:
There’s no upside to it. All they’re gonna think is, “Oh my God, I just bought a new car. I’m gonna lose my car and who’s going to help my mother?” and you’re just going to help freak them out. So embrace it, you’re gonna look back on this and say, “Wow, I got through the whole corona thing.” This will be just one of the next 20 things that come along that we have to deal with.

Loren Feldman:
We are out of time. Needless to say, we will be returning to this topic as long as it’s necessary. My thanks Karen Clark Cole, Jay Goltz, and Dana White.

Dana White:
Thank you.

Jay Goltz:
Fine job as always.

Karen Clark Cole:
Thank you.

Episode 7: Maybe This Isn’t the Right Job for You

Nobody goes into business because they think they're going to be really good at firing people. When you read books or magazine profiles of business leaders, you rarely hear anyone say, “You know, the one thing I've really mastered is knowing when and how to fire people.” And yet it’s something that every entrepreneur has to deal with. Even at the most successful businesses, some employees are not going to make it. In this episode, regulars Karen, Jay, and Dana answer the question: how many people have you had to fire or lay off? Plus: What do you do when you find you have venture-backed competition?

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.

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Jay Goltz: “Because of my extremely undisciplined and ignorant hiring practices as a 22-year-old, I hired a lot of people who couldn’t do the job or didn’t want to do the job or were just not planning on doing the job. Now that we’ve gotten better at hiring, we don’t fire a lot of people.”

Jay Goltz: “The test I use, which I figured out years ago, it’s just a visceral question you ask yourself. If this person showed up tomorrow and said, ‘You know what, I’m moving to Denver,’ would you want to jump up in your chair and give yourself a high five?”

Jay Goltz: “I also want to have what I would call ‘righteous firings,’ which means I’ve got clean hands. Like when they say to you, ‘I can’t believe you’re firing me,’ I want to be able to say, ‘I can’t believe you’re surprised.’”

Jay Goltz: “What lesson is there to learn from companies that give free shipping and never make any money? What should I learn from that? That I should give free shipping and not make any money?”

Karen Clark Cole: “I think it’s important to share why, because of two things. One is, it shows people, “Oh, that’s not me,” and they can relax, and two, it sets the standard: ‘This is what we just tolerate, this is what we don’t tolerate.’”

Dana White: “The last termination, I had been strongly recommended that I get a personal protection order because after this person was terminated, they were driving by the front of the salon, sitting in front of the salon for hours. They were so angry.”

Full Episode Transcript:

Loren Feldman:
Let’s meet this week’s 21 Hats Podcast lineup. Back with us today are Karen Clark Cole, who is CEO of Blink, a user experience research and design firm based in Seattle; Jay Goltz, who has several businesses in Chicago, including a picture frame shop, Artist Frame Service, and a home furnishing store, Jayson Home; and Dana White, who’s founder of Paralee Boyd, a chain of hair salons based in Detroit.

As far as I know, nobody goes into business because they think they’re going to be really good at firing people. When you read books or magazine profiles of business leaders, you rarely hear anyone say, “You know, the one thing I’ve really mastered is knowing when and how to fire people.” And yet it’s something that every entrepreneur has to think about, has to deal with. It’s an important skill. Even at the most successful businesses, not every employee is going to make it.

So let’s talk about this. I’d like to start first with asking each of you: roughly how many people have you had to fire or lay off? Karen, how about you?

Karen Clark Cole:
In the history of the company in the 20 years, I don’t have a count. That’d be interesting to find. I was actually thinking the other day, it’d be fun to find out how many people we’ve hired over the course of 20 years, because people come and go naturally.

Loren Feldman:
Sure.

Karen Clark Cole:
But we’ve certainly gotten better at it over the years.

Loren Feldman:
Is it more than 20? More than 50?

Karen Clark Cole:
Yeah, probably 50ish?

Loren Feldman:
Okay.

Karen Clark Cole:
I’m combining firing and laying off, although they’re very different. Firing is for, in our case, people not being able to perform the work at the quality that’s expected. The expectation is very clear, which makes firing much easier. If it was unclear and vague and nobody really knew what the standard was or what was expected of them, firing is much more difficult. But for us, it’s very clear what’s expected.

We talk about it all the time. It’s no surprise and it makes it much easier if somebody’s not cutting it. It’s usually not a surprise to them because they’ve been on a performance plan. We work very hard. We want them to succeed, so we do everything possible to try to help them and get them there. And if it becomes where it’s too much stress and work for all the people around lifting the load, trying to help them, then they have to go.

Loren Feldman:
Dana, how about you? Do you know how many people you’ve fired?

Dana White:
Eight people.

Loren Feldman:
You know exactly. [Laughter]

Dana White:
Exactly. Eight people in seven years.

Loren Feldman:
Has it gotten any easier over that time?

Dana White:
Yes, it has. I know now, especially with the last termination, I have to choose Paralee Boyd over people who are making it abundantly clear that they don’t want to be at Paralee Boyd. So when I look at it from that perspective, it has become easier—not comfortable, but easier to do.

Loren Feldman:
How about you, Jay? You’ve been in business over 40 years, I believe. How many people have you fired?

Jay Goltz:
Personally, probably, I don’t know, 200? Mostly in the first 20 years. I haven’t personally fired anybody in… I can’t even think of the last person. But for those years where I was the main manager and things were growing… I have to give you perspective, though. I have 115 employees. So over 42 years, I’ve been through 1,000 employees maybe.

But in the beginning, I’d never had a job. I had no idea how to hire people. If they showed up and had a pulse, I’d hire them because I needed somebody. I thought everyone just works hard and you tell them what to do. Because of my extremely undisciplined and ignorant hiring practices as a 22-year-old, I hired a lot of people who couldn’t do the job or didn’t want to do the job or were just not planning on doing the job. Now that we’ve gotten better at hiring, we don’t fire a lot of people.

Loren Feldman:
Have you gotten better at firing? Are there aspects to how you manage this that you’ve learned through the years and through all those firings?

Jay Goltz:
Yes, the first thing I’ve learned is: better that they quit for you and for them. So the first thing is, we sit down with them, and if they’re not doing things properly, we tell them, and then after the second time, perhaps we can say, “Listen, I’m getting concerned this might not be the right job for you, because I’m telling you the same thing for the third time now.” Sometimes they figure it out on their own, and they leave, which is good for everybody. I’ve yet to meet an entrepreneur who’s been in business for years who doesn’t say, “Yeah, I’ve waited too long,” plenty of times. Karen, you with me on that? Did you ever wait too long?

Karen Clark Cole:
Yeah, but how long has changed. It’s generally always a relief, and that makes it easier to do it.

Jay Goltz:
My thinking is, when all hope has left, so should they. I don’t just hope they get better. The test I use, which I figured out years ago, it’s just a visceral question you ask yourself. If this person showed up tomorrow and said, “You know what, I’ve got some bad news. I’m moving to Denver,” would you want to jump up in your chair and give yourself a high five? You shouldn’t be relieved when people quit. I actually in my head, if I would be relieved, I know it’s time. If I wouldn’t be relieved, I know I’ve got to work on it some more.

I also want to have what I would call “righteous firings,” which means I’ve got clean hands. Like when they say to you, “I can’t believe you’re firing me,” I want to be able to say, “I can’t believe you’re surprised. I told you three weeks ago that if you did this again, you were going to get fired. What part of this would be a surprise?” I don’t think people should be surprised usually when they get fired, unless they did something that’s just egregious that you couldn’t have seen coming.

Loren Feldman:
You’re kind of talking about situations where it’s, to some extent, black and white, where somebody makes clear that they’re not really into the job, they perhaps don’t even really want to be there. It can be a lot more difficult than that. The obvious situation is when someone just doesn’t grow with the business. They might have been just fine early on, but things changed. The business evolves, they don’t. Something has to be done. Have any of you had a really tough firing that you struggled with, maybe couldn’t even sleep the night before?

Dana White:
That was me with my termination in August. You’re right. It’s not so black and white. This was somebody I cared about. This is somebody who was great when we first started. I slept really good knowing that, in the beginning, this person was on my team. But towards the end when I started walking into my businesses and seeing things not being done and seeing not what I wanted and being told, “Well, it’s okay. It’s okay. It’s okay. It’s okay.” Or, “There’s nothing we can do,” or, “This is just how it is.”

I decided to hire someone who could help me execute what I needed to be done, because at that point—and this is three years in with this person—there wasn’t really much I could do to get them to do what I needed them to do. I knew that they were going to do what they wanted to do regardless. And then if you terminated that person, you’re left holding the bag for everything, meaning you’ve now got to work triple times as hard, so I knew I would need help, if it came to that.

When I hired this operations person, I’d actually hoped that this person would step up, but they didn’t. It got worse. It was really hard, and not so much because you know their life and their family and you care about them. It was hard because I had hope, and it got even harder when you realize that that hope was misplaced, that they’re not only not stepping up, they’re getting worse, because you put structure in place.

Loren Feldman:
Did you have that kind of conversation that Jay described of just laying it out to them, “You have to change the way you’re doing this,”?

Dana White:
In the beginning, it was, “Okay, Dana is not happy, so let’s talk to Dana to make Dana happy.” But the performance wasn’t changing. Then I said in a conference call with both of my managers at the time, “These are the things that need to change. This person is coming in to put in more structure, and this will help you.” One manager was excited. The other manager was skeptical. Needless to say, the manager who was skeptical acted out when this person was hired, continued to act out once this person got their bearings, and we wound up having to terminate them. That was tough because again, this was somebody who had been such an amazing support to me in the beginning. In order for Paralee Boyd to grow, I had to choose: “Either this employee, or Paralee Boyd. It’s up to you.”

After the person left, there was a sad relief, but it was relief because they weren’t there anymore. And then the cat comes out of the bag. You’re hearing from customers and staff members all the things that were going on behind your back, so to speak, all the things that were allowed, and then you start to see the change. Now, we don’t have people calling off every week. People are coming to work, and if somebody can’t come into work, they’re taking the shifts of somebody else. “I’ll take her shift,” or “I’ll take her shift.” Before, we were having a hard time covering shifts. All of this calling off and people not being accountable. Leadership had to change, and once the leadership changed, it started to turn and we started to see that turn in October, November.

Jay Goltz:
The harsh reality is businesses outgrow people. When you start a company by yourself with three employees, it is unlikely that those three employees, when you’ve got 73 employees, are going to still fit in what you used to be. Some will grow with you, and some won’t, and will be resentful. “It used to be you and me, and now it’s all these other people.” It’s just unlikely that you’re going to keep all the people from the beginning as you grow a company.

Loren Feldman:
I’m curious about what you tell the other employees in some of these situations.

Karen Clark Cole:
I think it’s important to share why, because of two things. One is, it shows people, “Oh, that’s not me,” and they can relax, and two, it sets the standard: “This is what we just tolerate, this is what we don’t tolerate.” That’s how you have a culture that’s not toxic. Because if you’re tolerating one bad attitude or low quality, where other people have to pick up the pieces and deal with this person’s bad attitude, you’re enforcing that culture. People, you would be surprised—they’re generally sad that the person’s left, I’m sure, if they have a personal relationship, but relieved to know that this is a company that really puts their money where their mouth is. “They really value this high quality environment, which is why I’ve come here. I want to work in a high quality place. I want to be with people who are really the cream of the crop beside me.” As soon as we let that standard down, they all of a sudden lose confidence in us.

Loren Feldman:
Karen, I’m curious. Is there a legal aspect to that? Have you discussed that with your lawyers whether it’s okay to tell other employees why someone’s been fired?

Karen Clark Cole:
I have not.

Dana White:
We don’t share why they’ve been fired because we do keep that privacy. A lot of times people already know.

Karen Clark Cole:
Yeah, we don’t get into the nitty gritty details, but it would be the quality of the work is not there. Everybody understands what that means.

Jay Goltz:
The important part is that you explain, and we certainly had conversations about this with them. I one hundred percent agree with Karen. There’s some anxiety there. Let them know, “I just want you to know, we’ve been discussing some issues that were a problem, and it wasn’t going right. Unfortunately, they’re gone.” Because otherwise, people make up their own stories. And then, “Oh, I heard it’s because he wanted to bring his brother-in-law in,” and they make up their own, and then the person who left tells a story.

I think it’s critical that everyone knows I play fair, we play fair, we tried, it didn’t work. I’ve never had a problem with that. As far as asking a lawyer, if you want to call a lawyer about all this stuff, they’ll tell you, “Don’t talk to anybody. Don’t look at anybody. Don’t fire anybody. Don’t hire anybody. Don’t sign a lease.” [Laughter] Trust me, get a labor attorney on the phone and they’ll tell you, “No, you should never say anything,” and then see how they run their own business. They don’t.

Dana White:
We have a culture called “cut the cancer.” All of our people work closely together, because we’re not that big in each salon. Once we’re at the point where we terminate, you’ve already spread, so to speak, and so we remove you.

Normally when people are let go at Paralee Boyd, people have already seen it coming and unfortunately the cancer has already spread and people have already started to underperform because we’ve allowed it with this person. We don’t really have to say much. They kind of already know. When they say, “Oh my god, what happened to such and such?” they’re normally doing it because they’re still speaking to that person and they want to hear what we have to say. So we answer it as if we’re speaking to the person who was terminated by saying, “Well, they were underperforming. We trained them and they didn’t quite make the mark for training, as far as their timeliness or getting to work on time or their performance. And so in order to keep our standards up, we had to let them go,” and we leave it alone.

Loren Feldman:
Dana, you’re very process-oriented. You operate your hair salons on the principles of Lean manufacturing, as you move your customers through the salon. Do you have an actual process for letting somebody go right down to prescribing how it happens and where it happens and who’s in the room?

Dana White:
Yep. Depending on who it is, if it’s a manager, we never terminate within the salon. It’s something that’s done before we actually let them know. We start taking down permissions and access to stuff probably the night or the day before, and then when they come in, we have a conversation. The process starts with my operations manager and I understanding the relationships that this person has within the salon and trying to manage that and preparing for the fallout of this person being terminated. So if it’s a stylist and we say, “Hey, how far has the cancer spread?” If it’s like, “Well, if we terminate this stylist, we know these two are probably going to follow,” then we say, “Okay, let’s hire their replacements, and then let them go.”

But we also have reviews. We’ve let you know and we’ve asked you, “How can we help you succeed in this position?” We have a stylist now who’s struggling with her timing. It’s taking her 30 minutes to style a person per head, so now it’s on Dana and my management to supply her with everything she needs to cut that time down and give her time to flourish but also schedule her so it’s not affecting the business. Then over time, if we see she’s just not improving, then that’s a conversation. Maybe she’s moved to another position, or maybe we just keep her on days that are slow where she can perform it that way, but we’ll let her know it won’t be for long, because these days aren’t going to be slow.

We let them know, “This is coming down the pipeline. Here’s what we’re going to give you to help you improve and we’ll check back in with you on this date to see if you’ve improved with our data.” We’re watching them to see, whether they know it or not. Sometimes they know it, sometimes they don’t. We’re timing them. And then when we get back with them, we say, “Here are the days that you know we timed, here are the days that we know that you weren’t, and this is how much you’ve improved.”

We also encourage their colleagues to help them as well. We’ll have them staffed on a day where they’re working next to somebody who’s at the speed that we want them at, and kind of through osmosis, they kind of pick it up. We have had people who decided, “No, I’m not doing it that fast. You’re rushing me.” We said, “This is not the place for you. You should probably be in a suite where you have one hour and 15 minutes to spend on one person, and you can do that. How do we transition you from here to there?” “You don’t have to transition me. I’ll leave right now!” “That’s your choice. That’s not what we want, but if you’d like to leave right now, then that’s on you.”

Loren Feldman:
Maybe that is what you want.

Jay Goltz:
Dana, you know I love you, so I’m just trying to help. I would stop using the word “spreading the cancer,” because some of those people are not cancer. They just have a different view then you have or they’re slow or they’re whatever. I understand what you’re saying. I use the phrase that they “take hostages” sometimes, but some people just—

Loren Feldman:
What do you mean by that, Jay? What do you mean by “taking hostages”?

Jay Goltz:
They go and they’ll start colluding in the back. “Oh, I can’t believe she’s doing this or she’s doing that,” and they take hostages. The phrase “spreading the cancer” is suggesting they’re bad. They’re maybe not bad. They just can’t do the job.

Dana White:
I don’t think that’s the case in my situation. I think that when I refer to people “spreading the cancer,” when my operations manager and I sit down and we talk about this, these are people who are obviously messy, who don’t have the professional standards or business acumen to not be nasty. I’m saying it’s not, “Well, they’re just talking.” No, they’re ordering 50 pizzas and having them delivered to the salon.

Jay Goltz:
Wow.

Dana White:
We’re talking nasty. That’s why I probably won’t change it. And it’s not something we say to them, but we’re talking about people who are calling the state board every week to get them to come and do an inspection on our salon because they’re mad. That’s what we mean by “the cancer,” and then they have people who work in the salon who may not be in line with what they’re doing, but who provide an audience for them.

Loren Feldman:
Dana, I want to ask you about the anger you’re describing. I wasn’t sure if I was going to ask about this, but I feel like I need to, given the times that we live in. Do you—or Karen or Jay as well—worry about somebody being so angry that they come back to the shop or the office with a gun or something?

Karen Clark Cole:
Loren, Jesus!

Dana White:
No, but I mean in my world…

Loren Feldman:
It happens.

Jay Goltz:
It happened two days ago.

Dana White:
Yeah, so they haven’t come back with a gun, but they’ve come out with family members wanting to get into an altercation. That’s just not who we are or what we do. We’ve locked the door and called the police, and you can stand outside and act a fool. You can stand outside and cut up, but I’m not entertaining you.

I am working with some people who haven’t worked outside of hair salons, and in some salons, this level of behavior and drama is acceptable. So they feel that because they’re in a salon, they could come in here and do it, and we just don’t tolerate it. You’re asked to leave and we call the police. It’s as simple as that. Some have wanted to get into an altercation with me. That’s why right now we have removed me from the termination process, because it’s about getting at Dana. It’s like, no.

We’ve had to have Google contact people because they’ve gone on Google and started acting up, on Facebook and started acting up. I can’t speak for the other two people on the call, but I know at Paralee Boyd, it has gotten quite contentious and we’ve had to involve authorities. I’ve crossed my arms and, “Okay.” Police reports have been filed.

The last termination, I had been strongly recommended that I get a personal protection order because after this person was terminated, they were driving by the front of the salon, sitting in front of the salon for hours. They were so angry. Getting threatening messages to my cell phone. “Better watch your back. I’m around the corner.”

Loren Feldman:
So what did you do?

Dana White:
There’s a side to me, Loren… [Laughter]

Jay Goltz:
Don’t mess with her.

Dana White:
Do your worst. Come on!

Loren Feldman:
Wow.

Dana White:
I’m not saying it with ego or hubris, but like I said when we were on stage at Blink, what’s for me is for me. If you come in, come on. Let’s go. I can’t go through life afraid. I can’t, “Oh they’re texting me…” [Fake cries]

Jay Goltz:
I really believe that if any of us wanted to, we can make a list of 50 things to be afraid of. We could be afraid of someone leaving a hot plate plugged in at the building and it burns your building down. You could be afraid of your bank canceling your credit line. There’s 50 things that could happen. I really believe that, if you’re in business for yourself, that fear is the kryptonite of business, and you can’t be afraid, and you just have to deal with things as they come along. Could that happen? Yes, sure. But I can’t be thinking about it too much because you go crazy. It’s the nature of being in business for yourself, which is the heart of the word “entrepreneur.” It’s taking a risk.

Dana White:
My faith is also another part of it. Like I said, what’s for me is for me. I’m not saying be stupid and call this person out and say, “Hey, come meet me here.” No, I take precaution, but I won’t run Paralee Boyd and operate Paralee Boyd in fear of what somebody who wasn’t in line with what needed to be done in the first place is going to do.

Karen Clark Cole:
Dana, you said this a couple of times and I have to admit I don’t understand what you mean when you say that. “What’s for me is for me.” What do you mean by that?

Dana White:
What I mean is that it’s already written. The blessings that are due to me and the adversity and the trials and tribulations and the lessons of life? That’s already done. In my belief, in my faith, God has put me here on earth to do this thing. Only he or she knows what that is. And so my job is to be guided by my faith, walk in my faith, and do what I’m supposed to do. I’m just saying, come what may, my faith will get me through it and I’m equipped to deal with anything as long as I keep the faith. What’s for me is for me, good and bad.

Loren Feldman:
But Dana, you’re also a very thoughtful and strategic person. What you just said kind of implies that you’re prepared to accept whatever may come, and I don’t think that’s fair to you.

Dana White:
No, you do the work. You do the work. You plan and you do the work.

Jay Goltz:
I think what you’re saying is you will deal with whatever comes along.

Dana White:
Come what may and I will be fine.

Jay Goltz:
That is the credo of entrepreneurship. I will deal with whatever happens because that is what entrepreneurship is all about at its core.

Dana White:
And I will be fine. I will be okay. People say the same thing with competition. “Dana, aren’t you worried about competition?” No. If it’s meant for me to be an international brand, I will be an international brand regardless of who is out there. If it’s not meant for me to be, I won’t be, and I will be fine.

Loren Feldman:
One other thing on managing this process, especially in a situation where you think there may be real anger on the other side. One way to possibly manage that is through the payment of severance, which can give somebody a reason to behave well. I’m curious about each of your attitudes towards paying severance. How about you, Karen? How do you approach that?

Karen Clark Cole:
We pay severance, definitely. It’s adjusted. Our goal is to make sure that there is not an undue financial hardship. We’re not obligated to pay any, but we certainly always do, and we look at the tenure of the employee. If there are any unusual circumstances that we know about in their lives, we may try to do more, certainly around extending their health care benefits.

Loren Feldman:
How about you, Jay?

Jay Goltz:
If someone’s been there less than a year, I don’t know that I’d be paying any, but I’ve always paid out severance. I think if you expect someone would have given you two weeks’ notice, I think it’s right to give someone two weeks’ severance pay if they’ve been there, let’s say, more than a year. I’ve had people who were here for five or 10 years—not a lot, very seldom—but over the years, I paid out a week or two per year while they were here, and you can take the edge off.

I also have learned when you’re firing someone, you don’t have to win the argument. This isn’t an argument. You just tell them, “This isn’t the right fit. We talked about it.” They tell you, “You’re wrong.” “Maybe you’re right. I’m not arguing with you. It’s just obviously the wrong place for you.” The mistake a rookie entrepreneur makes is they argue with the person. There’s nothing to argue about, the shorter the better. Everything you say can and will be used against you.

I have to tell you, in all of these years, I’ve only had one person who really went off, but not like swinging or anything, but yelling at me, it’s all my fault. But I’ve never had anybody who got that violent or got violent at all. I think you have to get good at trying to lower the volume of the thing and do it in private for sure. You don’t go screaming to someone on the floor, “That’s it, you’re fired!” I mean, it looks good in the movies, but it’s really bad practice. I think if you do it in a respectful manner, and you offer some severance, it will be better. I’m not going to say many people are going to thank you, though I have had a couple people thank me.

Loren Feldman:
Wait, wait, wait, thank you for being fired?

Jay Goltz:
Yeah, I hired a guy to run the factory and he was so over his head. And finally I just said, “This isn’t working.” He goes, “Thank you.” So it does happen. There are people who know that it’s over and it’s fine. I’ve just found it’s usually not as bad as you think it’s going to be if you do it in a respectful manner. I have talked to entrepreneurs who say, “Oh, I don’t pay severance pay.” I think that’s a huge mistake. I just think it speaks badly about the company.

Dana White:
I don’t pay severance pay.

Loren Feldman:
Why not?

Dana White:
One, I can’t afford it. Now that I’m listening to you guys, I don’t know if I would, because of the process we have in place to get you to succeed. If you’re working and working and you’re just not going to do the job, you’ve made a decision, and hopefully you’ve made preparations behind your decision to not work here anymore, because you know it’s coming.

Jay Goltz:
But that’s probably in the first year, I would assume.

Dana White:
We had a manager who we terminated in August. They had been with me 3 years and I didn’t offer severance. And thank God. When she left, we found out all the things that they were doing. I don’t want to pay somebody to prevent crazy.

Jay Goltz:
I don’t disagree with that, if it’s a situation like that. But if you’ve been in business for 20 years, you’re going to eventually have someone who’s got a little arthritis in their hand and they’re getting older.

Dana White:
Well, that’s different.

Jay Goltz:
Right, I’m saying they can’t do the job and you will probably get to a point where you’ll say, “It’s a reasonable thing to give them some severance.”

Dana White:
We’ve repositioned people within the company. “So you’re not quite making it as a stylist. Maybe we can do a shampoo assistant.” “You’re not quite making it as a shampoo assistant. Have you thought about reception?” We’ll move you before we terminate you.

Jay Goltz:
I’m telling you a new problem is, if you’re in business for 40 years, you will end up with people who are 70 years old who should retire. It’s illegal to fire somebody for age. It’s a problem.

Dana White:
And in that situation, severance is smart. If we had a young lady who had worked with me and she’s grown old with this company, I would not want to say, “Okay, goodbye, you’re gone.” Oh no, we would have probably talked way before then about, as long as you’re getting something out of it, and as long as the company is getting something out of it, and if you’re starting to notice, “They’re not really keeping up anymore,” then try to find something else for them to do, but if it’s just not something that’s working out, let’s phase you out with a parachute. I would do that for somebody who’d been with me for a long time. Sure, sure.

Loren Feldman:
All right, next topic. I do want to talk about competition, and I would like to start with you, Dana, because we just had an item that we ran in the Morning Report and that I sent to you about a venture-backed hair salon based, I believe, in San Francisco that’s kind of going after the same market you’re going after. And I’m curious, what’s your response to that?

Dana White:
When I got the email, I was like, “Oh, no!” I was like, “Oh, man,” because I’m human. And then you think about it and go, “Wow, this is a validator.” If I ever did want to take on venture capitalist funds, it would be, hey, this is working in this market. There’s somebody who is doing it, and it’s working.

Loren Feldman:
By the way, I should point out this is a fairly high-profile thing. We’re talking about venture capital coming from Alexis Ohanian, who is a tech entrepreneur, and who happens to be married to Serena Williams. So there’s some star power there.

Dana White:
Exactly.

Loren Feldman:
So your initial thought was fear, but you came to terms with it?

Dana White:
Yes, and you also said to me in your email that it’s a validator, saying, “Hey, this is a business model that you should look at investing in.” Then you do your homework, you do your research, and you look at the differences between the businesses, and you see that there’s room for everybody, because it is a different model, just catering to the same market. You just keep going.

For some of the entrepreneurs I talked to about this, I think what scares us is our network and the fact that we don’t have the network to put us on a national platform like that. It is like, “Gosh, I’ve been doing this for seven years,” or like another girlfriend of mine, “I’ve been doing this for five years. And I have this line or I have this business, but because I’m not in the Silicon Valley venture capitalist world, I will stay at four salons or four businesses because I’m not connected. Am I realizing my potential or am I falling short of my potential because I don’t have the network?” That was the takeaway from that.

Loren Feldman:
Karen, how do you think about competition? Obviously there are other firms that do similar work to yours.

Karen Clark Cole:
There’s not a lot with the experience and the scale that we have that are really specialized like us. But anyone working in the user experience industry in general, I think it’s good, because it helps raise awareness for the industry, because it is still fairly new. I look at it as more marketing power that we can piggyback on, the more companies that know about this kind of service that you can hire. And then because we have a really long track record and really high quality work and a great reputation, it doesn’t concern me that others are going to come in and replace us.

That being said though, I have tried to get some funding so that we can buy some of the smaller companies that are around because there is a consolidation going on with some of the big companies to try to snatch everybody up and be the highest volume. That is something that concerns me, is I want to be able to play in the big leagues.

Loren Feldman:
You make an interesting point about the industry you’re in. I’m guessing you probably still have to explain to people you meet sometimes what “user experience” is.

Karen Clark Cole:
Yeah, that’s the biggest thing right now, is the more people who understand it, the bigger the industry becomes, because it is a really important function. So yes, out in the general public. Our clients though, generally, they’re coming to us. We’re not trying to educate them. They’ve already figured that out elsewhere before they come to us.

Loren Feldman:
How do they find you? Is that word of mouth or particular marketing?

Karen Clark Cole:
It’s a lot of web searching. This is why any companies that are helping to market what it is, and what it means, is good for us. Because that would put an idea into a potential client’s head. They might do a web search, and they’re going to likely come to us at some point. If it’s not through a referral, which is a big part of our business.

Loren Feldman:
How about you, Jay? I suspect that the nature of the competition that you face in both your frame shop and in your home furnishing store has changed a lot through the years.

Jay Goltz:
Well, every time you say the word “frame shop,” I cringe a little bit just because [when] people think of a frame shop, that usually means two employees. My frame business has 50 people working here. My one main location is 20 times the size of the average frame shop. I started at 22 years old and it grew like crazy and I didn’t understand why. I finally realized that I brought a business approach to an artsy business and I got the two to work together. That’s unusual. I never really looked at what everyone else is doing because I don’t care, and I view it more like, I’m playing golf versus playing basketball. You pay attention to what you’re doing, you do it better than everyone else, everything kind of takes care of itself.

