The Temptation of Private Equity

Introduction:

This week, Shawn Busse, Jennifer Kerhin, and William Vanderbloemen discuss private equity. Both William and Jennifer have been getting emails and calls from representatives of PE firms who come promising all kinds of gifts—connections, expertise, money to invest in the business, and money to take off the table—which is why the temptation can be great. “If anybody even just offered me a three-day vacation, I think I would jump at it,” Jennifer jokes. But of course PE firms do exact a price, possibly including control of what used to be your business, which is why Jennifer says she wonders whether she should even take the phone calls. Entering the conversation, she says, feels a little like entering the Garden of Eden. Do you take a bite of that apple? Plus, Shawn thinks he’s found a better way to manage his company’s credit cards, and Jennifer gives us an update on her new website.

— Loren Feldman

Guests:

Jennifer Kerhin is CEO of SB Expos and Events.

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

Shawn Busse is CEO of Kinesis.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome, Shawn, Jennifer, and William. It’s great to have you all here. Jennifer, I gather you’ve been getting some phone calls from potential investors of late. That must be kind of fun and encouraging, I would think. Tell us about it.

Jennifer Kerhin:
Sure. I started getting some of them during COVID, as we switched to virtual conventions, and now hybrid conventions, on the technology. Suddenly, I think private equity likes tech. Surprise, surprise, right? So as we started getting into this world, I started getting—for the first time ever—emails from private equity. And they’ve increased in frequency in the past year. So I can’t tell if this is born out of they’re excited about my company or this is desperation of what’s happening in the PE space. [Laughter] So I don’t know. I’ve talked to two of them, and I’m just trying to figure out: Do you just ignore the emails? Do you take the time to talk to them?

Loren Feldman:
Tell us about those conversations. What did you learn, in talking to the ones you did talk to?

Jennifer Kerhin:
So it was two very different conversations on different ends of the spectrum. The first one I took was from a company that’s already in our space. It’s backed by PE, and they were wanting to expand their services. And they reached out to me. I was a newbie. I had no idea what I was asking. So I basically just listened. They talked a lot. And then I asked some questions, very rarely. I think I gave up too much information in the beginning, when I think about it.

Ultimately, my company wasn’t, at the time—it was just about nine months ago—the right fit. And then I took another conversation—well, I started bugging them with questions: Why are you calling me? What’s it about my company? Who’s backing you? What do they want? And they didn’t have any answers. So I was like, “Goodbye.” I’ve listened to all of your up-and-down podcast episodes with Jay about ESOPs. I love the concept of an ESOP. So I take these private equity calls just to learn about what’s out there. I don’t know. Every business owner should always supposedly have an exit plan. I don’t have an exit plan. So I’m thinking, “Huh, maybe I need to think about one.”

Loren Feldman:
Did they know anything of substance about your business? Do they have a sense of how big it is? Or how it’s doing? How many employees you have?

Jennifer Kerhin:
The first one did. They knew a lot about it. They had targeted me specifically. The second one did not.

Loren Feldman:
And did it leave you at all tempted?

Jennifer Kerhin:
Sure. I mean, the grass is always greener. If you offer any small business person who works as many hours as I work what seems like a lifeline: “Here, here’s some potential money.” It’s very tempting, absolutely. I think what I learned in this, though: I need to understand this space better. I completely do not understand.

I’ve learned a lot—I should say, a lot more than I did nine months ago when the calls first started over a year ago. But I learned a lot more about what even private equity is versus startup capital versus angel investors versus family offices or financing. Those words meant nothing to me last summer. You know what, it’s not pretty typical that a company just—or maybe it is—just starts up bootstrapping it. That’s another word I didn’t know: bootstrapping.

Loren Feldman:
You did it before you knew what it was?

Jennifer Kerhin:
I did it before I knew what it was! That’s exactly it. I’m learning the financial lexicon of this world that is so intriguing, terrifying, and tempting all at once. It’s kind of like the Garden of Eden with the apple. God’s telling me not to eat it.

Shawn Busse:
That’s the right metaphor, Jennifer. And of those three words you used, the middle one, “terrifying,” is the one you should focus on. Because private equity—over and over and over I have just seen this—they’re salespeople. And so I’m curious, before I start condemning them and throwing them under the bus—

Loren Feldman:
Oh, I think you’ve started.

Shawn Busse:
I’m curious, what was their sales pitch to you? What did they offer you besides, “Oh, here’s a pile of money”? What is their reasoning for approaching you?

