Why Not Become the Strategic Buyer?

Episode 96: Why Not Become the Strategic Buyer?

Introduction:

This week, Shawn Busse, Karen Clark Cole, and Jay Goltz compare notes on some of the many choices they’ve made building their businesses, such as the emphasis they’ve placed on growth, the risks they see in growing through acquisition, and—as Karen has recently experienced—the rewards of being acquired. They also discuss whether The Great Resignation, despite forcing companies to pay higher wages and work harder to find and keep talent, just might be a good thing for business owners. As Shawn says, “This puts more people into the marketplace looking for businesses where culture matters, where the owner has compassion and empathy, where families are valued, just on and on and on. And if you’re that employer, you win.”

— Loren Feldman

Guests:

Karen Clark Cole is co-founder and CEO of Blink.

Shawn Busse is co-founder and CEO of Kinesis.

Jay Goltz is founder and CEO of Artists Frame Service.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Full Episode Transcript:

Loren Feldman:
Welcome Shawn, Karen, and Jay. Karen, this is the first time we’ve spoken to you since way back in October after you sold your business in September, I believe (“Holy Crap! This Is All My Dreams Come True”). You sold Blink for $94 million, as we discussed here. You told us all of your dreams had come true. Have all your dreams come true?

Karen Clark Cole:
It has gone very well. If you think of what’s the best scenario possible, that has actually played out. It’s been everything that was promised to us, in terms of how we would be working together with our new parent company. You know, we joke that we probably could have not told anybody and nobody would notice. That’s how little change has happened inside of Blink. And for our employees, for our clients, nothing has really changed.

What has changed is, we’ve got some extra resources to help us grow, we’ve got all kinds of new client connections for more work, and less concern about the ownership—although I have to say that that’s sort of a hard pattern to break. I don’t actually feel any different about running the company and having that level of responsibility. It’s not like you can just turn it off. So our last two quarters were record breaking, so no one’s really had much time to sit down and worry or think about much other than the job at hand, so that’s helpful for sure.

Loren Feldman:
Karen, do you think those record-breaking quarters were kind of in the pipeline anyway? Or is that to some extent the result of the acquisition?

Karen Clark Cole:
No, it’s not the result. There’s really very little difference as a result, in terms of our business. So this is just what we call our core business. We track it now—for purposes of the earnout really, mostly—what we call synergy work, which is the parent company bringing their clients to us and us working within their bigger contracts. So we’re just getting started on that. They’ve really wanted us to not be distracted or deprioritize our main consulting work. That’s been the biggest concern, and so we sort of kept a lot of that at bay.

And just at the beginning of this new year, we’re starting to focus on, how can we work together when it makes sense, when there’s a big strategic opportunity, and there’s loads of them. So again, we’re being really careful, because we don’t want to blow the wheels off our bus, because the goal is to keep growing Blink for what we’re doing. And that’s why they bought us—because they wanted us to keep growing this work that we’re doing. They want to make sure that we don’t get overwhelmed with all kinds of new opportunities. I mean, their clients are chomping at the bit to try to have some of our services, but we only have so many people. But we kind of have the opposite of people switching jobs, leaving. We’re hiring like crazy, and so our main barrier now is how fast we can hire. There’s work for as many people as we can hire.

Loren Feldman:
Karen, you told us back in October that you were not at all worried about going back to being an employee with a boss to report to. In fact, you told us, and I quote, “I can’t wait to have someone tell me what to do.” Jay, do you remember what you said in response to that?

Jay Goltz:
Well, I’ll just be consistent. I go, “I can’t wait to ask you in a few months if that’s still the case, because…”

Loren Feldman:
You said you were going to write it down.

Jay Goltz:
Yes, I have a question, which is—this is an entrepreneur question—we all get in business, or most people I think get in business, because you want to control your own destiny and you want to make money, blah, blah, blah. So my question is this: I assume you’re still working a lot of hours, right? How many hours are you working?

Karen Clark Cole:
Oh, I’m pretty good. I mean, I’m not insane.

Jay Goltz:
Okay, so let’s say 50 hours. Okay, so the question is: Now that you have a considerable, clearly—I don’t think this is a big secret—given that you now have more money than you could possibly spend—

Karen Clark Cole:
More than I need, let’s say that.