In my industry, though, there have been franchises. They pretty much have failed. That’s why I have told Dana having four successful salons that make money might just be a great situation, because I see these guys who have raised money. I’m on the panel with them. Loren, you were with me. In Chicago, we did a panel thing there and the guy next to me, both of them said, “I wish I didn’t have to raise money.”

I don’t have to answer to anybody. So I always say to everyone, what’s better: not having to answer to everybody and making plenty of money that you can buy the nice car, the nice house, and blah, blah, blah, or maybe be worth five to 10 times more money, but have to take a call from some joker in wherever who’s telling you he doesn’t like this number or that number? Looking at the competition and looking at what everyone else is doing can be very dangerous because it might rob you of your happiness.

Loren Feldman:
I take your point, but don’t you have to pay attention to what others are doing? You have well-funded competitors. There is a frame service on the internet now that people can use.

Jay Goltz:
Yes, they have burned through $70-80 million, and I doubt that it’s working out like they thought.

Loren Feldman:
Well, how about home furnishings? There’s Restoration Hardware—

Jay Goltz:
I just read today Wayfair lost—in today’s news—they lost another $300 million. This free shipping everybody’s giving, when you give free shipping, it’s pretty much giving away your profits. So yeah, it’s a challenging environment with that. My home store is well-known in Chicago, and I do internet, but I don’t have any desire, ambition, or ability to go and raise. I just don’t want to do it. So I’m not paying that much attention to the competition. It’s not like I ignore them, but I’m just not learning anything from them other than, “Here’s how you lose a lot of money.” And as you know, they frequently, one day, poof, gone.

Loren Feldman:
Well, I’m certainly not trying to talk you into raising money. I’m just curious about to what extent you can get away with really not paying attention to what others in the industry are doing. When everybody else is giving away free shipping, it’s got to have an impact on you. You have to be aware of it and look for ways to deal with it.

Jay Goltz:
I think you should be conscious of your competition, but you shouldn’t be focused. You should be focused on your customers. I don’t think you should be focused on your competition, and I see people do that. Then you’re basically saying, “They’re smarter than I am. I’ll just copy what they do,” which in some cases, I guess, might be smart.

Loren Feldman:
There has got to be a middle ground there somewhere, Jay. I mean, I don’t know this business, this industry, the way you do, but I’ve read some stories about how Restoration Hardware has turned itself around and figured some things out and trying some subscription stuff. They’ve put a restaurant in some of their locations. Isn’t that worth paying attention to?

Jay Goltz:
I am, to a degree. There’s a big one in Chicago. They’re a public company. They’ve got nothing but money to burn. I have thought about maybe I should put a food element in my store, and I am thinking about it. So it’s not that I’m ignoring it, it’s just that I’m just not following what everyone else does. Because these days, the world has changed dramatically.

Thirty years ago, if you saw a company that was doing well, they actually were making a profit. Now you see these companies getting all this publicity and they’re worth $2 billion. Look at WeWork, for God’s sake. Explain how you can lose that much money. How many of these companies that you read about regularly are doing nothing but losing hundreds of millions of dollars a year? You can’t assume, “Well, they’re doing it, I should do it.” I don’t have hundreds of millions of dollars to lose, so it’s different.

Loren Feldman:
But that’s not the only choice, doing what they’re doing. The other possibility is that you just need to pay attention because it’s going to have an impact on you.

Jay Goltz:
What lesson is there to learn from companies that give free shipping and never make any money? What should I learn from that? That I should give free shipping and not make any money?

Loren Feldman:
I think it’s one thing to say you don’t want to do what they’re doing. I don’t think anybody’s going to argue with you. I think it’s another thing to say that you can just ignore it. That’s where I’m pressing you a little bit. You have to know what they’re doing.

Jay Goltz:
I would say, be conscious of it. But I’m arguing the point versus focusing on it. I’m certainly aware of it.

Loren Feldman:
Going back to Dana’s situation, we’re talking about a venture-backed company that I think has one location right now in San Francisco. I don’t think Dana should be giving up the ghost because of this possible competition that may or may not ever come. But they may do some interesting things, and it probably makes sense for her to pay attention to what they’re doing. Does that make sense to you, Dana?

Dana White:
Yeah, what I started paying attention to is the price point. It’s higher than mine. They’re at $75, for what I do. Even when I go up to $50—

Loren Feldman:
That’s good to know.

Dana White:
It’s a higher price point. They are, again, like most salons, appointment based, and so you can’t just walk in. They accept them, like most salons do, but it’s not their model. And then lastly, they’re doing more protective styles, meaning they’re doing more braiding, sewing in of hair. Again, it helps that this is somebody who is getting money to expand a business for my market. However, it’s not completely different. It’s not something new. It’s just the same model focused on this market doing it this way.

Loren Feldman:
How would you feel if they opened a store in Detroit tomorrow?

Dana White:
I would welcome it because we would be her alternative.

Loren Feldman:
To Karen’s point, they might increase awareness, but you’re providing different services at a lower price point.

Dana White:
The stylist at that salon had to cancel, something happened. You don’t want to wear braids to an event, you don’t want to wear a sew-in, you want a blow and go, or a straight or style. But I can’t get in anywhere. I just need this done. I could walk into Paralee Boyd for $40 and walk out.

Jay Goltz:
Loren, can you just verify, because you know this as well as anyone—or Karen, you might know this also—what percentage of venture capital funded businesses fail out of 10? Isn’t it like eight?

Loren Feldman:
That’s kind of the model. I don’t know the exact number, but it’s certainly… I wouldn’t be surprised if it’s seven out of 10.

Jay Goltz:
It’s not as simple as, first, get a bunch of money, and we’ll just make everything work. It doesn’t always work that way.

Dana White:
There are a lot of things that only experience can attest to. As much preparation as I did to open Paralee Boyd, there’s nothing that could have prepared me for all the knowledge that I have now outside of the seven years that it took for me to get that knowledge. There’s a lot that this owner and these venture capitalists—who are completely unfamiliar with this world—are gonna have to learn. I don’t believe that hair care products are this founder’s background. I don’t know if the actual salon is in this founder’s background, so if it’s not, there’s a lot to learn, versus making a product. The whole cultural dynamics of that system in and of itself is just a lot to learn.

Karen Clark Cole:
Maybe you should call them and offer them some advice.

Dana White:
No, actually I’m just gonna grow Paralee Boyd.

Loren Feldman:
Were you serious about that, Karen?

Karen Clark Cole:
Yeah, in a way. You can collaborate.

Loren Feldman:
What’s in it for Dana to do that?

Karen Clark Cole:
Oh, I don’t know. They might pay her a lot of money.

Loren Feldman:
Oh, I see.

Dana White:
I feel like Celie in The Color Purple. I’m just gonna sit over here and see what color the wall’s gonna turn next. I’m like, “Jay, let’s see how they do.”

Jay Goltz:
Look at what just happened with Blue Apron. I mean, that was the hottest thing you ever read and the next thing you know, they’re in the toilet.

Dana White:
Are they in the toilet? Because I get them every other week.

Jay Goltz:
I’m going to give you the core to many of these ideas that don’t work, many of them. It’s not cost-effective to ship something to one person in a UPS box. It’s just not that cheap. They always think they’re going to scale out of this, because a lot of them came from the computer industry, which, the first copy, or whatever you call a program, cost a zillion dollars, but then your margins are phenomenal. Not on food. The margins aren’t phenomenal. So as you grow, you can’t necessarily scale out your costs. You see it in a lot of things, that the math doesn’t work ultimately.

Loren Feldman:
And on that note, we are out of time. My thanks to Karen Clark Cole, Jay Goltz, and Dana White.

Dana White:
Thank you, Loren.

Mini Episode: The 21 Hats Business Owners Make Coronavirus Contingency Plans

In a quick update, Karen, Jay, and Dana talk about how the coronavirus pandemic has already affected their businesses and how they are planning for the future.

Guests:

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

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: “We go to Italy twice a year to buy picture frame molding, and I’m thinking we’re probably going to cancel the trip.”

Full Episode Transcript:

Loren Feldman:
We didn’t really plan to talk about this, but I feel we need to address the elephant in the room. That’s all the news that’s come out in the last couple of days about the spread of the coronavirus. We had an item in today’s 21 Hats Morning Report about how small businesses in China are really fighting for their lives. Could that possibly happen here? Also, Facebook just canceled its annual developer conference, which was scheduled for San Jose in early May. That’s a big deal. They had something like 5,000 people there last year. And on top of that, Americans apparently are now reluctant to order Corona beer in public because of the coronavirus, believe it or not.

I’m curious: how about the three of you? Has this started to affect your businesses? Are you thinking about contingency plans? Karen, how about you?

Karen Clark Cole:
Yes, we are just starting to develop our plan now. Some of our researchers travel around the world interviewing our clients’ customers. We’re not going to the obvious places like Italy and China right now, but we’re developing a broader plan, should that affect us nationally, or in some of the other places that we’re going. Also some of our clients are postponing projects that would take us to other places, even within the U.S., where there are people coming here, similar to what you heard with Facebook.

Loren Feldman:
Have you seen any change in orders for business? Are people pulling back at all…?

Karen Clark Cole 02:58
Just one, and that’s Facebook so far. That was for research happening in Japan. Right now, I don’t expect it to affect us very much because that’s a really small portion of our business overall. We’ve got a lot of variety and diversity in our clients. Most of our work is happening here in the U.S. But who knows, if it keeps going.

Loren Feldman:
Dana, how about you? You have a retail business, a hair salon. You have employees who actually touch your customers. Is this something you’re thinking about?

Dana White:
Absolutely. We are meeting on Monday to go over not only our weekly stuff, but to go over: how do we stay protected at Paralee Boyd from potential exposure to the coronavirus. The state of Michigan already has standards by which we have to perform, so we’re constantly sanitizing anyway. Barbicide alcohol between each guest, the chairs, the bowls, the brushes, all the tools. We’re just going to encourage our staff to wash your hands more, Lysol the front door where that door handle is, because pretty much everything is already pretty disinfected within the salon—especially those things that come in touch and contact with our guests.

Loren Feldman:
Have you had any concerns yet that business might get softer because of this?

Dana White:
I have, and that’s what we’re going to talk about on Monday. We’re coming out of our slow season now, and so I don’t want it to be extended due to this.

Loren Feldman:
It may not be up to you, Dana.

Dana White:
I know, right? We’ll see. I know that within the salon, it’s going to be clean and we’re going to do our best for our staff. We’re going to let them know, “If you’re feeling any of these symptoms, do not come to work. Please stay at home until you’re clear to come back to work,” which we kind of already have in place anyway because there’s so much interaction with so many people.

Loren Feldman:
Jay, how about you?

Jay Goltz:
We go to Italy twice a year to buy picture frame molding, and I’m thinking we’re probably going to cancel the trip for two reasons. One is: I just read that Northern Italy is shutting down religious institutions and all kinds of places. They don’t want any crowds to gather. Two: I’ve got to assume business is going to get a little soft, so I’ve got lots of inventory. I know the first thing you do is watch your cash, so I’m going to work inventory down a little bit, save some cash.

Loren Feldman:
When would you normally have gone to Italy, if you were still going to go?

Jay Goltz:
We would have gone probably in April, and it’s not an emergency. We bring in new stuff for the fall, but I can easily put that off.

Loren Feldman:
When will you make the decision, or have you already made it?

Jay Goltz:
I might have just made it two minutes ago. Coming in, on the radio this morning, I heard how difficult things are getting, so I’m going to call my guy who goes there and compare notes. But it’s just not that necessary, and I don’t know that we need to be both spending the money and going over there. It’s still early in the game.

I just have to remind everybody that that bird flu that was supposed to come here never got here. I’m not downplaying this at all. I’m just going, “This might be a lot of hysteria.” Who knows? It’s probably coming here, no question, but I don’t know that it’s going to take over the country and shut everything down.

Dana White:
Well, it’s already here.

Jay Goltz:
Right, but that doesn’t mean it’s gonna shut all of our businesses down.

Karen Clark Cole:
I just heard this morning actually, hot off the press, there are two more of our large clients who are stopping travel for all employees. We have a big conference next week, and Intel has asked to refund all of their people because they’re asking everyone to stop traveling. Then another one in Asia that’s stopping work. Then there are a couple of others who are worried about supply chain issues, so they’re reducing their spending.

Jay Goltz:
Keep in mind the Facebook thing, their international developers are coming here. You’d think that would be the first thing they would cancel because they’re coming from all these countries. Picture framing isn’t that big, believe it or not.

Loren Feldman:
Karen, does it make a difference to you that you’re in Seattle? Obviously, there’s a lot of travel between Asia and Seattle.

Karen Clark Cole:
Yeah, it’s crazy. When you’re in the airport, you can see it, for sure. Because of that, I flew internationally last month and when I came back in, it looked a little scary. I’m not looking at it like that for our business. I’m just looking at our clients who are large international clients. They’re making broad policies that will affect us.

Loren Feldman:
Obviously, this is something that we’ll keep talking about as time passes. Hopefully, there will not be the kind of impact that we are concerned about, but obviously, it makes sense to have contingency plans and to be thinking about what could possibly happen.

Special Episode, Part 2: We Want to Talk to You About the Bread

In Part 2 of our special taping in front of a live audience at Blink UX’s headquarters in Seattle, Brian Canlis talks about how he and his brother took over the family restaurant and what happened when they decided to modernize its operation: “We did lose 10,000 guests that year. And we lost money for the first time as a company ever that year. And we got three negative reviews in the paper. And we were averaging about a dozen complaint letters a week about how much they thought Mark and I were destroying a family legacy. That was a low moment.” Regulars Karen Clark Cole, Jay Goltz, Dana White, and Laura Zander join the conversation as well. Plus: how Canlis gets employees to work harder for less money.

Guests:

Brian Canlis is co-owner and president of Canlis restaurant in Seattle.

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

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

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

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Brian Canlis: “We did lose 10,000 guests that year. And we lost money for the first time as a company ever that year. And we got three negative reviews in the paper. And we were averaging about a dozen complaint letters a week about how much they thought Mark and I were destroying a family legacy. That was a low moment.”

Brian Canlis: “I would say about 90% of our regulars no longer come back, to this day, which is a big deal.”

Brian Canlis: “We realized what a bummer it is to make people do math at the table, so we switched to one price for the whole experience. There’s one price, no matter what you order, no matter what you get.”

Brian Canlis: “He was an early social media genius before social media. He claimed on the phones for the first few months that you couldn’t get in—like they would call for reservations, ‘Sorry, we’re full.’ We weren’t. It was empty, but word went around the city that you couldn’t get in.”

Brian Canlis: “We exist in a world of fine dining that is notorious for depression, suicide, alcoholism, broken families. Restaurants are rough, and it’s horribly ironic because we’re supposed to be in the business of restoration and serving, and yet we are some of the most broken people out there.”

Dana White: “The people who run my salons—the hair traffic controllers—are former restaurant high volume managers. I’ve worked in a restaurant, but the people who run the floor are the best. The best hair traffic controllers have run high volume restaurants.”

Full Episode Transcript:

Loren Feldman:
I’d like to call up our special guest, Brian Canlis, to join us here. [Applause] When I first told Karen that I had met you and wanted to invite you to do this, I knew this was stupid, but I did it anyway, for some reason. I said, “Do you know this restaurant, Canlis?” And she said to me—

Karen Clark Cole:
Oh my God, Loren. So embarrassing!

Loren Feldman:
That’s like if I said to you, “Have you heard of this building, the Empire State Building?” I’m from New Jersey.

Brian Canlis:
Stop! It’s been there a long time.

Loren Feldman:
Thanks for joining us here today. You and your brother took over the family business. It’s been around for 70 years or so now.

Brian Canlis:
We turned 70 this year.

Loren Feldman:
You took over more than 10 years ago, maybe 13?

Brian Canlis:
Yeah, we came back about 15 years ago. My parents stopped coming to work about 12 years ago.

Loren Feldman:
What I want to dive right into is, you and your brother had a vision, you made a bunch of changes. It didn’t all go exactly the way you hoped initially.

Brian Canlis:
No, it was terrible. People hated it.

Loren Feldman:
Your parents retained some ownership, they had made a loan to you to do the transactions. Your parents hated it too. What was the worst moment with your parents when things were not going well?

Brian Canlis:
The worst moment? We were sitting at table 54 in the bar, because my parents, they do this ominous thing where they say, “Can we just sit down for a little bit?” And my brother and I were both working the floor, but it was early, 5:30, so it was slow. In fact, that year, it was slow every night. It was 2009. We sat down, parents head down, and they said, “We want to talk to you about the bread.” We’re like, “Oh, awesome, great topic.” We just spent a lot of money building this new oven, it was about a $20,000 oven. We hired the best baker we could find in the city. We had been buying bread before. Now we were going to bake it ourselves. It was one of our steps into becoming a great fine dining restaurant. You have to make your own bread.

They’re like, “We hate the bread.” And we’re like, “Well, Mom and Dad, you’re wrong. Bought bread is not as good as our new fancy bread.” And they said, “We don’t care, and I don’t think your guests care that you bake your own bread if it doesn’t taste as good.” That devolved into a conversation of, “We think most of the decisions that you’re making aren’t the ones that the guests want.”

We did lose 10,000 guests that year. And we lost money for the first time as a company ever that year. And we got three negative reviews in the paper. And we were averaging about a dozen complaint letters a week about how much they thought Mark and I were destroying a family legacy. That was a low moment. [Laughter] Our ability to be profitable was our ability to pay back the loan to my parents to buy the company.

Loren Feldman:
Which represented their…?

Brian Canlis:
Retirement. That was their nest egg. They didn’t have a wad of cash, they had the restaurant, and they sold it to us. And our ability to keep it successful was their ability to grow old and retire. There was a lot on the line.

Loren Feldman:
Before you tell us how it worked out, let’s back up for a moment. Tell us a little bit of the background. Your grandfather started the restaurant. What was the restaurant like then? What restaurant did he start?

Brian Canlis:
He built that restaurant in 1950 in its current location. He built it as a home and a restaurant. The top level was his home. The bottom level was the restaurant. It was so far outside of town, on the road to Alaska. It was the highway that everyone took for the gold rush. He said, “If it’s within a $1 cab ride of downtown, people will come.” The paper, the Seattle PI, was like, “No one’s gonna go, it’s too far away.”

He was an early social media genius before social media. He claimed on the phones for the first few months that you couldn’t get in—like they would call for reservations, “Sorry, we’re full.” We weren’t. It was empty, but word went around the city that you couldn’t get in.

Loren Feldman:
That’s a ballsy risk.

Brian Canlis:
Yeah, he would go to all the social clubs and have himself paged. [Laughter] Like, wow, this guy, everyone’s trying to get ahold of him. He was a character, and he famously kicked out the Mayor of Seattle for not wearing a tie, which created a story, which created press. He famously started this rumor that I still hear about today, that if you don’t spend enough at Canlis, they’re going to slip you a card to ask you to never return.

Karen Clark Cole:
Is that not true?

Brian Canlis:
It is both true and not true. The person who tipped off the press on that rumor was my grandfather. He invented the story to get press. He loved the idea of being exclusive. He loved the idea of people talking about him. He offered a reward in the paper, a thousand [dollars] cash if anyone could produce this card, and it was this thing. Everyone’s like, “Find the card,” and he would angrily say, “No one has ever showed this card to me. Lies!” He built the entire thing. That was my grandfather. He was about being exclusive and about being the best, and about creating one of the world’s greatest restaurants. And he did that in the 50’s and 60’s.

Loren Feldman:
Your parents took over and ran it for 30 years.

Brian Canlis:
Yeah. My dad was a banker in California and my grandfather showed up at his bank, hadn’t seen my dad in years, and said, “I’ll be dead in a year. I’m leaving the whole company to you. You might want to move to Seattle and learn how to run a restaurant.” So my dad packed up our family, my mom was pregnant with me in our station wagon, and drove to Seattle and learned to run a restaurant. My grandfather was dead within six months and I was born two months later. That’s how my parents reluctantly took over.

Loren Feldman:
And what kind of restaurant did they run? What did they do with it?

Brian Canlis:
They did a great job. They kept it alive for 30 more years and flourished and gave me a wonderful quality of life as a kid. They turned my grandfather’s recipe a little bit on its head and they wanted to make the restaurant about being inclusive. They wanted to make it about being a good family member to the neighborhood and the community, and they were super involved in all these nonprofits, and then raising money, and then throwing events that generated a ton of money. They cared about humanity in a really beautiful way that my grandfather never did, and they ran a darn good restaurant.

The hard part was, in the 2000’s, Food Network came along and the birth of one of my least favorite words on Earth, the “foodie,” occurred. So restaurants did a hockey stick of evolution where fine dining didn’t change that much back in the day, and suddenly, chefs became celebrities and dining became something that was social. It wasn’t about being seen in a dining room as a regular. It was about telling your friends where you had been. It was about proving how cool you are and your taste and who you knew.

Loren Feldman:
Instagram.

Brian Canlis:
Yeah. The industry started rapidly evolving. You had restaurants like El Bulli in Spain just north of Barcelona doing things that people had never seen before and blowing people’s minds. And my parents were like, “I don’t think we have this in us. We’ve been running a great restaurant for 30 years, it was profitable the entire time, which is hard in our business.” My brother and I were both officers in the Air Force at the time. We had gone away. My parents wouldn’t pay for college, they made us pay for it, so we figured out how to do that through Air Force scholarships. And they said, “We’re thinking about selling the restaurant, because we’re tired, so if you want a crack at it, you might want to come home and try it,” so that’s what we entered into.

Loren Feldman:
When you took over the restaurant, before that difficult sitting at the table that you told us about, what was your vision?

Brian Canlis:
We didn’t really have one. We both started as dishwashers and we both worked in the kitchen. Back then, there were six people in the kitchen, plus the dishwashers. Now we have about 25, and we do almost half the covers. It’s a very different model now. We had been busboys. All we knew about fine dining was this restaurant. We knew we loved the history. We grew up going to sleep under dining room tables. That place was like a second home to us. But it was our version of the best fine dining there was.

On my Air Force money, I didn’t do fine dining very much, so we were pretty sheltered. We got nominated for a James Beard Award in 2005, right when we came back, for best service in the country. We thought that was pretty hot stuff. We went out to New York, and we dined at the four other nominees who were all in New York City, and all four of those restaurants were so much better than ours. It was a terrible, wonderful, frightening thing.

[To Laura Zander] It’d be like discovering wool that was so much better than your wool, like, what do you do?

We had no idea how behind we were when it came to what restaurants had become. That was when we got excited, actually, because it’s like, “Oh, we don’t have to run our parents’ restaurant. We can run something that we’ve never seen before in Seattle.” So we set out to become a restaurant that could compete with the greatest restaurants in the world, and that was the slow decline that led to table 54, bleeding money, and almost losing the entire business.

Loren Feldman:
So how did you and your brother respond at table 54 when your parents confronted you and told you, “This is not working”?

Brian Canlis:
Not as well as we could have. We disagreed. It took us a while to realize that they were right. It wasn’t as good, the bread, in their minds. I remember when we switched from Starbucks coffee in our dining room to this incredible, fancy, beautiful coffee that was grown just for us, and we flew down to Guatemala to meet our farmers and pick out our lot and make sure that it was sustainable. It was incredible, and we brought this new coffee back, and our pastry chef worked with it, and we did the roast perfectly to our liking. It was the perfect pairing with most of our desserts, versus the very roasted flavor of Starbucks, which isn’t necessarily great with food.

We were like, “Behold, it’s our new coffee.” Everyone hated it. And we said, “What are you doing? This is better.” And they’re like, just because it’s better, doesn’t mean it’s better. The bread, even though it was better, if you’ve been having the old bread for 20 years, you don’t want the new bread. We made that switch too abruptly. We said, “You’re wrong for not liking the coffee or the bread,” instead of being curious about why or what they were connecting to, or telling them the story. I’ll never forget this. They’re actually dining tonight, this couple who dines on table 26—

Karen Clark Cole:
You’re pointing at them. There they are.

Brian Canlis:
We brought them the new coffee and they’re like, “This is disgusting.” And we’re like…

Loren Feldman:
They said that to you?

Brian Canlis:
Oh, yeah, absolutely. “Take it away.” They dine every week, except in the middle there, they took a few years off, but the next time, we brought them the old coffee. And they were like, “Thank goodness, you’re bringing the restaurant back to where it should be.” And we said, “No problem.” And then the next time, we brought the old coffee to make sure, because it was a pattern, and then the next time we brought the old coffee and then we also brought the new coffee with dessert and said, “Hey, just for fun, we’re thinking about this new coffee. What do you think? There’s no pressure.” And they’re like, “Oh, that’s fun.” And then the next time, we brought both coffees, and then the next time they asked for both coffees, and then the next time—and it’s nice to have regular guests—they said, “You know what, this new coffee is super fun. We think it tastes better with the desert.” And we’re like, “You do? Oh, what a wonderful discovery.” And then the next time they said, “Just bring the new coffee.”

We did that with guests. We learned to take some of the older ones along for the ride, instead of telling them that they were wrong. We used to have all the silverware on the table. It was ridiculous. Why do you need the dessert spoon on the table when you sit down? It’s so dumb. What we did is what fine dining does today, which is there’s no silverware. You only get the thing that you need the moment that you need it. So why give someone a bread knife when there’s no butter on the table? It makes no sense.

Well, some of the guests were like, “We want our silverware back!” Instead of telling them, “That’s ridiculous,” which it is, we just set the table the old way. So you walk in on any given night, there were all these beautiful tables, and then three of them were covered in silverware. It made no sense. But it was a way to not tell people that they were wrong.

In that moment with my parents with the bread, it was a learning moment for us. It’s like, my parents aren’t making this up. They do like the bad bread better. We were making the restaurant better. The food that we were making with 25 cooks in the kitchen versus six was better. It was also more sustainable, more beautiful, more delicious, and more healthy. It’s better. But when you have a legacy that’s, at the time, 60 years going, better doesn’t mean better. We asked our parents to have faith in us. They raised us well. We said, “Hey, you raised us. Come on, have some faith.” We had a board at the time and the board was very successful in the restaurant business, and they were like, “Listen to your sons. I know they’re young and kind of stupid, but what they’re doing will ensure that Canlis is going to be around for the future.”

Karen Clark Cole:
Did you and your brother always see eye to eye?

Brian Canlis:
Yeah, it’s been a crazy gift that we are super aligned. We fight a lot, and we don’t always agree on little things, but the big things we’ve always agreed on.

Loren Feldman:
You won over your parents, apparently.

Brian Canlis:
Yeah, they’re big fans now.

Jay Goltz:
Yeah, they’re now living in a trailer park somewhere.

Brian Canlis:
No, their home is so much nicer than mine.

Loren Feldman:
How about customers? Did you have to turn over customers? Did you gradually lose the customers who liked the old way and bring in new people?

Brian Canlis:
I would say about 90% of our regulars no longer come back, to this day, which is a big deal.

Loren Feldman:
Did you have to go looking for those new ones, or did word spread?

Brian Canlis:
Well, yeah, we also redefined a regular. We now call a regular someone who dines twice a year. That’s a regular. Regulars used to be every week. That’s gone. Loyalty isn’t a thing anymore in that way. We threw ourselves a small pity party and then we moved on and figured out, what does it look like? Because at the same time, the world was changing, and dining tourism, which is still huge—it’s one of the first things people do—they make reservations before they make their flights.

Loren Feldman:
You made a lot of changes. You’ve told us about the coffee, baking your own bread, quadrupling the number of people in the kitchen, maybe halving the number of meals you’re serving—

Brian Canlis:
No, we removed tables. We decreased the amount of people that we allow at each table.

Loren Feldman:
So something else had to change. Your prices had to change, I’m guessing.

Brian Canlis:
Yeah, they’re a lot higher.

Loren Feldman:
How did you accomplish that? Was that difficult?

Brian Canlis:
Yes. One of the things that we did was, we had an experience at Disneyland where you realize you pay one hefty price upfront and then there’s this beautiful freedom to go on any ride you want. Every restaurant you go to, there’s this tyranny of choice of, “Do I want the salad or the lamb or the steak? Well, one’s $10 more than the other.” Why should that matter? And you start doing math at the table all the time of what’s more important: my desire in this moment or my budget? Then the valet was an extra $7 to get your car parked and then this was an extra…

We realized what a bummer it is to make people do math at the table, so we switched to one price for the whole experience. There’s only one price—you saw last night—on the menu. There’s one price, no matter what you order, no matter what you get. That price includes valet parking.

Karen Clark Cole:
And coat warming.

Brian Canlis:
And coat warming! So when we turned it into an experience—because before, we had to raise our prices. We changed our salad from $20 dollars to $22. And someone’s like, “The salad down the street is $16. What right do you have charging $22?” We’re like, “Well, the chair you’re sitting in cost $3,000,” which is true. But they don’t count those things.

