REVISITED: That’s The Price
Guests:
Karen Clark Cole is co-founder and CEO of Blink.
Sherry Deutschmann is founder and CEO of BrainTrust.
Lori Torres is founder and CEO of Parcel Pending.
Producer:
Jess Thoubboron is founder of Blank Word Productions.
Episode Highlights:
Sherry Deutschmann: “He patted my hand and told me I didn’t know anything about business. He said, ‘Just go sell another account.’ So I did, except this time, it wasn’t for his company. It was for mine.”
Lori Torres: “I will tell you that competing with Amazon, some entrepreneurs I’ve heard say, ‘We went out of business because we couldn’t compete with them.’ For me, I’m like, ‘Bring it on.’… It’s made us a better company.”
Full Episode Transcript:
Part 1: Interview with Sherry Deutschmann
Loren Feldman:
Sherry Deutschmann, thanks for joining us.
Sherry Deutschmann:
Delighted to be with you.
Loren Feldman:
We want to talk about all aspects of how you built LetterLogic and your really impressive entrepreneurial journey. To start, I’d like to read something from your book. You’ve written a terrific book that I recommend called Lunch With Lucy. In it, you write: “I was a 42-year-old single mom with a high school education and meager savings when I cashed in my 401k and took a risk. I sold my personal belongings in a yard sale that yielded just enough cash to start a company, LetterLogic, in my basement, which defied every single rule of what makes a sure bet in business. That business grew debt free to a $40 million enterprise.” Give us a quick version of how you wound up starting your own business.
Sherry Deutschmann:
I was working for a company in the same industry that was printing and mailing hospital bills. I was responsible for the sales. I was VP of sales. We screwed up everything we touched. I would sell a new account and lose an account, and it was a constant. Just observing one day, I realized that all of our problems were simple human error. The human error was because nobody cared and nobody cared because nobody cared about them. It hit me like a ton of bricks. I went to talk to my boss about what we could do to affect the morale and change the culture of the company and how that might affect the results. He patted my hand and told me I didn’t know anything about business. He said, “Just go sell another account.” So I did, except this time, it wasn’t for his company. It was for mine.
Loren Feldman:
Unlike a lot of books about culture, you don’t just talk about treating people well, which we all agree you should treat people well. You connect the dots between treating people well and having a profitable business.
Sherry Deutschmann:
Well, it seemed to me it was absolutely a direct line between behavior and profitability. I thought if all of the employees understood exactly how we made money and their part in helping us make money, they would behave differently, and they did. I set out to make sure that all of their basic needs were taken care of, so that when they were at work, they would not be worried about whether or not their lights were going to be on when they got home, or whether or not their health insurance would cover an illness. From day one, I paid for 100% of everybody’s medical, dental, disability, and life insurance.
Karen Clark Cole:
How did you afford to do that on day one?
Sherry Deutschmann:
I never considered not being able to afford it.
Loren Feldman:
It was a little bit less expensive back then.
Karen Clark Cole:
How many employees did you have right out of the gate?
Sherry Deutschmann:
Two. Then we grew to 60 at one time, and they back down to 50. In the beginning, we covered even their families’ insurance. We did that for the first five years. It was the whole family plan. Then we were challenged by a single employee who said, “It’s not fair that I cost the company this much. She has five kids, and she cost the company this much, so I want the difference.” We had to equalize it by paying just for the employee.
We also let them bring their kids and their pets to work, which doesn’t seem like a big deal, but if you’re a single mom and the kid has a wellness visit, you have to take them to school, first, leave work, go to pick them up to take them to their doctor’s visit, take them back to school, and come back to work. You get nothing done. Or if the kid has a runny nose, they can’t go to daycare. Just bring them to work. We all pitched in to help take care of the kids so that the parents could be at work with us.
The most important thing we did, the most game-changing thing, was taking 10% of the profit every month, splitting it evenly, so that the CFO and the janitor got exactly the same dollar amount, letting them know that they were just as important as everybody else in the company on the final results.
Karen Clark Cole:
I read that before you do that, you show them how the company is doing, you show them the financials once a month, and then distribute the profit?
Sherry Deutschmann:
Every month, we brought everybody together in one room and went over the financials so they could see top line and all of our expenses in between and bottom line, and then we talked about the results.
Karen Clark Cole:
What would happen for your employees? Did they understand it right away? Were they interested—all of them? In my experience, it sometimes terrifies employees if they see really what’s going on or it’s too much information. It’s overwhelming. Then how did they feel when when there wasn’t a profit?
