Episode 45: I Will Be Here

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

Episode 45: I Will Be Here

Guests:

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

Paul Downs is founder of Paul Downs Cabinetmakers.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

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

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

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

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

Full Episode Transcript:

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

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

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

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

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

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

Jay Goltz:
All right.

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

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

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

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

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

Jay Goltz:
Oh, oh.

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

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

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

Jay Goltz:
Absolutely.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Loren Feldman:
Anything’s possible.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Loren Feldman:
Dry powder.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jay Goltz:
Personally or for employees?

Loren Feldman:
For you personally.

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

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

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

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

Loren Feldman:
Paul?

Paul Downs:
Hmmm.

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

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

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

Paul Downs:
Okay.

Jay Goltz:
Give me a better one.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jay Goltz:
Wow.

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

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

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

Jay Goltz:
All it would take is one.

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

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

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

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

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

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

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

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

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

Loren Feldman:
Good answer. Jay?

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

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

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

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