Once we took the price out, and we started at $115—that was our opening price for a four-course menu. It’s now $135. Every price increase we’ve done in the last seven years, I don’t think we have a single complaint. Because it’s like, “Oh, the price of Crystal Mountain went up $5.” It doesn’t matter, you get to go wherever you want once you’re in.

Jay Goltz:
This is going to be odd, but the picture framing industry has gone through a similar thing where the bottom part of the market has been sucked off by the phony sales at the department stores and stuff and the people who are in business today got better and are appealing to the people who want better and nicer, and the prices have gone up and are more exclusive. My wholesale line, I sell better stuff from Italy and Spain. You changed customers. You went after a more stable market, which is people who want better and nicer, and the mass market people don’t do that.

Brian Canlis:
Well, they want an experience. No one comes to Canlis because they’re hungry. They come because tonight matters for some reason and they want to mark it. They want an experience, and to put one number to that experience is awesome.

Karen Clark Cole:
What I love about Brian’s story—that’s a user experience story. That’s exactly what it is.

Dana White:
Yeah, it definitely is.

Karen Clark Cole:
Right from when you pull up in your car, that’s a user experience. No tickets. There are no numbers in your restaurant. Wow, all you have to do is actually watch when somebody gets up and they’re about to leave. Wow, that’s amazing.

Brian Canlis:
Yeah, it’s one of my huge pet peeves that when you do valet or coat check, someone gives you a number, because all they’re saying to you is, “You don’t matter enough to me for me to remember you.” Like if Beyonce came, no one would give her a number, like, “Oh Beyonce, here’s your coat check.” Also everyone’s going to try on Beyonce’s coat in the coatroom. By giving someone a number, all you’re saying is, “You don’t matter.” And so by not giving someone a number, you are subconsciously telling them, “I care so much about you that I’m gonna remember you when you come.” And no, we don’t remember their face. We have systems secretly behind the scenes.

Karen Clark Cole:
Like what? Can you tell us?

Dana White:
I have the exact same system at Paralee Boyd. At Paralee Boyd, we have three hooks here, 10 hooks here, three hooks here, and the same above. Your coat is placed on when you came in, and so when we see you in the fourth station or the third station, we know which coat is yours. And if you have somebody with you, you’re on the second hook of that same group of hooks.

Loren Feldman:
Is that the idea?

Brian Canlis:
Almost exactly, yeah. We actually park the cars like the dining room is. Because you’re in the bubble when you’re dining, you probably don’t realize the valet walks by your table a dozen times a night. Did you notice?

Dana White:
[Gasp] I did not.

Brian Canlis:
The valet walks by your table a dozen times. They do laps around the dining room waiting for checks to get dropped. So as soon as the checks drop, they know they have—except for those evil guests who wait for an hour—what they do is they go back to the team and they’re like, “Okay, they’re in this table, which is this section of the parking lot.” And between the three of them, they can figure out, “Oh, I remember who that was.” Then what they’ll do is they’ll stand at the front desk and they’ll watch for you to stand up. As soon as you stand up, they go and get your car because they already know where it is.

Sometimes you go to the bathroom and your car’s waiting, and you’re like, “Why is…?” [Laughter] Sometimes we screw up. But that’s all it is. And you know what, it’s so much more fun because it’s challenging, and it’s relational. For those valets, it’s a magic trick, and the guests coming out can’t believe it. So you better believe that the valets want to work at Canlis. It’s harder, and because it’s harder, it’s so much more fun and more rewarding. Having someone take a ticket and put a number on it—a monkey can do that. That’s not difficult, but to challenge someone to say, “You want to deliver the greatest valet experience in the world?” That’s fun. People want to rise to that occasion.

Karen Clark Cole:
All of us, we got to go there for dinner last night, and all of our coats were there waiting by a person holding them by the fire and then they proceeded to put it on us. That actually takes a number of people though to be able to hold that many coats. And same with the valet, if you’ve got the cars exactly lined up on time, you have to hire enough people. I’m curious, is that rolled into your price? You talked about your kitchen staff being triple what it was and obviously you’ve got coat holders and valets…

Jay Goltz:
So for $135, you do get the coat heated.

Brian Canlis:
You do get the coat heated. But I’ll be honest with you: at 8:30, those coats aren’t getting heated. That’s the turn. Most of the guests, the second turn’s arriving, and the first turn’s leaving. It’s chaos, and we probably heat one out of 10 coats. But at the end of the night when you’re leaving, my entire staff is there and there are five tables left. Oh my gosh, every detail has to be perfect, or we’re idiots or we are just lazy.

So yeah, at the beginning of the night and at the end of the night, the details are what keep you engaged and excited and fun. But in that middle of the night? No, it’s not a rule that every coat has to be heated, because that would be a disaster. It’s when you have the margin. You do it because it makes people so happy.

Dana White:
What’s your reservation length now? How long does it take?

Karen Clark Cole:
It’s totally booked.

Dana White:
It’s totally booked for how long?

Karen Clark Cole:
Yeah, and I want to know if that’s really true.

Brian Canlis:
The first quarter is our slowest quarter, but weekends are always booked about three months out. For a weekday, you can get a reservation pretty easily if it’s not between the hours of six and eight. Six and eight you need to book a couple weeks out still, but like December, the whole month will book out a few months early.

Loren Feldman:
Brian, it was fun for me having dinner with these entrepreneurs watching the performance of your employees. They were amazed at the way the whole event was synchronized, the performance aspect of it, and the way the employees truly seemed to be enjoying themselves and putting their heart into it.

Jay Goltz:
I would say we appreciated it. We appreciated it. We knew what it took for you to get that to work like that, and we all appreciated the fact that you got it to work nicely, and it worked.

Loren Feldman:
But they also want to know how you found those people and hired them. What’s your hiring process like?

Brian Canlis:
You know, it starts with an unusual mission statement. It’d be hard to get out of bed every day if we were just serving dinner, for my employees too. I think that would get old. So our mission statement is, it’s kind of like yours, of changing the world. We’re literally trying to change the world. And I know that sounds big, but why not? Our mission statement is to inspire all people to turn towards one another in a world where everyone seems to keep turning their backs on each other, to have conversations. What can happen when you actually turn towards one another is magical, and that happens often beautifully at a table. But it also happens in the way that we treat our vendors, “What does turning towards look like?” or our neighborhood. What if we were to inspire people that it’s worth it, no matter who is across from you: class, race, color, whatever they believe, you turn towards, and that’s really powerful.

We exist in a world of fine dining that is notorious for depression, suicide, alcoholism, broken families. Restaurants are rough, and it’s horribly ironic because we’re supposed to be in the business of restoration and serving, and yet we are some of the most broken people out there. Then Food Network didn’t help because they celebrated chefs who [heap] abuse on people and you have so much sexual harassment that is glorified. It’s hard. It’s a bad industry.

We decided, okay, let’s exist. Maybe if we can do this thing, and we can inspire the world [about] how much more fun and more exciting it is to turn towards… and then, what’s our strategy for doing that? Become the best restaurant in America. Because no one cares if you’re the worst restaurant in America what you believe. No one listens to the Oscar acceptance speech of the loser. The reason we exist isn’t to become the best. That’s just our strategy to get there.

When we interview someone, we tell them that story, and we say, “Don’t come here if that doesn’t float your boat. If you don’t get tingles about trying to change the world through this thing, please go home.” Also, working here is really hard and most people quit. And so we make them work—

Loren Feldman:
Is that true that most people quit?

Brian Canlis:
Yeah. We make people stage for a night, which is do an entire shift before they’re hired. In the kitchen, they have to do two, and most people self-select out after because they don’t realize how much work it takes.

Jay Goltz:
You do have to pay them though, right?

Brian Canlis:
We do, but we pay less. You can make more money doing less work at most restaurants in the city. Because I have 115 employees for sometimes 115 guests. It just doesn’t work, the numbers. You have to want to be at Canlis for way higher reasons than making the most money. And so we tell people that you’re gonna work harder, you’re gonna make less money, you’re gonna change the world, and we make them work a shift.

We never let them accept the job that night, even if we want them. We say, “You have to go home and you have to ask the people who love you—you have to tell them all the worst things about working here—and you have to tell them, ‘If I work here, I’ll make less money and I’ll work harder and I might change the world but probably not. Do you think it’s the best thing for my life to work here?’ And only if the people who love you are totally behind it, then [we’ll] send [you] into battle with those people cheering you on.” So it makes hiring very expensive, very long, and very difficult, but you build a team of people who are totally on board.

Karen Clark Cole:
Once they’re on board, how long did they stay, on average?

Brian Canlis:
Not as long as I wished. Because the problem is we’re most often hiring people where they have much bigger dreams than working in a restaurant for the rest of their life. I think restaurant life is awesome. I’m doing it. The majority of my managers are tenure people. But that’s 15% of our company. The other 85% are hourly workers who want to run their own businesses. We hire the type of people with big dreams. Big Dreams are awesome, and if you fight them, then everyone loses. But if you embrace them…

The parties that we throw when people leave are some of our best parties, because if we’re going to change the world, and inspire everyone to turn towards one another, it means making our restaurant into a university that teaches a school of thought and sends out alumni across the world to change their restaurants. And so when we look at it that way, like, “Oh, you want to leave? Let’s throw a party, because that’s awesome.” That’s a hard switch, because it’s very expensive.

Loren Feldman:
I’m going to open this up for questions in a second. One last one, Brian, from me. How do you go about hiring a chef when your goal is to be the best restaurant in the world?

Brian Canlis:
Find the best chef. [Laughter] That’s my strategy.

Loren Feldman:
How do you hire a chef when your strategy is to have the best restaurant in the world?

Brian Canlis:
Well, you have to find a chef who agrees with the mission first, and who has the values first. That’s more important than his ability to cook. Because his belief won’t change over time and his ability to cook will get better.

Jay Goltz:
I have to tell you, you’re correct. Those cooking shows are shameful some of them where they’re screaming and humiliating people on national television. It’s really not right.

Brian Canlis:
It’s changing. Some of your most notorious shouty chefs are repenting and learning that, “You know, if I actually love my employees, the food tastes better.” There’s a movement, which is great. Maybe we were a small part of that, and that would be awesome. But in this particular case, when we found Brady, he was a 28-year-old child slinging pizzas in Brooklyn.

Loren Feldman:
How do you know that somebody who’s making pizza in Brooklyn is capable of running a fine dining restaurant?

Brian Canlis:
It was a risk.

Loren Feldman:
Did you make him cook for you?

Brian Canlis:
Absolutely. It was a restaurant called Roberta’s, but on the backside of Roberta’s was a little secret two-star Michelin restaurant, which has a 20-course tasting menu. He also was executive sous chef at that restaurant. He could do both. He could do volume—which we’re a big restaurant—and he could do tweezer food, and so we were inspired by him.

I had dinner with him in New York because I moved to New York to help open a restaurant. It’s a different story. I was pretty taken with this guy. He had started cooking really late because he was going to be a professional hockey player and blew out his knee and at the age of 20 had no career and nothing to do and started cooking. So he’d only been in the business eight years, which is nothing. He kind of blew my mind. We had another woman we were about to hire as executive chef. We were so excited. She was from New York. We had met her husband. She was the one. And then Brady was this dark horse late contender, and we flew him to Seattle with his wife and he cooked for us. That meal blew our minds. That meal felt like something… it was food we’d never had before. It was food that was five years into the future. One of the most exciting meals I’ve ever had was when he cooked, and we hired him that weekend. We’re like, “If you want it…” and they had plans to open their own restaurant in Brooklyn. It was a big deal that they chose to come out.

Loren Feldman:
Who’s got a question?

Audience Member #1:
Hi, my name is Avian. Thank you for being here. I really appreciate your time, your stories, and all of your wisdom. I have a question and it’s two-part. My question is: how do you optimize employee happiness and interpersonal slash professional growth? And what do you do to groom them for leadership? I’m especially interested in your answer just because you work in a really tough industry with high turnover and dealing with potentially really pretentious or really demanding clients.

Jay Goltz:
People always say to me, “How do you motivate people?” I always say, “Well, what are there, maybe six ways to motivate people? How many ways do you de-motivate people? About 150.” I’ve seen a lot of bosses and I’ve been in a lot of business groups and I have to tell you, treating people with respect and not yelling at them is an example. You talk to the typical entrepreneur, “Well, I yell once a while, but that’s because I’m passionate,” and I go, “No, you’re an asshole.” [Laughter]

When I was younger, I was out of control. I was growing like crazy. I find that if you treat people with respect, and you give them some room to do their job, they feel like it’s their own. They are motivated because they’re on the mission with you. Because just like you, we feel like we’re changing the world. I know it sounds silly, but someone brings something in to get framed. It’s really important to them. And we feel great that we’ve got something nicer and better, and we’re going to get it done on time and they’re gonna have it for their party, whatever. All of my employees are behind me. They’re all on the same page with being mission-driven. So I think if you treat people properly and respectfully and you hire carefully—which is incredibly important, you have to hire carefully. Nine out of 10 people who you interview are not right for the job. That was a long lesson I learned over the years. If you hire the right people and they join your mission, it’s not that hard.

Brian Canlis:
I think you’ve gotta have a lot of fun. I think it’s a betrayal of our values if we put more energy into the guests’ experience than we do in the employee experience. We [put] an inordinate amount of time and effort into doing things that are fun. Shutting down the restaurant late at night and throwing a laser tag party. We do costume parties for our staff all the time. They’re probably really tired of dressing up. We do something called Camp Canlis where we take everyone out into the woods and we camp and we play this crazy gun game in the woods and we drink lots of whiskey and we dream about the future of the restaurant.

Loren Feldman:
Who’s running the restaurant?

Brian Canlis:
We get back in time. We’re closed on Sundays. We’ll do late night poker tournaments until four in the morning. We’re always thinking about: why is this a place that I want to come to work? Because serving dinner gets old. You throw that kind of creativity into their experience and it’s so fun.

Laura Zander:
We do something similar that you guys do, and that’s everybody who works for us, I talk to them individually and find out where they want to be in 5, 10 years. What are your dreams and how can we use this business that has all these different facets? You can learn about inventory. If you want to be a doctor, let’s do some triage. You can work as a hostess or I’m sure there’s some biology we can teach you all about the different strains of wool or whatever it is. Or if you’ve got somebody who wants to be an accountant, okay, let’s figure out some accounting things.

I try with every person to figure out where they want to be and how we can build their resume. I tell them all the time, “I would love it if you worked here forever. But I’m the only one who has to. Doug and I really are. The rest of you guys are free, so tell me how I can help you get to where you want to go. And where do you want to go? Let’s work on getting you there.” A lot of them get kind of surprised.

Brian Canlis:
It’s sad how surprised they are, because they’re not used to their employer actually wanting what’s best for them.

Laura Zander:
But it’s fun.

Brian Canlis:
It’s really so much better.

Loren Feldman:
Jay, you’ve got something to say.

Jay Goltz:
They’re perfectly happy just coming to work and having a nice environment and security.

Laura Zander:
Some of them are, yes.

Jay Goltz:
The reality is, lots of people are perfectly happy going to work every day and doing the same thing for 30 years, getting a paycheck, being treated respectfully, having health insurance, having holidays, getting paid overtime, and having a boss that, if there’s a problem in their life, they’re supportive and give them some time off. There are plenty of people in this world who don’t have grand—

Brian Canlis:
No, but I think it’s common—I just had an employee, one of my best, come to me and say, “I have this artistic itch that for the last 10 years, I’m not scratching, and my dream is to open my own theatre company one day, and I’m thinking of maybe quitting my job and doing this internship for a year at this theatre to learn the skill of running a theatre company. What do you think?” At that moment, I have two options. I can say, “That is the stupidest idea. You’re gonna make no money, and that career is terrible, and we really need you, and you’re really good at your job,” and fight for her to stay. Or I can say…

Laura Zander:
“Why don’t we open on Sunday and do a theater event or have a special event that you could produce?”

Brian Canlis:
“What does it look like to throw the support of this entire restaurant behind you to make that dream happen?” Because it’s just worth it. It’s worth having people that are flourishing,

Laura Zander:
But to your point, I think where it gets expensive, if you will, if you’re thinking about it that way, is the time to figure out, “Okay, what’s important to you is flexibility. What’s important to you is money because you want to buy your first house. What’s important to you is you just want a place that’s less stressful than your home.” We have a lot of people who are like that. “What’s important to you is, blah, blah, blah,” and to tailor our approach to every single person who works there. And yes, there are some people who just want to show up, and that’s great. That’s awesome. Let’s make sure you have the best, you have what you need.

Brian Canlis:
I love those employees.

Laura Zander:
Yes, exactly. But the rest of them, I mean, everybody has different motivations. We’re all different. We have different DNA, so we treat them differently.

Loren Feldman:
Do we have another question?

Audience Member #2:
Thank you very much for being here. Very appreciative. My question is, particularly for Karen, I’m starting an IT consulting business and I’m stuck in doing proposals and marketing. Do you recommend a mentor to do something like that? Or do you want to be creative enough where you do it yourself?

Karen Clark Cole:
You mean, bring someone in to help you write those proposals?

Audience Member #2:
Correct.

Karen Clark Cole:
Honestly, if you’re getting going, in my opinion, it’s par for the course. I’ve done every job in this company. I remember when we first started, I spent day and night, weekends, evenings, you name it, writing proposals, formatting the footer, what kind of font are we going to use? Creating templates for this for that. And if I didn’t do that, I wouldn’t really understand it. I think particularly when you’re starting a business, you need to do every job there is so that you really understand your business. As you grow and you scale, you know what it looks like when you bring in somebody to help you. You know what you need them to do, you know what it takes.

Ideally, the main thing you want to start doing is hiring people who are smarter than you, that’s the best thing you can ever do, and then have them do really specific things that are not the best use of your time anymore, but this thing is the best use of your time. I’m always looking at, what am I doing, and is that the best use of my time? And if not, could somebody else do it and probably do it better? Because that’s their specialty. That’s the way to start carving things off, but you really need to do it yourself to understand how to do that, I believe.

Laura Zander:
Can I just be really clear about the “hire somebody who’s smarter than you”? Everybody will tell you that. I took that really literally. I hired a bunch of people who had much higher IQs. They sucked, for various reasons, and it took me about five years and probably hundreds of thousands of dollars to realize: it’s not that you need to hire somebody who has a higher IQ. Because who does, really? No, I’m just kidding. But it’s hire somebody who has done something that you don’t know how to do yet, or who has been somewhere that you haven’t been, so that they can teach you.

Karen Clark Cole:
Or somebody who’s just really good at—like, I don’t love details, so I hire people who are really good at detail. They love it. They’re way better at it than me.

Laura Zander:
That’s what I mean. There’s somebody who’s better at a certain skill, but I was really caught up on, “Okay, well, this person’s a PhD.”

Karen Clark Cole:
Did you actually have them take an IQ test?

Laura Zander:
Well, no, but you can tell. [Laughter]

Dana White:
It’s not, “Oh my God, you’re so smart.” No, I’ve done this job. I’ve taken it this far. I have found, Brian, that the people who run my salons—the hair traffic controllers—are former restaurant high volume managers. I’ve worked in a restaurant, but the people who run the floor are the best. The best hair traffic controllers have run high volume restaurants.

Jay Goltz:
I think you hire people who are better than you in areas, whether they’re better at sales, they’re better at running production. I used to hear that all the time and I never understood what that meant. And I realized, the entrepreneur has to wear 21 hats. That’s where the name came from. The entrepreneur is probably better at those 21 together than anyone else, but there are certainly people—I would say most of the people who work for me are better at their job than I would be, if not all of them. That’s kind of the point. But none of them could run my company. That’s the point. The entrepreneur is the best generalist, but you should hire people who are better at the job than you are.

Loren Feldman:
Next.

Audience Member #3:
Brian, you specifically called this out, but I’m sure all of you have mission or vision core values, things that help you make decisions in your company. You specifically said, “Our mission is not to be the best restaurant, but to inspire people to turn toward each other or toward one another.” And then the way you accomplish that is your strategy. You’re doing that by being the best restaurant in the world.

As someone who’s thought a little bit about mission and vision and core values and those kinds of things, it seems counterintuitive, but it’s almost harder to refine than you would think it would be. Can some of you speak to the process that you went through for defining your mission and identifying your mission, your vision, and your core values. And then possibly, how has that changed? Have you had to change your mission over time? What’s that process like? Thank you.

Brian Canlis:
I was in the Air Force, and it totally has defined how we think about mission statements, because we would get called in the middle of the night. They would say, “Come to base,” and you’d come to base. And you’d ask the question, “Why did you wake me up? Why am I here? What’s the mission?” And the mission answers the question, “Why am I here? Why did I wake up? Why am I getting out of bed? Why am I going to the office today?” That’s the mission, and it’s really hard to write. We’ve rewritten ours about six times, and we keep refining it to accurately reflect our hearts and our growth. I’m not afraid to change our mission statement.

I think what’s so powerful is people stop at the mission statement and they don’t think about a vision statement the way that the military does. If the mission is, let’s say when you get called in the middle the night to go to the base, is to rescue the hostages from the bad country—super easy. That’s the mission: rescue the hostages. Well whoever’s in charge, the general or whoever he is, can say, “Great. Here’s my vision. We’re going to go in, we’re going to strap speakers on the outside of the airplane, we’re going to blast Kid Rock. We’re going to drop down, we’re going to light fireworks, we’re going to kill everyone we see. We’re going to spray paint American flags everywhere. We’re gonna put the fear of God in this bad country and we’re going to rescue the hostages and bring them home.” That’s one vision. The mission was accomplished.

Loren Feldman:
Have you tried that at Canlis?

Brian Canlis:
We have not. Vision number two is, “We’re going to go super stealth. We’re going to use blow darts. They’ll never know we were there. [With] night vision, we’re going to drop in, we’re going to rescue the hostages, we’re going to get out. The bad guys are going to wake up the next morning and all the jail cells are empty. They’re gonna say, ‘Where did the hostages go? Who took them?’” In both scenarios, the mission is accomplished. So just defining a mission statement is not enough. It’s the joy of the entrepreneur, the leader of the company, to also define, “What is my strategy to accomplish this mission that is unique to me?” And so if we opened a hotdog stand, it could be to inspire all people to turn towards one another. It just so happens that we’re doing it through a fine dining restaurant. We tell that story a lot to our employees about understanding the difference.

Karen Clark Cole:
Brian did such a good job with that that I’m going to take that mission too. [Laughter]

Jay Goltz:
I think at the end of the day, in my case, I grew up from when I was six years old working in my father’s dime store, which is a variety store. Anyone know what a dime store is? Google it when you get home. I took care of customers my whole life. The reason why my business took off is because the people in the art business have “artitudes.” They think that the world revolves around them. The customer will say, “When will this be done?” “I don’t know, I’ll call you in three, four weeks,” and they didn’t care about the customers.

I think at the end of the day, our mission statement’s very simple. Make the customers happy, do the right thing, and treat employees properly. Sometimes it’s tricky with employees because sometimes the ethical thing is not the right thing and vice versa. You have someone who needs to be fired, they’re not doing a good job. They’re unwilling, they’re unable, or they’re unexplainable and someone in their family dies at night. Now is it unethical to fire them? It’s not unethical, but it’s not necessarily the right thing to do.

I think you have to navigate what’s the right thing to do. And in our case, every one of my employees knows this: we do what we need to do to make the customers happy. As much as that sounds simple, most companies don’t do that. They talk about it. They’ve got the mission statements. They don’t do it, they really don’t do it.

Brian Canlis:
I’ll piggyback on that and say that, when it comes to core values, you should have them in order, ranked. At Disneyland, I think they famously asked, “Our two core values are fun and safety and they’re equal.” And the consultant was like, “Great, so if there’s a little girl crying because she’s not having fun, and there’s someone falling off a roller coaster about to die, which way do you want the employee to run?” Like, “Oh, I guess safety is our number one value.”

If you have to rank your values, you have to have a few of them. I’ll steal from Patrick Lencioni, who said, “Your values are not your values unless they cost you something.” They shouldn’t be easy. They should be hard. You should wrestle and fight with them.

Karen Clark Cole:
You should be able to remember them. I got advice once that you should have one value and it’s the mother of all, so it’s the highest priority one. That way, it’s easy to remember.

Brian Canlis:
But it’s your compass! You run every decision through them. It’s such a gift once you do the work to define them.

Loren Feldman:
I think we have another question.

Audience Member #4:
My name is David. Thanks Brian and everyone for sharing all the great thoughts. It’s been a lot of fun to hear his story.

One question I had is, you talked about the importance of letting your customers co-create or be a part of your reinvention, and taking them along for the ride. I love the whole story of that. You all talked about how there’s no loyalty. So my question is, how did you define your most valuable customers or seek out those most valuable customers? And how do you involve them in your co-creation or remind them to come back today? It also sort of begs a bigger question, which is, there are a lot of businesses that are so focused on new customer acquisition that they start making compromises and working with customers, maybe folks who aren’t their most valuable customers or target customers. It strikes me that making no compromises, really focusing on your most valuable customers or target customers is really key as part of your strategy.

Brian Canlis:
I think for us, our most valuable customer is nothing financial. It’s relational. We are craving relationship. Customers are craving relationship. When we have a really good date, we both want a second date and a third.

It’s funny, you guys saw last night, we have these wine glasses. My grandfather started in the 50’s giving out wine glasses with people’s names on them that are beautifully etched, so then when you come to the restaurant and you sit at your table, it’s set with glassware with your name on it. It’s kind of cool. We’ve been doing it forever. We give away about five or six a year, that’s it. People have been buried with their wine glasses. It’s a thing.

Jay Goltz:
Not at the restaurant.

Brian Canlis:
No, not at the restaurant. We did have one guy die at table two. That was in 1957.

Loren Feldman:
What did he have? [Laughter]

Brian Canlis:
Food poisoning. I don’t know. [Laughter] We have people all the time ask, “How do I get a wine glass?” because they want it, because it’s status. “If I buy a $10,000 bottle of wine, can I have a wine glass? If I come every month, can I have a wine glass? Can I buy my way into a relationship?” And that is a surefire way to put them on the “never get a wine glass” list.

If I can make a regular twice a year guest out of a 25 year old brand new couple who are out—like last night on table three—on their first night away from their brand new baby, we get one chance to get that night right. It’s such a big deal to go away from your baby for the first time. They didn’t spend any money. They couldn’t even afford a bottle of wine. They’re my most valuable customer because I could turn them into a twice a year guest for the next 60 years. That’s how we define it.

Jay Goltz:
I do think there’s loyalty, and I think if you make the customer happy, and you give them what they paid for, they come back. I’ve had customers for 42 years at this point. I will tell you, though, the opposite of this is: you can’t be naive enough to think that you can make everyone happy. The fact is, as we’ve evolved and gotten into better framing and better stuff for my home store, there are some people who don’t want to pay for it. You have to grow up one day and realize that you just can’t be everything to everybody and the same person who used to come to dinner at your place for $40 is not going to want to spend $130, and that’s okay. But it’s about being loyal to your core base of people who work your business model.

Dana White:
We get this question a lot because we’re in and out, walk-in only. How do you have a relationship with somebody who’s there for an hour and 15 minutes? The relationship for your hair salon when you’re there all day is there. You’re there to talk to your hairstylist and they’re like your therapist. That element can be removed when you’re in a walk-in only, seven-day-a-week salon.

What we do is we build that relationship on the outside. The hair traffic controllers are also trained and listening. She’s standing with her iPad, going through the flow of the day: who to put where. But she’s also listening to what you’re saying on the phone. She’s also listening to what you’re saying to your stylist. If she just overheard that your father is in ICU, then you will probably get a call from our manager or assistant manager in a couple of days asking you, “How is your father?” And they’ll address it at the front desk. We’ve had guests come in who are on their way to an interview. They’re so excited. We will call you in a couple of days and say, “Hey, how did that interview go?” We have the relationship, but we also—as a part of our mission—respect your time and your dollar and give you the freedom of all of that back.

Brian Canlis:
I love that.

Dana White:
Do you?

Brian Canlis:
Yes.

Loren Feldman:
We’re going to have to wrap this up. But before we do, Brian, I just wanted to ask you… I asked everybody else about their attitude toward growth or aspirations for their businesses. How do you think about that? Do you want to open that hotdog stand? Do you want to open another restaurant? What’s growth for you?

Brian Canlis:
I don’t want to open another restaurant. Growth to us is: we want to grow our impact. I think we can do that by remaining one restaurant. We do silly things in our parking lot. We throw crazy parties.

Loren Feldman:
You guys party a lot.

Brian Canlis:
We do. Yeah, I won’t go into that…

Audience Member #5:
That’s my question.

Brian Canlis:
About parties?

Audience Member #5:
About your parties in the parking lot. I’m so excited about those and I am so intrigued. I’m a fan. I’ve been a customer and I live in the neighborhood. I’m so intrigued because I’m so excited about those.

Brian Canlis:
They’re not too loud?

Audience Member #5:
No, we love them! We love to see the cars parked, the people lined up. We’re so excited. But I want to know how you see converting those to your regular customers.

Brian Canlis:
It’s working.

Audience Member #5:
I’m sure it is, but the price point and everything.