Jay Goltz:
Someone from the outside could say, “Wait a second, you don’t really need the money anymore, and you’re working a lot.” Have you had any moments that you’ve thought, like, “I would have loved to have taken the weekend off like other people do”? I would think it would change the dynamic in one’s head. I don’t know. Or does it not?

Karen Clark Cole:
You would think. That was the big question and concern before these guys acquired us, because they needed myself and my co-founder to keep running and driving the company. And they were worried for exactly what you just said—

Jay Goltz:
Ah, okay. That’s a good answer. Okay, you’re fulfilling your—

Karen Clark Cole:
Well but the point is, I’ve never worked for the money. I don’t get up in the morning because I’m going to make a lot of money. That’s not what has ever driven me. I love what we do. So really, nothing has changed, and the same is true of our leadership team. We had 28 shareholders when we sold the company, and they all made a decent amount of money. And you can say the same for all of them as well.

Loren Feldman:
Are they all still there?

Karen Clark Cole:
Everyone is there, and everyone is working the same as they were. Like I said, we could have certainly not said anything, and nobody would have known the difference. Because everyone in the company is still really engaged—in fact, even more, because now we actually can grow faster, which is what we’ve always wanted to do. And so now, between our work and the work that they want to bring to us, what we talked about all day long is: Is it scalable?

Shawn Busse:
Karen, I’ve got two questions for you: Is there an earnout in place for you, as well as for the other 28?

Karen Clark Cole:
Yes.

Shawn Busse:
So everyone has an earnout? Right?

Karen Clark Cole:
Yeah, same package. We got a percentage of the deal up front of the cash. It was a cash deal. So it means there was no stock trading or anything like that, so it was all cash. We got 70 percent of it upfront and 15 after the first year, and 15 after the second year. And that’s based on our targets, and so what’s also unusual about our deal is the parent company didn’t give us a target. And that was very hard to achieve, which is often the case. These were our targets. That’s what we said we can do. And so far, we exceeded the first one in the first year. In the second part of the year, after the acquisition, we also had a target. So we had three targets, and that was essentially doing what we said we were going to do for the money that we already got.

And so if we didn’t meet our targets for last year, we would have been docked for the future years. So all it says is that we have to do what we said we’re going to do, which is why they’re being really respectful of not trying to get in our way and not trying to overwhelm our system so that we can do that. That’s the first priority. And then the next priority is, “Okay, how can we grow together? How can we help you hire faster so that you can do some of what we call ‘synergy work?’” And that’s where it’s very collaborative, and if we succeed, everybody succeeds. So that’s really their top priority.

Shawn Busse:
I mean, by industry standards, that earnout is pretty favorable. That’s probably one of the better ones I’ve heard of.

Jay Goltz:
Really, you think more than 30 percent earnout is normal? Because that surprises me.

Karen Clark Cole:
Oh, yeah, a lot of the offers we got were 60 percent earnout.

Jay Goltz:
That’s interesting. I didn’t know that.

Karen Clark Cole:
So you get like 40 or 50 up front and the valuation is quite low. And the terms for getting that earnout are really high, and they’re hard to meet. They’re hoping to not pay.

Shawn Busse:
Yeah, that’s really common. Now by standards, it’s remarkable, Karen. Really, hats off to you. Because it’s not uncommon for the earnout to start at three years, and sometimes go to five. So imagine, Jay, you’ve got to perform this incredible way over this three- to five-year period. And then, yes, I think like Karen said, a lot of folks are banking on you failing.

Jay Goltz:
Well, I will tell you, when you have a smaller business that’s not in the high-tech space, many people try to get a much higher number, because they’re going to assume they’re going to get screwed out of the back end of it, and that’s okay. In your case, you got plenty of money up front, and you probably will be able to perform to get the rest of it. But I think when you’re selling your business for, whatever, $5 million, people are very skeptical of getting the rest of the money out of it. And that’s why frequently, from what I’ve seen, they want to make sure they get enough money in that first check that they’re good, because who knows what’s going to happen?

Shawn Busse:
The other piece I was curious about, Karen, is I’m just seeing a flood of acquisitions in the Portland market—agencies that have been around a long time just suddenly announcing, “Hey, we’ve joined such and such, a multinational conglomerate, blah, blah, blah. It’s amazing. It’s awesome.” Everybody spins it as the greatest thing. I’m kind of curious: What’s your thought on that? Is it just generational? Like a bunch of agency owners are seeing the end of the rainbow and want to get out? Or is there something else at play? Cheap money?

