Something’s Happening in the Job Market

Episode 253: Something’s Happening in the Job Market

Introduction:

This week, Paul Downs tells Kate Morgan and Liz PIcarazzi that he recently posted a job on Indeed and got 153 resumes—more than he’s ever gotten before, which prompted some interesting questions: What does this mean for business owners? Should a job posting be more about what the company expects from a candidate or more about what the company has to offer? Do the owners ask candidates to take personality tests? If the owners get 150 resumes, do they ask ChatGPT to review them? And doesn’t it seem as if more people are looking to switch careers? “When I look at someone who’s working as a graphic designer in an ad agency,” Paul tells us, “I’m thinking: This person realizes AI is coming for their job.” Plus: Liz gives us a surprisingly upbeat update on her tariff situation. And the owners respond to a Reddit post asking whether it would be crazy to start a business in the current economic environment. Paul’s response: “Don’t do it.”

— Loren Feldman

Guests:

Paul Downs is CEO of Paul Downs Cabinetmakers.

Liz Picarazzi is CEO of Citibin.

Kate Morgan is CEO of Boston Human Capital Partners.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome, Paul, Kate, and Liz. It’s great to have you here. Paul, we spent a good bit of time earlier this year talking about why you were forced to lay off a third of your workforce. Last time you were here, you told us that you’d been able to hire a few of your folks back. And lately, I gather you’ve actually been soliciting applications on Indeed. Tell us about that.

Paul Downs:
Well, I hired a bunch of people back, and then two of them have turned in their notice for reasons that really don’t have anything to do with the layoffs. One is also in the military, and he’s just being torn in too many directions by home life and being deployed at random and then trying to maintain the job here. And he just decided it was too much, so that’s fine. You know, he was a great guy to have in the shop. I understand these issues.

The other one was someone who worked for me for 16 years, and he’s just basically retiring. So we had two openings on the shop floor for skilled labor, skilled woodworkers. And I put an ad out on Indeed and got 153 responses in the first week and a half.

Loren Feldman:
Wow.

Paul Downs:
And out of that, I found nine who I was willing to interview, and we’ve been doing the interviews all week. And what was interesting about it, to me, in sort of a horrifying way, is having to go through 144 people who I basically rejected on sight, and spending maybe two minutes looking at their qualifications and their resumes and coming to the very fast conclusion: If there’s any doubt at all, I’m not bringing them in for an interview, because I can’t do 144 interviews.

But I’m always cognizant that I’m looking at somebody’s life, and that in most cases, if they came to work for me, they would be improving their life situation considerably. Because the jobs a lot of these people have speak to a pattern of people who don’t get a good education and then enter the workforce, sort of as the cannon fodder of capitalism. And these are the ones who would have been—what do we call them—essential workers during Covid. You know, people who are normally underpaid and ignored, but they’re actually doing something important, and they want to do better in their life.

And so it’s just a tough feeling to have to say, “I’m sorry. No.” And that doesn’t make me feel good. Now, of all the hiring rounds I’ve done in the last, let’s say 10 years, this is the most applicants we’ve ever gotten, and the most qualified applicants—in other words, a higher number that I would be willing to bring in for an interview. I’m not exactly sure what that means. We saw people who were both sort of on the up and coming, starting their career, and then also a number of mid-career professionals who were switching out of other sectors. When I look at someone who’s working as a graphic designer in an ad agency, I’m thinking: This person realizes AI is coming for their job, and they’re looking to make a switch.

So, it’s a data point. I know that in my industry, the normal complaint is that you can’t get anybody to apply, can’t get anybody to show up, can’t get anybody to do a day’s work. And that really hasn’t been my experience with people I hire. And it’ll be interesting to see how these new hires, when we make them, how they integrate into our shop environment.

Loren Feldman:
From your conversations with the people you’ve started to interview, do you get any sense that this could just be a matter of the job market shifting, and that suddenly, jobs are harder to come by?

Paul Downs:
It’s certainly possible. It’s hard to know, because what we’re advertising for is, basically, “Do you want to be a professional woodworker?” which is something that a lot of people like to do as a hobby. And if they could get themselves into some situation where they were doing it all day, it’s attractive to people.

And so I think it’s hard to know exactly what’s motivating all this, but part of it is certainly that it’s a cool job. And we also have a great reputation in the area as a quality employer, which is something I’ve tried very hard to do, and to get that reputation and to maintain it. So that when the time comes to hire, I want to have the choice of who I’m hiring, not just have to get warm bodies—because I’ve been in that mode in other years, and that’s not so great.