Jennifer Kerhin:
The first one was, “We are looking to get into this space, and instead of building it, we thought to buy it.” The second one was very vague. It was, “Hey, we’re in this space, and we’re looking at companies to acquire.” Nothing of substance.

Loren Feldman:
Jennifer, did it sound like they were interested in just taking over your business, or investing in it and maintaining a role for you?

Jennifer Kerhin:
The first one, I think, the investment and a role for me. The second one, I have no idea.

Loren Feldman:
And when you said before that you were a little bit tempted, maybe, would it be for either of those options, or just one?

Jennifer Kerhin:
I think the temptation comes from, as I’ve said in previous podcast episodes, right now, my company is going through a pretty significant transformation—and a great one. But it means I’m working ridiculously long hours. So if anybody even just offered me a three-day vacation, I think I would jump at it.

But I think when I realize the effort I’m putting in now, I’m going through—and I forget the term when the caterpillar turns into the butterfly—that’s what’s happening right here in this company. Metamorphosis, is that it? But what’s been intriguing to me is knowing that I’m sort of peeling back the veil to understand there’s a whole world out there of the financial building up or taking down of companies that I didn’t really understand. I didn’t understand any of this world. And now, I’m really just getting a feel for it.

Shawn Busse:
Is it that you’re intrigued because if you had more capital, you could hire people to take on some of these jobs that you’re having to do, and you’re working two, three, four 21 Hats roles? Is that what you’re thinking?

Jennifer Kerhin:
I think that’s part of it. I think there’s also an incredible fear that all of my eggs are in this basket, and so to de-leverage some of my risk.

Shawn Busse:
Did they use the term “take some chips off the table?”

Jennifer Kerhin:
They did! Good job, Shawn. [Laughter]

Shawn Busse:
Oh, wow. That’s amazing.

William Vanderbloemen:
Total shocker.

Shawn Busse:
Right, William? I mean, we were talking about the Garden of Eden, William. I mean, you know all about the snakes.

Jennifer Kerhin:
I do! They’re presenting the apple, and saying, “Don’t touch it.” And yet, the snake’s saying, “Take it. It’s delicious.”

Loren Feldman:
I’m guessing William’s gotten some of these phone calls, too. And I want to ask him about that. But first, to Jennifer’s point, maybe we should define these terms. Let me take a crack at it. Private equity is a pool of money, a fund raised by investors who are looking to either outright buy or invest in businesses. It’s different from venture capital, in that venture capital is generally looking for startups they can take from zero to unicorn. Private equity tends to buy existing businesses that have a track record, and may continue to run them for a time.

Shawn Busse:
When I think of private equity, I think of an extractive model where the investors are looking to get a return, and then run the business for three to seven years, and then sell it to another—usually to another private equity firm—who thinks they can do the same thing.

Loren Feldman:
And they often do it using leverage. They buy a company. They borrow against the assets of the company that they’re buying, which often puts a lot of debt on that company and can make it very difficult for it to succeed long-term, but the investors tend to get their money out. That’s one of the horror stories you hear. William, how often do you hear from would-be investors?

William Vanderbloemen:
Oh, two or three times a week. It’s cooled off a little bit. I think, for a while, when debt was basically free, I think private equity was looking for places to park their money besides the market and really went on a buying spree. But having said that, I think, the merger-and-acquisition pendulum swings back and forth in every industry. And right now in the search industry, it’s definitely a hot thing.

So I haven’t taken any of those calls seriously yet, Loren. I took enough of them to start to understand what I think the market currently would value us at. I’m not interested in selling, but it seems to me nearly every small business owner thinks their company’s worth more than what other people will pay for it. [Laughter]

Shawn Busse:
There’s a universal truth.

William Vanderbloemen:
I mean, if you started a business, you ought to be its number one fan, right? You ought to think it’s just the best thing in the world. But I took enough calls to start to understand the options. And I really love our work. I love what we get to do. I’ve also noticed quite a few friends who’ve caught some form of lightning in a bottle with their company and think that they’ll just go do that again, and it’s not quite that easy.

So for me, it’d be more of a question of: How many options am I leaving open for an exit? And let’s stay on radar with PE in case that’s the one we want to do. You know, we might do an ESOP. We might just take passive-owner income and hire a CEO who’s better at this than I am. You talk about the snake in the garden, it is so funny. The old King James version, like the 1611 one that was used forever and ever, when it described the snake, it said, “Now the serpent was the subtlest of beasts.” [Laughter]

Shawn Busse:
Yeah, this is good.