Karen Clark Cole:
Didn’t you see it? Yeah, the end of the rainbow was there.

Shawn Busse:
I keep looking for it.

Karen Clark Cole:
Well, I think it could just be the space that you’re in. I mean, if some of those agencies are touching on product design, user experience, anything in that sort of digital product world, I think that’s where all of the snapping up [is]. Anything sort of digital transformation remotely related, there’s this massive consolidation going on. And that’s just because everything is digital now, and so you can’t ignore: What’s that customer experience like? So it’s become a business requirement now. And so a lot of these companies that are trying to stay in the game and win, they can’t do it without that. And so that’s why, if there’s an agency that’s doing some of that—because I know a lot of agencies have started doing that kind of work that is sort of high value—then that’s the kind of frenzy that’s going on.

I mean, we saw it when we were in our pitch phase. We talked to 50 or 60 big agencies that are dying to get into this space, and so there’s a real market for sure. And now we get to do the buying, too. We’re looking to grow faster, and so I’m sort of looking at companies that we can roll into us now. And so it’s sort of back to the fun part. But I think that’s what’s happening. There’s the big digital transformation of everything, and so I think that’s why the timing is now, and then there’s some pent-up demand from COVID and then just the way the world is going. Everything’s digital.

Jay Goltz:
Because you’re so shrewd, I assume that you’re considering buying into the picture-framing industry?

Karen Clark Cole:
Well, I have a lot of framing piled up that I need done, so I sort of am. [Laughter]

Loren Feldman:
If only you knew someone…

Shawn Busse:
I hear you can order that online. It’s really great. [Laughter] Sorry, Jay. Just messing with you.

Loren Feldman:
Well said, Shawn. He’s not even responding.

Jay Goltz:
I have to tell you. This thing’s spotty. It’s going in and out. I don’t know if it’s just me. I’m only catching every other word here. I’m sure you said something very complimentary to me, though, while it was skipping out.

Shawn Busse:
Oh, definitely, yeah.

Loren Feldman:
Let’s take a quick break to hear from our sponsor. We’ll be right back.

[Message from our sponsor, Work Better Now]

Loren Feldman:
And we’re back. We have a question from a reader in response to our recent episode in which Jay, Paul, and Shawn talked about their succession plans (“The Game Has to End at Some Point”). And Paul told us that he’s hoping to double the revenue in his business in the next five years so he can better position the business, in case he chooses to sell it. The question comes from Buzz Park, a listener who is founder and CEO of Lightyear Management Group, which buys service and manufacturing companies. Let me read the question to you:

“I want to encourage Paul that there is a much more efficient way to double his customer base than trying to grow organically 14 percent per year for five years. May I suggest Paul seriously consider scaling through acquisition, buying other furniture companies. There are multiple benefits to this type of growth, and often these acquisitions can be made without a huge cash expenditure out-of-pocket.

Not only could Paul instantly double his customer base, he would also be instantly gaining the talent and manufacturing capacity to handle the growth. Post-acquisition consolidation could reduce overhead and costs. Also, he could potentially cross-sell to a new customer base and vice versa. There are so many other potential benefits, too many to list. So if his exit strategy is to grow large enough to be attractive to a strategic buyer, why not become the strategic buyer? With this strategy, he could even grow large enough to become attractive to private equity in less than five years and sell at a much higher multiple. Frankly, this strategy is viable for all your guests, including Jay.”

So Paul’s not here today. But I can tell you, I ran this suggestion by him and his immediate reaction was, “I don’t want to work that hard.”

Karen Clark Cole:
Yeah, that’s what I was gonna say, Loren. That’s what we did. We had bought like four or five or six companies over the years, just small ones. And while everything that the listener said is true, it is a huge amount of work. It’s intense, the amount of work that’s involved.

Loren Feldman:
That’s what you were doing before we started the podcast [episode], and I think you had just about reached the point where you stopped doing that, right when the podcast [episode] started. And you were kind of drained by the whole experience, if I recall correctly.

Karen Clark Cole:
Well, I was drained by trying to get investment money. That was the problem.

Loren Feldman:
To pay for the roll-ups.

Karen Clark Cole:
Yeah, that was part of a bigger growth strategy. Especially if you’re in a services business—it’s different, even like what Laura did with the acquisitions that she made. I think she talked about all the cultural implications that go with that. But when you’re in services, particularly, people are messy, and it’s a lot of work to integrate and pull that off so it goes well. And then you’ve got to find the money to buy the company. So it’s absolutely a great way to scale quickly and you get a lot of good stuff, hopefully, but it is a lot of work. Paul’s right.

