Twelve Hours a Day, Six Days a Week

Introduction:

This week, we meet Jennifer Kerhin, the newest addition to the 21 Hats Podcast team. Jennifer’s business, SB Expos and Events, is an event-management business that survived the shut down in 2020 and has grown to more than $3 million a year in revenue. When COVID first hit, Jennifer tells Jay Goltz she really thought it would put her out of business; in the end, she says, it made her stronger. Even so, she is very much stuck working in her business, while looking for ways to extract herself from day-to-day tasks someone else could handle. But how do you free yourself up enough so that you have the time to put the people and systems in place that you know you need? And how long should that take? “I hate to tell you,” says Jay, “it took me 10 years. But I’m going to help you here, so it’s going to take you 10 months.”

— Loren Feldman

Guests:

Jennifer Kerhin is CEO of SB Expos and Events.

Jay Goltz is CEO of The Goltz Group.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome Jay, and especially Jennifer. It’s great to have you here for your very first 21 Hats podcast episode, Jennifer. Thanks for joining us.

Jennifer Kerhin:
Well, thanks for the invitation. I’m thrilled to be here.

Loren Feldman:
So to get started, tell us about SB Expos and Events. What do you guys do?

Jennifer Kerhin:
Sure. We are a comprehensive trade show sales and convention management company for associations. We only work with associations on their conventions and trade shows.

Loren Feldman:
Give us a little more idea of what exactly you do for them. What does event management mean for you? And how do you get paid?

Jennifer Kerhin:
Yeah, absolutely. That was my basic elevator speech in 10 seconds or less. So I’ll explain.

Loren Feldman:
Well done.

Jennifer Kerhin:
Thank you. So probably all of your listeners have been to a convention or trade show sometime, right? And there are all sorts of ones out there. The ones that we work with are run by associations, either professional membership or trade associations, where they have a trade show or convention throughout the year. The difference, for your listeners: A trade show is predominantly where there’s an exhibit hall and not much education; a convention is a combination. So when you go to a conference where there’s a combination of education, keynote speakers, breakouts, concurrent workshops, things like that, with an exhibit hall, that’s more of a convention.

What we do is comprehensive services. The company has been around since 2009, but in the last couple of years, we’ve added a certain amount of services. We started off just in the trade show world. We do exhibit and sponsorship sales and management. So an association outsources that to us. We contact companies, research companies, that might be interested in exhibiting or sponsoring at their meeting. When COVID hit, the events industry did just an amazing job during COVID, right? We were shut down.

Loren Feldman:
I remember that.

Jennifer Kerhin:
Yes, yes, yes, yes. We honestly thought we were gonna go out of business. At the time, we had been working on an event tech platform. The events industry started, I would say, 10 years ago, but really five years ago, really getting into event technology. We were already in it, and we switched very quickly to doing virtual conventions and trade shows. Because of that—you know, they often say that adversity can make you stronger—out of that became what I saw a need in the market for not just our trade show salesmanship, but the add-on additional services.

So now we do wraparound. We do registration. So when you go register to get your badge, we handle that. We do speaker management. So should this event be in Nashville? Or should it be in Omaha? Or should it be in Seattle? We’ll do site selection. We do all meetings management, logistics, food and beverage, sessions—where they should be—the event schedule, handling all of that. Hotel-room-block management: How many people are supposed to stay in this hotel? How many versus that hotel? We do something called lead retrieval. So any of you, all the listeners I’m sure, have been where you’ve taken your badge, and you’ve walked into the exhibit hall, and an exhibitor wants to scan your badge. That’s called lead retrieval. We handle that.

And then we handle—all of these came out of the adversity we faced during COVID—event-tech consulting. So associations can hire us to figure out how to take their event management and simplify it through technology.

Loren Feldman:
Can you give us an example of that? What does that mean?

Jennifer Kerhin:
So imagine—I heard this phrase years ago—that Excel spreadsheets are the “duct tape for meeting planners.” And Excel spreadsheets are wonderful, but they’re not databases. And we work with a specific technology platform. Some of our shows have 350 exhibitors, and all of those exhibitors need to upload their logos. And they need to figure out a certificate of insurance, they need to fill that out, they need to pay, they need to fill in their description.