William Vanderbloemen:
So when I think of some of my friends in PE, they’re pretty subtle in the way they state things. I do think I have seen some redeeming value in friends who have used PE and have been like, “You know, we started this thing, but neither one of us has a business degree. We don’t really know what we’re doing, and having a professional management team in place actually is good.” But I tend to agree with you all: If you go down that road, you can forget ever controlling your company again.

Shawn Busse:
Yeah.

Jennifer Kerhin:
The one thing I liked about these calls: One, I’m naturally curious. And so it’s been intriguing to me to see this whole world I don’t know anything about. But also, I’m very naturally attracted to an ESOP. And I’m trying to temper my natural inclination or enthusiasm with more rational thought. And so by looking more into PE, I can hopefully see the pros and cons of ESOP better, right? I’m not sure, but I’m looking at it from a comparison.

Shawn Busse:
William or Jennifer, in your conversations, did you ever get a handle on, “Hey, I can sort of see that this industry is valued at X multiple of EBITDA.” And I know every business broker listening right now is gonna be like, “But Shawn, It’s not just a multiple! It’s a lot more than that.” Whatever. Did you get a sense of that, William?

William Vanderbloemen:
Yep. I did.

Shawn Busse:
What’s kind of the range that you see in there?

William Vanderbloemen:
No one’s gotten inside our books to take a serious look, so a wide variance. In our industry, it depends a lot on how you run: how much of this is personality dependent. If it’s a guy who’s got a great book of business, and he wants to sell, you’re looking at 1X gross revenue. Maybe, maybe five or six times net. Now, on the other hand, if you get a firm that’s fully self-sufficient, that does not depend on personalities, that has a good balance of new business and recurring clients, and it has some digital components with some recurring revenue through software, then you can get up towards 15 on the net.

Shawn Busse:
On EBITDA or net operating income?

William Vanderbloemen:
EBITDA. You know, there’s not a lot of depreciation in such firms. So even a net is much closer.

Shawn Busse:
Like a manufacturer would be very, very different.

William Vanderbloemen:
Very, very different. But yeah, I think the key is, if you’re buying a guy, that’s not worth nearly as much as if you’re buying a process and a system with some software tools added on.

Shawn Busse:
Which has kind of been your journey. Right, William?

William Vanderbloemen:
I hope so.

Shawn Busse:
I mean, you talk about making yourself less relevant every year.

William Vanderbloemen:
Yeah, it’s far, far easier than my ego would like. [Laughter]

Shawn Busse:
I bet you’ve been pretty good on the operating side. I bet the marketing side is the hard side for you.

William Vanderbloemen:
Yeah, it’s what I love doing. So now, my game for marketing, I’m more like a brand ambassador. I’ve got a book coming out in November. And since the firm has the same weird name as me, the author, that’s sort of halo marketing for the firm without my marketing efforts being viewed as essential to a potential buyer. Does that make sense?

Shawn Busse:
Yeah, totally.

William Vanderbloemen:
And it’s a research-based book that tells stories about the common habits we’ve seen in the very best people we’ve interviewed, now that we’ve done 30,000 face-to-face interviews. So it’s pretty cool. And it will position the company as experienced and a trusted advisor. And so that kind of marketing I’m still involved in. But the day-to-day stuff, I’m really getting out of the way.

Loren Feldman:
William, in the approaches you’ve gotten from investors, have they mostly been from investors who are just interested in search in general? Or do you hear from people who have figured out that you have a distinctive firm with a very distinctive focus?

William Vanderbloemen:
Both. And I mean, you end up on a list, I’m sure. Because it’s everything from “We help with exit strategies” to “We’re private equity” to “Hey, we buy search firms, and you look appealing.” I just got invited to a thing next month that I’m not going to be able to go to where I think it’s put on by two dozen PE firms, and they’re inviting boutique search firms.

Shawn Busse:
I mean, the interesting thing, Jennifer, have you gone down the path of… well, the difference between private equity and an investment bank, for example?

Jennifer Kerhin:
No, I went to one of those sessions, though, that William was talking about, where a law firm put on one of these all-day retreats that you could go and listen to. And I remember I left it feeling so strange because they invited CEOs of small businesses to come, right? It was like bragging about how great they were and telling us how important they were. And I don’t know, it just rubbed me the wrong way. And then, when I brought up ESOPs, they were like, “Oh, that’s the stupidest idea ever. It costs too much money.” I didn’t really get a lot out of it or learn about it. But I had a speaker at one of our Vistage groups talk about investment banks. But I don’t know that much—the difference.