Sherry Deutschmann:
For most employees, just the high level was enough. There were some employees, specifically the sales guys, who really wanted to see more. In those cases, I would allow them to come to my office, pull up a chair right next to me, we’d get right into our NetSuite and say, “Have at it, you can go anywhere except to see peoples’ salaries,” and let them see exactly to the penny and to the fraction of a cent our costs. That changed their behavior in regards to going after the right kind of account and selling at the right price because they understood exactly what our costs were.
It took us a couple of years to become profitable, I think 18 months when we were first profitable, and nonstop profitable until about three years before I sold the company. I was investing heavily into technology.
Karen Clark Cole:
In order to run the business?
Sherry Deutschmann:
Yes. Actually building out the e-commerce so that I would no longer be printing and mailing patient statements, but sending the statements to patients electronically and facilitating payments for them electronically. I was spending millions of dollars doing that and not really minding our core. You know, what we were good at? In so doing, we had several months of declining profits, so I would have to stand in front of the entire company every month and say—
Karen Clark Cole:
60 people at that point?
Sherry Deutschmann:
Yes, at that point, it was 60. 63 people I think. I’d tell them, “Our profits were down this month.” It had gone from $7 to $17 to $700 and then it started going back down to $19 and then to $6, which is not even going to buy you a six pack of beer, right? And just tell them, “I’m sorry, we weren’t profitable,” and then two months back to back of losses. And for me to stand up and say, “There’s no profit share, because we didn’t make a profit.”
Loren Feldman:
You said you were sorry. Did you feel it was your fault?
Sherry Deutschmann:
Oh, it was my fault. Absolutely was my fault.
Loren Feldman:
How so?
Sherry Deutschmann:
I was chasing the shiny object. I hired an outside consultant—who ended up being one of the best things that ever happened to me and a lifelong friend—who challenged me to go back to our core strengths and to quit trying to be something I wasn’t and make the company something it wasn’t. At that time, we were on the Inc 5000 list for 10 straight years. The reason you’ve gone so fast is because you’re so good at this. You’re the best at this. You’re the undisputed best at this. Even your competitors say you are and now you’re saying that’s not good enough. I wanted to chase them down a rabbit hole.
Karen Clark Cole:
Did you do that because you were worried about the times changing, everything becoming more digital, and you needed to go there?
Sherry Deutschmann:
Yes, and somewhat a fear of missing out, and my sales team saying, “We lost this account because we weren’t able to do that and you’ve got to do this.” Just fear, totally acting out of fear. Up until that time, we had been partnering with other companies that could provide that part. We just had a tiny revenue share. That was really the right solution. We went back to that, and we quadrupled EBITDA over the next 18 months.
Karen Clark Cole:
So you just cut off all that money you had invested and said, “That’s a loss”?
Sherry Deutschmann:
Yeah, and we had just hired all these people to help us build out the technology. We had to tell them, “If you want to stay with us, we’ll find something for you to do. But we’re not doing that sexy work you thought we were doing.”
Karen Clark Cole:
Did they stay?
Sherry Deutschmann:
Some stayed, a few left, some were contract workers who we brought in and they left. We right-sized back to 51, 52 people and really got back to being—
Karen Clark Cole:
How was that transition for everyone in the company when you had to do the right-sizing and make the announcements?
Sherry Deutschmann:
Such a sigh of relief for everybody because those people who we had hired to do that work, we were hiring them so quickly that we couldn’t train them, we couldn’t integrate them into our culture. There was no place for them to sit so we had to do a build-out to add more office space for them and to try to be cool enough for these techies who were coming in instead of being a manufacturing concern. I was sending mixed signals being a pretty bad leader at that time, just running all over the place. I think that there was a huge sigh of relief for everybody, including those people who were brought in.
Karen Clark Cole:
What was the moment where you hired that consultant? What came into your head that said you should do that and something’s not working? Because you’re losing money?
Sherry Deutschmann:
Losing money and having to tell them there was no profit because of my poor decisions. He came in and for the first week, he said, “This is the best run company I’ve ever seen. I don’t know that you have a problem that we can’t fix pretty quickly.” Then the second week he said, “Oh, you have a huge problem, and it’s this, and you know what to do and you know how to fix it.” It was all on me. I made the hard decisions and made the hard choices and got us back to profitability.
Loren Feldman:
Sherry, you described talking to your bosses at the job you had before you started your own company and you told them what they were doing wrong and what you thought they could do better. Your boss patted you on your hand and said, “You don’t know anything about running a business.” To some extent, they weren’t wrong about that.