Loren Feldman:
Paul, correct me if I’m wrong, but I seem to recall your saying in the past that you had doubts about Indeed as a platform for you. And I think part of it was some concern that it might not be the right place to find the kind of blue-collar workers that you’re talking about. Am I right about that?

Paul Downs:
Well, in the past, yeah, but I’m obviously not experiencing that now. Thanks, Indeed! You sent me a million people. And I didn’t even really want to go down the road of their—they have a service where they look at what you’re offering for the job, and then they identify candidates to invite. I did try that a couple of years ago, and I really wasn’t very impressed with that. But people who are looking for a job, yeah, there were a lot of them.

And I don’t know. I mean, I’m not a job seeker, so I don’t know whether there’s come to be some kind of consensus of where everybody looks for a job, or is it just that Indeed is doing great? The other thing that I’ve used in years past is Craigslist. But I’m not that interested in dealing with Craigslist applicants, because Indeed has—in the interface, it’s a little bit easier to manage the steps that people are at. And so I feel pretty happy with them. I think the whole thing is going to cost me like 200 bucks.

Liz Picarazzi:
That’s nothing.

Paul Downs:
Yeah, I set a budget for the ad and a time frame, and then the applications were pouring in. We were getting like 20 to 30 a day through the whole course of the thing. I don’t know if that math works out right. Maybe 10 to 20 a day. Anyway, they were sending me people, and yeah, so I’m happy with Indeed at the moment.

Kate Morgan:
I’d say, Paul, you think you got inundated with your role. Try and put an ad for data scientists and see how many you get then. It’s crazy. Crazy!

Paul Downs:
Are you saying there would be a lot? Or there would be a few?

Kate Morgan:
Oh, yeah. Because we do more actual direct sourcing, but we will post roles. And this was really funny—this was just a couple of months ago. We had posted at the same time for one client. They were looking for, basically, an administrative assistant. And I used to panic when we’d post those kinds of roles, because inevitably we’d have 500 people respond. Well, we posted that one, and then we posted a data scientist at the exact same time. We got six admins, and we got 76 data scientists. And that was just in one night.

Paul Downs:
What do you think that means?

Kate Morgan:
Don’t go to school for data science.

Paul Downs:
Well, what about the admin thing? I mean, that’s kind of… If you only got six, why?

Kate Morgan:
Yeah, that’s actually interesting as well, because we looked at the challenge with the admin role was that they wanted to have five days in the office. Nobody wants to go into the office anymore.

Paul Downs:
Well, 144 people wanted to come to my office. [Laughter] I mean, we’re pretty clear. You can’t do a factory job from home. You’ve got to show up.

Liz Picarazzi:
Well, I have to say that I have never had much luck with Indeed, but I haven’t used it for many years. I used to recruit handymen for my home improvement company from Craigslist, and that was actually pretty effective, because most of those are blue collar. But one of the things that I have found with Indeed—and maybe that’s why I haven’t posted any jobs there in years—is that there’s awful people who have really very good resumes, or seemingly good resumes, but aren’t as interested in working for a small business where they can work their way up.

If I can find people who are between 25 and 30, maybe 35, who aren’t as seasoned, but are entrepreneurial and like working for a small business, they’re going to fit in a lot better. Because someone who’s coming in from Indeed, in many cases, if they’ve had a lot more years in the workforce, they’ve sort of been, I want to say, a little bit spoiled by sort of corporate America—or their perception of what they want is a lot narrower.

Like if you’re hired into marketing, you want a very narrow slice of the marketing that you do, whereas in a small business, you don’t have that specialization of roles. And I’ve always done well with people who are very adaptable and trainable, and I’ve yet to find that on Indeed. A lot of it has been word of mouth. I do have a couple of friends whose businesses aren’t doing so well right now, and they’ve had to lay people off. That’s often a good place to find good workers. But one thing do I dread is, as we grow more, I don’t want to have to use Indeed, because I feel like it’s never been effective, but maybe I should have a little more of an open mind now about it, Paul.

Paul Downs:
Well, I think part of it is also how you present the job. So, I go to great pains to talk briefly about who we’re looking for and extensively about who we are. And I see the opposite approach in most help wanted ads, which is, “We’re looking for a person with X years of experience, and they should be able to do this and that and whatever. Call us.” And thinking about it from the perspective of a job seeker, you have no idea what that company is all about. Are they hiring people because nobody can stand to stay there? Look on the website. All you’re going to get is sort of the Instagram version of whoever they are.