That’s not done by Google Forms or Excel spreadsheets anymore. It’s by a specific technology platform that we work on. That’s a whole ‘nother story that I can get into. But we picked one. And so now we only work on one event-technology platform, because we’ve become experts on it. It’s called the Cadmium event-tech platform. But that way, you don’t use Excel spreadsheets. You don’t use a Google Form. It’s a database of speakers.

Let’s say you have 250 speakers. Speakers have to upload their bio, they have to upload their credentials, they have to give us their demands for honorarium or if it’s free, what they’re speaking about. Sometimes they have slides. Oftentimes, we have to get financial disclosures, depending on the type of meeting that is being run.

We have a big department that handles medical association meetings, which has a whole list of regulations that the government’s been involved in and different accrediting organizations have been involved in. And speakers have to fill out financial disclosure forms, so that you know if that speaker is being paid by a pharmaceutical company or a medical device company. So managing speakers.

Again, you could do it in an Excel spreadsheet, but we don’t want to work in duct tape anymore. We want to work in 21st century technology. And so we’ve moved out of that realm, and moved into the next level of managing an event—simplifying it so that associations can think about sort of the next generation of experiences for their attendants and not worry about the considerable amount of administrative work that goes into it.

Loren Feldman:
Can you give us a sense of how big the business is?

Jennifer Kerhin:
Sure. So I think we’re going to do $3.4 million this year. We were on track from a budget to do $3.2m. We managed to get some additional sales in, so I’m looking at about $3.38m. Right now, I will say, my Vistage group will be super happy that I can say that metric off the top of my head. When I started, I wasn’t the best at that. So I’ve gotten better. No CEO knows everything, as obviously the name of the 21 hats. One of my hats that I did not like to put on was the financial metrics. So I’m gonna give myself a little pat on the back that I can say that out loud.

Loren Feldman:
And how many employees do you have?

Jennifer Kerhin:
We have two starting this week. So full-time equivalents, I’m gonna say 26. I think we have 30 full time employees right now. But we have several part-time. One of the things that’s interesting: At the beginning of COVID, I thought this company was going to be out of business soon. And yet it made us stronger. One of the other ways it made us stronger, besides the technology, was we went to a fully virtual company. We no longer have an office. We used to. And I was two weeks away from buying a building. We were supposed to settle on March 22nd.

Loren Feldman:
Oh, you’re breaking Jay’s heart.

Jay Goltz:
No, she might be breaking her own heart long-term. So not my heart. I wonder, long-term, whether you’re not going to look back and go, “Oops, I should have bought the building.” Not sure yet.

Jennifer Kerhin:
Well, we’ll see.

Jay Goltz:
The jury’s still out.

Jennifer Kerhin:
The jury’s still out. We’ll see. We were supposed to buy it March 22nd, and I walked away from that because of COVID. And then I decided to go to a fully virtual office. So now we’re in 12 different states. So the two people who started on Monday are in two different states. I’m based in Maryland, but they’re based in other states. So we’ll see, Jay. We will see.

Jay Goltz:
Yeah, I’m not sure. I’m just saying, I think when you’ve got a lot of new employees, I have a hard time figuring out how you’re going to train and develop things—and not just for you, for lots of other companies in America. I think it’s still early in the game to figure out, long-term, whether that’s going to work. I will tell you, every single thing you say—because I’m heavily involved with the framing industry—I totally get everything you’re talking about. It makes perfect sense to me because I am out there, involved with it.

Let me ask you an interesting question, I think. We figured out in the framing industry, only 15 percent of picture framers go to the national trade show. What do you think it is in a lot of other industries?

Jennifer Kerhin:
Yeah, it’s a strange statistic, because sometimes I’ve seen with smaller associations, they’re getting 25 to 35 percent of attendants based on membership, a percentage of membership. But those are small associations. The really big associations where you have a lot of members, they don’t get a high percentage. So I don’t think that that’s that bad, Jay. What I found is that associations will then come up with other types of meetings to try to get other groups. So for yours, are there other, what they call in the association, special interest groups? Do you have other smaller conferences?

Jay Goltz:
No, our problem is that the industry has shrunk considerably since the heyday because—it’s a whole story—a lot of it is just the Baby Boomers are getting out of framing and their kids aren’t framing pictures like they used to. And then there are big chain stores now that have eaten up a lot of the market. So the custom framing industry, for retail picture framers who own their own store, clearly is down by probably half. But still healthy, still enough business around.