Sherry Deutschmann:
Oh, they were absolutely right.
Loren Feldman:
Then you figured it all out on your own. All these steps you took from opening your books to the way you rewarded your employees—was there anything guiding you on that up until the point where you hired a consultant? Or were you figuring out what made sense to you on your own?
Sherry Deutschmann:
I think it was a combination of common sense and innate empathy.
Loren Feldman:
It’s not that common. though.
Karen Clark Cole:
It’s listening to your intuition. I think that’s a strength of a woman leader.
Sherry Deutschmann:
Simple human kindness too. I was just listening to the CEO of Cisco, where they’ve just been named the best company in the world to work for, and he talked about the importance of that, of just realizing that people are just human beings who want to be heard and want to be treated like humans. I employed that trait that I have to serve the company.
Loren Feldman:
We’re having this conversation at EY’s annual Strategic Growth Forum. You’ve come to this event for many years. I met you here because of your involvement in the Winning Women program. Tell us how you got involved and what the program meant for you.
Sherry Deutschmann:
My company culture was so unique that we started getting a lot of press fairly early on and somehow EY heard about me and invited me to apply for the program. I did. When they told me I’d won, that was 2009. I figured it was just like any other award thing. You go to a fancy dinner, which you pay for, and then they give you a little trophy and that was it. It’s not like that at all. It is really a commitment to helping the women with any resources they need to grow their businesses.
Loren Feldman:
Not investing in those businesses. Not that kind of resource.
Sherry Deutschmann:
No, not that kind, but invaluable connections. It gave me credibility in a way that I could never have achieved on my own and introduced me to the network of the other Winning Women. But all the brilliance of EY globally—they helped me several times with sales tax nexus issues and other things. They didn’t charge me a dime, but helped me conquer pretty insurmountable problems at the time. Then the press that I received as a result of the EY Winning Women program has been incredible. That’s how I met you, and as a result, I was featured in The New York Times. I’ve had Forbes talk about me and Success and Business Leaders and Inc and Entrepreneur. None of that would have happened without the Winning Women program.
Loren Feldman:
We’ve heard this really impressive story about how you built this special company and the success you had. Why did you decide to sell the business?
Sherry Deutschmann:
Two things. We had gone through that phase of quadrupling EBITDA in 18 months. The graph of our growth, for the first time, showed the bottom line was outgrowing the top line. On paper, that was exactly the right time to sell a company, when you would get the highest multiple. That coincided with my teenage granddaughter coming to live with me. Trying to raise a 13-year-old and working 60 hours a week didn’t look like a good decision. It’s like it was in the stars.
Karen Clark Cole:
You had a buyer?
Sherry Deutschmann:
Yes, I had a buyer, had a lot of interest, had multiple offers, and chose one.
Loren Feldman:
People had been approaching you about buying it you even before you went looking.
Sherry Deutschmann:
Yes, for many years.
Loren Feldman:
Did the sale work out the way you hoped it would?
Sherry Deutschmann:
Yes and no. Financially, it was a tremendous success. What pains me most is how the culture changed after that. The first thing the buyers did was do away with the profit share. Although, in the dog and pony shows and all the negotiations, they had indicated that they loved the culture and they loved the profit share and they saw how it affected the bottom line, not realizing it was just lip service.
Karen Clark Cole:
Did you have a role in the new company?
Sherry Deutschmann:
I didn’t, I exited. It was an all-cash deal. I invested in the new entity they created and then got a board seat with that investment. Then it was too painful for me after six months. I just said, “Please, I want out of this.” So I was totally out and got my investment back.
Karen Clark Cole:
Did some of the employees leave?
Sherry Deutschmann:
Yes. Today we’re three years after the sale, and of those 51 employees we had at the time, I think only 12 are still there.
Karen Clark Cole:
Wow.
Sherry Deutschmann:
They weren’t 38 mediocre employees. They were the cream of the crop employees.
Karen Clark Cole:
Have they been able to maintain the profitability of the company without those people?
Sherry Deutschmann:
I’m not sure. I think there have been two or three roll-ups since then. I sold a $40 million company. Now probably a quarter billion dollar company has emerged from a lot of roll-ups. I have no idea about their profitability.
Loren Feldman:
Did you feel you were as prepared as you should have been to sell the business? Did you know what you needed to know?
Sherry Deutschmann:
Probably not. I learned a lot in the process and getting the company ready to sell was the most fun I ever had running the business. I loved it.