And I write my job descriptions with quite a bit of information about our culture, what we expect of people, a promise—You’re not going to be working with idiots—and that seems to be, in my mind, effective in attracting a lot of candidates. Because people are taking a risk when they take a job. You know, I haven’t taken a job since I was 19, but it’s pretty clear from my experience over the decades that people are afraid of going to a new workspace. They would much rather deal with the devil they know. And so I’ve seen that when I thought people would be quitting right and left because of whatever was happening in the shop. They just didn’t. And then when you were talking to new applicants, if you started talking about, “Here’s who we are as a company,” they were always very appreciative that someone was addressing these things.

Kate Morgan:
Well, that’s it exactly, Paul. Because people really don’t take jobs. They take companies. And so, the best way to look at writing a job description—personally, I think most job descriptions suck. They really are designed to be marketing fodder. At least, they have been. But if you can really distill it down to who you are, like you just described, but it should just be designed to attract the people you want and repel the people you don’t want—and if you can build out even more, and flesh it out with, “All right, the expectations are…” And what we practice is this success-stage job description of what success is going to look like. It helps people to actually envision who they will be within your company. And then you’re wrapping it with more about the culture. That certainly will help.

Paul Downs:
So I’ve got a question about what you just said. What are the words you use to scare people away you don’t want?

Kate Morgan:
For my company, when we have our success-stage job description, it’s really about: Listen, you’re not going into an office, which sounds super appealing, but we have a high level of accountability within my team. And so you have to be really self-disciplined. So not only are you looking at it from the job perspective of, “Hey, expect to be working alone.” You’re going to be remote. It can be lonely at times. Just understand that the expectations are still there that you’re going to deliver. And then when we bring them in for those interviews, we’re drilling on those specific areas.

Paul Downs:
Well, my interview process consists of a shop tour, because I want them to be excited about the opportunity to work for us. So we show them all the things we do and the cool clients we work with. And then I sit them down and give them a 50-question test, a written test of mathematics, fractions, plan reading, ruler, all the things they actually need to do on the shop floor. And so, of the nine that I’m interviewing, six of them have done poorly on the test, even though they had enough of a resume to get me interested. But the test is absolutely weeding out some of the people who just don’t know what we need them to know.

And I’m curious about, if you’re hiring for a remote position, do you bring them in for an interview? Like, is that okay? Or is it like, “Oh, no, we’re not getting out of our house for anything.” I mean, what do you do then to take the next step? What does your interview process look like?

Kate Morgan:
Well, first, if I can just address one thing: So what you’re talking about, the work product, I am a huge advocate for. Because you don’t have time to waste hiring, making a bad hire. And so having something that will really help gauge what it’s going to be like when they’re working for you is huge.

So for us, yeah, we’re all remote. Most of the folks that are working for me now, I didn’t meet in person until after they were hired. And I’m okay with it, because we’re giving them work products. We do work products. We do an assessment and multiple rounds of interviews, not only on their background—because I don’t want to hire people from my industry, so we have to be super creative on how we’re going to screen them. Because it can’t be, “Oh, give me your history here.” Start drilling into our core values. Because we look at it from the perspective of: If they possess these core values, the chances of them being successful go up astronomically.

Paul Downs:
So what’s a core value that’s not obvious? Like, “Are you a big liar?” “No.” And tell me how you tease out whatever you’re after there.

Kate Morgan:
One of them is intellectual curiosity. Intellectual curiosity is really a critical skill for my team, having that attribute. You can’t fake intellectual curiosity. So we take multiple rounds of interviews. We’ll circle back on these core values, not just with myself, but my team leads. And so that question could start very easily with, “Tell me about something that you explored on your own, or in your last position, and walk me through that.” The folks with intellectual curiosity and who are really data-driven, they light up. They light up. And then we can just do follow-on questions about that.

Paul Downs:
Have you had any failures with this process?

Kate Morgan:
Yeah, so for us, we’re super successful with our core values, because the way we look at our core values is, you go from core values to edict. And edict, once you have it really well-established, then it becomes your ethos. And my team is so drilled on this ethos that they’re protective. Because I think, in society, we do all want a level of norms, norms that we can subscribe to. And so for that, it becomes a critical tool, because we can only gauge roughly if they’re going to have the skills to do it. Because, again, we’re hiring from outside of our industry.

Loren Feldman:
Kate, how many core values do you have?

Kate Morgan:
Five.

Loren Feldman:
Liz, do you have core values?

Liz Picarazzi:
I don’t.

Loren Feldman:
Paul?