Brian Canlis:
Price point, just really briefly, we’ve never been a more expensive restaurant than we are today. The average income of our guests has never been lower. I don’t believe that price has—

Loren Feldman:
How do you know that?

Brian Canlis:
Well, the credit card companies tell you because they give you information on your guests. You just know. When I first came back to the restaurant, the restaurant was full of people with silver hair with lots of money, and now it’s not. It’s full of young people who have saved up for that one perfect night out. Yes, we’re the most expensive restaurant in the city maybe. But we’re the same price as two times going to a bad restaurant. Don’t go two times to the bad restaurant. Go once to mine. A highest price doesn’t have to mean we’re saying no to people who can’t afford it. Our dining room is filled with people who can’t afford it, but they choose to save and make it worth it.

The parties are two things: it’s cross training for my staff. It’s like in Rocky where he does so much that’s not boxing that makes him a good boxer.

Jay Goltz:
Everything comes back to Rocky, I just want to tell you. [Laughter]

Brian Canlis:
The skills that my staff learns serving 1,000 people White Claw in a swimming pool and bikinis—that was a party we did last summer—it makes them a better server in a fine dining room. The creative muscles on: how do we throw a Hawaiian luau? The message it says, which is, “Canlis is a brand that is accessible and available to all people, not just if you have white hair and lots of money.”

Jay Goltz:
You’re picking on me now twice. [Laughter]

Brian Canlis:
It’s a win on every level. It’s so fun. It turned out to be profitable. Our plan was to lose money with that party. Profit is not something we ever focus on, and it shows often. Gosh, I’m glad you like them. We’re gonna do it again. This summer is going to be better.

Loren Feldman:
Karen Clark Cole, Laura Zander, Dana White, Jay Goltz, and Brian Canlis: thank you so much.

Jay Goltz:
Karen, thank you for having us in your wonderful space.

Brian Canlis:
Thank you. [Applause]

Special Episode, Part 1: All You Have to Do Is Be Better

In this special taping in front of a live audience at Blink’s headquarters in Seattle, Karen, Jay, Dana, and Laura talk about the risks of fast growth and why they haven’t taken investment capital. “I was so focused on growing that I kind of blew it up. I blew the whole business up by hiring people who we weren't ready to hire for. We were probably doing $5, $6, $7 million dollars in sales. I didn't need a $90,000 a year social media person 10 years ago. I just didn't, but I listened to what other people were telling me.” Plus: Dealing with competition.

Guests:

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

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

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

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Laura Zander: “These guys got $60 million in funding. Last year, they did $20 million in sales, but they lost $11 million. You take somebody who pulls $20 million out of the market, they can price everything at 40% off or 60% off because they just don’t give a shit.”

Laura Zander: “I’m all of a sudden surrounded for a couple years with all these people who are just kicking ass and taking names, and they’re pushing, ‘Grow, grow, grow, fast growth, grow as big as you can. You should be able to have a $100 million dollar company.’”

Laura Zander: “I was so focused on growing that I kind of blew it up. I blew the whole business up by hiring people who we weren’t ready to hire for. We were probably doing $5, $6, $7 million dollars in sales. I didn’t need a $90,000 a year social media person 10 years ago. I just didn’t, but I listened to what other people were telling me. I started to wear dresses. I started to wear heels. I started to try to fit the part, to fit in with what all of these people were telling me I should be, and really lost my way.”

Laura Zander: “One of the things that kept getting pounded into me was, ‘You’ve got to be afraid. Somebody else is going to come in, and they’re going to do this.’ I’m sick of it. I’m sick of living in fear. “
Laura: “It’s the Etsy lady. She sells $1,000 worth of stuff per year. You take 100 of those, and that’s one yarn shop that just went out of business.”

Dana White: “People come to you and say, ‘Oh, I want you to meet this investor.’ And I’ve said on the podcast, I’m not willing to give up the firstborn that I don’t have yet to that investor, so that’s not going to happen.”

Dana White: “The other risk I took was, I could either spend the money and pay rent, or I could have spent the money and have done a series of radio commercials, and everybody around me—not being entrepreneurs—said, ‘Pay your bill, pay your bill, pay your bill.’ But I thought if I bought the marketing, I’d be able to pay my bills for the rest of the year. And that’s what happened.”

Jay Goltz: “I figured out for myself that entrepreneurship is about, for me, having control over my destiny. […] I’m trying to put the message out to the world that, no, you don’t have to become the biggest place ever. I grow at 5% a year, and I’m perfectly happy.”

Jay: Goltz “There were 25,000 frame shops 15 years ago. Now there are 8,000. Industry’s dropped by about 30%. If I don’t figure out how to be better and make sure I continue to get more market share, then my business won’t be there.”

Jay Goltz: “I meet lots of people who are talking about starting a business, and I call them ‘entremanures’ because they just talk about it, and talk about it, and talk about it for years.”

Karen Clark Cole: “All you have to do is be better.”

Karen Clark Cole: “We tried [to attract an investor] and it was difficult because we’re a services company. We’re not a product company, we’re not going to do big hockey stick [growth], and we’re not a startup. It’s hard to fit into the right place to actually get money from a person or a group who we like. Again, there has to be synergy there. After a year and a half, we put it to rest. Now we’re focusing on fueling our own growth.”

Full Episode Transcript:

Loren Feldman:
I am Loren Feldman, host of the 21 Hats Podcast. We pride ourselves on having conversations that you don’t often hear in public. We try to get beneath the surface, not just talk about the spin, the PR. We talk about what it really takes to run a business. Our five regulars have been amazingly candid, willing to share, talk about what actually works, and what actually doesn’t work. We’re going to put them on the spot tonight and have them prove to you just how candid they can be.

Karen, just tell us very quickly what the business does and give us some sense of the size: employees, range of revenues?

Karen Clark Cole:
Sure. Hi, everybody. We’re a user experience consulting firm. We’ve been around for 20 years. We started in 2000 with just Kelly and I. In the first year, we doubled in size and we were four people, and those two people are actually still with the company, which is pretty awesome. And now we’re about 130. We’re 20 years in, about 30 million in revenue. We’ve got five offices. Seattle’s the headquarters. We are in Austin, Boston, San Diego, and San Francisco as well.

The kind of work we consult with our clients is complex—largely digital products. Anything where there’s not an obvious interaction, so a lot of back-end big enterprise systems we work on. We’ll design everything from the workflow, the design, the interface, all the way through, in some cases, the actual implementation. Everything we do is based on research. We call ourselves a “research and design firm.”

Loren Feldman:
Laura?

Laura Zander:
Loren? [Laughter]

Loren Feldman:
Tell us about your company.

Laura Zander:
Hi, my name is Laura and I’m an alcoholic.

Audience:
[Laughter] Hi, Laura.

Laura Zander
Well, it’s true. What? Oh shit, sorry.

Laura Zander:
My name is Laura. I started a yarn shop about 18 years ago. I was actually a software engineer in San Francisco during the whole dotcom boom in ‘97, ‘98, ‘99 and then moved to Lake Tahoe to ski and mountain bike and play and decided that I could make a living through a yarn shop and then building a website. My husband was also a software engineer. Anyway, we started this little yarn shop, started a website, and it just grew and has grown for now 18 years.

We have made a couple of acquisitions. That sounds really fancy, but we’ve taken over a couple of brands to expand from just retail. How many of you guys have read Retail’s Seismic Shift that came out last year? Seriously? It’s a page turner, like really good. You should totally read it. Anyway, in August of 2016, retail took a really big dip for multiple reasons: defragmentation, all these kinds of things. I wrote myself a little research paper that I can share with you if you’d like. We have had to transition and so have picked up a couple of our suppliers, so now we have about 85 people. 45 of our people are in Reno. Now we have a manufacturing facility in Texas. Then we are doing business in Vietnam and in China as well. I make these bags, which are available on jimmybeanswool.com, and sell lots of yarn.

Loren Feldman:
You have a brick-and-mortar store.

Laura Zander:
We do have a brick-and-mortar.

Loren Feldman:
But the bulk of your sales are online.

Laura Zander:
Correct. We started the online shop in 2002 to supplement the sales Monday through Thursday because we lived in a second-home community in Lake Tahoe.

Loren Feldman:
Rough range of revenues?

Laura Zander:
I don’t know, probably, hopefully 13 to 14 million. A little small compared to… fancy pants over here. [Laughter] But the nice part is I can wear whatever I want. You guys have to impress people.

Loren Feldman:
Dana White?

Dana White:
Hello. I’m Dana White, and I am the owner and founder of a chain of walk-in only, seven-day-a-week hair salons called Paralee Boyd. I have used Lean manufacturing to solve the problems of no appointments and long waits at hair salons. Growing up, I would spend my Saturdays in a hair salon. I was working overseas and I couldn’t do it, I couldn’t stay in the salon all day. In New York, there are places you can walk in and walk out, but they just didn’t pay attention to customer service. They weren’t really deliberate about their processes.

So what I did is I decided to become deliberate about it, talked to two engineering friends of mine and said, “I need to make a customer’s experience in here as quick, efficient, and as quality as possible.” The long and short of it is I’ve been open for seven years. I have two locations in metropolitan Detroit with a vision to go national to solve this problem nationally. That’s it. I’m the small one.

Loren Feldman:
How many employees?

Dana White:
I have 20.

Loren Feldman:
Rough range revenue? Less than…

Dana White:
A million. Less than a million.

Loren Feldman:
Jay Goltz?

Jay Goltz:
I started my business right out of college. I’ve never had a job. This was 1978, no computers, imagine that. I got an accounting degree and I had the wisdom and vision of, “No, accounting is no good. I’m gonna go into the picture frame business.” I can assure you nobody thought that was a good idea, but I just wanted to make a living. I liked picture framing and I hated accounting.

I opened up on a third-floor walk-up loft in Chicago in what is now a very bustling street. My rent was $200 a month. I figured if that didn’t work, I’d go get a job and business took off like crazy. I did $120,000 the first year, then I did $240, then I did $480, then I did $710, then I did a million dollars. The average picture frame shop in the United States today does $200,000 a year, so it was quite the phenomenon, and it continued to grow. I eventually after 10 years opened a furniture store and then I started an art business and now I sell wholesale to frame shops around the country.

To summarize the last 41 years, I’ve got 115 employees, my frame business is about 20 times the size of the average in the United States. It’s by far the biggest.

Loren Feldman:
I’m not going to let you get away without telling us how big your business is. Employees?

Jay Goltz:
I’ve got 115 employees.

Loren Feldman:
Rough range revenue?

Jay Goltz:
$20 million.

Loren Feldman:
But that’s not all in the frame shop. You also have a—

Jay Goltz:
I have a very hot furniture store. We do online business. I’ve got like four different businesses and it has its challenges with running four different businesses. The whole technology thing, it’s not easy being a retailer today.

Loren Feldman:
Okay, so here’s where it gets real. You’ve heard the basics about what they do. Karen, why don’t you go first. Is your business operating the way you would like it to? Are you satisfied with its performance?

Karen Clark Cole:
Yes…

Loren Feldman:
And don’t pay attention to the fact that there are employees of yours in the audience. They’re not really paying attention. They have other things to think about. [Laughter]

Karen Clark Cole:
Well, the truth is, that’s all we’ve got. We are a consulting firm, and we are employees, and so paying very careful and special attention to our employees is the only thing that’s worth worrying about, truthfully. Our employees are interfacing with our clients every day all day long.

Loren Feldman:
You’ve talked very openly on the podcast about your attitudes toward growth and your notion that there are a lot of people buying up companies that do the kind of work that you do, and it occurred to you at a certain point, if somebody is going to buy up all those companies, why not you? You spent a lot of time working to try to bring in the capital that would help you purchase other companies. In the end, that didn’t work out the way you expected it to. You also took a sabbatical away from here for a couple of months.

Karen Clark Cole:
In two hours, I’m going to answer that one. [Laughter]

Loren Feldman:
How has that affected your attitude toward the growth of this business, having been through that experience, sitting here today? What are you thinking are your goals for Blink?

Karen Clark Cole:
There’s a lot that Loren just packed in there, but we are in a very fast-paced industry that is growing like crazy. If you think about user experience, if you know anything about it, it’s on fire. It’s important that we are relevant in that fire, so we need to be a certain size, we need to continue to grow so that we remain the best UX firm out there, so that when the big clients come, there’s no question they’re going to hire us. That needs to remain true, and that means we have to continually grow with the times and we have to be up on the latest technology.

My cofounder, Kelly, is focused on innovation so that we know what’s the new tech that’s coming? How do we bring it into our own practice? How do we advise our clients? How do we make sure that we’re using technology and know everything about it? So there’s that side of it, that we have to continue to be growing and evolving, but in terms of running the actual company, it’s hard not to grow, period, for anybody.

Loren Feldman:
There are a lot of businesses that manage to do it.

Karen Clark Cole:
I think it’s harder to not grow, actually. The world doesn’t stay still around you, so how could you stay still in a world that’s constantly changing? I mean, everything’s moving.

Loren Feldman:
Maybe that’s more true in your industry than some others.

Jay Goltz:
You think?

Loren Feldman:
Jay, have you had trouble not growing?

Laura Zander:
I grow out as I get older, but I’m not growing up.

Karen Clark Cole:
You’ve grown. You’re not not growing, and none of us are not growing. I can tell you, my CFO tells me all the time, “It’s quite difficult to not grow.”

Jay Goltz:
You are living in your own Seattle high-tech bubble that you think that everybody’s growing and you can’t stop it. That isn’t even close to true. There are lots of companies where their markets are deteriorating, or changing, or feeling influences from other countries. Read the paper every day. Retailers are shrinking. There are lots of companies that are struggling. Not only are they not growing, but they’re struggling to just stay in business. I’m in retail, it’s not easy. You see all these people with the free shipping and the companies like…

Laura Zander:
It’s called Amazon I think. [Laughter]

Jay Goltz:
Well them too, but Wayfair. They’re doing billions of dollars and losing hundreds of millions of dollars doing it.

Loren Feldman:
Does Jayson Home compete with Wayfair?

Jay Goltz:
Not much, but enough. There are plenty of these companies just throwing public money at stuff and they’re losing money doing it, and it’s putting a squeeze on everybody else.

Laura Zander:
Yep, we have even that in the yarn industry. Like these guys got 60 million in funding. Last year, they did 20 million in sales, but they lost 11 million. Most yarn shops are really small, and if you’re lucky, maybe you might take home $30,000, so it’s obviously a lifestyle business. But you take somebody who pulls $20 million out of the market, they can price everything at 40% off or 60% off because they just don’t give a shit. They’re just trying to get customer names and build that customer list so that they can sell it and ride off on their yacht. It really damages things. It changes the whole ecosystem.

Loren Feldman:
Tell us about your attitude toward growth. You were ahead of your time when you went online—don’t make a face at me like that. You know it’s true! [Laughter]

Laura Zander:
Yeah, but it wasn’t on purpose. I mean, we just got really lucky. The timing was really lucky. It was magic.

Loren Feldman:
You figured out how to use YouTube as a learning and marketing tool.

Laura Zander:
Before Bezos did, I’ll say. Yes.

Loren Feldman:
You built a neighborhood yarn shop on the internet. You didn’t have any competition back then. You were growing very quickly. You thought you were going to take over the world at one point. What happened?

Laura Zander:
Well, I still kind of think I’m gonna take over the world… Growth-wise, to your point, we started in 2002. I’m the only employee. I have a little 500-square-foot shop. I’ve got an espresso cart because I built a website for an espresso manufacturer and he traded me for an espresso cart. Built a website for a yarn manufacturer. They traded me for yarn. I have yarn and espresso and let’s just roll the dice. I’ve got a 50/50 chance.

Loren Feldman:
Jimmy Beans Wool?

Laura Zander:
Yeah, Jimmy Beans Wool. Wool was for the yarn. We carry other fibers, just in case you ask. But then the online stuff started to take off and I opened a second location and none of it was strategic. Maybe there was a little bit of strategic intuition that I didn’t realize I had, but the internet business and the world of e-commerce really started—some of you guys probably weren’t born yet, but in the year 2005 before Facebook, people started to get more comfortable buying things online. Then we couldn’t help but grow. We really couldn’t. We didn’t have to worry about inventory, I didn’t have to worry about cash flow, I didn’t have to worry about anything. Because, damn, the money was just coming faster than I could count it.

But then I start to swim into the growth. If you’ve ever been rafting or you ski, first, you just let yourself go into it, and then you start to really power into it, to see if I can get a little more speed and a little more momentum going. So I started to really push, got myself in some magazines—because not many business magazines were writing about knitting at the time, so I would pitch myself, and I’m like, “Look, yarn!”

Laura Zander:
How many people here know somebody who knits or crochets? It’s like almost everybody, right? Holy shit, if you can get an article in a magazine, it doesn’t matter what genre the magazine’s in. I always wanted to be in Car and Driver because I’m like, “The dude has a wife, or he’s got a mom, or at least had a mom at some point biologically.”

I was really pushing, getting in magazines, getting in Forbes, ended up meeting Loren, being a writer for The New York Times with Jay, and trying to go for—does anybody here want to have their own business? Okay, I don’t blame the rest of you, because it sucks… most of the time.

Jay Goltz:
You don’t mean that. She’s mixing up the AA meeting again with this one. [Laughter] This is a business thing, we’re happy being business owners.

Laura Zander:
Jay, it’s all a 12-step program. Life is a 12-step program. So I realized that if I started to apply for awards, that I would get some press and get some notice and maybe I could convince people that I was actually legitimate, even though I didn’t feel like it inside. If enough people thought that we had a legitimate business, maybe people would start to like buy from us and they would think we were legitimate. It was like The Emperor’s New Clothes.

I applied for a bunch of awards and I got one through Ernst and Young and became part of their Winning Women program with a bunch of really successful women. The woman who started Swell, the woman who started Spanx, people like her. All these super successful women, I’m all of a sudden surrounded for a couple years with all these people who are just kicking ass and taking names, and they’re pushing, “Grow, grow, grow, fast growth, grow as big as you can. Keep focusing on having a $100 million dollar company, you should be able to have a $100 million dollar company.” I’m relatively competitive, I’ve been told.

Loren Feldman:
You’re an athlete.

Laura Zander:
I have been an athlete before. Right now, I’m more of an athlete eater. But yes, I always want to go faster, like how can I go faster? How can I grow bigger? How can I get to $100 million? I can open 50 shops, we can do this, we can do that. I was so focused on growing that I kind of blew it up. I blew the whole business up.

Loren Feldman:
By…?

Laura Zander:
By hiring people who we weren’t ready to hire for. We were probably doing $5, 6, 7 million dollars in sales. I didn’t need a $90,000 a year social media person 10 years ago. I just didn’t, but I listened to what other people were telling me. I started to wear dresses. I started to wear heels. I started to try to fit the part, to fit in with what all of these people were telling me I should be, and really lost my way. It sounds so cliche, but—

Karen Clark Cole:
How long ago was that?

Laura Zander:
About seven years ago, six years ago. The growth kind of stopped, and I think a big part of it was I quit doing what came naturally to me and I started doing what I thought I should be doing. It’s that nasty should word.

Loren Feldman:
So the growth stopped as soon as you decided you were going to focus on growth.

Laura Zander:
Totally, it absolutely did. And then the shit hits the fan and it all falls apart. My dog dies, my mom dies, blah, blah, blah. The truck broke down, all these things happened. It took us a couple years and we finally, just now in the last 18 to 24 months, have gotten our shit back together.

Loren Feldman:
And now it’s more difficult because of the retail apocalypse. You’ve got competition. What’s your attitude toward growth today?

Laura Zander:
My attitude towards growth is that I just want to have fun. I would really like to be able to ski again. I’d really like to be able to get on the trails again. I’d like to be creative again. I would like to grow again, if I can do it because it’s fun, but not for the sake of growth.

What has also changed for us in the last 10 years—and Jay probably has experience with this that he can talk about when I’m done talking—

Jay Goltz:
Tomorrow, or the next day? [Laughter]

Laura Zander:
Yes. 10 years ago, most of our employees were passionate knitters, retired people, college students. Now, for almost all of our people, this is their career, it’s their full-time job. Part of the growth—and you and I have talked about this before, you’ve made some moves this way—part of the growth has been to keep the people who we love and who are part of our team, to keep them interested, and for them to be able to grow and for them to find things that they can learn to develop new skills, so that’s a part of it. Okay, I’m done. Goodbye. [Laughter]

Loren Feldman:
Dana, you said something before about your aspirations. You do have the smallest business of the four businesses here. But in some ways, the biggest aspirations. You would like to go national. Tell us, what’s your plan? How do you do that? Do you know?

Dana White:
I don’t, because the plan has changed. We’ve talked about the plan changing. People come to you and say, “Oh, I want you to meet this investor.” And I’ve said on the podcast, I’m not willing to give up the firstborn that I don’t have yet to that investor, so that’s not going to happen. Franchising has been an option.

I think for me right now, I’m with Laura. I want to have fun. I want to grow slow. I think slow and steady is gonna win the race because when we’re talking about the growth of a company, my direct competition is the individual hair stylist, and she cannot see 15 women on Sunday morning standing outside of her salon waiting for her. That’s a typical Sunday morning in my salon. Then the salons that are big or that are national—your Great Clips, your Supercuts, your BoRics—they’re definitely not catering to my market. I believe the field for me is wide open.

Loren Feldman:
Tell us exactly, who’s the market you cater to?

Dana White:
Right now, it’s African American women between the ages of 17 and 70 because I felt the pain. A lot of people just don’t know what it has taken for us to get our hair done. I think products and tools have evolved, but the business model around the hair salon for this market hasn’t. I went ahead, added some math, did some science, and then tried to evolve it. We cannot not grow because there isn’t a walk-in only, seven days a week, Lean-manufactured hair salon. The growth and the speed in which it’s done is up to me.

Karen Clark Cole:
Are you worried that someone else might come and do it and beat you to it?

Dana White:
I was until my mentor sat me down and said, “You have seven years on them. They have to start from zero.”

Loren Feldman:
It’s also a big country.

Dana White:
It’s a huge country and there’s plenty of space. McDonald’s and Burger King are not suffering. There’s room for Five Guys and BurgerFi. But he said, “Even Burger King needed ramp-up time. By then, McDonald’s was McDonald’s. So consider yourself in your ramp-up phase.”

Laura Zander:
Well, one of the things that kept getting pounded into me was, “You’ve got to be afraid. You’ve got to be afraid. Somebody else is going to come in and they’re going to do this.” I’m sick of it. I’m sick of living in fear.

Dana White:
What’s for me is for me. It’s already done. What I do, you may be able to do better, or maybe not. But you’ll never be able to do what I do the way I do it because I’m me. Maybe national isn’t for me. Maybe it’s regional. I’ll learn that as I grow and get older. But for now, I am extremely passionate about our time and how it’s being taken for granted.

The kind of anecdote we talked about is, what touched me was, a mom came into the salon. She said, “My daughter just got a partial scholarship to Purdue on the swim team.” And I said, “Wow, that’s amazing!” And she said, “Because we were able to walk in after practice on Tuesdays and after meets on Saturdays and be in and out in time to go home to have dinner.” That is something that is just not something that we do en masse. The fact that Paralee Boyd is there, and she got a partial scholarship to Purdue, that’s why I said it’s a national solution.

It’s about hair health. It’s not just get you in and out. But is it growing and is it getting thicker, and are you able to be versatile with it? Can you go super curly and then decide to go super straight? Growth for me, it’s what you want to do until you decide you don’t want to do [it].

Loren Feldman:
Jay, did you ever go through a stage where you thought you were going to take over the world?

Jay Goltz:
In my 20’s, I was surprised just because I had a successful business that was doing millions of dollars, which, that wasn’t the plan. I don’t need no stinking plan. You know what that is. Then 30’s, I figured, “Oh, I’m gonna take over the world now.” Then I hit 40 and I realized, “Gee, what did you do wrong? You’re not worth $200 million.” Because I’m not in the computer business, because everything you read about in Forbes is always the computer business or real estate. Then I hit my 40’s, I figured out by the end, by the time I hit 50, I’ve done just fine. I’m actually happy now. I don’t have this albatross on me, “You’re not doing enough, you’re not growing fast enough.”

I realized that success is not about the income, it’s about the outcome. My outcome is way better than most of the people I read about in Forbes. Almost all of them, their lives are messes. If you read the stories closely, you’ll see these aren’t happy people. So I figured out for myself that entrepreneurship is about, for me, having control over my destiny. I don’t have anybody to answer to. I have happy employees. My average person’s been with me 10 and a half years. I have three good kids who are married with nice daughters-in-law and life is good and I’m trying to put the message out to the world that, no, you don’t have to become the biggest place ever. I grow at 5% a year and I’m perfectly happy.

I’m afraid that entrepreneurship now, when people hear the word, they think entrepreneurship means raising money. No, raising money is raising money and entrepreneurship is starting a business.

Loren Feldman:
Were you ever tempted to take investment money?

Jay Goltz:
No, I told you the story when I was written up in Small Giants, I went to the book signing, and there was a guy who you know who was doing a speech about his business, and he was in the boutique hotel business, and it was going well, and he started taking in money. Now he’s doing like five hotels a year, and I’m sitting in the back thinking, “Boy, that guy really thinks big. I just don’t think that big.” And then by the end of the speech, he’s telling us how there was the crash, and I’ll never forget this. He said, “I had a wife call me from one of the investors going, ‘You son of a bitch. You’d better figure out how to fix this. My husband was up all night crying because of you.’” I thought, “Yeah, I don’t need to think big like him. I think medium.”

I make a really good living and buy what I want. I’ve realized that’s not a bad place to be, but you don’t hear about this stuff. You just hear about the ones who are going crazy and growing and lots of them disappear one day.

I’m trying to get people to understand that entrepreneurship is about being happy at the end of the day. There are a lot of unhappy entrepreneurs out there and that is the ultimate irony. They went into business for themselves to control their destiny, and they controlled it to where they’re miserable because someone else is more successful or someone’s bigger. God forbid someone’s bigger than you are, or they got written up in the magazine or something, and it’s a little out of whack at the moment.

Loren Feldman:
Karen, has your thinking about taking investment capital evolved over time?

Karen Clark Cole:
Yeah. We tried and it was difficult because we’re a services company. We’re not a product company, we’re not going to do big hockey stick [growth], and we’re not a startup. It’s hard to fit into the right place to actually get money from a person or a group who we like. Again, there has to be synergy there. After a year and a half, we put it to rest. Now we’re focusing on fueling our own growth, which is where we were before. In 20 years, we’ve never taken any investment, so it’s not like we can’t do it. There was just a big opportunity all around us to consolidate the UX market, and rather than having somebody else do it, I wanted us to do it. But, as a lot of people know around here, it’s not that easy to pull all that off, and so it became not worth it, because it was causing too much hardship for too many people.

I listened to all you guys, and I’m thinking, “Wow, you can serve a lot of people in this country, and you can have a lot of happy employees, and you should grow so that you can do that.” That’s kind of how I feel. I mean, not only can we serve more clients if we’re bigger, but we can have more happy employees. I think if we can have a great place for people to come to work in more cities with more client work to do, then wow, that’s a pretty good reason to do it.

For me, it’s not a greedy thing. I made way more money when we were four people, and I’ve never worked so hard in all my life, and I don’t want to do it again. I always say, “Get bigger, it’s easier.” Because you can hire really smart people to help you, which you can’t afford to do when you’re small.

Loren Feldman:
We’re going to open this up to questions in a second. But before we do, Laura, could you tell us a little bit about what’s working for you, in terms of marketing and generating growth? You were ahead of your time on YouTube. That was a while ago. You did really well on Facebook for a while. I know you’re focusing on Instagram now. What have you learned? What’s working right now?

Laura Zander:
I’ve learned that the rules are constantly changing. We’re whitewater rafting and the river’s just never the same and you never know how long the rapid’s going to be.

We won a Facebook global marketing award. I got Hugh Jackman to do a knitting video for us. [Laughter]

Loren Feldman:
When was this?

Laura Zander:
Two years, three years ago. He had a movie that we helped him promote. We just rode it and rode it until the wave crested, if anybody surfs. You just ride it out and then you’ve got to figure out what the next wave is. I feel like the Facebook stuff has kind of died. Instagram is obviously very popular. I think we’re kind of at the tail end of that. We’re keeping our eyes open.

I believe now that we wholesale, which means that we sell to a lot of yarn shops, I think that that’s our sales force and that we’re really spending the next year or two years dedicated to—you had mentioned that [with] growth, you want to create lots of happy employees. I want to Superman the knitting industry and the yarn industry and I want to create a stronger industry. I want to do whatever I can, and I know it’s a little arrogant and narcissistic to think that I have that power, but whatever I can do to get as many people knitting, and to get as many people buying yarn and walking into yarn shops, I think that really gives me a high and a buzz.

I’m trying to do everything that I can from financial education to marketing education to make stronger yarn shops so that our ecosystem is stronger, and that it feeds itself. As one of the main retailers, even if we maintain the same market share, I don’t want to grow my market share, because I don’t want to take away from other people. But if I can grow the whole pond, and we maintain the same percentage, then everybody wins.

Loren Feldman:
You know, they’re trying to take away from you, don’t you?