Loren Feldman:
How so?
Sherry Deutschmann:
We had a brilliant broker who first did a free valuation for us and then coached us on having mini valuations. Every Monday and Thursday, my leadership team had a mini valuation and we made decisions based on valuation for the first time. You would think that your company value wouldn’t change from a Thursday to a Monday, but if you add a big account or you lose an account in that time space, it can change a lot if you’re looking at a seven or eight or 10 multiple. It changed our behavior and we were working as a really tight team.
Karen Clark Cole:
You did that for how long?
Sherry Deutschmann:
About a year and a half.
Karen Clark Cole:
Can I just ask you, when you’re doing your monthly reporting to the employees and doing the profit sharing, how did you choose monthly versus quarterly, which seems more common to me?
Sherry Deutschmann:
It’s really hard to tie your behavior and your actions to something if it’s quarterly or annually. But monthly, if we brought everybody together and said, “Look, we made a ton of money this month, and this is why.” It was like a Swiss watch. Everything happened exactly as it should have. Then there was a direct correlation between their behavior and the profit.
Karen Clark Cole:
You talk about being able to measure profit by treating your employees well. Is that how you did that?
Sherry Deutschmann:
I think mostly it was seeing their dedication to the company and retention of employees. Nashville is one of the fastest growing cities in the U.S. For the last three or four years, we’ve had over 1,000 open IT jobs every day. Our IT workers were highly sought after. They stayed with us and stayed loyal because of the culture that we created.
Loren Feldman:
Looking back, are there things that you would do differently if you had to do it over again, in terms of the sale?
Sherry Deutschmann:
Yeah.
Loren Feldman:
What would you do differently?
Sherry Deutschmann:
I would have coached the leadership team about how to handle the integration with a newer, bigger leadership team. What I thought naively was that we were going to infect the larger company that was swallowing us up, that we were going to inculcate our culture into them. I think we could have done that if I had realized that I needed to train the team on courage and sticking to their convictions. I think I failed in choosing a bad leader. Not a bad leader, but somebody who wasn’t really equipped to withstand—
Karen Clark Cole:
Somebody who had to do your role, right?
Sherry Deutschmann:
Yes.
Loren Feldman:
Although that was going to be hard anyway. Once they got rid of profit sharing…
Sherry Deutschmann:
But the right person would have stood up for that and would have gone to the board and said, “No, this is why we’re profitable. These other companies that you’re acquiring, they’re not profitable. They’ve got tons of debt. They’ve got three times the employees we have with the same revenue.” I wish that I had taught them to take that tack and to infect the other company.
Loren Feldman:
What are you doing now?
Sherry Deutschmann:
Too much. The first thing I did was start a little angel investment firm to invest in women-owned businesses, because women only get less than 2% of the private equity and venture capital. I wrote a book, Lunch With Lucy. It’s available right now on Amazon, but it’ll be out at a bookstore near you on March 10th.
Karen Clark Cole:
There’s a lovely quote at the beginning that you put in by Mother Teresa. Can you tell me about that? Is that an old favorite of yours?
Sherry Deutschmann:
Yes. It might make me cry. She said, “There is more hunger in this world for love and appreciation than for bread.” When you think about how many people in the world are starving literally, don’t have enough food, and more people are suffering from lack of love and appreciation.
Karen Clark Cole:
Yeah.
Loren Feldman:
You started the investment firm, but don’t you have a business now as well?
Sherry Deutschmann:
Yes, I’ve started a company, BrainTrust, which is a peer-to-peer membership for women-owned businesses to help them get to the crucial million dollar mark. Less than 2% of women-owned businesses—I think there’s almost 12 million of us now in the U.S.—get to the million dollar mark.
Karen Clark Cole:
And beyond that.
Sherry Deutschmann:
Right. I think the average is $88,000 in annual receipts. You’re not going to ever build personal wealth or financial independence when your total cash receipts are $88,000. You’re not going to change the lives of your family at that rate and you’re not going to be able to be an influencer in the community to change the world.
Helping women get to a quarter of a million dollars, at that point, they can start paying themselves a little better. By the time they get to a million, they’re making a decent salary. They have several people working for them who are working in the business so they can work on the business. At that point, they are more bankable so they can get a line of credit to grow the business. They can attract investors. Importantly, they can join come organizations like the Women’s Presidents Organization and EO, the Entrepreneurs Organization. But until you get there, you can’t be a member.