Shawn Busse:
I think my shorthand is, essentially, an investment bank is looking to sell a business, and private equity may be a buyer. So that’s another approach you could take, right? You could work with a firm that positions you for sale, and then they play the different capital groups against each other. That’s the ideal situation. If you want to sell, and you want somebody to help you navigate that process, that’s the investment bank route. And they collect a fee and that whole thing, but there are advantages and disadvantages. But they’re all going to tell you ESOP is terrible, because they can’t make a commission on it.

Loren Feldman:
Or not as big a one.

Shawn Busse:
Or not as big a one, yeah.

Jennifer Kerhin:
I met an entrepreneur who sold his third company to a private equity firm. What are they called, the “bolt on?” And I asked him, “They say that saying, ‘Every business owner is like a boat owner. You should figure out how you’re gonna exit. When you’re gonna sell your boat the first day, you buy it, and vice versa when you start your company.’” I was like, “Is that true?” He’s like, “Absolutely. I absolutely think of an exit plan.” And I was like, “Oh.” And he said, “Did you?” I was like, “It’s never occurred to me that I could exit my company.” [Laughter] So I want to learn and understand this world.

Loren Feldman:
But Jennifer, you must know that you are not alone in this. And Shawn, you would probably know best. It’s unusual for a business that’s still kind of in the growing stage to already be thinking about exits.

Shawn Busse:
I mean, what is really interesting to me, because I think last time we were on together, Jennifer, you shared you were just below $5 million, but over 2, somewhere in that—and thanks for sharing that. What’s interesting is that they’re being aggressive with you. And to be aggressive with a company at your size tells me they’re very bullish on the industry or the solution, because usually PE doesn’t want to talk to you until you’ve hit like $5 million or half a million in earnings in EBITDA.

And so I think what’s going on here is, you’re in a hot market, or you’ve created something that’s hot. And I think you want to really keep that in perspective as you go forward, that there’s a reason they’re talking to you. And you have the value. And they’re gonna portray it as like, “Oh, we can help you and blah, blah, blah, blah, blah, blah,” but at the end of the day, I think you’ve got the leverage here.

Jennifer Kerhin:
That is a great insight. Thanks, Shawn. I had not thought about that at all. And to go back to William, they’re being subtle with me, huh? [Laughter]

Shawn Busse:
Well, they are the subtlest of creatures. And the other thing, too, Jennifer is—and William brought this up—the capital markets have radically changed, so money is not cheap-slash-free anymore. So I suspect that the PE folks are starting to look at businesses that have good net operating income. And a well-run professional services business should have really good net operating income. And what they probably see with you, through their lens, is: services. People are moving back into real-life events. This is upward. You know, Zoom is going to go down, events are going to go up.

And they probably see it as the opportunity to squeeze margin out of your business by optimizing it. So let’s say you have 10 percent net operating income, or 15 percent. They’re gonna want to drive that to 20-25 percent. And how they do that is the painful part. So that’s the thing. I suspect they’re moving towards margin and away from speculation, because the capital markets have become so difficult for them. And I’ve read articles that say, basically, the private equity model breaks in a high-interest environment. And that’ll be interesting to see over the coming years.

Loren Feldman:
I should point out, I’ve talked to business owners who sold to private equity, and were very happy with the way it turned out. It does happen.

William Vanderbloemen:
Same here, Loren.

Loren Feldman:
Based on my entirely unscientific, anecdotal survey, those companies seem to be in the minority. And that’s certainly what you tend to read about, but every fund is different and has different characteristics and interests and focus. And I think sometimes the stars do align. It is possible.

I know one company, it’s technically a private equity business, but their name is Permanent Equity. And their strategy is to buy and hold and to keep the owner involved as long as the owner wants to be. And they’ve done that with all their investments. They don’t make that many. They really just focus on bringing in—not professional management to take over, but professional help to supplement what the owner has been doing. So there are other flavors out there.

Shawn Busse:
I’m curious, Loren, when I first heard about the Permanent Equity idea, I was like, “Actually, that could work.” But that was before interest rates went up. And you know, I’m curious if that’s changed.

Loren Feldman:
That’s a great question. I have not spoken to anybody there since interest rates went up. So I don’t know the answer. One thing I do know about them is that, unlike some places, they don’t feel compelled to invest if they don’t have an investment that they find attractive. So they’ll go, you know, more than a year without investing in a business, if that’s what they think is the right thing to do. And maybe, as they say, they’re keeping their powder dry right now.