Paul Downs:
Oh, yeah. [Laughter] I mean, we’ve got a long, extensive set of—we don’t call them core values. It’s cultural statements. And they encompass all the basic ones: Be honest, be productive, blah, blah. But it’s a more detailed approach to laying out what we expect from our employees, but it also includes what the employees can expect from the company. And so I think there’s something like 45 different statements. They have some explanation attached to each one. And that’s an approach that I learned in Vistage, and I think that it’s actually more effective than just having some core values. Because, Kate, could you describe your core values in five words? Or what’s the minimum?

Kate Morgan:
Each core value, we have descriptions underneath so people really understand what it means. So when we say “intellectual curiosity,” one of those points is we seek to go beyond buzzwords. Another one that’s sort of nebulous is “awareness of the moment,” and that’s when we’re always looking for those unspoken cues. So we have those descriptions, because we want them to understand it. But the way I look at core values, if you’re hiring to them, and you’re going to fire to them, well, you need to manage to them. So our performance reviews are all based on if they’re demonstrating a high capability of those core values.

Paul Downs:
Well, I think that what you said is key, that you follow up and talk about them later. And that’s, I think, something that a lot of companies, they’ve got something on the wall in the lobby, but then when you walk through the door, it’s a different world.

Kate Morgan:
Well, yeah, because they’re aspirational. And this is sort of the thing that makes me just apoplectic when I talk to HR people, particularly if you look at the economy when it was booming, it was all really focused on trying to find people, not to repel them. But that’s part of the basic—so HR became just glorified marketers, rather than actually figuring out how to attract and retain the top echelon people that are going to be custom fit not for every company, but for yours specifically.

Liz Picarazzi:
Loren, you asked to describe your values in five words. I’ve got four for you: Act. Like. An. Owner. Act like an owner. That is something that, while we don’t have written values or train on that, which I do know that we need to, the “act like an owner” has been a principle that we’ve sort of reinforced with everybody. And currently, I would say, I don’t have even one employee who doesn’t act like an owner. They always act in the benefit of the company. They do have intellectual curiosity. They want us to be successful.

I know that I’m in a lucky position right now, and I haven’t always been in that. But the sort of cultural thing that is common among my employees is, they do act like owners, and they know that they’re expected to. So it’s sort of simple, but a lot of candidates are not going to act like owners. So when I go out to the job market, and I’m looking for people, someone who requires a lot of direction, or someone who doesn’t seem to really get it, or someone who doesn’t seem to care about the mission or the culture, that can be detected. And those sorts of people don’t ever act like owners.

Loren Feldman:
Do you ever get pushback from employees on that?

Liz Picarazzi:
Yeah, I would say, occasionally, when someone doesn’t want to work past—like, we’re a nine to six company. I rarely ever ask people to work past six or on weekends. If we do, we pay them time and a half. But some people don’t like last-minute things coming up. But I’ve never gotten the amount of pushback, also, because it’s within reason. I’m not going to make someone work installing Citibins in Times Square until 10 or 12 p.m., but I may ask them to end work at seven and not at six. So that’s not exactly an “act like an owner,” but I would say it’s an action that would show that, at the moment, you might not be thinking about what the company needs.

Loren Feldman:
I have heard from some owners that they’re reluctant to ask employees to do that, unless they actually treat those employees as if they were owners in some sense, with profit-sharing or something like that, so that they actually do have a stake in the outcome.

Liz Picarazzi:
Yep. Well, my employees, all of them from the installers all the way up to my main sales person, they all get bonuses based on profit. So if they do things that help the company—you know, increase revenue or decrease expenses related to mistakes—then they know there’s going to be more bottom line at the end of the year, which makes up a larger bonus pool.

Paul Downs:
Yeah, I don’t really use the framing of “act like an owner.” Because the flip side of what you just described would be, when the company’s in trouble, you get the money back from them. That’s what an owner does. And my employees have no illusions that they’re the owner. What they are is, they’re working for a company that’s dedicated to delivering prosperity to them.

But they’re in a different situation than an owner, and I think that expecting people to actually act like an owner is not likely to lead to success. That doesn’t mean you can’t ask them to do things. You can certainly make clear when the company needs something to be done and why they would do it, but I would never frame it as: You’re some version of an owner. I just don’t see people thinking in any way like I do.

Liz Picarazzi:
Well, maybe it’s not that I train on that necessarily, but it is something that is a characteristic of people who are successful at my company.

Paul Downs:
Well, that’s fair enough. I mean, it’s your company, too. [Laughter] You can run it however you want. If it’s working, go for it.