I had been lucky enough to be in WPO and EO and found how critically important they were to me. I started this organization for all those women who don’t qualify. I’m going to help you get there. We’re going to help you get there so you can move on and go from a million to 10 million.
Loren Feldman:
Sherry Deutschmann, thank you for joining us. Really appreciate you sharing your story.
Sherry Deutschmann:
Thank you. It’s been a pleasure.
Part 2: Interview with Lori Torres:
Loren Feldman:
Lori Torres, welcome to the 21 Hats Podcast. Really appreciate your stopping by to talk about Parcel Pending. Tell us what the company does first.
Lori Torres:
Thank you so much for having me here. I’m thrilled to be part of it. At Parcel Pending, we have electronic smart lockers. We manage packages. We’re a package management solution company. Envision a bank of lockers that have a keypad where a courier (UPS or FedEx) can go to the touch screens. Once they find your name in the system, they then put a package into the locker, close the locker door, and now it sends you a text or an email that says you have a parcel pending.
Karen Clark Cole:
Is this a physical locker?
Lori Torres:
It’s a physical locker. Imagine you’re at work and you have personal items delivered, and instead of having it stolen off your front porch at home, you can have it shipped to your office, but it goes straight into the locker at your office building. Now you can go on your way home, grab your package, off you go, and you have not lost your package.
Karen Clark Cole:
There are varying sizes that you can rent, I assume?
Lori Torres:
That’s correct. Small, medium, large, extra large. Different sized lockers for packages. We are now in multifamily, commercial, grocery, retail, universities, and commercial office buildings. We even have our lockers in corporate headquarters such as UPS. All their employee packages go through our lockers at their headquarters.
Karen Clark Cole:
When you say multifamily, do you mean apartment buildings?
Lori Torres:
Yes, apartment buildings.
Loren Feldman:
Can you tell us how big the business is now?
Lori Torres:
We’ve grown the company over the last five years. We’re now in 48 states and Canada. We take 1.6 million packages a month. We’re expecting to take 3 million from Black Friday to Christmas this year, so it will be a crazy, wild ride. It’s a lot. We have over 200 employees.
Loren Feldman:
Wow. Where did the idea for the company come from? How did you end up starting it?
Lori Torres:
I was in real estate my whole career. I was working for a large company, a developer in Orange County, California. We had 44,000 apartment units and I was the senior vice president overseeing the operations of those 44,000 units. I kept going to the properties and they would say to me, “Lori, we have such a package problem. We need more headcount, we need bigger package rooms.” And I thought, “No way, we’re not going to add headcount. That’s going to kill on the margin. And we’re not going to get bigger package rooms because just doesn’t make sense.” So I knew there had to be a way to take technology and marry it to something, some type of a box system so it could be self-service.
The other benefit to Parcel Pending lockers is that you can get your package in the evening on your time. We have people pick up packages at 2am, 4am.
Karen Clark Cole:
Can people share lockers?
Lori Torres:
It’s not a one-for-one. It just depends on when your package comes today, your locker might be in the left upper hand side of a small locker. Tomorrow, you might get a package over on the right hand bottom that’s a large locker. It’s not your own designated locker. It’s based on when you have a package. If you don’t get a package but once every five days, you only have a locker used once every five days.
Karen Clark Cole:
You pay per package?
Lori Torres:
No, there are different pricing models. We actually sell the lockers to the landlords and owners and they pay a monthly software and service fee. Some models, we give them the lockers and then the end user pays a monthly fee. In the different verticals that we’re in, there are different models, whether it’s a subscription model, a lease model, or a purchase model.
Karen Clark Cole:
How many years did it take you to figure out these different models?
Lori Torres:
I just thought, “This is going to be genius.” At one point, I actually thought we will never sell another locker and we will only give lockers away and charge this fee and the residents will pay. Well, the industry said, “No, we don’t want to nickel and dime our residents. We want this as an amenity.” And so they said, “We’ll pay for it.” I really thought that 80% would be the subscription model and 20% would be the purchase, and it’s the opposite.
Karen Clark Cole:
How many years did it take to figure that out? Was the subscription model gradual?
Lori Torres:
No, we’ve only been in business six years now. We’ve had to figure out a lot very fast.
Karen Clark Cole:
Wow, you’re growing really fast.
Loren Feldman:
Was anybody else doing this when you started?
Lori Torres:
When I started, no. Then since I started, there have been a few competitors. I’m sure you’ve heard of those guys called Amazon, and they’re a big competitor now.