But the part that I find interesting is whatever industry—the ones you just talked about, the one I’m in—it blows my mind that people would not go to a national trade show for the industry they’re in. And I just don’t think it’s smart. I think the fact that only—whatever the number: 15, 20, 25, 30—it’s hard for me to imagine how you could be in an industry and go to a trade show or a convention and not leave there with enough value that it paid for itself 10 times over. And that’s just surprising. I think the average person might think, “Oh, well, a national convention, I’m sure 80 percent of the people will go.” And that’s simply not the case.

Jennifer Kerhin:
No, and I agree. I am surprised that if you’re joining—now, let’s say your dues are $225 to the association—how you haven’t figured out that the return on investment of going to the annual meeting is worth it, I think the smartest associations have figured out that ROI and how to convince their members, but it is a problem across the board for all trade shows. You know, a member doesn’t mind writing a check for $225. And to be honest, sometimes it’s not even budget. Sometimes it’s just time out of the office. They’re like, “Oh, do I really wanna go…?”

Jay Goltz:
No question. Right, I’m too busy to go. I mean, it doesn’t make any sense, but that’s the nature of small business. No, that is interesting. Because in our industry, there’s no big accreditation, so the question becomes—this is absolutely chicken and egg. The people who don’t go say, “I can’t afford it.” And my argument is, can you afford not to go? And do the people who go there go there because it pays for itself? Or is it the fact that the people who don’t go to it can’t afford it?

It’s self-defeating. I mean, I think people need to go—I don’t know if “need” is the right word. If you want to grow your business, I believe going to a convention or a trade show is clearly worth the time commitment, even if you’ve got to close the business for a day or two.

Loren Feldman:
Because, Jay, you’re going to see how other people are running their businesses? Is that the idea?

Jay Goltz:
No, three reasons: A, there are vendors there. You might find a vendor that no one else knows about. And I mean, it’s hard to cover the country with reps. There are new vendors that come up that don’t necessarily have rep coverage around the country. B, the classes. You could find one insight from one class that just can change your whole world. And three, you can be standing in line getting lunch and start talking to the person next to you and get some tremendous insight from someone else who’s not in your market. That’s the key to this. You can let your hair down and have an honest conversation with somebody who’s across the country that you wouldn’t want to have with somebody whose business is two miles from yours. So like I said, I can’t imagine how this doesn’t pay for itself 10 times over.

Loren Feldman:
All right, you’ve written enough ad copy for Jennifer, Jay.

Jennifer Kerhin:
Well, and that’s just one side, right? If you’re a business, and you’re going to a trade association to learn about your business. But imagine a small business where their clients are at, right? Whether they decide to exhibit or not, if all of their clients or many of their clients go to a specific trade show, they should be there. Besides them going to learn about what they should do better in their company, learning what the clients are doing, what are the trends that their clients are seeing, what does the future look like for their clients? The only way they’re going to have all of their clients in one room possibly is at a convention or trade show. And so every small business out there should look at their top 10 clients and what trade shows they go to and figure out how to go to at least one of them every year.

Jay Goltz:
I can also tell you, I’ve got a couple of cronies who I’ve been friends with for 30, 40 years. I get tremendous insights from. One comment to me 30 years ago: “Oh, you should go to the trade show.” It changed my business. And then I started importing molding and stuff. So it could be just one comment from one person you’ve developed a relationship with over the years. You would have never had exposure to that person if you didn’t go to the convention or the trade show. So I’ve been to hundreds of them over the years, literally.

Loren Feldman:
We saw this in Chicago. Jay and I met you, Jennifer, at the first 21 Hats in-person event, and I know you talked to people around the room, and some of them, it seemed, hadn’t given a whole lot of thought to whether there even was an association for their industry.

Jennifer Kerhin:
Yeah, absolutely. Long-time listener, and so when Loren decided to have this meeting, I was one of the first people to email him and ask to sign up, because I know the value of meeting face-to-face in that kind of environment. I just wanted to meet other business owners.

And I was sitting next to Steve Krull, and we were talking about different trade associations. And he’s like, “I don’t think I’m a member of that many.” And we typed in one, and he was like, “Well, that’s not the right fit.” And then we found another one, and he’s like, “Whoa.” And we looked at the board of directors, and it was a lot of his competitors. And so he’s like, “Absolutely, I need to be a part of this.” I’m hoping I’m not throwing him under the bus a little bit.