Laura Zander:
I know, but I don’t care. It doesn’t matter. I live in my own little world, and I like to pretend that everybody likes me, for me.

Jay Goltz:
Who buys any of this? Do you buy that she doesn’t want to take any more market share?

Laura Zander:
I really don’t, I really don’t. There’s so much room and it’s not a zero sum game. It’s just not.

Loren Feldman:
Judging from this room, though, you’re already hitting a lot of people.

Laura Zander:
But how many people have ever heard of Jimmy Beans?

Loren Feldman:
But they’ve heard of yarn.

Laura Zander:
All right. Yeah, I mean, I want to grow the market share of yarn and of hobby and DIY, but I don’t want Jimmy Beans or our personal thing—I don’t want to take business away from somebody else. I want you guys to spend more on all of us.

Jay Goltz:
Do not try that at home. Do not try to grow a business without trying to take some business from your competition. That’s all I can tell you. You with me on that, Karen?

Karen Clark Cole:
No, I actually am not. Similar to Laura, we’re in an industry where there’s plenty of room.

Jay Goltz:
Well, if you’re in a growing industry like that…

Karen Clark Cole:
My feeling about competition is the more, the better, because it raises awareness. It floats all the boats.

Jay Goltz:
If you’re in a growing industry like that, you can do that. If you’re not, you have to take business from other people.

Loren Feldman:
The percentage of people who get custom frames is…?

Jay Goltz:
There were 25,000 frame shops 15 years ago. Now there are 8,000. Industry’s dropped by about 30%. So in my business, if I don’t figure out how to be better and make sure I continue to get more market share, then my business won’t be there.

Laura Zander:
Yeah, but if you look at it from a math perspective, you actually just did gain market share, just your natural attrition. I’m a big fan of natural selection. All of those other shops just disappeared.

Karen Clark Cole:
All you have to do is be better.

Jay Goltz:
But they disappeared because the market shrunk. It used to be a $3 billion industry, now it’s probably a $2.2 billion [industry]. Part of it is just because baby boomers are not framing pictures like they used to.

Loren Feldman:
Do we have any questions?

Audience Member #1:
Just in the sake of keeping this thing going. If you’ve got an expanding business, you don’t care about share. But if you’ve got a declining or stagnant business, the only way to grow or even stay the same is getting more share, right?

Laura Zander:
Yes and no. That’s exactly where we are. Our industry is going through the exact same thing, or a very similar thing. Our industry is shrinking and shrinking and shrinking.

Loren Feldman:
Explain that, though. Are people knitting less and buying less yarn as a whole?

Laura Zander:
People are just dying. [Laughter]

Karen Clark Cole:
The knitters.

Loren Feldman:
Knitters tend to be older.

Laura Zander:
They’re humans, yeah. [Laughter]

Loren Feldman:
There are more humans today than there were a week ago.

Laura Zander:
Yeah, but they’re aging out.

Jay Goltz:
It’s a baby boomer thing.

Laura Zander:
The baby boomers have just, in August of 2016, passed their prime spending years. They’re spending less, they’re dying off—I mean literally dying off, they’re not being replaced. The Millennials, or whatever this youngest generation is, are minimalists, and they are very niche focused. There’s a ton of fragmentation, and so the buying habits are not the same. Then there’s a glut of available products. Now any of us can go on Alibaba, any of us can go on Etsy. You can buy anything that you want from anybody basically in the world.

Traditional retailers, we are losing market share to everyone. It’s not just Churchmouse on Bainbridge Island (which if you’ve not visited, please tell Kit and John I said, “Hi.” They’re really great and it’s a beautiful spot). But it’s not them that we’re losing market share to. It’s the Etsy lady. She sells $1,000 worth of stuff per year. You take 100 of those, and that’s one yarn shop that just went out of business. I’m sure that framing is very similar. There’s lots of DIY framing.

Jay Goltz:
Not anymore. The baby boomers’ kids are not framing pictures like the baby boomers did.

Laura Zander:
But to be more specific and answer your question, what we have done is we have actually taken a step back, in terms of the primary things that we were selling—the yarn, if you will, and needles and stuff—and have been inventing. I have a knitter’s watch coming out. I’ve been patenting things. I made some knitting needles that mark every one inch and patented that. I’ve always taken an additive approach, like we don’t discount things. Instead, we charge more, but we give you things that make you feel like you should pay more.

Laura Zander:
We’ve started inventing, like we’re going to have toilet paper that says—Tosh is the new brand—”Tosh is the shit.” Then we’re going to go to trade shows and we will put our branded toilet paper and we’ll get toilet paper with little sheep on it or like a little knitting pattern.

Loren Feldman:
You heard it here first, breaking some news.

Laura Zander:
Then instead of doing a knit-along, we’re gonna do a shit-along, and people can all knit the same pattern together on the toilet. We think it’s gonna be great, but we do stuff like that. There is no competition. Nobody’s ever done that before. I don’t know why.

Loren Feldman:
You’re not taking that business away from anybody.

Laura Zander:
Exactly! I’ve got to get creative. I don’t go in other yarn shops because I don’t want to see what other people are doing because I don’t want to compete.

Dana White:
I think that’s the key, right? I think if you’re going to not take market share, you have to evolve. At Paralee Boyd, it’s not a matter of, “Don’t go to your stylist.” It’s a matter of, “Go to her to get your cuts and colors, come to us for your maintenance.”

Jay Goltz:
You might not want to take it from your competition, but you are, and if you are successful growing your business, it’s coming from you. So you might not like that idea, but that is what’s going to happen.

Dana White:
She’s offering more and she’s offering different stuff.

Loren Feldman:
We have another question, and if you do, we need you to go to the microphone because we want the people who listen to the podcast to hear it.

Audience Member #2:
As a young entrepreneur, it’s so nice to have this energy here. Can you guys talk to me a little bit about your own personal experiences? Both in each of your businesses, but personally: one, a time where it benefitted you the most when the universe was teaching you patience, and secondly, a risk that you took that paid off beyond when your soul had that, “Okay, I was just going to take this risk.” It could be personally, like I just wrote a book myself about my journey leaving law school and going to Mexico and Guatemala on a one-way ticket with $200.

Karen Clark Cole:
That’s the same as starting a business. You have a one-way ticket and you’ve got $200. [Laughter] I think, for me, I didn’t even know I was taking it. It was really one foot in front of the other. It’s not like I was taking a risk to say, “Hey, I’m going to open a $30 million company with all these people and have five offices.” It’s not like that, right? It’s just, “I’m going to do one job by myself,” and then gradually it comes on. I think the risk is tempered by that, for me, anyway.

Dana White:
I think opening Paralee Boyd was a huge risk.

Loren Feldman:
You had had a successful career before that in corporate America.

Dana White:
I did, and I was doing well. Man, wow. But I said, “I think I can do it.” And there were no associations where I could go to, there were no conferences where there were people taking people walk-in only, collecting data, using engineering notes, using Kaizen to work in their salon. For me, it was that risk taking $30,000 of my own money, finding a salon where a lady was leaving her current location, taking that $30,000, turning it into my first location, seeing what happens next, handing out flyers, telling people about it.

The other risk I took was, shortly thereafter, I could either spend the money and pay rent, or I could have spent the money and have done a series of radio commercials, and everybody around me—not being entrepreneurs—said, “Pay your bill, pay your bill, pay your bill.” But I thought if I bought the marketing, I’d be able to pay my bills for the rest of the year. And that’s what happened. I took the risk.

The risk question is all of us opening a business when you’re in a society that says, “Get up, go to work, go home, have kids,” when there’s a science to it. But for any business owner, the risk is opening and the patience comes in with how you interact with people and managing the expectations of people around you.

Loren Feldman:
Quickly, Jay.

Jay Goltz:
I don’t think you have to be nuts to start a business, but it does help. I will tell you that I’m not sure I ever did anything and thought about the risk involved. I just thought it was going to work. I know that sounds crazy, but that’s who I am. I’ve done some stuff that didn’t work, and it cost me a lot of money. I realized that optimism is the gift of the entrepreneur, and it’s also the occupational hazard. I’ve been on both sides of that, so I’m not sure that you pick entrepreneurship. I think it might pick you. I meet lots of people who are talking about starting a business, and I call them “entremanures” because they just talk about it, and talk about it, and talk about it for years.

Loren Feldman:
“Entremanure”?

Jay Goltz:
Bullshit, basically. They’re bullshitting themselves.

Laura Zander:
You need some knitting toilet paper!

Jay Goltz:
They like the idea of it. They want to tell all their friends about it. But at the end of the day, it’s about signing a lease. It’s about quitting your job. It means you have to go and do something about it.

Laura Zander:
Nobody to blame but you if it doesn’t work.

Jay Goltz:
I don’t believe that opportunity knocks, I think it lurks. I think that it’s out there, and I’m sure you did it, you thought there was a market there, and you jumped into it. There was a market there and you made it work. I think we’re all in the same boat. This idea of, “Follow your passion and the money will follow.” Oh my god, I know lots of people who have gone broke. Passion is not enough. It’s a critical part, but the math needs to work.

Episode 6: We’re at the Edge Right Now

Karen, William, and Laura discuss taking investment capital, dealing with stress, and why Karen’s going on sabbatical: “I just thought, ‘Okay, okay, I'll go.’ Then of course, I'm worried, like, ‘What if everything goes better without me?’” Plus: how are you managing health insurance costs?

Guests:

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

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

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Karen Clark Cole: “The last 12 months have been pretty stressful for me—the most stressful in the 20 years of the company, for sure.”

Karen Clark Cole: “We would get regular phone calls from some of these companies trying to buy us, and my attitude was always, ‘Well, forget that. We’re going to do the buying. We’re going to be the world’s leading UX firm.’”

Karen Clark Cole: “In one case, we bought a company with everybody knowing what the situation was, including the seller of that company. The money was coming on Friday. It never came.”

Karen Clark Cole: “We had a lot of people… while we love them, we didn’t need them to run the company anymore, because we weren’t doing this massive growth. I had to figure all that out.”

Karen Clark Cole: “I’m a single mom. That’s important, right? I come home at the end of the day, and I’m focused on my 11-year-old. I think that actually saves me in a lot of ways, because I can’t stew on it all night long. I turn off my phone, and I’m with her.”

Laura Zander: “We’re at the edge right now. My husband is not sleeping. With the acquisition that we just made, we have invested way more… We are right at that line of about to have a nervous breakdown. I guess you figure out how strong you are.”

Laura Zander: “It’s hard for me to be that brand ambassador and go to an event and just be like, ‘Yeah, we’re great. We would love to work with you!’ When all I want to do is just crawl in a hole and sleep and I don’t want to talk to anybody.”

Laura Zander: “We don’t have any friends. We have no social life. We exercise. It just is what it is.”

William Vanderbloemen: “When we started, we’d do a search, and I just did it all. All of it lived in my brain. Well, that’s great if you want to be a company of one person.”

William Vanderbloemen: “He said, ‘William, have you never heard the old line: The first day you’re the CEO is the last day you hear the truth’?”

Full Episode Transcript:

Loren Feldman:
Let’s meet this week’s 21 Hats podcast lineup. With us today are Laura Zander, CEO of Jimmy Beans Wool, a digital version of a neighborhood yarn shop that is based in Reno, Nevada; William Vanderbloemen, who is CEO of Vanderbloemen Search Group, a recruiting firm in Houston that specializes in working with churches and other faith-based organizations; and Karen Clark Cole, who is CEO of Blink UX, a digital research and design firm based in Seattle.

Karen, we’ll start with you. As I found out when you and I taped the podcast in Palm Springs at EY’s Strategic Growth Forum, you’ve decided to take a sabbatical from running Blink. Tell us what’s going on.

Karen Clark Cole:
Sure. It wasn’t really me who decided. It was sort of decided for me by some of the members of the leadership team who I work most closely with, largely my chief cultural officer who runs all of our HR, and she’s a psychologist, trained for many years. We should back up a little bit. We’ve had a pretty rough 16 months in total. The last 12 months have been pretty stressful for me—the most stressful in the 20 years of the company, for sure.

Loren Feldman:
Tell us why.

Karen Clark Cole:
We decided to take on some outside investment for the first time in order so that we could grow more quickly. The U.S. market is pretty hot right now. There are a lot of companies trying to consolidate, so a lot of acquisitions going on. We would get regular phone calls from some of these companies trying to buy us, and my attitude was always, “Well, forget that. We’re going to do the buying. We’re going to be the world’s leading UX firm.” I got busy fulfilling that.

Our strategy before we had acquired some companies was to buy, using a line of credit, and then gradually pay that off, and then do it again and do it again. The trouble is the market’s moving too quickly for that and we needed to get some outside money so we could get some jet fuel and go on a buying spree, basically with similar kinds of companies. It’s essentially finding great talent, because when you acquire a company, they come with revenue, so the people are billing. So we don’t have to worry about hiring a whole bunch of people, having them sit on the bench while we get the work, and then the sort of cat and mouse game. The acquisition strategy avoids that. It’s expensive, obviously, and you have to integrate the people and really pay close attention to the culture, but it’s a fast way to try to dominate the market.

The problem is, though, that it was a long and sordid path of trying to find the right investor. Because we’re not a .com company, we’re not a hockey stick profile—we’re a services company and we don’t have a bunch of assets, besides our people. It takes a special kind of investor to want to put money into our business. We were focused on family office type of money.

Loren Feldman:
You put a lot of time into searching for the right investor?

Karen Clark Cole:
Yeah, we had hired a company to help us do it. But they require a lot of my time and a lot of my CFO’s time, so between the two of us, we were completely absorbed in this, getting all the due diligence materials ready. That is an inordinate amount of time for not only me and my CFO, but for a lot of our senior leadership, our sales team, different folks in the organization at various points having to provide a lot of data, which is interesting to do. It’s a good exercise in understanding everything about the company. We also had to do an external audit of the company, which is just good to have anyway. It’s expensive and consuming for everybody in terms of time, for sure, but it’s great to get some validation that things are looking really good.

Then we’ve got to find the right match, in terms of somebody who you like, who you want to go to dinner with, who you want to have on your board potentially, and who you want to be in partnership with, because that’s the reality of what happens. It took a long time to find that person and those people, that group, and we finally did, but then it got complicated, because the way they like to invest, there’s some debt involved with their bank. Then we had to basically go through the whole thing again with their bank. Long, long, long story short, in the end, it didn’t work out for a variety of reasons, but we were very close to closing, like as in, for a couple of months, we were closing on Friday.

Loren Feldman:
Wow.

Karen Clark Cole:
We had all kinds of things in motion based on that, including my job was to go out and find these companies that we could buy right away. I had been searching the country, meeting with lots of people, getting all of the terms together, negotiating, getting in some cases letters of intent in place.

Loren Feldman:
You were so close, you thought this was almost a done deal, and you were out looking for ways to spend the money buying the companies you wanted to acquire.

Karen Clark Cole:
Yes, that was the deal, is that they wanted to invest in us and have the money go out immediately to these other companies. That was part of the plan. I had to have these companies lined up, because it takes a really long time to do this. It’s like dating, it takes forever. I spent the whole year doing that and found some really great companies that we were really excited about. Then you get to know these people and you have a real relationship with them.

Loren Feldman:
Did you start the transactions with them? Were you close to closing with them?

Karen Clark Cole:
Well, getting the letter of intent in place is the beginning of that. So yes, for sure. In one case, we bought a company with everybody knowing what the situation was, including the seller of that company. The money was coming on Friday. It never came.

Loren Feldman:
You bought a company, thinking you had the money from the investor coming in on Friday, and it didn’t come.

Karen Clark Cole:
Yeah, and everyone’s looking at me going, “Well, no kidding.” It’s never over ‘til the fat lady sings. But at the time, everybody had their routing numbers and everything. It was going through on Friday. In particular, this final Friday, there was no question. In retrospect, of course, I would never do that again. But at the time, it wasn’t just me, there were many of us who were certain it was happening.

Loren Feldman:
So why didn’t it happen?

Karen Clark Cole:
It was complicated on their end with the bank relationship. Their bank pulled out and then they went to a different bank, and that’s why it took so long originally, and then that bank had questions. They had a complicated structure on the back-end of how they did other investments and other deals. We weren’t the only one. It became too complicated and too far away from the original plan, so in the end, it wasn’t working for them, and it wasn’t working for us. We amicably walked away and agreed that we should not do this, but that wasn’t until April of the following year. We continued on after the new year, eight months later.

Going through all of that, the problems, the stress for me is the waiting and the not knowing and the expecting something that’s not happening, and trying to run the company based on that every week for months and months and months. We made decisions internally about our operations and people to hire to make sure that we’re ready for this influx of people coming, in terms of systems, processes, as well as culture—a lot of things we were doing internally to prepare for this to make sure it was going to go well, because that was really important.

Laura Zander:
I am so grateful to hear that you have just gone through a similar experience to us and that I’m not the only one. That’s the ambiguity. I’m trying to predict three different paths. If it goes this way, this is what we’re going to do in six months. If it goes this way, this is what we’ll do. It fried my brain. I’m glad I’m not the only one.

Loren Feldman:
Laura, you’re talking about the lead up to your acquisition in Texas?

Laura Zander:
Exactly, yep. Every Friday, we thought it was going to close. “Oh, it’s going to be this Friday. Well, it’s going to be this Friday. It’s going to be this Friday. Now we’re at a 20% chance that it’s going to happen. Now we’re at 30%.” Trying to plan for all of that was exhausting.

Karen Clark Cole:
While you’re running the company at the same time.

Loren Feldman:
William, are you sitting there thinking, “Boy, am I glad I’m not doing any of this”?

William Vanderbloemen:
Oh my gosh, yeah. I’m a little different though, Loren. To me, the whole point of the exercise of earning is so I have some measure of peace, insofar as you can ever get it financially. That makes me feel very unsettled. I don’t know that I’m made for that kind of risk. Kudos to you for trying it and doing what you’re doing, but it’s not my schtick.

Karen Clark Cole:
I have a pretty high risk tolerance, but I tell you, I saw the edge of it.

Laura Zander:
We’re at the edge right now. My husband is not sleeping. With the acquisition that we just made, we have invested way more. We haven’t brought anything in. We’re just finding out more and more of these expenses that are coming up. We are right at that line of about to have a nervous breakdown. I guess you figure out how strong you are. We’ll see. Check back in a month.

Loren Feldman:
Karen, it sounds like you actually made an acquisition thinking that the investor was going to come through and then it didn’t. Did that acquisition go away? Or did you keep it?

Karen Clark Cole:
Nope, sitting in San Francisco right now. I was in the office yesterday. We’ve got them, and they’re great, and we love them. There’s a reason why we wanted to buy them.

Loren Feldman:
Did you have money to buy them without the investor?

Karen Clark Cole:
No, we did not have a lot of money on hand. Laura’s describing all of these things cost a lot of money. The legal fees, accounting fees, doing the QA. We didn’t have any money, and so we’ve spent the better part of the next year… It’s hard for me to say this out loud actually, because we still haven’t finalized the deal with that owner. I was at a holiday party with him last night. We’re good friends, we respect each other. We’re confident we’re going to work it out. But it’s a very different deal than what we started with. We’re working on a long-term payment plan with him right now.

Laura Zander:
It’s funny, Karen, on the hard costs of the acquisition, like you said—the lawyers, accountants, and all that kind of stuff—in my case, I’m so involved in sales and marketing, or have been, that the opportunity cost and the distraction cost has almost been more than the financial part of it.

Karen Clark Cole:
I totally agree. That’s exactly the case, particularly for my CFO. He’s running the day-to-day finances of the company and he absolutely could not provide reports for people, because he was being hounded by the bank all day long.

William Vanderbloemen:
Just to try and add something to the conversation, we are pretty close to acquiring a smaller company and they’re not in a great place financially. It’s not a lot of cost to us. It’s really, really affordable would be the nice way to say it. But I talked to our COO about it and he said, “I don’t want to fool with it.” “Why?” “Because it’s going to take your time, it’s going to take your energy.” Nobody ever thinks about the opportunity cost of you’re not going to be focused on being the brand ambassador and spreading the company. Because my job is to wake up every day and think about how to spread our brand. Taking the eye off the ball to acquire—even if it didn’t cost anything—costs us, and I wouldn’t naturally think about that. I don’t know if that’s something that you guys were born with, or if it came through experience, but it’s a lesson I’m having to learn.

Laura Zander:
For me, it has not just been the time, as well, in terms of opportunity cost, but the emotional energy. It’s hard for me to be that brand ambassador and go to an event and just be like, “Yeah, we’re great. We would love to work with you!” When all I want to do is just crawl in a hole and sleep and I don’t want to talk to anybody.

Karen Clark Cole:
Which is actually what you need to do in order to survive.

Laura Zander:
Nice segue into this sabbatical.

Loren Feldman:
Karen, what was your reaction when you realized the deal—finally, this is it, no more Fridays? It’s just not going to happen.

Karen Clark Cole:
Honestly, I was so relieved. I just couldn’t take it anymore. It’s exactly what Laura described. It’s the uncertainty, which is so incredibly stressful. I’m used to running a business. I’m driving it, I know where we’re going. I’m in charge, good or bad. In this case, it was completely out of my hands. And yet, I still had to drive the ship.

Loren Feldman:
So what happened to your business over those 16 months?

Karen Clark Cole:
We had a rough year.

Loren Feldman:
Without you driving.

Karen Clark Cole:
Well, that’s not true. We had a good year. We’re profitable. We’ve got lots of great clients, lots of great work, and lots of great employees. On the outside, nothing. But there were many meetings, and not just for me, but for the entire leadership team, where we were all under so much pressure that you’re just not your best self. We’re acting in ways that aren’t helpful for everyone else around us. Particularly me, and that’s hard on everybody for the year. We lost some really good people because all of a sudden, they’re uncertain about what’s happening with the company. They think, “Oh, we were doing this thing with complete certainty.”

Loren Feldman:
Everybody knew.

Karen Clark Cole:
Oh, yeah. We’re very transparent about this in the company. Everybody knew exactly what we were doing. Then, it’s not happening. It’s not happening. What’s happening? Everyone’s in limbo. I have to be careful about how much I’m communicating or not communicating because I don’t want to cause any alarm. Besides, I thought we were moving forward, nothing to worry about. Then all of a sudden, I make an announcement that we’re not doing that, and that we’re totally changing course, and that we have to lay off a bunch of people who we had in place to support all these acquisitions on the operations side. That looks like trouble to most people.

Loren Feldman:
That must have been painful.

Karen Clark Cole:
I felt good about that, actually. That was finally a decision that I knew had to be made and I knew how to do it. But everybody else, it was absolute pandemonium. That was, to me, the tail end of the whole thing. I thought I had survived because I had survived this year of stress behind the scenes, and then when it becomes, “It’s great. We’re moving forward. Now we know what we’re doing,” that’s when the pandemonium hit in the company and it was really, really traumatic for a lot of people when we laid off a bunch of people, because we’ve never done that before. In 20 years, all of a sudden, they think, “Oh, God, I don’t know if this is stable.” We’ve had some people leave because they want to work for a stable company, even though we are, and the future is bright. It’s just different than how it was for that year.

It’s tricky as a leader to be communicating the right amount of information because we are a transparent company. I’m very open about what we’re doing because I want people to be behind it and to be excited about it because I am. It’s easy for me to get people excited about it, but as a result, people see when I’m not excited. So I have to be careful. That in itself is really stressful. It’s like, I can’t even be myself because I have to be a strong leader for people to see that and feel confident about the company.

Loren Feldman:
What did you do when it became final and this investor was not going to buy in and you knew it for sure? Did you sit down with your team and reassess all the options? Did you think, “All right, we’re going to find another investor”? Did you think, “We’re going to go into a completely different path”? What happened then?

Karen Clark Cole:
Yeah, we engaged the original company that was helping us find investors and we were going to look for another one. Quickly, it just became clear to me that we were done, we had to stop, we had to get focused back on the company. Just look internally, pay attention to what we’ve got right here, and take care of it. Quickly, we stopped that as well. Then I made the announcement that we weren’t doing any and so we haven’t since. That was in June of this year.

Loren Feldman:
Quite a bit of time has passed. Half a year since that point. You’re taking the sabbatical now.

Karen Clark Cole:
After that, we had to do all the layoffs and the cleanup of, “Okay, what do we have to do internally now to become profitable, or to get back to being profitable?” Because we had a couple of losses, which is actually pretty normal for us in the slow season in summer. But we had to make sure that we were going to end the year strong and we had a lot of overhead people who we were paying for that aren’t billable, and for us, that’s very expensive, and we didn’t need them. While we love them, we didn’t need them to run the company anymore, because we weren’t doing this massive growth. I had to figure all that out.

Laura Zander:
Can I ask you a personal question—a personal-professional question?

Karen Clark Cole:
Yeah.

Laura Zander:
Who do you vent to? Like, do you talk to your husband about this at the end of the day, or do you have a number two who you work with? How are you offloaded? Do you have a therapist who you talk to three times a week?

Karen Clark Cole:
Yeah, if I had a husband, I would talk to him, but I don’t. I’m single.

Laura Zander:
Got it.

Karen Clark Cole:
I’m a single mom. That’s important, right? I come home at the end of the day, and I’m focused on my 11-year-old. I think that actually saves me in a lot of ways, because I can’t stew on it all night long. I turn off my phone, and I’m with her. That is such a relief for me in so many ways. It has been my whole career. It teaches me to be focused on what’s in front of me. I’m really good at that, at being able to parse things out. There’s a lot of that going on, but that doesn’t help digest and process.

Laura Zander:
No, that’s just a distraction.

Karen Clark Cole:
My chief culture officer, Linda, who I mentioned at the very beginning, she’s the primary person who has helped me through this. But truthfully, there are not a lot of people. I have a couple of friends who are very close to me who I talk to, but it’s certainly not five times a day like I need.

Loren Feldman:
That was a great question, Laura, and it’s really interesting in that both you and William work with your spouses. I’m wondering how you deal with that, because I’m sure there are pluses, but I’m sure there are also some minuses. You are bringing it home with you, I’m guessing.

Laura Zander:
Yeah, I am. I would say for us, all of the pluses outweigh any of the minuses. There are a few minuses during peacetime. I don’t know if you guys have read Ben Horowitz’s The Hard Thing About Hard Things, but he’s talking about peacetime CEO versus wartime CEO and how it’s hard to find somebody who’s an effective leader in both times. That’s the transition that we’ve gone through, is being in peacetime, and now we’re in wartime. Doug and I actually perform much better together in wartime than we do in peacetime.

Loren Feldman:
We should clarify by wartime, because you’re going through acquisitions, not because you’re at war with your spouse. Am I right?

Laura Zander:
Correct, yes. Great clarification. Because the last couple years, we’ve had market transitions and retail in our industry, and we’re fighting. We’re fighting competition. We’re fighting profitability on multiple different levels. For us, it’s great, because we have that and we have a 10-year-old son together. Those are our things. We don’t have any friends. We have no social life. We exercise. It just is what it is.

Loren Feldman:
I hear that from so many entrepreneurs. The friends thing. It’s really interesting. People don’t realize what people give up when they choose this path.

Laura Zander:
We have no family. It’s just us. Doug has parents six states away, he talks to him once every few months. I have a father who I didn’t grow up with. In some ways, it’s nice, because there aren’t a lot of phone calls to make. We can really focus on the business. There’s not a lot of Christmas shopping to do. For Thanksgiving, we had grilled cheese sandwiches. But on the flip side of it, there aren’t a lot of people to vent to.

For me as an emotional person, there aren’t a lot of people who I can talk to who know the truth, who know me better than I know myself, if that makes sense, and can be really honest with me, and if I make a mistake, they can forgive me. There’s not a lot of unconditional love, through either friendships or family. That’s a kind of a scary place to be sometimes. So anyway, that’s why I was kind of asking: who do you have who unconditionally loves you who you can say, “God, I really screwed up at work today” who isn’t gonna say, “Yeah, you really did, you suck”?

Karen Clark Cole:
How has it worked for you, William?

William Vanderbloemen:
I think we’re learning as we go, Loren. The conversation we continue to come back to and we hear from others is that we seem to try and be aware of boundaries. What I mean by that is boundaries for: when are we doing the work thing and when are we not? We don’t get it right all the time. But we have seven children and we have extended family around. In fact, we host family dinner for 25 or 30 people every Sunday night and had several of them working for us at one point, which is a whole different podcast.

Loren Feldman:
We may have to get back to that.

William Vanderbloemen:
Yeah. I think it’s the boundary thing. Laura, the two biggest pluses, you hit on one of them. Adrian knows me better than anybody. I mean, there’s just no hiding from her. All the crap or facade I want to put on, she’ll see straight through that. If it’s going well, great. If it’s not going well, she knows and she knows if I’m doing something on the fly rather than prepared. She has a strong gut towards some parts of our business that I will never question. Hers is more operational, risk management, keeping things in order, should we hire that person or not? Which is kind of ironic. I’m not the better one at that, she is. But on the sales front or the expansion front, if I say, “No, I feel it in my gut,” we have very clear boundaries. Like “Okay, well you’re usually not wrong about that.” So knowing each other and trying to keep boundaries helps us. Knowing each other really, really, really well is the single biggest plus to the business. Frankly, the staff appreciates that.