Shawn Busse:
Well, they are the subtlest of creatures. [Laughter] I mean, that’s a classic sales strategy. I hate to say it, but saying, “Well, we’re really busy, and we might be able to take you on.” Sorry for the cynicism, but I think you could build a model. There are certain industries, for example, where the margins are sufficient to service the debt from an outside investor. The problem is, a lot of owner-run businesses just don’t have the margins to support that type of outside investment. And so when the investment comes in, they’ve got to find the money somewhere. And usually, that means cracking down on costs in the business, and that’s where then the culture suffers. The employees leave. So the owner might be happy.

William Vanderbloemen:
Not to poo-poo, but having learned quite a bit, and still learning, about culture, I think if the private equity does well, and they grow at a triple-in-five-years kind of rate, the culture is going to suffer. Because culture does not withstand fast growth.

Shawn Busse:
Yeah, that’s a good point, William.

Loren Feldman:
That’s kind of damned if you do, damned if you don’t.

William Vanderbloemen:
I think that’s right.

Loren Feldman:
So the interesting thing about Jennifer’s situation—and she told us that she was a little bit tempted, because she, as she’s described here in previous episodes, is in what Shawn called the “valley of death.” She’s at this stage where she personally is working really hard. The business is growing, it’s doing well, but she doesn’t quite have all the people in place that allow her to grow comfortably and live a normal life. William, I’m curious, did you ever go through a stage like that? And were you approached by investors at that point?

William Vanderbloemen:
Yes, we went through that stage. It was probably seven, eight years ago… eight years ago. Yeah, we had a really big hockey stick growth, and then had a great PR firm that helped us get our first book out and got a couple of big placements. The Chicago Tribune wrote a thing about the rise of pastoral search firms. And so those calls came, and it was an easy decision. Because I’ve got a bunch of young kids at home. This was not going to be life-altering money, if that makes sense. I was gonna have to go find something else to do after some time off, and I didn’t know what that’d be. And I was convinced—and still am—that we haven’t even really scratched the surface of our market. So I turned it down pretty quick. And then our growth has, as Loren knows, been intentionally at the speed of cash, and not ever intended to be sort of hockey sticks. We’ve had nice growth, but not anything that has put us at a new place of saying, “Now it’s time to take those calls.”

Loren Feldman:
Do you think you got out of that stage where you were working too hard and stretched too thin just by keeping at it?

William Vanderbloemen:
No, no. I think we did, for good or bad, restrain some growth by, beginning eight years ago, me taking a little less ownership over the day-to-day decisions, taking a little more time in the summers, getting me out of doing searches. “We need to get William out of searches. He can’t be doing the searches. We’ve got to save him for other things.”

So our young sales guy is talking to this church and says, “Well, this is the fee.” “Is William involved?” “No, William’s not involved. If you wanted William involved, it would cost you another $25,000.” And they’re like, “Well, we definitely want that, then. Because it’s got to be cool.” So total backfire. We tried it for like a year, and I ended up with more searches than ever. [Laughter]

Shawn Busse:
You are the subtlest of search firms. [Laughter]

William Vanderbloemen:
So we did turn the spigot off a little bit on: What can we squeeze out of William being involved in the name of a more peaceful long-term venture? I don’t know that I’m building a 100-year company, Loren, but the Tugboat idea—you know, let’s make this sustainable, let’s be a Small Giant—that kind of came on radar. Let’s get serious about growth that can live past me. And that has taken a long time, and not without some ups and downs, culture going sideways, having to get reined back in. I mean, it’s not been a totally up-and-to-the-right journey, but I like the decisions we’ve made so far.

Loren Feldman:
Jennifer, does that sound like a viable approach for you?

Jennifer Kerhin:
Yeah, absolutely. I think, right now, this hockey stick growth that we’re in—to use his analogy—is because of what happened post-COVID and this entire new market of hybrid conventions. And I almost feel like I’m in the perfect storm of opportunity, that if I don’t take advantage of this now… Like, it’s just the perfect time to jump on it. I can’t sustain this pace of me personally working this growth forever. And I feel close.

A lot of things have happened recently: new hires, let some people go. I have a fractional CFO who realized the strain I’m under and who said to me, “Jen, you know what? I’m taking a more active role, because you just can’t do all of it.” And she got involved, and she has been making decisions and brought people in right and left. So I feel the edge of the desert. Let me put it that way. I feel the edge of it. So to what William’s saying: Yeah, I like the Tugboat idea. I like it. I also, like I said, love ESOPs. It’s just tempting because I’m working every weekend, but we’re getting through it.