Loren Feldman:
Jay, any interest?

Jay Goltz:
My new thing is it’s not about balance. It’s about alignment. And my alignment is, I’m finally, after all these years, happy. I go to work, no one’s bothering me, I’m not getting Post-It notes, no one’s calling me at home. They don’t know if I’m here or I’m not here. Life is simple and easy now—compared to what it used to be, for sure. I have absolutely no desire… and the business is big enough, which I didn’t use to think was such a thing. It’s 20 times bigger than I ever thought it would get. I have zero interest in trying to make it bigger.

And we’ve discussed on this podcast, I thought about buying a frame shop, and I’m glad I didn’t. Because I don’t need more frame shops. I’m good. I’m in a happy place. I am a recovering entrepreneuraholic, and I need to stay on the wagon. I need to stop starting businesses because it’s bad alignment. I don’t need more cash flow things. I don’t need more. It’s fine. I’m good.

So if I were at Paul’s stage, maybe that’d be a different story. But my company’s four or five times the size of his. I don’t need to grow it. It’s good where I’m at. So I agree that that’s a great strategy for many companies. You have to have the mindset to do that.

Loren Feldman:
Shawn, have you ever thought about being the acquirer?

Shawn Busse:
Yeah, I mean, I’m in a fortunate position that I see a lot of businesses do this stuff. You know, past clients, friends, etc. And I think the biggest issue that I have is most people look at it through the lens of a spreadsheet first: “Oh, look, our financials work. Their financials work. We’ll get rid of all these people who are redundant.” That’s always the dream, right? “Oh, we don’t need two bookkeeping departments. So we’ll create all these synergies, etc., etc.”

Jay Goltz:
Economies of scale. Throw that in.

Shawn Busse:
Yeah, that’s what they always think—the economies of scale. And then after they do the deal and everybody’s high-fiving and drinking champagne, they look around and go, “Holy crap, our cultures are totally different.” And that’s the thing I see more often than not, is there’s not a good strong evaluation of the culture. That’s changing, but a lot of times, especially if private equity is involved, it’s more about the spreadsheet. The consequences—and I think this is what Paul’s talking about—the amount of work that has to be done to make that work can be really significant.

You know, I’ve got a great thing. It’s funny, Karen was saying how we both started at the same time, and I’m like, “Well, I’m like 1/100th her size,” or whatever, in terms of valuation. And I’m okay with that. I like the culture here, I like the people, I love the clients. We grew really fast for a number of years, and that was fun and rewarding, but it was also really stressful. And when you lump on a new company, that’s quote-unquote “fast growth.” And it just depends if you like that kind of thing. Some people do.

Jay Goltz:
You’re 100 percent right, though, that nowhere on the spreadsheet is any of that there. Those are just numbers. Nowhere on the spreadsheet does it show anything about: Who’s working there? What’s their whole unique selling proposition? What’s the corporate culture? None of that’s on a spreadsheet. And I’ve seen private equity mess up a lot of good companies—I think everyone has. It’s more than just the numbers.

Karen Clark Cole:
Yeah, so buying those companies is a lot of work to integrate them well. But finding them is a lot of work. Because of that you have to get in there and do just hours and hours to evaluate the different companies.

Shawn Busse:
I think the point your caller makes, which is a really interesting one—I don’t know if he’s saying this specifically—but money has been so cheap, and it still is, relatively, by historic terms. And so for a company like Paul’s, I could see an acquisition there making a ton of sense, because you could almost sidestep a lot of the culture challenges there if you’re just like, “Hey, we’re buying these businesses for their customer base.” And I mean, that’s kind of a cold, callous way to look at it, but he could kind of go that way and see if he can adapt the culture to his culture. And if not, he’s just got a bigger business now.

Jay Goltz:
No, no, your point is absolutely—there might be someone out there that isn’t looking for that much money, because they don’t know what to do with the company. And it happens to integrate really well with him. It’s really a question of: Does that company exist out there? Yeah, he’s certainly got an excellent point. Everybody who wants to grow a lot should certainly look at that as an alternative, because I’m sure that those work out extremely well sometimes.

Loren Feldman:
Karen, you said that you are getting into this area again, looking around. What are you looking for?