Karen Clark Cole:
With the same sort of product?
Lori Torres:
The same product, yes. They came into multifamily because they want to distribute more packages.
Loren Feldman:
They’re not just in Whole Foods?
Lori Torres:
They’re not just in Whole Foods anymore.
Loren Feldman:
I didn’t realize that.
Lori Torres:
They’re in universities, commercial office buildings, retail even, and the reason for that is they just want to distribute more stuff faster. But their model is completely different. They’re not doing it for a P&L purpose. It’s tough because competing against them when they’re not out to make money—their prices can be significantly less than ours. We have a value proposition of what makes us different. I will tell you that competing with Amazon, some entrepreneurs I’ve heard say, “We went out of business because we couldn’t compete with them.” For me, I’m like, “Bring it on.” This has been the greatest challenge. It’s made us a better company. It’s made us smarter and think better and be more on our feet. I’ll take it.
Loren Feldman:
But it must have squeezed your margins too, didn’t it?
Lori Torres:
It has squeezed in some areas, for sure. Then the tariffs have certainly squeezed margins because we manufacture in China. We’ve got our challenges. It’s not been a walk in the park by any means.
Loren Feldman:
Oh, that’s interesting. How did you deal with the tariffs?
Lori Torres:
You deal with them. Do you have a choice? We’re actually moving our manufacturing out of country. This year, we’ll start manufacturing still offshore, but in a different country.
Loren Feldman:
Vietnam?
Lori Torres:
Yeah.
Loren Feldman:
Interesting. With that kind of fast growth and competing with Amazon, did you have to raise capital to build the business?
Lori Torres:
I bootstrapped my way for the first year or so. Then I did an angel round of about a million and a half. Then I had a strategic investor. We did a $15 million round. The strategic investor was interesting because we’d set it up in different tranches and we ended up after the first year of that deal going back and renegotiating it. It became a revolving line of credit and I only used $6 million of the $15 million before selling the company. I recently sold the company in January to a French company, Neopost. Now they have changed it to Quadient.
Lori Torres:
They’ve been in business since 1934 in mail, so probably every mailroom you go into either has equipment from Neopost or from Pitney Bowes. The two are competitors. Big, big business but somewhat declining because obviously people aren’t sending mail anymore. The locker strategy made a lot of sense for them and it was in alignment with their business and the other business verticals that they have and products that they have. They already had lockers in Japan and in France, but they couldn’t bust into the United States. So you know what I say: “If you can’t beat ‘em, buy ‘em.”
Karen Clark Cole:
Their locker system in Europe was similar to yours?
Lori Torres:
Yeah, similar technology.
Loren Feldman:
Had you been thinking about selling the business?
Lori Torres:
It’s a great question, because of course, I had been thinking about selling the business from the day I started the business. I will tell you, I think it’s really important that I never did it to make money. While I’ve had a wonderful outcome, it was never my goal. Like, “Ooh, I can’t wait, I’m going to be rich.” Not at all. I was solving a problem. I’m a solution finder. The real estate business I was in—you’re in property management and property operations. All you do all day long is solve problems.
When I saw this problem, I knew I could solve it. But yes, once I started planning for the business and writing my three-year plan (before I even put a name to the company or spent $1, I wrote a three-year plan), I always thought I’d exit in probably seven years.
Karen Clark Cole:
You really are a planner.
Lori Torres:
Yeah, I really am. We were starting to just interview investment bankers who were we going to use. We were going to have our first audit, because we didn’t even have a formal audit yet. We were just in that process and they came along and it was a crazy fast deal. I met them December 3rd in my office, we got a letter of intent December 21st, and we closed on January 23rd.
Karen Clark Cole:
Holy moly!
Lori Torres:
It’s a 32-day deal. They said, “We’ll do light due diligence.” No, EY was involved. Let me tell you…
Loren Feldman:
On your side or their side?
Lori Torres:
On their side, and it was not light due diligence.
Karen Clark Cole:
They went that fast?
Lori Torres:
You know what’s interesting about that? I think you set a precedent. It set a precedent for the new owners if they think that we can always work at this pace, which we do. We work at an insane pace. They said, “We’ve never seen a company fill a data room as fast as you guys filled the data room.” Because we worked day and night and it was over the holidays. December 21st was the letter of intent. The office was pretty empty. People were off because of the holidays and we just worked day and night, weekend after weekend. It was crazy.
Karen Clark Cole:
Wow, congratulations.
Lori Torres:
Thank you.