Kate Morgan:
You could kind of morph it into really having a heightened sense of purpose. If you have people who really look beyond themselves, and they want to have a purpose and feel integral to an operation, that’s saying the same thing without having to convolute it with actual ownership. We actually hear “act like an owner” a lot. We hear that, and then we have the—I think this is probably dying out—“work-life balance.” Work-life balance is not a core value. That’s a perk, that’s a benefit.

Liz Picarazzi:
Or an aspiration.

Kate Morgan:
Again, I remember having an accelerator tell me, when I asked her what her core values were, one of them was work-life balance. And then six months later, she was super frustrated when the market started to go a little sour, and she’s like, “Yeah, so this employee left at 3pm, and I thought she’d get back online after she got her kids home. But she didn’t do anything until the next day.” I’m like, “Well, you encouraged her to have work-life balance. She put life as a priority over work. That’s on you. You can’t even be mad at the employee.”

Loren Feldman:
I want to move on to a couple of other things. But before we leave this, Paul, I’m curious, when you got those 150 plus applications, did you consider throwing them into ChatGPT or another chatbot and getting their analysis?

Paul Downs:
No. That’s the world we’re heading to, and that’s a world I will be happy to not experience.

Loren Feldman:
Because?

Paul Downs:
Well, you just let some—I mean, who the hell knows what’s going on under the hood with ChatGPT? And also, these are human beings. Yes, I’m looking at resumes. Yes, I’m just doing it on the web through an interface. These are human beings, and they’ve taken the time to apply to my job, and I feel like I owe them at least 60 seconds to take a look at them and judge their life.

And if I decide that I want to outsource that one day to some robot, like, what am I even here for? My company is not in any way suitable towards our robot future. We do things by hand. We talk to each other. We’re in the same space. And it would be a violation of my approach to doing things to automate that. As a matter of fact, I was going to ask Kate. Do you use personality tests in your hiring?

Kate Morgan:
So for my own team, yes. We have it as an option. For our clients, we strongly recommend it for executive hires, but not everybody opts for it.

Paul Downs:
Yeah, I don’t like those things. We’ve had various people come to our Vistage group and say, “Hey, we’re going to give you a couple months’ trial and see how you like it.” And one company in particular, we were given access for a whole year. So I tested all my people to see what it had to say about them, and some of them, it was right on. And some of them, it was not. It was saying that people who were successfully performing a job that they had been doing for years, that I was familiar with their performance—it was saying, “Well, these people can’t do that job.” I’m like, “Well, I got news for you.”

So I contacted the company, and I said: Okay, you’re telling me who to hire, and you’re actually giving me very specific hints about how they should be managed. And when I ran this through my own reality filter, your ideas don’t match my reality. In other words, I have a bunch of people who are successfully performing a job that your algorithm says they can’t do. So my question for you is, what’s your feedback mechanism? How do you improve your model? How do you make sure your algorithm is actually true? And they were flabbergasted, because nobody had ever asked them the question, and they didn’t have an answer. They didn’t have an answer. They basically said, “You know, our founder did research back in the late 60s.” Some complete nonsense, irrelevant.

And they just would not address the idea that their algorithms were not a great fit for reality, and it had not even occurred to them to figure out some way for me to report back about what their algorithm said, as opposed to what I had experienced. They just had no way to do it. So they’re firing out all these tests and all these recommendations and all these companies they’re dealing with, and owners like me love it because it saves a ton of time. And it also gives you something to point to to make a decision. Like, “I didn’t make a decision, the algorithm says you suck. It’s not my fault. It’s your fault.” And so, I just hate that.

Loren Feldman:
Kate, do you disagree?

Kate Morgan:
I actually have no idea what test would actually say that they wouldn’t be specific to a position. The one I believe in talks about the communication style and the motivation. It doesn’t tell me a yes or no. It just gives a deeper dive on who’s going to be coming into that position.

Loren Feldman:
I want to hit some other topics. Kate, before we move on, do you use AI to review resumes?

Kate Morgan:
Absolutely not.

Paul Downs:
And why not?

Kate Morgan:
So, how we operate, we’re not just posting and praying. We actually go in, and we direct-source to find people. Anything that has to do directly with people, I do not believe should have AI wrapped around it. Look at your inbox to see how many spammy sales bots are attacking you on a daily basis. Now, I tell my team: Figure out a way to incorporate it 30 percent of the time. But all of our reach-outs are real. We’re writing or prospecting emails specific to that particular candidate.