Loren Feldman:
I think you’re giving him some good publicity.

Jennifer Kerhin:
Steve joined. I talked to him or emailed him afterwards, and I was like, “So did you join?” He’s like, “Yeah.” It was a trade association—a niche one—but a perfect fit for his type of company.

Loren Feldman:
Digital Marketing.

Jennifer Kerhin:
Yeah, a very specific type of digital marketing. So he was thrilled to see it. I think people sometimes think that trade associations are sort of very early 20th century. But if they look, a new trade association seems to be born once a week, right? Because the world of commerce and trade is changing so fast. There weren’t any artificial intelligence associations, I’m sure, 20 years ago, and I’m sure I can probably find 10 right now. So I think for every business owner out there, they should find the trade association that fits their company, and find the ones that are good for their clients.

Jay Goltz:
With that being said, many of them—you know, better than me—are struggling terribly.

Loren Feldman:
The associations?

Jay Goltz:
Yeah, there are lots of trade associations. Listen, we haven’t had a picture-framing trade show for two or three years because of COVID. And like, it’s getting started up again in February, but I know for others, COVID was brutal to them, and it’s been a problem. So while there are some new ones coming along, you tell us: Some of them have dropped out? Yes? No? Have some just gone out of business?

Jennifer Kerhin:
I think it just depends on the industry, Jay. I haven’t seen that across the board. We work with a wide variety of associations, and I think it depends on what’s happening with the industry. There are some associations that are growing gangbusters and even grew dramatically through COVID. Think about the industries that did really well in COVID. There were quite a few, and those associations did well, too. I think the bigger question, if you look at which ones are struggling, is: How much of their budget depends on the event? Or how much depends on dues? If it depends on the event, then sure, COVID was rough in our industry. Really rough.

Loren Feldman:
Do you have competition, Jennifer?

Jennifer Kerhin:
I do. I would say, honestly, there are other third-party companies out there like us, but the majority of our competition is more staff for associations. Does the association want to outsource this to a third-party? Or do they want to hire staff to do it internally? I mean, there are other competitors out there, but I feel like lots of times I compete with the concept of hiring staff to do it.

Loren Feldman:
You described a broad range of services that you offer and how those services, those offerings, expanded after COVID. As you were describing them, it occurred to me that each one of those represents a pricing decision. It seemed pretty complicated. How do you approach that?

Jennifer Kerhin:
So I vastly underestimated the level of complexity that I walked myself into when I decided to add these services. Yeah, Loren, you’re absolutely right. About two years ago, I decided to add all these other services. I understood the concept of them. I had been part of the events industry for 25 years. I knew the different vendors that were out there, the different ways it was done. But I underestimated it.

We operate on a scope of work based on a fee-based service. So for the whole year, if you want to do registration for 5,000 people, it’s going to cost X amount of dollars. It’s usually a 12-month planning cycle. And that’s what you pay us, based on the scope of work, which makes it a little bit easier for cash flow and definitely makes it a little bit easier for invoicing, but vastly underestimates how much time you have to spend to really define the scope of work. And you need people who really understand it to make sure the scope of work is done. So I’ve been learning a lot. There are a couple other ways. We do fees that we’re playing with. Hotel commissions are part of it. Lead retrieval fees are another part of it. Hourly tech support is another one. But I am working a lot of hours to figure that part out.

Jay Goltz:
I’ve gotta tell you, I went through the exact same thing with every one of my businesses, because I didn’t understand the business model, quote-unquote. Like when I went to the wholesale side, I didn’t know the volume and paying sales reps. So I’ve been through the whole thing with trying to figure out what you’ve got to charge and what the expenses are.

So I won’t even say you’re reinventing the wheel, because in some ways, you probably are inventing the wheel. You’re coming up with a whole new thing to some degree. So that’s normal, and you are going to figure it out. And as soon as you figure it out, life gets easier, because then you start charging properly, and then all of a sudden, you can afford better staff and life gets easier.

Jennifer Kerhin:
Jay, how long do you think that took? I’m still in the midst of it.