Loren Feldman:
I hope you don’t mind me saying I read on the internet that you had a very successful outcome. You sold the business for $100 million.
Lori Torres:
It was over 100 million dollars. I don’t like to say it out loud, but it was very public because a public company bought us.
Loren Feldman:
Was that a difficult negotiation or did they come knowing what they wanted to do?
Lori Torres:
They were very clear on what they wanted and they had a clear agenda. I had a clear agenda, and I wasn’t planning to sell the company. I thought we were two years out and our revenues weren’t far enough along. Our new business verticals that I was trying to achieve hadn’t gotten to where they were. I said, “Look, in order to sell, this is the price.” I just stayed firm on it.
Loren Feldman:
You stuck to it.
Lori Torres:
I stuck to it and they stuck to it as well. They’re great people. They were such wonderful people to work with. I really enjoyed everyone at the company,
Loren Feldman:
And you’re staying with the company, at least so far?
Lori Torres:
Yeah.
Karen Clark Cole:
How long?
Lori Torres:
I’m under contract for a couple years.
Loren Feldman:
Did you sell 100%?
Lori Torres:
I did.
Loren Feldman:
You’re an employee.
Lori Torres:
I am an employee again. Here’s the funny thing. I was in corporate America my whole career, for 30 years. I really thought I’d probably be the best person to be acquired by a large corporation because I can deal with corporate America. Is it as much fun? Maybe I would admit that it’s not as much fun as I used to have.
Karen Clark Cole:
Do you get to go to France more often though?
Lori Torres:
I have no invitation to France yet, so no. I’m sure the day will come. I have too much to do. We have huge, huge growth goals. I don’t have time to go to France because we are running with our hair on fire.
Karen Clark Cole:
What’s your role in the new organization?
Lori Torres:
The CEO of Parcel Pending.
Karen Clark Cole:
They kept it separate.
Lori Torres:
Yes.
Karen Clark Cole:
So you’re running the U.S. part of it then.
Lori Torres:
U.S. and Canada.
Loren Feldman:
Do you have a lot more capital to spend now?
Lori Torres:
It is really nice to have the big backing of a billion dollar company. We’re scaling it much faster than what we we were able to do and making the investment back into the company now. It’s a wild time.
Karen Clark Cole:
Giving Amazon a run for their money?
Lori Torres:
For sure. They know us. But Amazon is Amazon. They can make a decision to give away free lockers. If they do that, that’ll be a problem for us, but also they’re not delivering on their promise and their service. Not everyone’s elated with them. I just had a client meeting in Dallas on Monday and the client said, “I can’t wait to get these lockers out of here,” which were Amazon Lockers. But you’re going to have good and bad. I’m sure there are people who say that about us, right?
Loren Feldman:
We’re having this conversation at EY’s annual Strategic Growth Forum. You’ve been here many times because you’ve been a part of the Winning Women program. Tell us, how did you get involved with that and what did it mean for you?
Lori Torres:
It has been a game changer for me. I was in the class of 2017. I have met amazing people. I have friends for life. I have a group of gals where we travel together, we talk. Three of us all sold our companies this past year, and all three of us are struggling somewhat in the new world, just because there are the goals. When a new company comes in and buys you, they want to take it to a whole new level, and we were already growing at this crazy level. It’s challenging, but it’s nice to have some partners in crime and to talk to other CEOs. You can’t have that conversation with your employees. It’s nice to have other CEOs, and that’s what it’s done for me—it’s created this network of people to be able to call and reach out.
Loren Feldman:
You’ve forgiven EY for the due diligence they did on you?
Lori Torres:
It’s funny that you asked me that. But yes, I had a softer spot in my heart because of it, so I didn’t want to wring their necks as much. There were three times during the deal that the deal almost died, but I had leverage. I was not in a hurry to sell. There were three different times where I was like, “If we need to put this on hold, and pause and go clean up what you think is an issue, let’s wait six months.” They were motivated to make the sale happen, so it did.
Karen Clark Cole:
Suddenly the problem went away?
Lori Torres:
It did cause a few pain points for us, I will tell you.
Loren Feldman:
Did you learn anything through that process that you think others could benefit from?
Lori Torres:
Oh my gosh, I learned from every process. In the Winning Women program, the women who take advantage and really embrace the program get so much out of it. The women who don’t, don’t. They don’t show up and don’t participate and they are so missing out.