We started the company together. Actually, I said, “I’m going to start this company,” and she said, “Well, if you ever get a client, I’ll send them an invoice.” A giant cheering squad. The decisions we’ve made together have been the best ones. But as we grew, and we didn’t need somebody to send the invoices—we actually had staff people to do that—she backed out of the business and then she came back in about three years ago. We were in the middle of this part where I needed to no longer do any searches. The staff had been trying to tell me that.

When we started, we’d do a search, and I just did it all. All of it lived in my brain. Well, that’s great if you want to be a company of one person. But once we start putting systems in place, if I got involved in the search, it just created more messes than solutions. The staff had been trying to say, “Well, maybe we can take that off your hands.” Adrian’s back for one meeting, and she said, “William, I don’t think you need do searches anymore.” I was like, “Okay, that sounds good.” And the staff, you could hear their jaws drop, like, “We’ve been trying for three years to tell him and it took one meeting.” So the staff I think sees the plus of, if they really need to get a message to me, they’ll go to her. And in the same way, if they need to get a message to her, they’ll come to me. The minuses, there’s just the messiness of if things are not good at the business, you can’t run away from it by going home. I don’t know how you get around that, but I’ll take the pluses with the minuses over not having it all day long.

Laura Zander:
That’s really funny on how your staff will go to Adrian if they need to get something to you and vice versa, because that’s exactly the way it is here. They’ll text me and be like, “So, could you talk to Doug about blah, blah, blah?” I can filter it, I can soften it.

William Vanderbloemen:
Back in a previous life when I was a pastor, I had a guy come to me. He was being considered for a CEO position at another company and he wanted my advice. Here I am, a 31-year-old pastor, like, “Why are you coming to me?” He’s like, “I just want your advice.” I said, “Why would you not take the CEO?” He said, “William, have you never heard the old line: ‘The first day you’re the CEO is the last day you hear the truth.’”

Laura Zander:
Oh, gosh.

William Vanderbloemen:
I was like, “Oh, that’s not true. My staff tells me everything.” But now with Adrian in the office regularly, I do hear the truth. It’s made a world of difference around here.

Loren Feldman:
Karen, let’s get back to your sabbatical. You told us initially that it wasn’t really your decision. What did you mean by that?

Karen Clark Cole:
Well, it certainly wasn’t my idea. Linda would say to me, “We have a sabbatical program in the company, that if you’ve been with the company for five years, you can take three months off.” And she said to me, “When this is all done, you should go on sabbatical,” and I just sort of thought, “Haha, wouldn’t that be great?” Yet she kept saying it until eventually it sunk and I’m like, “You’re serious about this, aren’t you?” She said, “Yes, you may not recover if you don’t take this seriously, the amount of stress that you’ve been under.”

Then she went into explaining the brain science behind it, and all of a sudden, I was listening. Then it took a while to plan for. I kind of was planning for it but not really thinking. It got very close, it got to like two days before it was supposed to happen, and I was still not really telling anybody. But meanwhile, I was shopping the idea around with the leadership team that I worked most closely with. What was most surprising to me is not one single person thought that was a bad idea.

Laura Zander:
How do you not take that personally?

Karen Clark Cole:
I know! I’m like, “Really?” I just thought, “Okay, okay, I’ll go.” Then of course, I’m worried, like what if everything goes better without me and they don’t really need me and then I don’t have a job? That was my first natural reaction, but it turns out that they do need me and they like me.

Loren Feldman:
Serious question. What happened? How do you know that?

Karen Clark Cole:
Because they’ve told me, for one. Truth be told, I can’t really check out entirely, but I am not in the day-to-day. I’m not going to the office. Those two things are a massive difference for me, in terms of my ability just to stay out of the weeds and out of the stress of the weeds. I meet with my COO, I probably talk to him once a week for a couple of hours just to check in and help guide him. He’s new on the job doing a great job. It’s actually better for him to sink in without me there so I can let him work through things in a timely way, instead of with me always breathing down his back. That’s good timing for that, which is partly why I did it.

People will check in. I’ve said to people, “Please, it will be way better if you need me to just call me and I’ll give you a quick answer, I’ll help you with the direction to go in, than for me to come back in two months and have to unravel something or change the course of the ship. I’ve put the autopilot on. If we need to change that for any reason, you need to call me. But otherwise you don’t need to call.” People get that right away. They’re like, “Okay, I get it.”

The time of year is important. We don’t want to make any major changes, in terms of process, systems, how we’re doing things, right now in this time of year anyway. We’re just busting it, burning hot. Everyone’s very busy until the end of the year. It’s kind of a good time for me to get out of the way. Because I’m constantly trying to refine our process, look at new opportunities externally, like how can we grow? Right now, everyone doesn’t really need that. They just need a break. They want to work hard for our clients for the rest of the year, so it’s actually a good time for me to get out of the way.

Loren Feldman:
Did you have a goal when you went off? Was it just the idea of clearing your head for two months, or is there something you want to accomplish?

Karen Clark Cole:
Linda has put me on marching orders of rest, reflection, and rejuvenation. Part of it is I’m writing. She said what’s really important is that I actually process the year that’s gone by. I’m very much a forward-thinking person. My job is to figure out the future of the company. That’s where I live. I’m very much in tomorrow. I don’t even know what happened today. I’m already in tomorrow.

As a result, the downside of that is I do a terrible job of looking at our accomplishments and seeing what has gone well, and what I’m grateful for. I try to be more aware of that. I think about the grateful side more, but I don’t think about “Hey, I need to process the things that didn’t go well and understand why, and know why I’ve gotten into this state of stress.” Because I’ve kind of forgotten truthfully. How I’m doing it is I’m going back and I’m looking at my calendar. I’m saying, “Oh god, this time last year, I was in this kind of meeting with this investor and this bank and I was flying across the country meeting with banks.” I’m like, “Oh my god, I forgot about that.” I really have a terrible short-term memory and I have forgotten most of it, yet I’ve got the residual effects of it still very much. What I’m doing is I’m going through my calendar and I’m writing about it. This is therapy for me right now. I’m talking about it.

Loren Feldman:
Happy to help.

Karen Clark Cole:
That’s a big part of it. Sleep is really, really the most critical piece of it. I’m getting a lot of sleep, doing things that are right brain, left brain, trying to balance them. I’m gardening and I’m trying to do things that are using a different part of the brain to try to balance it back out. It would be better if I could completely check out, but the reality is, I can’t. It’s a lot. She may tell me that I need to take longer. We’ll see about that, when the time comes.

William Vanderbloemen:
Something’s lost with technology speeding up our lives. It’s the forced rest. Not to go too deep here, but in my morning studies right now, I’m studying the life of the apostle Paul, who wrote two thirds of the New Testament. Beyond that, he was an incredible entrepreneur. He planted churches all over. The Romans finished those roads, and he took advantage of it to build a network. It’s an amazing entrepreneurial story.

I was thinking the other day as I was reading a letter that he wrote one of the churches, looking at the map of where he traveled, there was a lot of time that he just spent sitting in a cart or on a horse and he wasn’t able to do anything. That’s just not our life anymore. We’ve got our whole world in our pocket or purse on these smartphones and there is no forced downtime anymore. I’m just wondering how much creativity I’m losing by being “on” all the time.

Laura Zander:
One hundred percent. I tell my staff, “My only downtime is taking the dogs for a walk.” We actually bought a house that’s right on the trail, so that I can just go out the back door, I go in the woods, and if I’m lucky, I’ll go for an hour or two hours. Sometimes I’ll go for five miles and I’m on my phone the whole time doing emails.

Karen Clark Cole:
Oh, Laura, no!

Laura Zander:
But at least I’m outside. When things are going well, and day-to-day is going really well, then everybody knows I don’t come to the office ‘til 11 or 12 because I’ll spend the first two hours—sometimes I listen to a book on tape, or I play it by ear—that’s my creative time. It’s by mile three or four, my brain starts to let go, and I can start to problem-solve. I can start to forward-think and I can really tell when I haven’t had enough of that. 30 minutes at the gym is not enough. Walking around the block is not enough. It has to be an hour. It’s got to be two hours.

Loren Feldman:
Can you imagine taking a sabbatical, Laura?

Laura Zander:
Oh, absolutely. That’s what I’m working towards. I’m working my ass off right now as hard as I can with that in sight. How do I get two months off? How do I get this back? I’m trying not to stress about the fact that I’m not working out a ton. I’m not eating super well, but it’s okay. Because it’s a temporary thing and I’m doing what I need to do.

William Vanderbloemen:
So spot on, so good. The whole work-life balance thing is such a myth, and I just don’t believe it. If you own a business, if you’re running a business, there are times where you have no life, and that’s just the way it is. You buckle your seatbelt and go. The trick for me is then, after that’s over, okay, now I gotta let go for a little bit. Because I’ll lose my creativity, I’ll lose my ability to be energized, I’ll lose my ability to make hard decisions.

Laura Zander:
I’ll lose my edge. To Karen’s point, the only thing that is non-negotiable—even when I’ve got my seatbelt on and I’m just going and I’m working as hard as I can—the only thing that doesn’t suffer is sleep. I still get nine hours of sleep.

Karen Clark Cole:
That’s amazing.

Laura Zander:
That is my rest time. I like to have a slow morning, so I’ll lay in bed for 30 minutes and just let my brain process. That’s kind of my meditation, is just sitting there. I kind of see it as all this sand in a jar and it’s got to work its way through and settle.

William Vanderbloemen:
I know this doesn’t apply to everybody, and I don’t want to sound like CEO problems, but there is something about the role—particularly if you’re a founder, like I think all three of us are founders—you get stuck with stuff that nobody else wants, and you better be recharged for it.

I was meeting with a founder-pastor the other day of a very, very large church, and we were doing our podcast with him. He said, “William, I think I preach for free now.” I said, “What do you mean, Mark?” And he said, “Well, I mean, I like doing it, and it’s fine, and I know I’m supposed to be doing it, and I’m pretty good at it, and people like it. But the reason they pay me is to make about four or five really hard decisions every year that no one else wants to make. And if I’m not ready for those, I have not earned my salary.” I thought, “Wow, that’s not just pastoral. That’s like CEO gold right there.” I don’t know if that’s the case for you guys. But I get stuck with four or five things no one else wants to decide. If I’m depleted, it’s not going to be good.

Karen Clark Cole:
Yeah, I talk about how my job every day is to make decisions, and preferably good ones. You can’t do that if your brain isn’t functioning.

Loren Feldman:
I want to move on to some other stuff. But before we go, Karen, obviously, we will come back to this in future podcasts and check in with you and how it’s going.

Karen Clark Cole:
Loren, what I would love to do is, can I read you what I sent out to all the employees about why I’m doing this and why it’s so important?

Loren Feldman:
Go!

Karen Clark Cole:
It’s important to me that everyone understood that I’m not just going off to hang out in Mexico, and that I’m not going on vacation. I’m going to be at home. This is through the teachings of Linda, of understanding what’s happening with my brain. I said this to everyone.

“When the brain is under elevated stress for prolonged periods of time, the executive functioning of the brain, the prefrontal cortex, starts to shut down, and the brain goes into survival mode, dominated by the sympathetic nervous system, especially the amygdala. The job of the amygdala is to constantly scan our environment looking for potential threat. In our modern work world, this is everything from deadlines to disgruntled employees to poor financials. In the meantime, our attention and memory, creativity, innovation, and problem solving, which are under the control of the prefrontal cortex, are diminished.” It’s exactly what William was just talking about.

“This causes tunnel thinking and the inability to see a big picture or put things in proper context or perspective. It also causes heightened sensitivity and overreacting. Moods become more dramatic and small things can seem big,” which is really what was happening to me. “Regular stress reduction methods, which also build resilience, such as eight hours of sleep, regular exercise, and taking breaks are not enough when the brain is under elevated stress for prolonged periods of time. If this goes on for months or years, the neurons of the prefrontal cortex actually become damaged by the constant exposure to the stress hormone, while the neurons of the amygdala actually thrive and grow. The amygdala becomes more dominant, and it’s harder and harder to shut the stress response off. It becomes very difficult for the brain to recover to its normal state, for those neurons to recover from their damage, unless there’s a real break from the stress hormone over a longer period of time. Exercise, sleep, and social support are all essential for the neuron recovery.”

“And in my case, it’s my job to define the corporate strategy, set the big vision for the company, and move us towards it. If my thinking is impaired, and I can only see narrowly what’s in front of me, this is a dangerous place for the company, as I’m not able to do my most important work. This became my greatest fear, as I realized with the help of others, that I had to take the recovery of my resilience seriously with the hope that after two to four months of reduced stress, rest, and reflection, I could be renewed and get back to my big picture, calm self and return to being the leader that everyone in the company wants and needs for our company to thrive.”

Loren Feldman:
Well, that was a little scary—the science of it.

Karen Clark Cole:
I actually read this to myself regularly because I’m like, “What am I doing? I should go to the office.” And then I’m like, “Oh, I shouldn’t go to the office.”

Laura Zander:
Can you send that to me?

Karen Clark Cole:
Sure.

Loren Feldman:
Karen, when the sabbatical’s up, how will you know if it was successful?

Karen Clark Cole:
Great question. I don’t know. I guess I’ll feel more relaxed.

Laura Zander:
I suspect you will just know. You’ll know it when you see it. I think it’s going to be very obvious.

Loren Feldman:
All right, so I want to move on to the point in the podcast where I ask William and Laura, in this case, what they’ve learned lately, what’s working, what’s not working. But if you’ll forgive me, I’d like to go first this time because I think I’ve learned something surprising. Maybe I’m the only one who didn’t know it, but I’m curious.

At 21 Hats, were going through a web development project. We bid it out to a bunch of developers. We picked the low bidder and then went through this process of thinking through what exactly we wanted our website, 21 Hats, to be, and coming up with the designs, and going through wireframes, and then we’re going to build this thing. It just occurs to me at some point, we did it all wrong. There was no reason to bid the whole project out to everybody. We should have talked to firms just about doing the design, think through what this website was really supposed to be, what it was supposed to accomplish, take it through maybe the wireframe stage, get that all down, and then take those designs to developers and have them bid on the actual project.

Instead, as I know happens all the time to other people, the project has evolved. What we bid out six months ago is not exactly what we’re getting. That’s good in a lot of ways, and I think we’re going to end up in a happy place, but I think it could have gone a lot better. You guys have a lot more experience with this than I do. Am I the only one who didn’t know how to do this?

Karen Clark Cole:
Loren, can I just ask you why you went with the lowest bidder?

William Vanderbloemen:
I was gonna I was gonna ask the same thing.

Loren Feldman:
Well, we didn’t go with the lowest bidder just because he was the lowest bidder. It was somebody who had worked with my parent company, Advantage Forbes Books previously, and they had a really good relationship, and he was the lowest bidder. It was a good combination. We were confident that he could do what needed to be done and we were happy to spend less money.

William Vanderbloemen:
Our sales team, Loren, has learned and now instructs new members, that if a lead contacts us and their first question about us is, “How cheap can we do this?” We just almost immediately say, “We’re probably not right for you.”

Karen Clark Cole:
We do the same thing. You get what you pay for.

Loren Feldman:
We didn’t determine initially that we were going to go with the lowest bidder. We just looked at the options we had and decided, “You know what, we’re comfortable with these people and they’re the lowest bidder. We’re going to do it.” But how about the idea of splitting the project up into parts and thinking it through, getting designs, and then going back to web developers? Karen, obviously, this is your business. Is that the right way to do a project?

Karen Clark Cole:
Yeah, didn’t I tell you to do that?

Loren Feldman:
No, you didn’t.

Karen Clark Cole:
I should have. Yeah, absolutely. Remember though, you’re not just looking at the design of your website. You’re talking about user experience: who are your customers and what do they want from it? Why would they come to it and what do they need?

Loren Feldman:
Right, and having that conversation obviously changed the parameters of the project. We wound up in a different place.

Karen Clark Cole:
Well, what’s stopping you from stopping it and getting it right?

Loren Feldman:
Nothing. I think we will get it right. I think we wasted time. It’ll end up being a little bit more expensive than we thought, because we’re going to make them do things that we didn’t talk about initially. Hopefully, he’s not listening to this conversation right now.

Laura Zander:
My experience has always been that that’s very normal. I mean, that’s just the way it goes. That’s like getting married and expecting you to still be married to your girlfriend 10 years later when you both change and everything’s different.

Karen Clark Cole:
Yeah, it’s pretty common for things to evolve and change as you go, Loren. That’s that’s sort of par for the course. Your web services partner should know that and be expecting that.

Loren Feldman:
We talked to a lot of people. Nobody said to us, “Why don’t you do the designs first and then bid out the build?”

Laura Zander:
I don’t know. I think about, when we built a house…

Loren Feldman:
Yeah, you get an architect first, right?

Laura Zander:
No, we did not.

Loren Feldman:
Somebody designed it.

Laura Zander:
Yeah, we did. But it was somebody who the builder worked really well with, because when it came time to building it, sometimes things aren’t going to turn out the way that you thought they were going to be in the original design. It was really nice to have that relationship.

When we’ve built other stuff, the guy who designs it is also the guy who codes it. We like that. We’re a smaller company. But we liked the flexibility of being able to make those small changes as we go, and having a programmer, it’s really nice to have somebody who can code but who also understands the UX part of it, so that they can make some tweaks as they go. They’re like, “Oh, this doesn’t really turn out the way I thought it was going to, so let me adapt the design as I go.”

Loren Feldman:
William, how about you? What have you learned lately? What’s working?

William Vanderbloemen:
One thing that we’re working through right now, we’re opening four regional offices over the next 18 months. We’ve got one open, and this is a big move for us. I’m learning tons and tons of things. But we’re in a fortunate position of having a whole lot of people who want to be considered to be regional directors, basically start an office and build it up from the ground up. I’m reminding myself of a painful lesson I learned when I really messed up a search early on.

As a client, the church was a couple thousand people, which is big church. They needed a second in charge, a number two who can do right. There was a person at a much, much, much larger church that was one rung below the number two who can do, and that was a very fast growing church. I thought, “This is perfect.” And we went through the interviews, and the client thought it was perfect, and every box was checked. Then the person really didn’t do very well at all and didn’t make it. The lesson for me was, just because someone’s been a part of a growing company means nothing about their ability to be a catalyst for growth in another company. We get these people who want to be regional directors, and a lot of them have impeccable resumes, but I’m having to ask myself, “How do I measure whether the growth they’ve been a part of is something they were the author of, or were they just riding the coattails of growth that was already there?” I don’t know how to answer that. I’d love for you guys to solve that for me before we close the show. That would be great.

Loren Feldman:
Have you gotten close?

William Vanderbloemen:
It’s questions like, “Tell me about an initiative you led.” You can walk through the mechanics of what kind of interview to run, but it is one of the harder things to discern. I’m a recovering golfer, and Ben Hogan used to say, “The secret’s in the dirt.” You’ve got to get down in the dirt to learn how to hit the ball. Can they get down in the dirt and go build out an office for me and a regional presence? I’m still figuring it out. I don’t know if it’s under the heading of what’s working or what’s not working.

Loren Feldman:
Karen and Laura, either of you have any suggestions?

Karen Clark Cole:
We do this thing in our company, it’s a personality profile called the Big Five. It’s the most modern psychology of Myers-Briggs, but it’s a different algorithm and it gets at people’s hardwiring, so what they’re born with and what they’re naturally good at. It doesn’t mean you can’t do something else. But it means there are certain things that you gain energy from. It’s your sweet spot. If you’re doing this all day long, you won’t burn out, because it’s in alignment with how your brain functions. How we use this is for the exact kinds of things that you’re describing, William.

There’s somebody who you think is a real shining star in the company, they could do anything, you give them this job, and they fail. Then it turns out, it’s because it’s actually not in their wiring. They’re really good at this other thing, but they’re really not good at that thing. It just helps us get people in the right places in the company so they can do their best work. For themselves, as well as for the company. It sounds a little bit like you may have somebody who’s a great employee, but not quite in the right position. I think it’s not safe to assume that everyone can do the same things.

Loren Feldman:
Laura, what’s up with you? What’s working, what’s not working?

Laura Zander:
What’s working? What’s working is that I have now two companies that are states apart from each other, and they are supporting each other like they are family—like they’ve been working together for 10 years. It’s phenomenal. I guess the cultures that we’ve built are just strong enough and open enough that we have the mentality that you chip in when you can.

Loren Feldman:
Do you have advice for William as he thinks about an acquisition? How did you make that happen?

Laura Zander:
Don’t do it? What’s not working right now, and maybe this will kind of answer it, is that I am completely overwhelmed. I’m just way in over my head and have so many people asking me so many different questions, and I’m recognizing how many systems I don’t have in place. I’ve gone through this, through the growth of the business, and so we’re in this growth period again by acquiring a new company, where I really every day I’m at a breaking point where I have to figure out, “What can I hand off, what can I hand off?” And then I have to take the time to figure out, “Who do I hand it off to? How do I train them?” It’s all piling on, and I don’t have the time to train them. I’ve got to try to figure out how to make the time. It’s just a really uncomfortable, freaking miserable place to be. But I can see the light at the end of the tunnel. I know it’s all going to be great, blah, blah, blah…

Karen Clark Cole:
But do you have a strategy for at the end of the tunnel that you’re moving towards?

Laura Zander:
I can see it, yeah. It’s just a matter of walking into a new company that does not have existing management. I’m playing manager, CEO. I am playing all of the higher-level roles in this new business with 40 people, that is manufacturing, that I know nothing about. The challenge is figuring out how it works as quickly as I possibly can, figuring out where the holes are as quickly as I possibly can, and then figuring out how to plug those holes. You know, it’s just a process.

Loren Feldman:
Before I let you guys go, as we usually do, I like to bring up one news item—the kind of thing that we often write about or highlight everyday in the 21 Hats Morning Report. I just saw a report that the increase this year in employer costs for health insurance is the highest it’s been since the Bush years. I’m curious: it’s that time of year. What are you guys seeing? Is this affecting your companies?

William Vanderbloemen:
First year ever, ours finally went down this year.

Loren Feldman:
Wow. Do you have an explanation for that?

William Vanderbloemen:
I have an awesome benefits guy, a company here in Houston. You can’t get into the whys of premiums, because confidentiality, but we haven’t had many incidents this year.

Laura Zander:
I need your benefits guy, William. I’m going to email you.

William Vanderbloemen:
He’s awesome.

Laura Zander:
For us, this will be the first year that we’ve ever offered benefits, because now we have 80 employees. We’ve only ever had 39 full-timers max. This is all new territory for us.

Loren Feldman:
So you have just picked your first health insurer?

Laura Zander:
We’re working on it right now.

Loren Feldman:
How’s it going? Do you have a sense?

Laura Zander:
It’s not going well, no. The guys who we’ve talked to so far are not as responsive. It’ll be okay. It’s a big shock because we’re talking about six figures plus. Again, bringing on a new company that was in a close to bankrupt spot, there’s no revenue being generated, so it’s just another added expense right now that we’re needing to figure out how to budget for and how to find, not knowing anything about the health care industry, what are the good plans? What are the not-good plans? And finding a good benefits guy who can help walk us through that and make life easier for us as opposed to make life harder is the challenge. But it’s like finding a good accountant or finding a good lawyer, or finding a good husband. I guess sometimes you have to go through two or three until you get the right one.

Loren Feldman:
This is probably more expensive.

Laura Zander:
I don’t know. I’ve heard about some pretty expensive divorces.

Loren Feldman:
Just to be clear, you have been under the 50 employee threshold, so you haven’t been required. Now, with these acquisitions, you’ve gone over that. You have to do this now. Suddenly, you’re going to have a big new expense line to deal with, plus you’re figuring out what you can offer your employees. Are they aware of what’s going on?

Laura Zander:
Yeah, and we knew, obviously, that it was coming. We knew that would be an expense, a side of it. We thought that we were going to have a little more time to get back into a cash flow positive state before we needed to incur some of those expenses, but we’re going to need to do it a little sooner rather than later. But yeah, the employees are excited about it. Out of the 40 people in our Texas company, only eight people take advantage of it. We’re kind of expecting the same thing in Reno. It’s not going to be a huge number.

Karen Clark Cole:
Is that just because they have coverage with a spouse?

Laura Zander:
Yeah, exactly.

Karen Clark Cole:
For us, it’s probably the third biggest expense in the company: health care. We’ve got salaries, rent, and then health care. It’s wildly expensive.

Loren Feldman:
Has your rate been going up recently?

Karen Clark Cole:
Oh, every year it goes up astronomically. It’s mind blowing to me.

Loren Feldman:
Thank you all once again, I so appreciate your being willing to share like this. You guys are so open. I have no doubt a lot of people are going to appreciate hearing they’re not the only ones going through these kinds of experiences. So thank you very much for another great episode.

Laura Zander:
Thanks, Loren.

Episode 4: What Do I Have to Lose, Right?

Jay, Dana, and Laura talk about risking it all, figuring out digital marketing, and connecting with your target audience: “Right now, my market is predominantly African American, but we have a lot of redheads. We have a lot of women of Indian and Middle Eastern descent.” Plus: how do you know if franchising makes sense for your business?

Guests:

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

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

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

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Dana White: “My managers are taught listening exercises. When you hear a guest in the chair, speaking of their father who is sick in the hospital, you’re going to get a call from us in a couple of days: ‘How’s your dad?’”

Dana White: “I had to make a very hard decision and I had to fire a manager. That was ugly.”

Jay Goltz: “My belief, in the city these days, is you’d better have one or two things: you’d better have high-rises, or you’d better have parking. If you’ve got neither, you don’t have enough customers.”

Jay Goltz: “The best franchises are turnkey businesses. A moron could run them. I don’t think a moron could run your business.”

Laura Zander: “Instagram advertising now is so saturated. It’s fantastic. It’s useful, and I think it’s probably at its peak in my opinion, but it’s going to start turning people off here pretty soon and we’re all going to start ignoring it and we’re all going to find a different platform to go to.”

Laura Zander: “For us, it was always, ‘How do I recreate the in-store experience online?’… We did that through YouTube videos.”

Full Episode Transcript:

Loren Feldman:
Let’s meet this week’s 21 Hats Podcast lineup. With us today are Laura Zander, CEO of Jimmy Beans Wool, a digital version of a neighborhood yarn shop that is based in Reno, Nevada; Jay Goltz, who has several businesses in Chicago, including a picture framing shop, Artists Frame Service, and a home furnishing store, Jayson Home; and please meet Dana White, who is with us for the first time. Dana is founder of a chain of hair salons based in Detroit that specializes in helping women with thick and curly hair. In creating the salons, Dana adopted the principles of Lean to make them operate as efficiently as possible and to allow women to walk in without scheduling an appointment. Dana has two locations in Detroit and big ambitions to take the chain national. Welcome to the podcast, Dana.

Dana White:
Thank you, Loren. Good to be here.

Loren Feldman:
We’re excited to have you here. Jay and Laura, as always, feel free to jump in. But I want to start by introducing Dana, talking a little bit about how she got into this. Dana, before you opened this business—correct me if I’m wrong—you were an international labor relations specialist?

Dana White:
Yes, I was.

Loren Feldman:
What exactly did that entail?

Dana White:
It started with me working on behalf of a labor union for healthcare workers. It started with healthcare workers, then it went from there to teachers. Then before I knew it, I was teaching people in the Middle East how to negotiate contracts, how to have a healthier workplace environment—even though there were labor issues that, here in America, we would cringe at the thought, but over in the Middle East, it can be quite different. My job was to go over there and help workers manage that.

Loren Feldman:
Given that experience, I assume that managing your employees at your own business has been the easiest thing possible?

Dana White:
No, absolutely not. It’s been helpful when it comes to having an eye or an ear towards the needs of my staff and putting that up top. But for the most part, labor just depends on the industry. A lot of it depends on the culture around the industry. Having textile worker culture or teacher culture or healthcare worker and nurses culture has not helped me in the beauty industry. And if it has, it’s been minimal.

Loren Feldman:
How did you get into the beauty industry? What prompted this?

Dana White:
My own experience and the experience of my family. I was working over in the Middle East and I made a hair appointment here in Michigan, because I lived in New York at the time, and I was coming to visit my family. I had to get my hair appointment before I could get my flight. I had to call back and say, “Hey, can we reschedule this flight so I can make my hair appointment?” No, that that didn’t fly, so instead of flying directly to Detroit to spend more time with my family, I actually flew into New York, was there for a couple of hours in a place where you could walk in and get your hair done, go back to the airport, and then catch a flight out to be with my family.

My family had issues of their own in regards to moving appointments, and it was just too much. I decided there are salons in New York where you can walk in, but they weren’t very deliberate about your time, they weren’t very deliberate about their customer service or the products that they were using. I decided to take that model that had been around since the 80’s and bring it into the new century, and then Paralee Boyd was born.

Loren Feldman:
Jay, you’ve had that experience with having to balance your flights with your styling, right?

Jay Goltz:
Well, my pilot’s gotten fairly easy to work with. He understands the importance of my hair, so we’ve worked it out.