Karen Clark Cole:
It’s the same, like what we’re doing. We’re in a services business, so we’re looking for companies that have great employees. We are looking for people who have companies and people in geographic locations where we are not, and it’s all access-to-talent strategy. So we’re just trying to be creative about where are pockets of grads or experienced people who are working in user experience, in some way or another. So that’s the goal.

And one way to get a bunch of people quickly is to buy a company. But again, it’s a lot of work. They’d have to be the right kind of people. It has to be the right kind of company. We have some good strategies for how to evaluate all the cultural aspects, as well as, certainly, work quality. I’m just sort of lightly looking. That’s not our primary strategy right now.

Jay Goltz:
You know, in the big picture, it really comes down to one thing—which is why this podcast, I believe, is so valuable—it comes down to what makes you happy. And Loren, to your credit, you put together people who are in very different places in that spectrum of, “I just want to go to work and be happy. I don’t need to grow it a lot.”

Paul’s looking to grow. Karen did her thing, which is great for what she wanted to do. Shawn, you really should sit down and think about what makes you happy, because unfortunately, many of us—including myself—jump into stuff thinking we’re going to get what we want out of it. And then we end up with some unexpected consequences like, “Oh, wait, I’m never home now. It was already bad enough before, and now it’s even more stressful.”

And I did do that to myself years ago, and maybe I shouldn’t have. Because I had three kids at home, and it made it even more stressful, because now I went from working six days a week to sometimes seven. And I wasn’t even thinking about it because I was absolutely drinking the entrepreneurship Kool Aid and just couldn’t grow fast enough and couldn’t do enough. And I try to counsel people that are younger than I am that, “You ought to take a moment to think about it before you do it.”

Shawn Busse:
I love that you said that, Jay, especially because you’ve achieved quite a bit of financial and business success. Because I think there’s a dogma out there. It’s almost like a religion. Here are some of the mantras: “If you’re not growing, you’re dying,” or, “Oh, she has a lifestyle business. It’s not a real business.” Right? Because you’re …

Jay Goltz:
God, you’re hitting on all my hotspots. You are 100 percent. Loren knows that I hate those phrases.

Shawn Busse:
And so many organizations feed that dogma, and it makes for a lot of miserable people. And it’s not to say that growth is wrong. I mean, a lot of people really thrive on it, and it just fulfills them. But very few people ask the question: What makes them happy? And then I think the other piece that I’ve observed is that a lot of businesses get stuck in a zone of death, meaning they don’t grow enough to realize the benefits of the larger size. But then they’re too big to realize the benefits of being in control of everything. So it’s like this awful, awful, awful place to be, and they’re miserable.

Loren Feldman:
All right, I want to talk about The Great Resignation. Karen, you mentioned that you’re hiring like crazy. I’m eager to hear a little bit about how you’re managing that, but I want to start with a question that I haven’t really heard asked directly, which is this: Is The Great Resignation and what’s happening with the labor market, is it a good thing or a bad thing? Anybody?

Karen Clark Cole:
I think it’s good.

Shawn Busse:
Mhmm, I’m with you.

Jay Goltz:
I’m indifferent. I think I’ve lost one person, that was unfortunate. I said, “Call me in a few months. Tell me if this is working out.” I know where she’s going, and I don’t think it’s going to be what she thinks it is. It certainly put all of us under a little stress. If you didn’t weren’t aligned with your employees, yeah, I’m sure you’re losing some people. But knock on wood, I can’t tell you I’ve had a lot of that.

Loren Feldman:
So why did you say you’re indifferent?

Jay Goltz:
I’m indifferent, in that I don’t know if it’s good or bad. If it happened okay, maybe it’s not bad, but I don’t know why I would say it’s good. As a business owner—

Karen Clark Cole:
People are getting happier. They’re living their lives in ways that are more meaningful and better.

Jay Goltz:
Okay, from the perspective of the employee, yeah, sure. That would be good.

Karen Clark Cole:
But from the perspective of our world, right? If there’s more happy people in the world, it’s better for everybody. And so I think what this has done is it’s forced people to think outside the box and think, “Hey, wait a minute. Do I really like commuting into the downtown core of my city every day? Well, actually, I don’t. Like, whoa. And if I can work from anywhere? What if? Where would I go?” And then people are just going. I think it’s amazing. I love it.