Loren Feldman:
All right, next topic. Liz, how are you doing? What’s going on with your battle with the tariffs?

Liz Picarazzi:
So there have been a lot of ups and downs, as there always is, since we last spoke. The most recent thing that happened that I was very surprised by, but I probably shouldn’t have been, was that on May 30, Trump announced at a rally in Pennsylvania that he would be raising the tariff on aluminum and steel.

Loren Feldman:
Doubling, right?

Liz Picarazzi:
From 25 to 50, doubling. I went to bed on a Friday night, and it was 25. I remember thinking that day: Wow, you’re doing a lot better. Things are really leveling out. We’ve got a plan now for Vietnam at 25. You know, went to bed that night with that feeling, and then woke up. Frank, who is my husband, and also COO, didn’t want to wake me up to tell me, but the change had happened overnight from 25 to 50. And we had a container coming in within the next week, and didn’t know if it would be tariffed at 25, which we had budgeted for, or at 50. Luckily, it came in on June 2, and the new tariff amount went into place on June 4, so we absolutely dodged a bullet on that.

We have four more containers coming in July and August, and if those tariffs at 50 percent continue, we’re going to have another very large tariff bill. At this point last year, if we were at seven and a half percent, I would have spent—let’s see here… Well, between the two, $110,000 that I’ve already spent on tariffs and $120,000 that I’m going to be spending. If things were like they were last year, at seven and a half percent, I would have spent $51,000 on tariffs by August, which is when our last containers come through. So it’s been a huge amount and definitely unexpected.

I would say a couple of things have helped us. One of them—and I wouldn’t have expected this to have such a big effect on me—is that I actually joined an online tariff support group, and it has about 600 people on it. Most of us are members of EO Worldwide. There’s been this community of manufacturers, American manufacturers, that are trying to figure out what to do. Most of them were still in China. And so I may be griping and feeling bad, which I very much do, about my own situation. I literally met, like hundreds of people who are in or were in the 145-percent tariff in China. And that comparison made things feel a little bit better.

People are doing a lot of different things to mitigate that. Some people are keeping their shipments in Asia and just waiting and not bringing them over. I know quite a few people who are doing that. Some people are redirecting it. Once it arrives in the U.S., they’ll redirect it to a warehouse in like the Philippines, or there are bonded warehouses in the U.S., where you can stash them. And then once you retrieve them, you pay the tariff at that moment. So needless to say, there are no more warehouses to be able to stash things. Luckily, I don’t need that, but I would say, I am down, but I also have started to view this as a moment in our history that is, hopefully, an outlier.

Unfortunately, it’s impacting me and my business and my employees a lot, but I know that we’re going to get through it. I know that my tariff cannot possibly stay at 50 percent. You know, the American economy, the worldwide economy, can’t afford a 50-percent tariff on everything that comes into the U.S. that is aluminum and steel. It’s just not sustainable.

But then on the positive side, what I can say is that I do have higher volume. I’m having growth in my business, surprisingly. With municipal clients, we’re at about a 30-percent increase in sales this year, even up to the present date, with the tariff higher and with my prices having increased. The place where we’ve definitely lost sales is in the residential area. So for people who have homes, and they want to beautify their trash situation, if they feel like this is sort of an expensive purchase, they might wait until all this tariff stuff feels like it’s gone, or it is gone.

Whereas a city or a park or a library or any of the places we now work in, if they’ve had beautification budgeted for several years, they actually have the budget to implement. And so, in New York City in particular, some of the city budget that has been in the works to be approved for beautification and containerization is now happening, and so we’re getting a lot of orders from commercial districts, from parks. And I’m not a religious person, but the timing of that could not possibly be better for me, because that increase in that segment of business is probably going to save me.

Loren Feldman:
Will it save you even if you have to pay the 50-percent tariffs on those orders that you have already placed?

Liz Picarazzi:
Yes, because I’m playing the long game. You know, even if I need to decrease my salary, even if I need to increase my prices more, I don’t think this is going to last that long. And then I’m burying the lead here, Loren. You know what the real thing going on is?

Loren Feldman:
Please tell us.

Liz Picarazzi:
I have begun the search for manufacturers in the U.S. I did another RFP process. It is my fourth that I’ve done in the eight years since I outsourced manufacturing to Asia—and I did not have any luck with all those past rounds. But this one, I sent an RFP out to eight companies, some of them in the U.S., a couple in other countries. And I have two factories that have pricing that should work in my range—and, in fact, are probably going to be even less expensive when you consider the 50-percent tariff that I’m now getting.