Loren Feldman:
Dana, I understand the need that you saw there. What made you think that this was a problem that you could address?

Dana White:
I still don’t know if it’s a problem that I’m addressing. No, I felt because it wasn’t being done and, if not me, then who? If not now, then when, so why not? All you have to lose is your life savings and you’ll have to start all over again.

Laura Zander:
Amen!

Dana White:
What did I have to lose, right? I did it and seven years later, here we are looking to go national with our franchise. I didn’t really think I could do it, but I did think I could try.

Loren Feldman:
You didn’t just open another hair salon. You tried to open a place that operated differently. If I recall correctly, you actually called some friends in the auto business who helped you think through, almost from a manufacturing perspective, how you handle your customers.

Dana White:
Yeah, it wasn’t enough to just have a space that was walk-in only seven days a week. While my guests were in the salon, I had to find the best way to be very deliberate about their time. I had two friends who were automotive engineers, and Lean was their thing, and said, “Hey, what’s the best and fastest way to get the shampoo out of the bottle? Where should I put the towels? Where should I put the shampoo? How should I blow dry the hair to get them in and out in a certain amount of time? What should we say on the phone? What should we use to cash them out and what should be the script?” Everything literally from the time they walked in to the time they walked out. Of course, you can just have somebody come to the door and not say anything. That’s quick, but we had to balance having great customer service, giving quality service, and then getting them in and out in a certain amount of time. Then how could I do all of this affordably?

Laura Zander:
Just to ask a quick clarifying question: is this like a high-end Fantastic Sams kind of thing?

Dana White:
I get that. It’s like a Great Clips for women with thick and curly hair, but it’s high-end.

Laura Zander:
Got it.

Dana White:
It’s really nice and they’re like, “Wow.” It really is deliberate about being focused on the health care of the hair. We have a lot of women who have thinning issues, a lot of women who have color or damage issues. We don’t cut or color. We trim. For the ladies with color, they come into our salon and get a steam treatment. It makes the color last longer. It keeps the hair more hydrated. A lot of our guests, after three or four visits with us, they’re seeing a noticeable change in the health of their hair.

Jay Goltz:
We’ve all seen these commercials on TV for years with hair salons, and it seems like they come, they go. Can you give us an idea of the franchise model in the hair salon business, like the Fantastic Sams? There’s probably been, not 100, but I can probably think of three or four that I’ve seen come over the last 20 years and I don’t even know if they’re all in business still. Could you give us a snapshot as to how that whole franchise model has worked?

Dana White:
I think in the past, it’s also the market that they’re trying to target. Women can be much more involved in their hair salon. Don’t get me wrong. Men can too. I have family members who go to the same barber they’ve gone to since they were eight. Now they’re 50. I think that the franchise model—I don’t want to say it failed, because you still have some Super Cuts and some BoRics and some Great Clips—I think it was too blanketed and it wasn’t tailored enough. They had general haircuts. It was very business, right? Just get you in and out and give you a good haircut. I don’t think they focused on the quality of the products they were using for hair health, and then I’m not sure if they really had to, because I don’t know that market.

But I think where that failure was, for example, our level of customer service is my managers are taught listening exercises. When you hear a guest in the chair, speaking of their father who is sick in the hospital, you’re going to get a call from us in a couple of days. “How’s your dad?” Or, “My daughter is going to homecoming.” In a couple of days, “How was homecoming?” “I just had a job interview.” “How did that interview go?”

I don’t think that they were doing that, and then what I’m concerned with is, how do we do it when we get busier and when we scale? But If we go up to seeing 100 guests per salon and managing that volume, how do we keep that personal? The other thing is, my market has never seen anything like this before.

Loren Feldman:
What do you mean when you say “my market,” Dana?

Dana White:
Women with thick and curly hair. You talk to women with thick and curly hair and they go and make an appointment at a salon, they are upcharged or it takes them longer. Because your hair is curly, you’re here. Right now, my market is predominantly African American, but we have a lot of redheads, we have a lot of women of Indian and Middle Eastern descent, because when they go and make an appointment at a regular salon, they are charged more, their appointment is longer.

Laura Zander:
You’re a genius.

Dana White:
Thank you!

Loren Feldman:
Dana, I think it’s worth emphasizing that, from day one, you’ve been thinking about this as something that you want to go big with. It wasn’t that you opened one salon just to try to build a business and make a living that way. In fact, you’ve created custom technology that you might sell to other hair salons, but that would make it possible for you to manage your customers along the lines of what you were just saying. So if a customer walked into your shop in Detroit, and then a month later into a shop in Brooklyn or somewhere else, that person in the next shop would know exactly who this customer is and how to treat them.

Dana White:
Yeah, we collect data now and I’ve just thought of technology that will allow us to collect data on a bigger scale. I think it comes down to, that’s where we’re going in business. If you’re not looking at artificial intelligence, if you’re not looking at data collection on the front-end, as well as the back-end, I think there’s got to be room in everybody’s business to collect data, because that lets you know how you grow. I want to solve this problem everywhere, because everywhere I’ve gone, I’ve not been able to have it solved consistently. I want to solve this problem everywhere consistently.

Right before I opened, I drove from New York City to the Grand Canyon in a Chrysler minivan. I was in Iowa, and I asked women there with thick and curly hair, “Where do you get your hair done? How long does it take? How much does it cost?” And resoundingly, it was the same thing. I’ve noticed that hair care has not evolved for this market in well over 50, 60, 70 years. That was my impetus to go ahead and start it and see if it’ll work in my original hometown—I’m from Kalamazoo, but I lived in Detroit for years—and then take it from there.

Loren Feldman:
As you know, the idea of the 21 Hats Podcast is to have the kind of conversations with business owners that you don’t often hear in public. So let me put you on the same hot seat that I put Jay and Laura and our other regulars on. Is your business—and by that, I mean the two existing locations in the Detroit area—is it making as much money as you think it should?

Dana White:
No, it’s not.

Loren Feldman:
Why not?

Dana White:
Do you want the Dr. Phil answer, or…?

Loren Feldman:
I want the Dana White answer.

Dana White:
Okay, Dana White has two reasons. One, I believe it is the market. That’s not my business. It’s several business owners in the Detroit metropolitan area, especially in the Detroit area, that are saying, “Detroit is not as ready for a small business comeback as it would like to be.” It’s coming back, but it’s not where it needs to be for all of these businesses to thrive. That’s restaurants, hotels, and the service industry.

Jay Goltz:
Let’s be specific about that, though. The question is: why? I have a very similar story to yours. I started a picture framing business. It was a big hit. I opened a store in the suburbs, the numbers weren’t as good as I thought, and then I realized I was in the wrong neighborhood. I opened a third store and it was much better. So the question is, when you say they’re “not ready,” quote unquote, for small business, is it because the density of the customer isn’t there?

Dana White:
Yes.

Jay Goltz:
Okay, that’s legitimate.

Dana White:
It was something that I went out to explore it with my lender, with other business owners. I’m a Goldman Sachs 10k SB alum. It was something that the business advisors that you keep in touch with were saying amongst their graduates. The density isn’t there. A lot of the restaurants wouldn’t survive if they didn’t cater, because the people aren’t coming in from the suburbs. They’re not coming in from the suburbs and staying to eat, and if they are, they’re only going to the bars and restaurants that they know. They’re not going to pay $20 for a steak. They’re going to pay $10 to $12 for a steak. That was for the restaurant. For my specific purposes, it was I don’t think I did a good enough job managing the expectations and putting out through marketing, which I’d done very little of, who we are and how we’re different. That transition hasn’t quite happened. For some of my guests, yes, but for other guests, no. They want the traditional salon, but they want to be walk-in only seven days a week, but they don’t know who they have to be or what it takes in order for that to be there.

For example, you can’t come to the salon and bring four kids and serve them dinner in the lobby in a walk-in only salon, because you’re not going to be there that long. We can’t give you a color appointment-based salon. They come in and they want a color. They think it’s either go to my stylist or go to Paralee Boyd. I’m trying to show them that you go to both.

Laura Zander:
Have you studied Jimmy John’s at all? Because I hear a lot of similarities there. The education of the customer and creating a new segment of the market, that takes a while for people to understand and catch on.

Dana White:
The Dr. Phil answer is, I got tired and I did the minimum.

Loren Feldman:
You’re saying when you got tired, it was the marketing that fell through the cracks?

Dana White:
No, when I got tired, it was the growth, meaning do more for data compilation, do more for updating your training. Everything that moves the business forward, I did less of that and did the things that move the business forward everyday. Payroll, supply ordering, inventory.

Jay Goltz:
There are certain blocks in Chicago—Halsted, if you’re familiar—literally every other storefront is empty. Every other storefront. You go to other streets, that’s not the case. It seems obvious to me, but you don’t hear it talked about. My belief, in the city these days, is you’d better have one or two things: you’d better have high-rises, or you’d better have parking.

If you’ve got neither, you don’t have enough customers, and the problem with Halsted where I’m talking about is, there’s neither. The reason why there are very few restaurants left in Lincoln Park, which no one thinks about, it’s simple: permit parking. All the side streets that people used to park in when they went to dinner all had permits. Now you can’t park there unless you are a resident. There’s nowhere for people to park their car, therefore the restaurants are not what they used to be. I would think a hair salon’s the same thing: if you’re near some high-rises, you’ve got heavy density, or they drive. I’ve got to think that’s one of the key elements to where the right location is.

Loren Feldman:
Does that apply to you, Dana?

Dana White:
Our high-rises are businesses. The DMC is across the street (Detroit Medical Center), Blue Cross Blue Shield is down the street. What I’m going to do is open at 7AM.

Jay Goltz:
Wow, smart.

Dana White:
Validate parking. That’s what I’m gonna do. I’m going to open at seven before they have to be there at nine, and I can get you out by 8:30 every time. So open at 7AM, validate parking, take away the challenges. But what I had to do because, again, my Dr. Phil portion of this is that I got burnt out, so that means staff wasn’t as quality as now that I’ve been reinvigorated. I have a great staff right now. Now, we can start talking to them about opening at 7AM and not worry about losing people.

Loren Feldman:
How did you get reinvigorated?

Dana White:
Well, first thing, my mom is huge. My mother walked in and got her hair done and said, “Oh, no, no, no, no.” She called me and said, “Oh, no, no, no, no.” I walked in, and I was never happy and I never wanted to be there. And I’m like, “If you don’t want to be there, then close.” Well, no, you don’t want to close. I had to make a very hard decision and I had to fire a manager. That was ugly. I hired an operations person who would oversee my new manager, the manager that oversees both locations. I had to not be afraid to command respect. It was something I learned at Small Giants: I’m managing people that used to bully me. I was like, “Like me.” It was this weird dynamic that I had to get rid of in order to make this turnaround in my business.

Jay Goltz:
You were allowing them to bully you.

Dana White:
When I was a kid, they were, yeah. But now, when I grew up, it was like that baggage was still there. I learned that at the Small Giants conference that was here in Detroit. I was like, “Oh my goodness.” So yeah, it’s learning to be the boss.

Loren Feldman:
Dana, I want to talk about the marketing aspect a little bit. I think you did say that you haven’t done as much of that as you probably should have. Why is that?

Dana White:
Money and lack of competence and actually knowing if I know what to do. I know how I want the ads to look. I’ve actually tried, but again, in this environment, you’re looking at marketing companies that want you to pay $12,000 a month to try, because they’re used to your Art Vans, your Suburban Chevrolets, your Little Caesars Pizzas, your Meijer Thrifty Acres, which is a huge grocery store chain here. If you guys know of a small marketing firm, there are a ton of small businesses here that would love to give them business!

Jay Goltz:
I could tell you the problem, because I’ve lived through it for 40 years. The problem is, they can’t make money on little accounts. They can’t make enough money on them, so you are forced—and this is what I’ve done—to learn how to do it yourself.

Loren Feldman:
I want to hear from someone. who’s had a lot of success doing exactly that, and that’s Laura Zander. Laura, you really got your business off the ground through digital marketing, if I recall, especially YouTube videos. Is that right?

Laura Zander:
Yeah, and then we’ve transitioned into print marketing and more traditional marketing as well. What’s worked really well for us is teaming up with a college and finding either college interns or, as Jay said, graphic designers, working with a business professor and getting their whole class to do a project on your business. You’ve probably explored that.

Dana White:
I spoke at USC last year, and they have opened up both their communications college and their business college. I literally just posted that internship last week for January.

Laura Zander:
Oh, perfect.

Jay Goltz:
There are people out there in the world who are mission-driven. I have them working for me. They love what they do here. They could go work at a big ad agency and be at an ad factory where they’re just doing one little piece and getting yelled at by the art director, or they can sit here with the owner of the company and a couple of other people and brainstorm and figure out the ad and do it and execute it. It’s a wonderful thing for those people. But you’ve got to find the people who want to be in that environment, because they can make more money at the big ad agency. That’s the reality.

Laura Zander:
The other talent pool, Dana, that I have pulled from—and you might have a similar experience—are my own customers. My customers are more passionate about my product than just about anybody else. You’d be amazed. I’m sure you know. Your customers are doctors, they’re lawyers, they’re graphic designers, they’re stay-at-home moms, they’re people who are smart and talented and some of them, like Jay said, don’t want to go work at an advertising agency and might be willing to trade. They’re going to be your best advocates and your best marketers, at least in my experience.

Loren Feldman:
Laura, have you also made use of your customers as, to use the phrase “influencers”—people who you’re not actually paying to market your business, but who share what they create with your yarn, for example?

Laura Zander:
Oh, totally. That’s what I was thinking about when Dana was talking about, whether it’s Fantastic Sams or Great Clips, I’m not sure that those franchises are still relevant and have not turned a corner, in terms of social existence and social marketing. That seems like a huge hole and a huge opportunity for her business to really take advantage of that and jump in with both feet.

Influencers are people who are active. We’re really focused on the micro influencers right now. We’re dedicating a percentage of our time and energy to what I call the “A-listers,” but it’s the B and the C-listers, it’s the Rocky story—they’re the ones who are going to fight the hardest and who are going to work really hard for you and that we want to support, because our whole goal is to get these B and C-listers into the A-list.

Loren Feldman:
How do you do it? How do you encourage people to spread the word?

Laura Zander:
You just be you and just be real and be honest and be supportive and you communicate. It’s just human. It’s the golden rule. Just be a good person, support people, and if you like what they do, interact with them and see if there’s stuff you could do together.

Jay Goltz:
I’ll tell you what I see all the time that surprised me. You go to these websites, and it says “About Us.” You hit About Us thinking, “I’m going to hear about Laura’s story,” and you don’t even hear the name of who owns the company. They just go, “We’ve been dedicated to blah, blah, blah,” the typical advertising baloney. They don’t even tell you who they are. If you’re just authentic and say, “Hey, my name is Jay Goltz. I started this business because I thought I could give a better product and blah, blah, blah,” or whatever, people are interested in your story if it helps them, and if what you do does help them. I do think there’s an opportunity to stand out, because a lot of companies aren’t doing it.

Laura Zander:
Loren, you were talking about marketing. And yes, digital marketing has been a big thing for us, but 17 years in and now we’re on our third evolution. What has really pushed this third evolution are the relationships that we’ve built over the last 17 years. It’s not the digital marketing. It’s the fact that we’ve always been nice to people.

Loren Feldman:
Tell me, Laura, at one point, when I was at Forbes, we did a short story about you guys and the success you were having with Facebook’s look-alike ads, which is where you basically upload your emails for your existing customers and they come back to you with customers who have similar demographics, based on their Facebook profiles. You can target ads at this similar audience to the one that you already have. I think you’ve moved away from that and I’m curious why. I’m also curious whether you think that would be effective for Dana and Jay too.

Laura Zander:
The reason that we’ve moved away from it is I believe—or at least my observation over the last 15 years of what’s happening with digital marketing—like fashion, things come in fashion, and then they fall out. Snapchat comes in, and everybody’s on top of it, and they’re all loving it, and they pounce on it to the point where—and this is the case, in my opinion, of Facebook advertising—in the beginning, it was kind of raunchy. It wasn’t very attractive. It wasn’t organic, it wasn’t authentic. We happened to jump into it when it was at its high, at its most organic and most effective. Then the effectiveness started to wear off because everybody jumped on that bandwagon. Then it becomes—I don’t know what the right words are—not dirty, but it just became so commercial.

Jay Goltz:
Trite.

Laura Zander:
It’s very trite, and it’s just not a game that we want to play anymore. Sure, we’re still playing it. We’re still doing some and we’re participating. But that’s not where our focus is. Our focus is now: what’s next? How do we get in on not necessarily the beginning, because the early adopters are the ones who end up spending way too much money for way too little, but trying to get in on the tail end of the early adoption, and the beginning of the mass curve?

You see it with Instagram. Instagram advertising now is so saturated. It’s fantastic. It’s useful, and I think it’s probably at its peak in my opinion, but it’s going to start turning people off here pretty soon and we’re all going to start ignoring it and we’re all going to find a different platform to go to. Do I think it would be helpful for them? Sure, maybe dabble in it a little bit, especially if you can do some localized advertising. I personally right now am a big fan of going back to billboards, going back to print, going back to 1980’s, 1990’s stuff that nobody else is looking at.

Jay Goltz:
The key also though is she’s got a storefront. That’s got to be the top way to get new customers: people going by your storefront. I saw a salon in Chicago, it was very funny. They had a big picture of Christopher Walken and it said “Walk-ins welcome,” and it was funny. Using the storefront to get attention, that’s why we all pay a lot of rent to be in a storefront. Most people’s front windows are not really doing much, and I think they could be doing more with it, and the signage. Signage is still critical.

Laura Zander:
Signage, and then doing the classic grassroots marketing. I’m sure you’ve done this, Dana, but that’s going to church groups and giving a presentation, going to the Girl Scouts meeting and giving a presentation. I get a lot of a lot of eyeballs on me, not because of knitting locally, but because of the business side of it. You don’t have to talk about hair. Don’t do a presentation on hair necessarily. You go do a presentation on what it’s like to be a female business owner in the up-and-coming Detroit community, and maybe already have, but you end up on the cover of Detroit magazine. That would be my goal. Because as I always say, every person who reads Reno magazine knows someone who knits, so if I can get my face out there and my name out there with an unusual business, something that you don’t typically see, it’s gonna stick.

Loren Feldman:
Laura, I think also the secret with your YouTube videos was that they were not ads at all. What you were actually doing was providing guidance—helping your customers solve problems and figure things out and do what they love to do better. First of all, am I right about that? And second of all, I’m thinking there’s got to be a corollary to that, certainly for Dana, and maybe for Jay too.

Laura Zander:
Yeah, absolutely. Again, it goes back to being authentic before authentic was cool. We opened a storefront and then we built an online segment because, like you, we’re in an area that has low traffic. We don’t have a huge population. It takes hours to get here from any other big city, blah, blah, blah. So for us, it was always, How do I recreate the in-store experience online? That’s through the technology that you’re talking about: how do I answer the questions that they might have when they’re in the store online?

We did that through YouTube videos. In the beginning, my husband was clever enough to realize right when Google bought YouTube that if we used the right keywords, and we created these things strategically and did it based on product names, that Google would index us, and the SEO would really help us, so that when somebody looked up one of our products, our videos popped up as the first things. For hair and for framing, of course that’s doing how-to stuff, but I also feel like that stuff’s pretty saturated. We feel like that in our industry. Everybody’s caught on. So, what’s next? I want to do virtual reality, so that’s what’s next. How do we create some virtual reality where this is what it would look like if you got your hair straightened?

Jay Goltz:
Let’s go back to the original premise. Let’s do a little whiteboarding here. What are Dana’s options? Option one is: keep these two stores, get the sales up, make a really nice living, have a nice life. Option two is: franchise, go national. What’s involved with that? What kind of commitment is involved with that? What kind of potential problems? Third one is: take an investor and own them yourself. Let’s flesh that out a little bit, because I think that’s interesting and a good time to do that.

Loren Feldman:
Dana, any reaction to that?

Dana White:
I love those options. I think it’s a combination of option one and option two. I’ve learned recently that I don’t have to do one separately from the other. They can be concurrent. Option three, taking on an investor, I tried. I don’t have children. But I wasn’t ready to give the promise of my children. I hadn’t found an investor—as Loren had told me years ago, which I still use to this day—that is the unicorn investor. I don’t think investors understand that there is still room for something new. I think they’re used to investing into different versions of the same thing, and so when you do have something that is very new, they approach it the same way. I think a unicorn investor will see the problem that I’m solving for, that it hasn’t been done ever, and the way I’m doing it is different, and approach investing with me in that way, understanding that your returns aren’t going to come in the same form, had you invested in an app—that the returns are going to come differently, that this is a legacy investment. This is long-term.

Jay Goltz:
I’ve been exactly where you’re at. I did talk to a franchise consultant and I did think that whole thing out. At the moment, I realize that most successful franchises have three things: they’ve got proprietary products; they’ve got a name brand that’s important that if you’re traveling anywhere, you can stop into the same name that you were in your hometown or across town or whatever else; and they had some incredible system that was helpful to grow the business. I realized in the picture framing industry not one of those was valuable, and as a result, the franchises that have been in the framing industry haven’t really worked.

I would ask the question: have you done enough research to understand what the pitfalls of franchising are? Because when you take someone’s life savings and you put them in the store and it doesn’t go right, they sue you. That’s a problem. There are plenty of franchises that have worked great, and there are plenty that have been spectacular failures because here’s the problem I see. This is not a turnkey business. The best franchises are turnkey businesses. A moron could run them. I don’t think a moron could run your business and I know a moron can’t run a good frame business.

Dana White:
That’s a hard call. First of all, you can’t pull somebody off the street to do hair. There has to be some semblance of training. You have to go to cosmetology school and have a license. You have a foundation as far as the operators behind the chair. That’s one thing. The second thing is behind the front desk, the front of the house. That can be trained. That’s why the technology when it’s adapted is important, because it makes it that much easier. But that can be trained. Not the technology, but the order, the process, can be trained. I think you’re right. Can, you know, somebody just come in and push a button? No, but I don’t know if I want to franchise like a Tim Hortons where you get a cup of coffee, press a button for Americano, press a button for a latte.

Jay Goltz:
I agree you can train those things. Here’s the moron factor though. People still haven’t figured out it’s not worth fighting with customers. They just can’t stop themselves. I’ve seen people where they just don’t get it. You can you can preach to them, you can train them, you can explain to them, “The customer’s giving you their hard earned money, it’s not worth fighting with them.” They just can’t stop themselves from fighting with customers, and that’s what I would call a moron

Dana White:
What do you mean, the “customers”?

Jay Goltz:
I’m talking about you get someone who’s great. They’re trained in hair cutting and they’re great and they know all the systems and some customer comes in who’s having a bad day and says something to them that they don’t like and they get into a fight with the customer. “No one’s going to talk to me that way. You just get out of here. I don’t need your business.” It happens every day in retail. I see it all the time. When they go broke, it’s never their fault. It’s always the bank’s fault or the government’s fault or the landlord’s fault. It’s never their fault.

Dana White:
Do they have the system? My question to them would be, I’m not setting them up to fail. I’m not saying that these franchisers are, but—

Loren Feldman:
You do have a system, Dana. One of those three elements.

Dana White:
Yes, I have a system for everything. I think it’s also about setting up the franchisee to succeed. If we’re seeing that numbers are declining, we need to go in and assess why. I’m not saying that can be a process, but there’s a system in place on how to deal with customers, and if you are not following that system, franchises can be pulled from a franchisee for a list of reasons or for two reasons.

Jay Goltz:
If you watch the McDonald’s movie, it was right there. They failed because they were starting to sell fried chicken out of them because the guy decided he should sell fried chicken. I’m confident that successful franchisors have figured out they have to be extremely careful who they sell the franchise to.

Dana White:
When I saw The Founder, it wasn’t only the people who they hired. It was also the operating agreement. There were things they overlooked. The McDonald’s brothers, that was not their thing. Kroc even said in the beginning, “Oh gosh, I didn’t realize I’d have to tell them that they couldn’t serve hot dogs.” Their franchise agreements has to be tight. We have a way we answer the phone between 9AM and noon. This is the way we do everything. Everything. The way we post signs. It works for some people, and for those it doesn’t work for, we wish them on their way. We have an employee in our salon who wants to leave because they don’t think they’re making enough money. We have a way that we have that conversation. We have to—

Laura Zander:
Dana, as somebody who is terrified of systems and rules and regulations—like I hate them because I want to just be able to do my own thing—how do you balance that? I also fully recognize that I need more systems in my life and more routine. I’m not bragging. In fact, I’m sad about it. How do you balance all of those ways you do things with a human element?

Dana White:
Culture.

Laura Zander:
So they still have some freedom to have that conversation in their way?

Dana White:
Our culture is not punitive. Even though we have the systems and processes in place, you’re not going to get in trouble. Even if you’ve bucked the system, taken a pot and popped it upside somebody’s head, okay, that’s a conversation. As an owner, we are ready to deal with the consequences of somebody not doing that. However, that has not happened. Why? Because it’s an interactive culture. It’s not dictating to you. Here’s how we do it, and if you can find a better way to do it, which you probably can or maybe not, let’s talk about it and implement it.

Laura Zander:
No wonder you’re so tired or that you got so tired. This sounds like a lot of work.

Dana White:
It is. But also the front-end of the work comes from hiring the right people. Once you have the right people like I do now, the work is done. The work comes in the documentation. When we debrief at the end of the night, and they follow the protocol or they follow the systems or processes in place, as long as we’ve done everything, if a customer’s still upset, there’s nothing we can do.

Jay Goltz:
It gets back to the hiring piece. I’ve lived through exactly what you’re talking about. The reality is my life is 180 degrees from where it was 20 years ago. I was putting out fires all day long, 25, 30 years ago. I finally figured out how to hire, and once you have the right people, it falls into place.

Dana White:
I’m comfortable with letting them—I don’t want to say fall, but letting them stumble. When I hire, I’m expecting that time when you’ve got the person who said, “You know what, I’m going to do it my way.” It’s not because, “Dana, I love being the boss and I love controlling everybody,” No, I have learned that if you don’t do things this way, things happen. I give them that leeway of time for them to hit their heads.

We have a very quick reading when you call Paralee Boyd. When you want to do, “Hi, thank you for calling Parelee Boyd, it’s a great day. My name is—” and their phone drops twice and then now she’s calling back a third time upset with you because she’s had to cut you off because your greeting is so long, that’s an example of how you bump your head. Or when we say, “Please don’t just give them a free deep conditioner,” but no, because you like her and you felt bad, you’ve told her the next time she can come and get her hair done for free three weeks later. So now she keeps coming in upset and making things up about how she can’t stand her service because she knows that she can. There are all of these little things. I let you hit your head a couple times. I say, “Do you realize why we only give a free deep conditioner within 72 hours?” My experience has dictated the process and some people think that my ego or me being on a power trip has dictated the process. No, we do things the way they are to prevent me putting out fires every day.

Loren Feldman:
Laura, does that answer your question?

Laura Zander:
It does, but I’m thinking, “Dana don’t franchise. Come work with me and create systems for us, please.”

Dana White:
Laura, you have my number!

Jay Goltz:
You said something a couple years ago when I was in New York with you. You made your presentation with Loren, and you said, I’ll never forget it, “I don’t do messy.” That’s what you said.

Dana White:
I don’t do messy.

Jay Goltz:
I said to myself, “Good luck with that.” But you’re fixing it. I believe in your business versus mine, it makes sense to me that the franchise model could very well work.

Loren Feldman:
How about you, Jay? What’s going on with you? What are you figuring out this week?

Jay Goltz:
I’m going through, once again for the third time, the bank thing where you figure out the right bank to pick. They’re local and they do a lot of small business loans because that’s where their bread and butter is. You have a great relationship with your banker and then they get bought out. Then the next one up, you think, “All right, not bad.” It seems to have been smooth. Then about three months later, they get bought out, and now you’re back with the big bank with the big billboards, with the rules and the guy making a decision in some other city somewhere, you don’t even know who he is, and you can’t get straight answers. Through no fault of my own, I’m navigating that now.

Loren Feldman:
Jay, we’ve had a number of conversations on this podcast with other people who shy away from debt. Tell us why your banker is important to you. How do you use a bank?

Jay Goltz:
I think that debt is like riding a bicycle. It’ll get you somewhere faster. But if you’re reckless, you can fall off the bicycle and crack your head open. Anybody who thinks debt is good, debt is bad—debt is both. Debt can be great. It can help your growth and can help you finance machinery. It can help you put in new inventory, or you could use it badly and get yourself into a bind. I’ve always used debt.

Here’s a shocking thing. My kid’s getting involved in the business now. He started to look at the books and he comes back to me and he says, “Dad, did you realize that we were getting a review?” It’s not an audit, but you pay extra for a review. I’m paying $27,000 a year to get the two accountants to sit in the office for about a week and go through stuff. They’ve been doing it for 20 years, and they’ve never really found anything. So I’m paying $27,000 for a review, quote unquote, so that I have the bank line. That pretty much is effectively doubling the interest on the bank line. I realized, wait a second, I’ve got some property that has no mortgages on it. I’m going to go get a mortgage on the property and not have to get the review and save $27,000 because they’re like two different worlds. The real estate side is completely different from the business side. If you put down your 30% on the other side, they just give you the money and they leave you alone. I’m figuring out how to navigate dealing with the bank thing again.