Jay Goltz:
Well, it depends… I hate to tell you, it took me 10 years. But I’m going to help you here so it’s going to take you 10 months. [Laughter]

Jennifer Kerhin:
I’m at the 18 month-mark.

Jay Goltz:
I had no one to talk to. I’m telling you, I had no one to talk to. And my framing business got so much bigger than anybody else’s. It’s not like I could go find someone to talk to about, “What do you do with a million-dollar frame shop?” And I had to figure it out, and you know, it took a while. In your case, you’re gonna figure it out much quicker.

Loren Feldman:
Jennifer, you talked in Chicago a little bit about your struggle with the hours a day that you’re working and the number of days a week. Can you tell us a little bit about that? Why are you personally putting in such long hours? And how are you hoping to address that?

Jennifer Kerhin:
Sure. I think I mentioned in Chicago that I was working about six days a week, 12-hour days, since COVID. I would say before COVID, in the end of 2019, our company was just trade show sales and management. I think in January, 2020, I had a staff of nine. And we had our workflow and our processes on our invoicing. We had everything down very, very good. At that point, I was training leadership, and I wasn’t working as hard.

COVID hit. Obviously, I had to put all hands on deck to try to get us through it. When I decided to add the services, I didn’t realize it was exponentially more difficult. To Jay’s point, I’m inventing the wheel. For some of these other services we offer, I know what to do. I’ve hired good staff. But you can’t expect staff to create your financial structure of how to do invoicing and deal with cash flow, because that service has a different way to collect fees. You can’t expect staff to figure out how to create the structure of the department—”Hey, we have a director, a manager, a coordinator. How often are we going to meet?” Things like that.

You have to sort of put it in place and hire the people to do it. And I was hiring people so fast that I didn’t think through the structure of each department, which is based on the service line—or how they talk to each other. How does the director of registration talk to the director of meeting planning? And what are the transitions of work between them? And the handoffs? I vastly underestimated this.

Loren Feldman:
Especially in a remote environment, right? Has that been a challenge?

Jennifer Kerhin:
Remote’s not. It’s funny, because I was not on board with hybrid work. I was the first CEO to say, “No, you have to be in the office. You can’t work at home one day a week.” And then I go fully virtual. So I’ve done a 180 on that. Because we’re in the events industry, and because we meet on show sites so often, we can have dinners. We can be a part of it. We see each other. I see our employees a couple of times every year. It doesn’t seem to be as difficult. But I also know that if you’re a coordinator, and you’re right out of college, and you’re not quite sure what to do, it’s much harder than I had anticipated than sitting next to somebody at a desk and figuring out how to work. So in that case, yeah, I agree with you, Loren. It’s harder.

Jay Goltz:
I would say the key part to this is that—and I fully accept that you’re going around the country, so you do see them, so that certainly helps.—is hiring staff. You know, I talk to people, “Oh, I want to hire someone to do what I do, so I can just go out and sell.” And I go, “Do you know what they call those people? They’re called entrepreneurs. They don’t need you.” So I think in your case, and everyone else’s case at your stage, you have to find three very capable people.

And I used to always hear CEOs go, “Oh, I hire people smarter than myself.” And I used to laugh. It’s true. People are better than you at the financial piece, the marketing piece, the managing piece. Those people exist. And you’re just going through the learning curve now of figuring out what you need and finding them, but you will figure it out.

What makes us successful is the same thing that drags us down: torturing ourselves. We’re really good at torturing ourselves. You said, “I didn’t think it through.” That really isn’t the case. You just didn’t know. I mean, you could have thought it through all you wanted. You haven’t been in this situation. Some of this is simply a learning curve. There was nothing to think through. So I hope today I can give you the gift of: Stop torturing yourself. You’re doing extremely well.

Jennifer Kerhin:
Thank you for the pep talk! [Laughter]

Jay Goltz:
No, I mean it. No one’s going to come into a situation like yours and figure it all out on the front-end. That’s just not how it works. So you will figure it out. You need three key people, and I don’t think you have them at this stage.

Jennifer Kerhin:
I think I have one, and I’m trying to train the others. And then I have a fractional CFO who has said to me for the past year, “Jen, you really need someone internal.” I don’t know if it’s a controller, because I do all of the bookkeeping and the invoicing.

Jay Goltz:
Okay, that’s crazy. So yes, you clearly need that person, and they will pay for themselves. You’re not an $800,000 a year business. It’s your stage.