So this was very unexpected. We’re in the process of doing samples. We plan on doing small production orders with a couple of them, but the plan is not to move everything out of Asia. I actually think Asia is always going to be a partner. I’ve had a great experience there. I built relationships over eight years with factories, with various people who have just done a great job in helping me grow my business.

So I’m looking at this as a diversification of my supply chain, where a portion of it will be made in Asia and part of it will be made in North America. And that is something I could not have said on this podcast two months ago, but that’s also part of the reason why I’m feeling a little better about things. Because I really propelled the move from China to Vietnam after the election, and then as the tariffs have gone up and up and up, I propelled trying to diversify and work in the U.S. So I basically have three options now.

Loren Feldman:
Do those domestic options—would they still make sense if the tariffs just went away?

Liz Picarazzi:
I would say yes, because I want permanent diversification. I just do. I don’t like this vulnerable feeling. My prices overall, they’re going to need to come up, but it’s going to be a blended rate of Asia and U.S. If I get some sort of big purchase order, and I give them the choice, I can produce in Asia for you or the U.S., and this is what the price difference is, there’s going to be a much narrower price difference, which will make U.S.—if they really want to do that—a better option. Usually, it’s very easy for my clients to make the Asia decision, and now they’re going to have some choice, and it’s not going to be such a stark difference.

Loren Feldman:
All right, we only have a couple of minutes left. I want to throw kind of a case study situation at you, as I sometimes do. This comes from the small business subreddit. It’s a former owner who wants to be an owner again, who wrote in basically asking the question: Is this an okay time to start a business, or am I crazy? Let me read it to you quickly:

“I’m a bit paranoid about the economic implications of our current administration. I don’t know what to expect, and things feel very uncertain regarding the future/everything. Am I being overly paranoid? I want to start a food service business. I ran the numbers on the conservative side, and they look great. I’m passionate about the concept, and it feeds into a longer term goal I have. I had a successful small business for about seven years until Covid hit. The summer before Covid, I went all in to scale that business and, well, everything went to shit. It was a business that heavily correlated with the travel industry. I lost it all. So now I’m a bit trigger shy. My new idea is much safer to try, and I plan to scale it slowly and responsibly. But am I an idiot to go at it now, or am I just overthinking it, looking for problems?”

Anybody?

Paul Downs:
Oof. Yeah, don’t do it. [Laughter]

Loren Feldman:
Why, Paul?

Paul Downs:
When he tried to scale a business before Covid came, it sounded like it didn’t go well. And if you make up a bunch of numbers that show your business is going to be a huge success, and then take that as an indication you should go all in, that’s also a bad idea. I think that what would have made me more confident that this person could succeed would be maybe a little bit more information about what the local market is, what the business is.

I mean, it’s not like food service is a known winner. That’s a very difficult industry with an enormous amount of competition. So maybe, “No, don’t do it,” is a little harsh. But I would want to know a whole lot more before I was putting my own money into something like that.

Liz Picarazzi:
Yeah, I would also run the business plan by someone who has started restaurant businesses, because what I’ve found with them is, often, they’re not good business people. He doesn’t sound like he’s a chef, but there’s often people who are chefs who want to start a restaurant business because they like to cook, but then they don’t cook. We all know, if you’re not going to cook, if you’re in the restaurant business, you’re going to be doing everything else, so assessing your ability to function in that role. And then also, it’s all about location. You know, if one has a very good location and can see that there are other food service places that are killing it, then that’s pretty good evidence. But it’s highly risky.

Kate Morgan:
So I actually had a food service idea before I launched Boston Human Capital Partners, and I took it to a CEO who I really respected. I had crunched all my numbers and everything, and I will tell you it was 2010, so we’re still in the recession. And he looked at me, he goes, “Well, this is interesting.” He goes, “But don’t be dumb. Don’t ever start a business you don’t know anything about.” And I said, “Good point.” I ripped up that business plan, wrote my business plan for Boston HCP, and within two and a half years, I was over $2 million. So, yeah, I think now is actually a great time to start a business, as long as you really understand it.

Loren Feldman:
That was the question I was going to ask next: If you take aside the specifics to this business—and obviously, as you’ve all pointed out, that’s tremendously important—but the other aspect of this question is just, right now, assuming he had all his ducks in a row, would this be a good or a terrible or it doesn’t matter time to start a business?