Loren Feldman:
Do you think you’re going to have to change banks again?

Jay Goltz:
It always reminds me of the fable with the fox and the scorpion. “Oh, no, no, no, I’m not gonna sting you. No, no, no. Why would I do that? No, no, no, nothing’s gonna change. No, no, no, nothing’s going to change. It’s going to be just like it was before.” And then when you get to the other side of the room, it stings you and it’s like, “I is what I is.” Do I think the big bank is going to start acting like the bank that they bought? No, I think we’re going to be right back like the other two times where, at the end of the day, the economy’s going to get a little soft. What’s the first thing they do? Go after the retailers. That’s how I was at the last bank. I got jacked around. I found out later, I asked my banker—10 year banking relationship—I said, “What happened? I never missed a payment.” And he said, “Well, you know how it goes.” I go, “No, I don’t. Explain it to me.” And he says, quote unquote, “The new guy didn’t like retail.” That was it.

It doesn’t happen with the local bank who needs your business. These mega banks don’t need small business business. They’ve got the retail business, they’ve got big business. They don’t need us. Here’s a shock. The people who write the ads aren’t the ones who give the loans. I know that’s disappointing, but it’s true. I won’t even say it’s frustrating. I’m kind of used to it. Do I think I’m gonna change banks? 50/50.

Loren Feldman:
Jay Goltz, Laura Zander, Dana White, thanks so much for joining us today.

Dana White:
Thanks for having me.

Jay Goltz:
Thank you.

Episode 5: Does Culture Really Eat Strategy for Lunch?

Jay, William, and Laura discuss whether a great culture produces a successful business or whether a successful business produces a great culture. Do you think of your employees as family? Do you have anyone working for you whom, if you had it to do over, you wouldn’t hire? Plus: do you manage your Glassdoor page?


Guests:

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

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

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Jay Goltz: “I think most companies would say, ‘We want a respectful environment. I want everyone to treat each other nice.’ But they keep Bob around, who really is a jackass, and everyone rolls their eyes and says, ‘Everyone knows how Bob is.’ And that is a bad excuse.”

Jay Goltz: “I have eights, nines, and tens working here. Tens are a fluke of nature. You’d be lucky if you ever get a few of them at one time. Nines, got lots of them. Lots of eights. The ones that kill companies are the sixes. They’re not quite bad enough for anybody to fire, but they’re not good, and they’re costing the company and the other employees are covering for them.”

Laura Zander: “We say we only hire broken people. If you’re not broken, don’t come work for us.”

William Vanderbloemen: “There are a lot of terribly competent people who are decent human beings who would never fit in at our company because we have quirkiness that all of us share.”

William Vanderbloemen: “There can be a whole lot of risk seeing your staff as family…”

William Vanderbloemen: “You can Google image [search] the Enron main office lobby, and the images that would show up are for the elevator lobby. You walk in, they have core values literally plastered to the wall. Right in front of you is the word ‘integrity.’”

Full Episode Transcript:

Loren Feldman:
Let’s meet this week’s 21 Hats Podcast team. With us today are Laura Zander, CEO of Jimmy Beans Wool, a digital version of a neighborhood yarn shop that is based in Reno, Nevada; Jay Goltz, who has several businesses in Chicago, including a picture framing shop, Artists Frame Service, and Jayson Home, a home furnishing store; and William Vanderbloemen, who is CEO of Vanderbloemen Search Group, a recruiting firm that’s based in Houston and specializes in working with churches and other faith-based organizations.

Today, I’d really like to talk about culture. And I have to confess: this is a term that kind of gives me the willies, mostly because it gets thrown around a lot and I think its meaning often gets lost. We often end up talking about trivial things that I’m not sure really reflect the true culture of a business. Also, I think we often talk about it almost like a fantasy version of what it’s like to work at a company when everything is going great that ignores what happens to the culture when the business struggles.

I’d like to start with a question. I’ve always been curious about this. What do you think comes first: do you need a great culture to build a successful company, or do you need a successful company to build a great culture?

William, I’d like to start with you, both because you’ve written a really good book on culture called Culture Wins, and because in that book, you acknowledge that you didn’t start out with a great culture. In fact, you didn’t have a very good culture at all, and you had to figure it out. Let me ask you first: which one comes first? Is it a successful business or a great culture?

William Vanderbloemen:
I think some of that depends on the age of the organization. One organization I worked in where I didn’t fit the culture was a church that had been around for a long, long time. I came in assuming that I could shift or change a culture that had been around a long time. If you’re going into an organization that has been around—like the culture of IBM—it’s arguably going to be pretty tough to change whether it’s good or bad.

On the flip side, if it’s a startup, what I’m learning as we’ve built our company here is we didn’t figure out culture for a while, but the culture in a newer organization seems to be predicated on the people themselves that are there: the founder and the first three or four who work alongside the founder. In some ways, I think you can say you want to have a culture all you want, but the culture for me is how an organization behaves while they’re trying to get their vision or mission accomplished.

Here in Houston, we’re known for innovation. We have the first dome sports centers, the Astrodome (that’s why we have astroturf), MD Anderson’s innovative medicine curing cancer. President Kennedy wants to go to the moon. He says let’s go to Houston: innovation in space. When I got to Houston in 2001, I realized we had innovation in accounting, and it was called Enron. Not the best. When I was writing the book, I don’t know if it’s still true, you can Google image [search] the Enron main office lobby, and the images that would show up are for the elevator lobby. You walk in, they have core values literally plastered to the wall. Right in front of you is the word “integrity.” I don’t know that that’s exactly who they were.

You can name cultural values all you want. You can say, “We’re going to have a great culture and this is who we are.” But that’s kind of like me saying, “I’m going to win the slam dunk competition for the NBA this year.” It’s not going to happen. It’s more of, “Who are we as people? How do we name that?” The question I like to ask is, “When we’re functioning at our very best, what do we as a team do that’s common to us, but uncommon to other teams around us?” Then rather than travel to the mountain and come down with the cultural commandments, you do an archaeological dig of the team that you have, and you’ll discover your culture. Then you can lean into a little bit more aspirational of a version, but you can’t just create culture. That’s a roundabout answer for you.

Loren Feldman:
I hear you saying that culture is something you discover, not something you mold. I think if you read business journalism, you read the opposite. People seem to think that culture is what you make it. Laura, what does culture mean to you?

Laura Zander:
We are who we are. I guess people call that “culture,” but I don’t try to create a culture intentionally. I’m on the same page as William. We’re like Madonna: who we are today is very different from who we were five years ago, which is different from who we were 10 years ago. There are some consistent rules, if you will. You must respect every human who walks in the door and recognize that we all have equal value and equal talents. That’s something that’s always been the case. There are a few things underlying, but as an outsider coming in, if you were to look at and try to define our culture, you would see that it has changed over the years, because we have different people who worked here over the years.

William Vanderbloemen:
Laura, that’s where I’ll buddy in and say exactly. The culture is defined by the people on your team. The mistake I see organizations make is they say, “We’re going to go copy the cultural values of Google or the slide deck for Netflix, and we’re going to do that.” Well, no, not unless you want to just change out all your people to match that. I think the people you have define the particular culture that you have.

To clarify a little bit, to me there are two layers of culture. One is: are you a healthy place to work? You brought up such a good point, Laura: respect everybody who walks in the door. That’s just got to be a cardinal rule. That’s just: are you healthy or not? The second piece is: within that general health, what is our particular set of family behaviors or family rules or the way we always do things around here?

Laura Zander:
I love what you just said about the family rules. We just had a conversation yesterday here, now that I’m in Texas, about how—I’ve not used this term before, but I’m going to use it from now on—one of our family rules is you’re allowed to have a bad day. You’re allowed to be snotty. You’re allowed to cut somebody off or do whatever it is because we’re humans, but you have to come back and apologize and own it. That is one of the fundamental rules. If I’m shitty with somebody, then I come right back as soon as I can and say, “God, I’m so sorry, I was totally inappropriate, blah, blah, blah.” Then we move on. I guess if we were MBA students, we would be teaching that that is culture, as you’ve defined it.

Loren Feldman:
Jay, I want to get you in on this. What I’m hearing from William and Laura is, I think, very different from the conversation that we often hear on this topic. One of the lines you hear repeated all the time is, “Culture eats strategy for lunch,” which certainly implies that it’s something that you mold, not something you discover. Where do you fall on this?

Jay Goltz:
First of all, I think corporate culture is a subset of management. Its management. It sounds much sexier and much cooler, but at the end of the day, I believe it’s a function of management. In my little world, in my brain, I think corporate culture is three things. One: how far are you going to go for customers? Are you going to do whatever it takes? Everyone says they do, but they don’t. In my case, we always get the customer taken care of. Whatever we have to do, we do it, and everyone who works here knows that. If we’ve got to stay late, we’ve got to come early, we’ve got to drive somewhere, we do whatever we need to do.

Number two is: how much do you expect out of employees? I don’t want people working here 60, 70 hours a week. That doesn’t mean that I want them working 40 if they didn’t get the job done, but some organizations push people a lot more, and I think how far you push people, and do they need to be pushed, and how demanding you are, is absolutely part of the corporate culture. Lastly is: how do you treat each other?

The problem I see a lot of time is I think most companies would say, “We want a respectful environment. I want everyone to treat each other nice.” But they keep Bob around, who really is a jackass, and everyone rolls their eyes and says, “Everyone knows how Bob is.” And that is a bad excuse. I get rid of Bob eventually. I talk to Bob. I talk to him the first time, I talk to him the second time, and I explain to Bob, “You can’t do that again. Because if you do, it’s going to be your last day.”

I’ve had to do that two or three times. There were people working for me who were here for years, and I would find people in the back crying. “What’s wrong?” “Oh, so and so makes me feel bad about myself.” I would talk to this person, and they can’t stop. They just can’t stop themselves. My corporate culture is, I’m going to walk the talk.

I believe that there’s a lot of talk about corporate culture, but there are a lot of people who aren’t walking the talk. I think that whole “Corporate culture eats strategy for lunch”—what a ridiculous line. What does that mean? We don’t need strategy anymore? How about both?

Loren Feldman:
William, Jay just walked us through what having a good corporate culture means to him, how he defines it in his business. How do you define it in yours? What are the key elements of your culture?

William Vanderbloemen:
Rather than elements, the recovering preacher will tell a story. Years ago, long before smartphones, my mother’s father would take his daughters and sons-in-laws to Europe once every other year or so. He made each of them host a city. They went to Amsterdam, and of course dad, being Vanderbloemen, said, “Okay, you’re hosting this one, find a place for dinner.” So he calls the restaurant that he looked up in some book. He said, “Table for eight in the name of Vanderbloemen,” and they said, “Sorry, we only do tables of four or fewer.” “Okay, can I get two tables of four?” “Sure.” “Okay, two tables for four. One in the name of Beech, and one in the name of Vanderbloemen.” They said, “Can you spell that?” He said, “Sure. V-A-N-D-” “No, no, sir. Spell “Beech.” These are my people. This is home.

A good company culture is when a new person walks in the door, and in a very short amount of time, is like, “I belong here. This is my people.” There are two layers to that. One is, there’s a layer of human decency. There’s the basic: Is this a healthy place to work? Beyond that is: I fit in here. This feels like family. I don’t mind spending most of my workday here because I function like they do. There are a lot of terribly competent people who are decent human beings who would never fit in at our company because we have quirkiness that all of us share.

Laura Zander:
Amen, brother.

William Vanderbloemen:
We all carry the same dysfunctions, whether that’s we respond at a ridiculous rate or we can have a love for a wide range of different clients. We’ve been able to identify nine different things that identify our kind of crazy, our dysfunction, and then go find people who fit that, so that when they walk in, they say, “Finally, someone who can spell Vanderbloemen. Finally, this is my people.” That’s a long-winded answer, but there you go.

Laura Zander:
I love that, William. The watershed moment for us a couple of years ago was when I finally quit trying to mold our business around. Well, that would come in that we just couldn’t quite fit. And I kept thinking it was my fault. And then I needed to figure out how to be different. And I finally just let go and surrendered and was like, “You know what, we are who we are. Either you’re going to fit or you’re not.”

We can’t quit trying to do all these gymnastics to bend to every person who is, as you said, a good decent human who might be smart and capable who walks in the door who doesn’t fit. We are who we are. We say we only hire broken people. If you’re not broken, don’t come work for us.

William Vanderbloemen:
I love it.

Laura Zander:
I am so broken, I cannot deal with a bunch of perfection around me. I just can’t.

William Vanderbloemen:
Jay, I totally agree with you about strategy and culture need to go together. But the mistake I made in hiring many times early on was to say, “Oh my gosh, they’re so talented and they want to work here. This is awesome. Their talent is so good.” To lay it over the metaphor, their strategy for business is so good, but they didn’t fit who we are, and I couldn’t make it work. I finally got to the place where—there are some exceptions to this—my general rule is, I can’t teach cultural fit, but I can teach strategic competency. I’ll take culture over competency almost every time, and that may get closer to the Drucker phrase that Loren mentioned earlier.

Jay Goltz:
Which Drucker phrase? I love Drucker, he’s one of the few guys I love.

William Vanderbloemen:
The line about culture.

Jay Goltz:
Seriously?

Loren Feldman:
Yeah. Sorry to burst your bubble.

Jay Goltz:
God, that is so, so disappointing. Okay, one more hero gone. He said some brilliant stuff. He has said, “You can’t look for opportunity and solve problems at the same time,” which means you better find out a way to fix your problems, because you can’t continue moving forward without it. I think he’s said some really smart stuff, other than that.

The people who work for me are really into what they do. I need people who identify something who are really into it—not someone who will take any job because she figures it will maybe give her a better line on her resume.

We’ve gotten really, really good at hiring because, after enough conversation, you can figure out whether these people think like we think. That’s my turnaround. My average person has been here 10 and a half years. It’s because of the hiring process for sure.

Loren Feldman:
William, I’d like to go back to something you said. You gave the example where you told the story of feeling at home because someone knew how to spell Vanderbloemen. When you think about the fit in those terms, it seems as if it would be easy to end up in a situation where you are hiring people who mostly look like you. How do you avoid that? How do you spot fit while also looking for diversity?

William Vanderbloemen:
That’s a great question. I started the company on a card table. We started adding people. All of a sudden, we’re winning culture awards when we had named our cultural values and gone through a process, but we never really studied it, then got asked to write a book about it. I went and said, “Well, this doesn’t help me because I’m just a preacher with a religion and philosophy degree.”

We went and interviewed 150 CEOs of companies that were winning Best Places to Work, Top Company Culture, defined the common threads, and one of the common threads that I heard is this two-layered approach. One, we need to be a healthy place to work. But then secondly, we have to do the hard work of discovering why we all fit together. That’s where I got to this question: when we’re functioning at our very best, what do we do that’s common to us, but uncommon to other teams around us? Once we started to get clear on that—and I heard it over and over and over from huge organizations to small startups that have gotten Best Place to Work—we figured out what we as a family do together that might be weird for others. Once that got named for us, we were able to interview around it. A great example: one of our values is ridiculous responsiveness.

There’s a long story behind that. Basically, I’m a little OCD about getting back to people, and that birthed a team that carries that same value. We generally get back to people within 60 seconds of them reaching out to us. That’s kind of crazy. I mean, there are a lot of smart people who just don’t do that. That doesn’t make them abnormal. Once we had that figured out, we could start interviewing to see if someone innately behaved the same way we do.

Loren Feldman:
Do you have a test?

William Vanderbloemen:
Oh, yeah. I’ve got to find a new one because I’ve told the story, but, we bring Loren in for an interview because he wants to come work with us, and it’s great. You fly all the way back to Newark and you take the train into Princeton and you finally get home and then you get a text from somebody you don’t recognize. It’s a text that says, “Hi, Loren. This is Jay. I work at Vanderbloemen. I was on the road today. I heard you in the office for an interview. Would love to connect with you some time.” If you don’t do anything, that’s fine. If you get back to Jay within 24 hours, that’s pretty awesome. The average response time for leads is 42 hours, which is insane.

Laura Zander:
Why would you not reply in two minutes and just be like, “Hey, hey.”

William Vanderbloemen:
Two minutes is too slow. But if Loren chooses to text right away and say, “Hey, I’m just getting home to my family. But let’s set up a time to talk next week,” and that’s that same night, wow.

Loren Feldman:
William, if you had just told me you wanted me to respond within 60 seconds, I would have done it. I didn’t know.

William Vanderbloemen:
Yeah, right. That’s like the lame interview question, “Tell me your greatest weakness.” No. Find ways to interview when you’re not supposed to be interviewing to see if people function and behave the same way you behave that’s weird to the rest of the world. That’s a whole step above, “Is this a healthy place to work?” and “Harvey’s just that way.” It’s a different way of thinking, but my study of the 150 companies showed me people are starting to say, “We’re all broken. But do we share the same kinds of brokenness so that when we work together, there’s a synergy that’s really amazing?”

Laura Zander:
Oh my god, that’s really smart. You should write a book.

Jay Goltz:
I’ll ask someone, “Why are you looking for a job?” They go, “It’s just time.” Really? What does that mean? I know you’ve been told not to say something, but there must be something about your job you don’t like, and I’d like to know. Because maybe I’m the same way here. It’ll save both of us a lot of time.

I had a woman tell me one time, “It’s just too corporate.” “Really? What does that mean?” “You’ve got to use a key card to get into the bathroom.” I figured out myself what the problem was. She was a graphic designer in a real estate firm, the only one, and she probably had 10 bosses throwing stuff on her desk all day long going, “No, no, no, this is more important than the other guy.” And I’m sure it was frustrating. If she would have simply said, “Frankly, I’m the only graphic designer there, I’ve got 10 bosses,” I would have accepted that. I would have liked her honesty, and I would hire her. Instead, I don’t want to hire her because I learned that if they’re not honest on the interview, they’re not going to be honest two months later, I found that people that do the phony interview don’t work out well here.

Loren Feldman:
Do any of you refer to your teams as “family?”

Jay Goltz:
Absolutely not. I’m not getting trapped into that. I think it’s like a family, but I believe that’s a very, very serious trap because you don’t fire your family members.

Laura Zander:
Yeah, but Jay, that sounds like you have a much different family background. See in our family, you do fire family members.

Loren Feldman:
I’ve fired a couple of cousins.

Jay Goltz:
I did too.

Laura Zander:
You don’t have to love them. You don’t have to like them. You don’t have to see them. You just have a biological connection to them.

Loren Feldman:
Laura, do you refer to your people as a “family”?

Laura Zander:
Informally, every once in a while. It’s not like it’s a term that we use. But I can’t say that I’ve never said that sometimes this is like family. Again, it’s okay, every once in a while we’re going to get into an argument. Every once in a while we’re not going to agree, but as long as we respect each other and care about each other, we can work through it. I also refer to it as a basketball team.

Loren Feldman:
William, how about you?

William Vanderbloemen:
It’s so interesting. I learned a new word a few years back. We do have a lot of millennials in the office, and I learned the word ”framily.” The friends and family sort of thing. I’m just learning from them, and one thing I’m learning is this generation—which now dominates the U.S. workforce—in general, they’re the first generation, the first people within sub-generations where it’s not really a cardinal goal to get married and have kids before you’re in your mid-30s. You’ve got a lot of people who are waiting longer to get married, waiting longer to have kids, so what does that mean? That means you’ve got a lot of people whose primary relationships are found in the workplace. That’s a whole different ball game.

This generation is going to come and go from jobs and careers like crazy, and to me, retention is going to be the competitive advantage for companies over the next 10 to 15 years as this generation saturates the workplace. Retention, to me, will depend largely on: is this a workplace and a group of people I want to spend most of my time with? Maybe you don’t call it “family,” but it’s different than the old-school “they just work here.” We call it “framily” and we’ve had to learn that that means there have to be boundaries, like it can’t get too fuzzy. There can be a whole lot of risk seeing your staff as family, but it’s certainly more familial.

Loren Feldman:
Including drawing a line when you have to draw a line. Do you feel like it gets in the way of that?

William Vanderbloemen:
Totally. We could spend hours parked on this, because I’ve learned so much the hard way. Well, yes, we’re all one big happy family until something gets weird. It’s hard. I totally hear where Jay’s coming from, but in my experience, I’ve had to change my leadership to not view people who work here as just people who work here and then go home to their family. Because a lot of times, they’re not going home to family.

Loren Feldman:
Laura, do you have anybody working for you, who if you had to do over again, you wouldn’t hire them?

Laura Zander:
Is this part gonna get edited out?

Loren Feldman:
No!

Laura Zander:
Perhaps. But let’s say 99% of the people that we have right now, for the very first time in 17 years, perhaps, are rock stars.

Loren Feldman:
Nobody has 99% rock stars.

Jay Goltz:
No, no.

Laura Zander:
No, but we’re good. I don’t think we have anybody…

Jay Goltz:
I have eights, nines, and tens working here. Tens are a fluke of nature. You’d be lucky if you ever get a few of them at one time. Nines, got lots of them, lots of eights. The ones that kill companies are the sixes. They’re not quite bad enough for anybody to fire, but they’re not good, and they’re costing the company and the other employees are covering for them. Those are the ones where we all roll our eyes and go, “Well, they’re trying hard. Oh, he’s been here a long time.” Those are the ones who kill companies.

I’m happy to say that out of 115 people, I’ve got eights, nines, and tens. I have a seven who’s been here a long time and sometimes it’s just not worth the grief. I finally figured out I don’t need to figure it out. I just know they shouldn’t work here.

Laura Zander:
To be fair, like all forms of happiness and peace, it is temporary.

Loren Feldman:
William, do you have any sixes or sevens?

William Vanderbloemen:
I don’t know that I’m as quick to grade, because it’s six or seven within what we’ve hired them to do. I’d say no, we don’t, not at the moment. It’s always a moving thing. The company moves and changes. Right now, there’s nobody on my team that I wouldn’t hire over. I might hire them for a different position than I have them in because I’ve had to move them into a place where they’re stronger, but right now, fortunately, we’re at a place where I’d hire them all over again.

Jay Goltz:
I had an interesting conversation when I joined a business group because, in my case, I never worked anywhere. I was just on my own trying to figure out the way the rest of the world works. Joining business groups was very eye opening. So I go to this business group, I’m probably 32, 34, something like that, and there’s a bunch of older guys in this group. I go there, and I’m really frustrated. I said, “I’ve got this problem. I’ve got this guy who’s been with me for 10 years, and he’s just losing it, and it’s killing me. I don’t know what to do.” I thought they’d all just go, “Jay, grow up, do what you gotta do.” And you know what they all did? They all roll their eyes and said, “Yeah, I’ve got one of those.”

It’s a problem. This wonderful family we want to have, “like a family.” We want to be nurturing. We want to be responsible. But the reality is, people can eventually get to a point where they can’t do the job, or maybe the job changed. It’s not pretty. I don’t have a quick and easy answer to that. Most companies—not most, every company—goes through that eventually. I don’t know how you can avoid it.

Loren Feldman:
Doug Tatum wrote a book called No Man’s Land. The whole notion of the book is that every company reaches a point where what’s worked for you so far, what got you to this point, stops working. You’ve grown to a point where you need better capabilities. Suddenly, somebody who may have been a very loyal employee for an extended period of time is in a role that they’re not prepared for.

Jay Goltz:
And can’t change or don’t want to change.

Loren Feldman:
Laura, William: have either of you dealt with that?

Laura Zander:
Absolutely. That’s the worst, at least that’s been the worst for me. Because, again, you sit there and you wonder, “What am I doing wrong?” Am I the one who’s not growing? Is it this person who’s not growing? Especially sometimes when they try really hard in this new role and it just doesn’t work. It’s horrible.

Jay Goltz:
That’s when you grow up and you realize it’s just not always pretty at work. You try to be fair, you try to be nice, you give severance pay, you try to figure out: is there somewhere else in the company you can do something? It’s just not always pretty.

William Vanderbloemen:
Try doing it and try doing it in church: “Well, Jesus never fired anybody.”

Loren Feldman:
So what do you do, William?

William Vanderbloemen:
I point them to the story where he did. He fired a fig tree and it was bad. But that’s a whole different…

Jay Goltz:
Can you send me a note on that so I can use that?

William Vanderbloemen:
Would love to. It’s terrible. What I am trying to do is keep a couple realities in front of our people. I keep our core values, our cultural values. Sometimes life shifts and cultural fit is seasonal. It’s not permanent. People change, their life circumstances change, and keeping the cultural values out there many times has saved our bacon on having to have hard conversations, but having something for a reason—the why behind the conversation. Another thing to try and do is to say, the organization changes, and hopefully, people who are listening today are in growing organizations. The hardest call I’ll get is from the pastor who says, “When we started this church together, Joe was awesome. Then when we got up to 200 a week in attendance, he was good. We’re headed toward 2,000. He’s not done anything wrong, what do I do?” That doesn’t have to be a church, it can be a business too.

I bought a copy of the book What Got You Here Won’t Get You There. I actually read it on Kindle, but I bought a hard copy just to keep in my office on my desk. It reminds me, and I hope it’s a visual reminder to everybody out there: just because we all fit together now doesn’t mean we’ll fit together in the future. Jay’s right—it’s just messy and then it’s time to put on the big boy, big girl pants and have hard conversations. It’s the worst, though. I don’t know a worse termination.

Jay Goltz:
The problem out there in the marketplace is when—like I said, I never worked anywhere, I thought it was just me—you read these books about these great companies. There’s nothing ugly in those companies. Everything’s always great! I’ve read some really popular books about famous companies, like Starbucks. It was a really interesting book. But apparently he’s never had to fire anybody because there wasn’t one episode in that entire book that talked about that awkward moment—nothing. Then you read all these other books and you think, “What am I doing wrong?” They don’t tell the truth.

Laura Zander:
That’s what it was like having a kid, and all you read are all these stories about how babies are so great and it’s so wonderful and magical to give birth. Yeah, no, it is not.

Jay Goltz:
One of the smartest things I did, is I had my management staff sit around one day. This was years ago. I said, “Let me ask you a question. Let’s think about this. How demanding do we want to be as a company?” Let’s say that at the number one scale is Mr. Rogers, and we’re just lovely to everybody and sweet and we go broke. Number 10, at the time, was GE. I don’t want to be GE where they just fire 20% of the people. We all agreed that we want it to be a seven and a half or an eight, and that we were probably a six and a half and we needed to toughen up a little bit.

A wonderful thing happened a couple of years later. I was talking about a particular employee problem and I finally said to one of the managers, “I think we’ve got to give them a little room on this, blah blah blah,” and she turned to me and she said, “You know why? Because we’re an eight, not a ten.” And it just made me feel good all over because she heard me. That’s exactly the point. The fact that she was able to articulate that from something I told her a couple of years later, I felt great.

Loren Feldman:
One thing that has changed in recent years is that there’s now kind of a measure of your culture that’s available to the public. People can go on Glassdoor now and read comments about your business. I’m curious how seriously you take that. Do you pay attention to what people are writing about you on Glassdoor? Do you try to manage what they’re writing about you? How do you think about it? Laura, how about you?

Laura Zander:
I don’t go on there. I do have our staff go look at it, so that’s not fair.

Loren Feldman:
You’re afraid to look?

Laura Zander:
Yeah, absolutely. I’m too fragile. A lot of times, the negative comments that are on there are things that I know. What I’ve noticed is, the only people who put stuff up are the people where it did not end well, or in many cases, it’s the scenario that we had just talked about before where it was somebody who couldn’t grow with the company. It’s just messy. We should probably work a little harder on that, but we don’t.

Loren Feldman:
How about you, William?

William Vanderbloemen:
We do. I try not to let it monopolize my energy. It’s kind of like: do you really pick your restaurant based on Yelp reviews?

Loren Feldman:
Nobody would advise a restaurant to completely fake positive reviews. But smart people do advise restaurant owners to encourage their customers to write a review.

Laura Zander:
Was it Amazon that got in trouble recently for all the fake reviews that are on the site and people gaming all the products? Being in retail, that’s kind of the area that I look at. You just can’t trust the information, at least from my perspective, it starts to lose its value when you can’t tell if it’s been gamed or not been gamed. All of a sudden, at some point, it’ll become useless.

Jay Goltz:
Maybe this is the difference between my age and the other people’s age. At some point, you just say to yourself, “Enough already, it is what it is.” You could make yourself nuts. Someone’s going to get mad at you about something and that’s just the way it is and you’d better get a thicker skin, because if you’re naive enough to think you’re going to make everybody happy, and then when you fire people, they’re going to thank you for giving them an opportunity to find a different job, you’re crazy.

It starts with: do you think you’re going to hire perfectly? No. Are you going to have some people who you’re going to have to eventually fire? Yes. Are they going to be happy with you? No. Are they going to go on Glassdoor? Quite possibly. Are they going to say nice things about you? No. It is what it is. And there’s only so much you can do.

Loren Feldman:
On that note, thank you all. I thought this was a really good conversation.