Loren Feldman:
How do you mean they’ll pay for themselves? They’re not going to drive revenue, but you mean by freeing Jennifer up?

Jay Goltz:
No, they’re going to free her up, and they’re gonna catch stuff. She’s not an accountant. They’re going to have some skill-set to be able to do stuff she’s not used to doing. There’s a good example of hiring someone that’s better at something than you are. You’re not an accountant. So you’ll find that person.

So you clearly need the financial person at your stage. Though the part that would be harder is if you told me you were doing $1.2 million. That’s a problem. It’s hard to get the math to work to go hire a financial person for a $1.2 million business, but you’re big enough now that that shouldn’t be a problem. So you get the financial person, the person to do the marketing-slash-sales, perhaps, and then the operations. And then you do the entrepreneur stuff, which is spending a lot of time on 21 Hats and talking to Loren and I.

Jennifer Kerhin:
Well, that’s the oversight. You’re wearing so many hats at a million dollars. As you grow, you’re trying to take the hats and put them on other people, right? The financial side, at a million dollars, I could send out our monthly invoices and manage it.

To give you an example, we travel a lot, so our Amex bill is pretty high. But it’s also a lot of transactions. So before, after every show, I would have to go into QuickBooks and manually do the transactions for all the Amex ones and put them in the proper GL code. Well, now, every Sunday, I’m spending four to six hours doing stupid $5.15 at Dunkin Donuts at the airport and putting that in the GL code. I’m like, “How did I miss that this needs to get off my plate?”

Jay Goltz:
Ouch. No, I can tell you because I live in that world. That’s a $50,000-a-year job.

Jennifer Kerhin:
Oh, God, I’d pay it tomorrow!

Jay Goltz:
No, that’s what you pay people. That’s called a payable person. For $50,000, probably, in whatever market, you get a very competent person that’s very good at it and is totally into it and does a good job and totally takes it off your hands.

Jennifer Kerhin:
I think I’m going to post the job tomorrow because I would like my Sunday nights back.

Jay Goltz:
Yeah.

Loren Feldman:
Jennifer, let me ask you this. You mentioned that you went through a period where you were hiring very fast. Did that go well for you?

Jennifer Kerhin:
Overall, pretty good. We started hiring last year. So in January of 2022, I started with 11 staff, and now we’re at 30. So we’ve hired 28? No, maybe we started at 14. We’ve hired 20 people in the past year, and two of them didn’t work out. So the rest of them did. Last year—if everybody remembers the summer of the great labor migration—I think you had a podcast panelist who sort of predicted this.

Loren Feldman:
Yes, William.

Jennifer Kerhin:
Yeah. We saw it a lot. Everybody saw it last summer. Because of the virtual—you could work from home, the remote aspect—we were able to get better employees than I would have expected because they valued the stay-at-home, the remote work, and we could hire in different states. So overall, I think the hiring part was okay. The training! I mean, to Jay’s point, when you’re remote, you have to have a more established training program than when you’re in person. And that’s another thing I underestimated.

And now we have a better training program. We have an office manager who spends the first week with them just introducing them to our systems. They don’t even meet the rest of us except for one full staff call. Just taking that off our individual directors’ plates has been dramatic. So overall, I’ve got a lot to learn about training. Hiring, I felt okay. But I’ll tell you another thing that I need to get off my plate. Boy, oh, boy, state tax! When you hire a new employee and they’re, let’s say, in Nebraska, holy moly! If I could find a company that could say, “Look, I’ll set up your company in Nebraska, and I’ll figure out the code to give ADP.”

Jay Goltz:
Wait, wait, wait, wait.

Loren Feldman:
That company exists.

Jay Goltz:
Are you not using an outside payroll service?

Jennifer Kerhin:
I use ADP. ADP won’t do this!

Jay Goltz:
Okay, you need to get away from ADP. There are 10 other companies out there. ADP was for gigantic companies and I was with them years ago. There are companies. As Loren just said, this already exists, for sure.

Jennifer Kerhin:
It does? Oh my gosh. Do you know how much time I was on the phone?

Jay Goltz:
Yeah, I do know, because I’ve got several people that work out of state. I absolutely know.