Then selling the company—especially doing it in 32 days—you just don’t get an experience like that. There were so much I didn’t know. I had to make a ton of phone calls and get advisors in. “What do you think about this? Oh my gosh, I’m not sure what direction this is.” Then what happens is when you’re going that fast, and you’re so tired because you’re working so many hours, you simply start to forget things. You’re like, “Wait, did we negotiate that? Did you get that covered?”
Loren Feldman:
You also can’t run the business the same way when you’re going through something like that.
Lori Torres:
You can’t. The acquisition has hurt—not hurt I wouldn’t say—but it has been a challenge for Parcel Pending for this year. I finally feel now after 10 months, the dust has settled and we’ve got our arms back around this beast. We can go and take on this next trajectory. But it really set us back because there’s this get to know you and so many new processes and new reporting. It’s been a challenging year for sure. I say it’s been the hardest year ever, but I think that maybe it’s like having a baby and you forget the pain, because every year growing my company was really hard.
Karen Clark Cole:
Did your employees know that you were going through that?
Lori Torres:
Yes and no. There was a small group that was under the tent, about six of us. For the beginning, no. My family didn’t even know. I couldn’t even tell my family in the beginning and that was pretty brutal.
Loren Feldman:
Is this because your family is particularly untrustworthy?
Lori Torres:
No.
Loren Feldman:
I was kidding.
Lori Torres:
No, you weren’t. Part of it was when I was growing the company, I ended up hiring a lot of people. There’s this web of a lot of connections. My son knows this guy who works at my company and this guy knows this guy who knows my son, or my other son, they’re best friends, and she works here. My ex-husband’s best friend was an investor in the company. There were all of these interconnections so I felt I couldn’t tell the family until we were ready and couldn’t announce because it was a public company. But I had to go to the shareholders because it was such a short window. I couldn’t get a vote in time. There were a lot of challenges that happened with that quick of a sale. I had to tell my family the day before I told the shareholders because I knew that the shareholders that knew my husband were going to reach out.
Karen Clark Cole:
You didn’t tell your husband?
Lori Torres:
Ex-husband. We weren’t married at the time, but I still had to tell him.
Karen Clark Cole:
What was the reaction from your employees?
Lori Torres:
I think it was mixed. We had a vision and we were clear on what our purpose was, and we were clear on what we were trying to accomplish. Then the game changes and it creates fear, because the first thing that happens when you sell a company, is that people say, “What’s in it for me? And what’s going to happen to me? And oh my gosh, are they going to keep me around?” It’s not like a company that comes in and buys you has all these people in their back pockets, but you hear of all the horror stories where people lose out on opportunities and things change. It was funny because I have an all-hands meeting with all employees once a month, and we talk about what’s going on in the organization. When I announced that we were selling, that we had sold the day that it was closing, I asked the team to raise their hands if they thought we were going through a sale. Half of the room said yes.
Karen Clark Cole:
Really?
Lori Torres:
Yeah, we’re just we’re too transparent of a company and then all of a sudden, we’re doors closed and we’re off-site meetings. It was just not our behavior, and they knew something was up.
Loren Feldman:
Last question: you referred before to how fast you were already growing and then the challenge of being bought by a much larger public company and having to grow even faster. What are you doing to grow even faster and what are the challenges that you’re facing?
Lori Torres:
You want me to give you my secret sauce? I can’t because Amazon could be listening or another competitor. We have had significant growth in prior years. For the first five years, we had 70% year-over-year growth every year. It was just insane.
Loren Feldman:
Now you have to do it even faster.
Lori Torres:
Even faster.
Karen Clark Cole:
So without telling us what it is, do you have a secret sauce? Is it like that?
Lori Torres:
I think that every company has a secret sauce.
Loren Feldman:
Do you have a secret sauce, Karen?
Karen Clark Cole:
I don’t know about that.
Lori Torres:
I think you have to ask yourself what makes the company successful and why are other companies that have a good product and a good service not as successful? I think it’s about the vision of where you’re going. It’s absolutely about the people.
Karen Clark Cole:
I read you talked about employee appreciation.
Lori Torres:
Yeah, because I couldn’t have done any of this without the team. I won the regional EY, and it felt wrong for me to take that that win. It was not me. It’s the team that did it. I could never have done it without the team. Every single person in my company benefited from the sale. I wanted to show my gratitude. They all have stock options, but no one had vested. We hadn’t been in business long enough to vest.
Karen Clark Cole:
That’s awesome.
Loren Feldman:
Lori Torres, thanks so much for taking the time. Really appreciate your sharing your story.
Lori Torres:
Thank you for having me. I appreciate it.