Paul Downs:
Bad time, and I’ll tell you why. When I was writing for you, Loren, I would get all kinds of emails from people who were failing, because that was sort of what I was talking about. And I came to think that there were three ways to fail. And the first one is: You just do dumb things. You don’t understand the business. You make bad decisions, hire bad people, whatever things that you are in control of that you do poorly: number one. Number two: vast forces. In other words, you launch your business. It’s like throwing a little, tiny boat in a big river, and if the river is raging or the river is drying up due to nothing that you’re in control of—like tariffs, like interest rates—that can kill you pretty thoroughly. And then the third thing is just bad luck. You could be in a great position, be running your business great, times are fantastic, and you get cancer.

And those three things are what you should think about. How would I survive any or all of them? And everybody’s convinced they’re going to make the right decisions, and sometimes they do. There’s really nothing to be said about that, other than if we knew more about this person and had some idea of: Are they a sensible person who you know can execute a plan, or do they suffer from manic depression, and this is just the manic phase? These are real things.

But I mean, the guy’s already been through this with Covid. He was doing whatever he was doing, and then Covid just comes and wipes him out. That can happen, and we’re in the most unstable government situation I’ve seen in my entire life. And so I just think that this is a bad moment to be betting the farm. And leaving aside bad luck, because good luck and bad luck happen at random, and they can help you and they can hurt you. But they do cause damage when it’s bad luck, so that’s how I think about that. And I think this is not a great time to start a business.

Kate Morgan:
See, I’m in a very different boat because I coach founders, and I particularly like student entrepreneurs that are graduating, that are running on their business ideas. I look at it from the perspective of: Yeah, the moment is testing the souls of founders across the board. But the very things that make this time so damn hard—the ambiguity, chaos, and the fear—are also the things that can push us onto the other side. So if you’re trying to build a company that’s going to be competing, there’s a lot of founders out there that are just fatigued. And if you’re bringing a new perspective, a new different light to how they approach the business and their customers and clients, there’s actually a huge opportunity to get sharehold.

Paul Downs:
Maybe. Let me just throw out a different path for this person. If they have such a great idea, then, first of all, talking to someone who’s operating the same business is a pretty good idea. And you’re correct that there are a lot of businesses with very tired owners, but those businesses are up and running. They have a premise, they have customers, they have a business model that’s been successful. Why isn’t this person looking at acquiring an existing business with an owner ready to retire?

That, to me, strikes as a much higher percentage successfully, because you’ve got someone who’s motivated to show you how the business works. And if you’re a nice person, maybe you could get them to hang around and show you the ropes a little bit. When you just start going off your own faith, it can work. It worked for me, but it was a very, very difficult journey, and I would have been much better off if I had worked for someone in the industry for a few years and figured out what was actually going on.

Liz Picarazzi:
I would also say to talk to people who have been successful at it, like in food service, like in your own neighborhood. But just as importantly, talk to some people who have failed at it. So we all know which restaurants are in the neighborhood that come and go. If there’s a way to get in touch with anybody who had something fail and find out it had to do with the landlord. It had to do with the cost of goods going up. I wasn’t able to hire the right people. Whatever the reasons are, they’re going to get a taste of what can go wrong, rather than just talking to people about what can go right and how they were successful.

Loren Feldman:
I will say, I’ve had numerous conversations with business owners who started a business during a difficult time, like the Great Recession, and ended up thinking that that actually had been an advantage—that if the economy had been stronger, they might not have been ready to handle an additional flow of business. It was good for them to have the opportunity during a difficult time to try different things, get their feet on the ground, and then when the economy picked up, they were prepared and ready to run with it.

Kate Morgan:
When I started in 2011 the recession was winding down, but the job market actually didn’t come back until 2014. And so there were a lot of people who were too timid to be doing what I was doing, so I used it as a competitive advantage.

Loren Feldman:
That’s what I’m talking about.

Paul Downs:
All right, good for you. I’m glad you succeeded. [Laughter]

Loren Feldman:
It sounds like you’re biting your tongue, Paul.

Paul Downs:
Well, we’re not talking to the one who started at the same time and failed, and they’re out there. We have no idea, right? And I mean, this is just a constant problem with business communication. You only hear from the winners, you don’t hear from the losers, and so it’s difficult to to really evaluate what happens when you just are missing half the story.

Loren Feldman:
That’s a great point, but that’s one of the things I admire about you guys. You guys have all had your ups and downs. You’ve survived difficult times, and best of all, you’ve been willing to discuss them so that other people can learn from your mistakes, which I know I appreciate, and I think everybody listening to this appreciates. My thanks to Paul Downs, Liz Picarazzi, and Kate Morgan. Really appreciate it, guys.

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