Jennifer Kerhin:
It’s crazy! Like, “Hey Tennessee, could you please send me the unemployment insurance number so I can take it out?”

Jay Goltz:
No, I get the mail. And I see, “Oh, there’s mail from Colorado.” I’ve got somebody in Colorado. We’ve got somebody in Oregon. Yeah, I know. And like, there’s something that you should be putting zero time into, because there are companies that do that.

Jennifer Kerhin:
Jay, send me those companies. Again, that’s somebody I’m going to hire tomorrow.

Loren Feldman:
You can Google it. This is a very common problem.

Jennifer Kerhin:
Oh my gosh. Is it?

Jay Goltz:
Absolutely.

Jennifer Kerhin:
And this is the problem with growth, right? You just miss things. You miss the things that you can take off of your plate. That’s all.

Jay Goltz:
The fact of the matter is, your biggest problem, as mine was, you’re by yourself. I’ve got this theory—and it usually pays off—that one human being can run about a $3 million business by themselves. Now, match that with a husband, wife. Match that with a father, son, mother, daughter, whatever. Now all of a sudden, you see some of these companies that are doing—there are three siblings working together, or there’s a parent. You’re by yourself!

Now, with that being said, I have people working for me now who are every bit, if not more, competent than a relative would be. I mean, it’s not a matter of trusting them. They’re totally trustworthy. But you just haven’t found those people yet. Maybe you found one, you said. Once you find those three people, life gets very much, much, much, much simpler. But a lot of these companies have enough family in there that they can basically can get away with it, because they’ve got enough family there to cover it.

Jennifer Kerhin:
Well, let me ask you this, Jay, because I have three other, I think, burgeoning leaders. They’re getting there. They’re new. They’ve been hired in the last six, eight months. And one of the things I always hear is that a business owner needs to spend, at this point, a lot of time and investment on training the next level of leaders.

So I have one that has a skill-set. But I have three to five who I think are the next generation of leaders. Like, they’re strong, and I just need to get them leadership development. Would you agree with that?

Jay Goltz:
Here’s an interesting twist: You keep calling them leaders. There’s a difference between management and leadership. In this stage, you’re the leader. You’re not that big that you need a bunch of leaders. On my level with 130 people, I absolutely need leaders, and I have them. At your stage, first start with getting them management, and then they become leaders. But people use that phrase all the time: “Oh, I’ve got my leadership team.” I go, “What are you talking about, a leadership team? They’re not leaders, they’re managers.”

Jennifer Kerhin:
That’s perfect! Yes.

Jay Goltz:
And I will also tell you, this is the biggest problem in entrepreneurship. We figure stuff out. That’s why we’re successful. If we didn’t figure it out, we wouldn’t be around. You wouldn’t be on here today if you didn’t figure it out. You’d still be running a $600,000 business. We figure stuff out. Everyone else doesn’t figure it out. They need to be trained. And once they’re trained, they’re just as valuable as we would be.

We have to understand stuff that we figure out, that people say, “Oh, well, that’s common sense.” No, it’s not common sense! That’s the point. It isn’t common sense. For whatever reason, we figure stuff out and other people, especially if they’re younger, we can save them [time]. Maybe they will figure it out, too, 15 years from now. We can take someone who’s 30 and get them to be as smart as a 50-year-old within a year or two. You and I are out there trying to figure it out on our own. And it takes a long time.

Jennifer Kerhin:
Oh, that’s so timely, Jay, because I think yet another mistake I made in the past sort of two years is that I thought if I hired people with a good skill-set that they could create and solve those problems and create that structure. And to your point, I realized, once I set it up, they’re amazing. But I expected, I think, just too much of them to do it.

Jay Goltz:
And the reason you expected it is because you figured it out.

Jennifer Kerhin:
That’s exactly it!

Jay Goltz:
That’s why I’m saying, you’re an entrepreneur. They’re not. It’s just different. And like I said, I’ve got key people here who are way better at stuff than me. They correct me plenty of times. I’ll have a meeting: “Jay, we shouldn’t do that. Here’s…” “Oh, yeah, you’re right.” They’re extremely smart and insightful. They’ve also been here for 20 years. You don’t have 20 years to get this straightened out.

So I’m hoping that I can help you. Listen, I wish I could have gotten my own advice 30 years ago. Oh my god, my business would be twice the size or twice as profitable. The world’s changed. There was no one to talk to for me—well, I didn’t try that hard, but I did try.