Loren Feldman:
Jennifer, can you charge your clients $25,000 more, if Jennifer is involved? [Laughter]

William Vanderbloemen:
I remember those days. We were in line at Space Mountain in Disney, and a sales call came through. And I had our youngest on my hip, and my phone in my ear. And Adrienne said, “What are you doing taking a call right now?” And I said, “Well, how do you think we got to Space Mountain?” You know, it’ll pass. I promise it’ll pass, if you plan for the long haul.

Loren Feldman:
Did you really know it was gonna pass at that stage, William?

William Vanderbloemen:
No, and I really don’t want to think about how much money I left on the table by not being on the road all the time. But I think that I’m happy with where we are.

Shawn Busse:
Jennifer, I love hearing what you said about your CFO. Do you have anybody else in your organization who acts as that lieutenant for you—that, “Gosh, they know what I need to do next, and they’re helping me do it before I ask them to do it”?

Jennifer Kerhin:
Yeah, I have a person who I hired. I’ve known her for 20 years. She came in in a different role, and in the last nine months has realized, “Okay, Jen…”—and I don’t know if I’ve mentioned this before, but I’m the visionary. And so I gave her that book, Rocket Fuel.

William Vanderbloemen:
Great book. Fantastic book. Everyone listening should read that book. It’ll take you one day.

Jennifer Kerhin:
Yes, I totally agree. And so she’s like, “Okay, I get it. I’m the integrator. You’re not the detail-oriented integrator. You see the future of what’s happening with hybrid conventions. You’re the speaker. You’re the person who understands how to combine this new technology with the services.” She goes, “I’m going to help you be the integrator.” Because, to be honest, I don’t need business development. I have slowed down growth. We get so many RFPs. We get so many calls. I don’t need more growth.

And so, yes, to your question: She’s been instrumental in the CFO jumping in. And I have some other people who I’ve hired that are stepping up to that role. We had a senior leadership retreat two weeks ago, and they all said to me what I think, William, probably your staff said to you years ago. They said, “Jen, you need to get out of this decision making and do the stuff that you’re good at. And we need to get you out.” So we’re on our way.

Shawn Busse:
This is gonna be my prediction: In a year, your life is going to be dramatically different. I think you’ve got it. You’ll get there.

Jennifer Kerhin:
Thank you. Well, Shawn, my 30th wedding anniversary is next year. I was a child bride. [Laughter]

Shawn Busse:
So you’re 42.

Jennifer Kerhin:
Right. I’m convincing my husband. We’re gonna go for a two-week trip to Europe. My husband’s from Poland, so we’re gonna travel around the southern part of Europe. He’s never seen Italy or Spain. So I’m hoping that I don’t have to look at email, except to run payroll. So we’ll see. Talk to me next July after my anniversary.

Shawn Busse:
Make that part of your one-page plan, and let your team know that that’s what you want to do. Let them know that’s your vision.

Loren Feldman:
All right, I want to hit a couple of other points in the limited time we have left. Shawn, you’ve recently decided to change banks. Can you tell us what prompted that?

Shawn Busse:
Honestly, the pandemic and the PPP experience was really one of the first dominoes. I learned really quickly how grateful I was, because I had two banks at that time. I had a local community bank—shout out to Beneficial State Bank, which is a B Corp bank, a really, really great organization.

Loren Feldman:
What did you use them for?

Shawn Busse:
They helped me with the PPP. I was in the middle of transitioning my accounts to them when the pandemic hit. I still had Bank of America as my primary bank, and I’d had them forever. And the difference in experience of getting PPP funds from Bank of America versus Beneficial was dramatic. Because I applied to both organizations at the same time, and Beneficial came through, and Bank of America a year later was like, “Well, we’re ready to help you with your PPP.” I was like, “Sorry.”

So, community banking is obviously a big deal for me, and you’ve heard Jay talk about this a lot on the show, as well as others, that having a relationship with your banker is really important, especially when you don’t need them. Because what I find is that they really want to be your friend when you don’t need them. So build the friendship then, and not when you’re desperate.

And then the other thing that happened is, I learned that—because I had our credit cards still through Bank of America—just how little control you have with a credit card and how vendors can charge it once they have access to it. And I was really shocked. I had a vendor who threw a $5,000 charge on the card, pretty much fraudulently, but the effort it took to unwind that was—

Loren Feldman:
This was a subscription type business, right?

Shawn Busse:
Yeah, I had a subscription. It was $200 a month, and I canceled the subscription. And they said, “Well, now you owe us for three years, per your contract,” which, actually, I hadn’t signed the actual contract that they were citing. But then I was stuck in the bureaucracy, because it’s all automated, right? So it was tons of time and hours on the phone with Bank of America. I finally got it reversed. But it took the better part of two months, three months, and a lot of my time. So yeah, it just was a real eye-opener to the credit card world and the banks that run them and the control or lack of control that you might have.