Loren Feldman:
So we’re running short on time here. But before we go, Jay, I want to check in on your business a little bit. You’ve talked here about having inventory coming out of your ears. I think the last time we talked about it on the podcast, you told us that you were still out there buying stuff, even though you were storing it all over Chicago. But you were still buying because that’s what your home store does. You need the current stuff. Have you made any progress with that? Where do you stand?

Jay Goltz:
Well, I’ll tell you, having my son here, I’ve made him the chief profitability officer. He rides me like a typical employee wouldn’t, because he’s my kid, and he’s not wrong: “Dad, Look at the inventory we have!” And it made me sit down and do the math. And I showed it to him. The fact of the matter is, my business is big enough now that I figured out we’re going to use up X amount of cost of goods sold, and that by the end of the year, if half of what we sell, for instance, in the home store—

Loren Feldman:
Okay. But you told us that six months ago. Have you made any progress?

Jay Goltz:
It’s working. No, for sure, for sure. I mean, the fact of the matter is, my business is a little seasonal. The first half isn’t as busy as the second half. My point is, ask me December 31st. I think I’m going to tell you—

Loren Feldman:
I’m going to ask you before that.

Jay Goltz:
If whatever I sell, half of it comes out of inventory, we’re good. So I think that’s where we’re at. It also illustrates, on the entrepreneurial level, you better have lines of credit.

Loren Feldman:
Thank you for mentioning that, because I think we haven’t really covered what this does to the economics of your business and why having too much inventory can be the financial problem that it presents. Can you walk us through the accounting of that a little bit and how it can get you into a cash crunch?

Jay Goltz:
Because buying stuff is very easy. I literally send people around the world to find cool and interesting stuff. And 20 years ago, I might have knee-jerked and said, “Stop buying stuff!” Well, you know what? That doesn’t work, because Jayson Home is based upon having cool and interesting stuff. And I can’t just shut off the spigot. On top of which, the collateral damage from that, to tell your people who are totally into the mission, “Stop doing your job for a few months,” is not a good thing. So the math of it is, I literally have millions of dollars of too much inventory, but I’m going to go through it by the end of the year.

Loren Feldman:
But you mentioned the lines of credit and how important they are. Why do you need lines of credit?

Jay Goltz:
Because I’m buying inventory. The first half of the year or the first five months of the year, I lose money just because of seasonality. And so that uses up cash. And then, it’s very easy to buy a million dollars worth of stuff. You go to a few trade shows, you go to some things, and all of a sudden your inventory goes up, and it’s coming right out of your cash.

And in some businesses—it depends what business you’re in—what sucks up cash? Inventory. Receivables could be a killer. In my case, not terrible because a lot of my stuff is, you buy it, and you pay for it right away. And in some businesses, it’s buying expensive machinery, which you should be able to lease, so that shouldn’t be a problem. But inventory kills a lot of companies.

Loren Feldman:
So there’s a difference there, right? If you had bought equipment last year, you would have been able to deduct that.

Jay Goltz:
Yes, a lot of people don’t understand. Inventory is not a tax deduction. Instead of having cash, you’ve got inventory. You can’t deduct the cost of inventory. So it doesn’t even help you tax-wise at the end of the year. Now, in some cases, you want to get rid of inventory that’s not selling because you can then take the loss, and it does help your tax bill.

Loren Feldman:
But the key thing there is that if you bought the inventory last year, you can’t write it off until you actually sell it.

Jay Goltz:
Exactly. And the issue for me versus—if you’ve been reading about Target’s got all this problem with too much inventory—I’m not in the fashion business. Our stuff doesn’t have a shelf life, like, “Oh my god, last season this was hot, and now this is.” So I’m not running the risk much of getting stuck with stuff. Whereas some companies, they got in trouble. I mean, they bought too much inventory, and now they’ve got to dump it, because the fashions change so quick.

Loren Feldman:
Jennifer, are you glad this is one problem you don’t have?

Jennifer Kerhin:
I was thinking the same thing. Inventory is not a problem I have, and considering the financial part—maybe not my specialty—I’m happy I don’t.

Loren Feldman:
My thanks to Jay Goltz and Jennifer Kerhin—and of course 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 for listening, everybody.