Loren Feldman:
So what are you doing for credit cards now?

Shawn Busse:
I found a fintech company. This was assisted through the LinkedIn network that I have. So I kind of put the situation out there on LinkedIn. I was like, “There’s got to be a better way.” And I sort of proposed, “Hey, wouldn’t it be cool if there were like a virtual credit card company,” and somebody said, “Well, there actually is, Shawn,” and it’s called Divvy. And what it does is, it allows you to spin up virtual cards with all kinds of controls on them.

So you can say, “Hey, I want this card to have a $200 monthly limit, because I’m going to use it with this vendor that I’m not sure about, and it doesn’t have a proven track record.” And then you can assign a cancellation date. You can say, “Hey, this card is going to expire in six months.” You can assign the card to employees in the company. It’s really powerful. Now, the downside is, there’s no points. There’s no lines of credit. You have to pay it off every month. But it gives me absolute control over where my money goes, which is fantastic.

Jennifer Kerhin:
Shawn, do you pay everything on your credit card? Or do you have ACH direct deposit, whatever, set up?

Shawn Busse:
Kind of a mix. So the bigger stuff and the stuff where we have a high trust relationship, we would do ACH, but there are just a lot of subscriptions that we use, technology. I’m sure it’s the same for you. I mean, tons of technology. And you know, 30 bucks a month, 50 bucks a month. And the problem with everything going to subscription is that, these companies, they can change things willy-nilly.

Speaking of private equity, I had a great software vendor, wonderful. It was kind of expensive. It was $600 a month, but it was fantastic. They were bought by some sort of private equity company. They jacked up the rates to $900 a month, and they’re like, “Oh, yeah, we can do that per our agreement.” And it’s like, “Wow.”

But we weren’t paying attention, right? That’s what they kind of lean on, is that you’re not really focused, because it’s a proven vendor. You’ve paid them over and over. So your bookkeeper may or may not flag it as he or she is processing your books. So I think there’s a bit of a predatory environment out there with the ability to have a subscription, and I think some companies kind of count on that, that you aren’t looking very closely. So I’ve just taken a lot more control recently, and it feels good to be back in control.

Loren Feldman:
Do you miss those points?

Shawn Busse:
I don’t. I don’t. To be honest with you, I think it’s tripping over dollars to save dimes often times. It just doesn’t motivate me.

Loren Feldman:
Jay Goltz would argue with you on that. I think Jay’s prouder of the money he gets back from his credit cards than he is of the business that he built.

Shawn Busse:
Jay is at a different point. Jay’s got a much larger organization, so the money he gets back is meaningful. When you’re in that $1 to $5 million range, yeah, okay, maybe you get a free plane flight once a year or something. My time—just to Jennifer, to your point—is way more valuable than that free flight. And so I’m looking for ways to basically scale up my efficiency, not to get 50 bucks here or 100 bucks there. Maybe you have a different—I’m curious, Jennifer. What’s your, how do you work?

Jennifer Kerhin:
Well, it’s been all American Express. Same thing, Shawn. We have a lot of subscriptions, and also, my CFO was like, “Look here, you’ve got to change the way you pay for some of this stuff,” because it was either actual checks—like I was actually writing, a year ago, manual checks.

Shawn Busse:
Oh, wow.

Jennifer Kerhin:
It was crazy. So we switched to Bill.com.

Shawn Busse:
We use that too.

Jennifer Kerhin:
It’s been great. So a couple people have recommended Divvy to me. It’s interesting you said that. They’re like, “Jen, I think you need to switch to Divvy.” And so I’ve been looking into it to get out of just the reliance, to your point, on these credit cards that are on everything. My AmEx is on everything. And yeah, the same thing happened to me with Salesforce. “Oh, wait. Why am I paying so much money?”

Shawn Busse:
And the other thing, too: I’m glad you mentioned Bill.com. I think that’s a really good tool, and we use it a lot, especially for higher-ticket items that are non-recurring. The other thing I think —somebody stole my credit card number through a website. I don’t know how they got it.

But we put our credit cards on so many websites. You’re just never going to know which website was compromised. But as soon as they have that number, the first thing they do is they start jacking up illicit spend. And then you’re kind of in this awful situation where you’ve got your card at 25 different companies, and you’ve got to reset it. And just that time it takes, and then you’ve got to go to the credit card company and dispute the fraudulent charges, and then that’s a process.

Loren Feldman:
Do you think that’s going to be easier with Divvy, if it happens?

Shawn Busse:
Oh, for sure. Because basically, I’ve just created cards for different vendors. And so if that one card is compromised, no big deal, you know?

Jennifer Kerhin:
And our issue is we have people travel nonstop. And we submit travel expenses. And so, we’ve just finished this very complicated syncing between QuickBooks, Bill.com, and Expensify.

Shawn Busse:
Oh, cool.

Jennifer Kerhin:
It’s fantastic. It’s gonna save us a lot of time. But I don’t want to do Divvy, because I’m like, “I just finished this!” But I have limits on everybody’s American Express, and then if they get close to the limit, I get an alert on my phone that, “So-and-so is getting close to the limit.”

Loren Feldman:
We’re almost out of time. Jennifer, you’ve talked to us about working on your website. Can you give us a quick update on where you stand with that?

Jennifer Kerhin:
I’m so excited. Phase one of our new website is up. Please, everybody, take a look: discoversb.com. We have a brand new website, and we are moving towards phase two, which will have videos and case studies and more testimonials. We’ve been doing a lot of taking B roll footage at our conventions. So, super excited. By the first of the year, we’ll have phase two, but phase one looks a thousand times better, and I love it.

Shawn Busse:
Congratulations.

Jennifer Kerhin:
Thanks.

Loren Feldman:
What did you learn in the process?

Jennifer Kerhin:
ChatGPT can be really good at writing marketing copy. [Laughter]

Shawn Busse:
You realize you’re talking to an editor, here.

Jennifer Kerhin:
I know! But second, it is really hard—really hard—to find the right photographs to encapsulate what you do. They always say an image is worth a thousand words. That takes a lot of time to find the right, perfect image on your website. And we have good, not great, images. So that’s part of phase two. It’s really trying to get great photography and great video. So that’s probably the second thing I learned, and that having a professional do your website is worth the money.

Shawn Busse:
“Amen,” says the professional. [Laughter]

Jennifer Kerhin:
I tried to do it too cheap for too long, and it was silly. It’s really silly. You should hire a professional. They’ll make it look great. They taught us how to do some basic text edit changes in WordPress. So, great, but I should have done this a long time ago.

Loren Feldman:
What did you Learn about using ChatGPT for marketing copy?

Jennifer Kerhin:
I tend to write very business-oriented. The staff that I had wrote very business-oriented. We put them in and asked it to refresh for like a subhead or a heading and worked it through. ChatGPT came up with some cool headers that I wouldn’t have had.

Loren Feldman:
William, didn’t you tell us that you put the information about your coming book into ChatGPT and got a headline out of it?

William Vanderbloemen:
Oh, yeah. I do a lot of writing, whether it’s Forbes or whatever, but I use it for titles all the time. I think the title is half the post, if you’re trying to get people to read. And I don’t know if I’m not very good at titling, or they’re very good at it, or both.

Jennifer Kerhin:
Do we call it they? Or is it? Is it he or she? What is ChatGPT? [Laughter]

William Vanderbloemen:
This is a good question. This is a good question.

Shawn Busse:
It. It’s an it. Let’s please not turn it into something.

Loren Feldman:
William, what have you figured out, in terms of getting those titles from it? How do you prompt it?

William Vanderbloemen:
I usually put my existing title in and say, “Retitle this.” Now, I have found that the content that they produce, like copy for things, is not reliable.

Jennifer Kerhin:
I agree. I think what I found is that I could write the paragraphs of copy, but I couldn’t think creatively enough on the headers, the titles, and they helped me. One of them is, “Unleash the magic of outsourced meetings logistics.” I would have never come up with that. Now Shawn, a company like yours, your people, you’re more creative. But our website designer wasn’t a copywriter. They helped me with some of it. They helped me organize stuff. But I think that was pretty cool what ChatGPT could do.

Shawn Busse:
Well, and you put your finger on something I’ve seen for a long time with real humans. It’s that there are headline writers, and there are body copy writers. And each can do the other, to some degree. Like, I’m a headline guy. I can write headlines all day long. It takes me a long time to write full copy. I can do it, but I’m not that efficient at it.

Loren Feldman:
All right, I suspect Jennifer and William and maybe Shawn have to check and see if they’ve gotten any offers for their company while we’ve been talking here. My thanks to Shawn Busse, Jennifer Kehrin, and William Vanderbloemen, and to our sponsor, the Great Game of Business, which helps businesses use an open-book management system to build healthier companies. You can learn more at greatgame.com. Thanks, everybody.