Jay Goltz:
You know what, that totally goes under the category of: I’ve got my business owner hat on right now. And as a business owner, I don’t know why that’d be good. But you’re totally right. And forgetting about being a business owner, sure. People should be happier.

Loren Feldman:
Wait a second. Let me stop you there. I think you can make an argument—and maybe Karen or Shawn would—that it’s good for business owners as well. Karen and Shawn, do you agree?

Karen Clark Cole:
Yeah, more happy people means they’re gonna have more. They’re paying like a fifth of what they would have been in a big city. That means they’ve got more money to frame their art, right? They’re more happy because they’re in their house more, so they need more art. Actually, that whole thing is gonna be good for you.

Shawn Busse:
I mean, I think it’s great for you, Jay, because here’s why: As a business owner, you’ve got a bunch of people leaving jobs because they were terrible jobs. And so what people do when they realize they’re in a bad situation is they look for something better. I started Kinesis because I worked for a terrible employer. They were awful on every level, and I essentially started this business because I was like, “I want to build something that people enjoy coming to work at.” That was it. And so this puts more people into the marketplace, looking for businesses where culture matters, where the owner has compassion and empathy, where families are valued, just on and on and on. And if you’re that employer, you win. Like, you totally win in this environment, I think. I mean, I don’t know, Karen.

Karen Clark Cole:
Yeah, that’s what’s happened to us.

Jay Goltz:
Shawn, I just want to give you a big hug. You’re just saying some good stuff today. No, no, no, you’ve got a really good point with that. I feel like I do run a good company. And I do think I’ve attracted—now that you mention it—everyone complains about Millennials. I just hired a few lovely, happy, totally-with-the-program Millennials, because they’re into what we do. And we treat people nicely here. And we’re on a mission to make people happy. And yeah, I buy what you just said, for sure.

Loren Feldman:
I like what you said about your former employer. I have a pet theory that behind many entrepreneurs there is a terrible boss who forced those entrepreneurs to take the leap that they might not have taken if they had been working for a better boss. It sounds like you might be one of those, Shawn.

Shawn Busse:
Well, and look at the rates of new business startups. They’re going through the roof, and a lot of that was people got laid off. But I think a lot of it is just reevaluation of their past life. And they’re spending more time at home with their kids. And they’re realizing that they love their children, and they want to be with them, and not in a car all day commuting, to Karen’s point. And so I think a lot of those folks are like, “You know what? I can do this thing on my own.” With all the software and everything in the cloud, you can spin up a business so fast now, and make pretty good money at it.

And so honestly, I think that’s the challenge for employers more than anything. It’s that really self-motivated people are going in that direction, so how do you spin your business in a way—you’re like, “Well, yes, you have a lot of autonomy like you’d have if you had your own thing,” but also you have community. And that’s the opportunity, I think, for businesses that want to take advantage of the situation right now. It’s sharing how they create community, how they’re creating diverse workplaces, how they’re empowering employees. You do that, and you can have an awesome, awesome set of folks working for you.

Loren Feldman:
Karen, tell us what it’s like, in your situation, where you’re hiring like crazy. Are you frustrated because it’s so hard? Or is it coming together?

Karen Clark Cole:
No, not frustrated. It’s new for us to have just opened the floodgates, have all positions open, and hire whoever we can—you know, whoever is the right fit. Up until four months ago, we were very careful about hiring. Do we have a position open? What does the pipeline look like? What are these projects? Who’s rolling off? Who’s rolling on? And it’s been very, very slow and careful hiring. And so it’s just fun and exciting, and it’s a challenge to solve. It’s not frustrating, though.

Loren Feldman:
Are you concerned that you may have problems if you’re not as careful as you once were with your hiring?

Karen Clark Cole:
No, but look who you’re asking, Loren. I would never answer yes to that.

Loren Feldman:
Even if it were true?

Karen Clark Cole:
No, because it wouldn’t be true for me, because I wouldn’t see it. Because all I see is what’s possible and focus on how we’re going to get there. So I talk to other people to show me where the red flags are, because I never see them. No, it’s kind of fun for me, because we have to think differently. We have to think totally out of the box and do things that we’ve never done before in order to find more people. They’re out there. To me, that’s just a super fun challenge.

Loren Feldman:
Have you found any interesting strategies that are working for you?

Karen Clark Cole:
Yeah, we opened an account for a recruiter in Atlanta, which we’ve never done before, because we wanted to get more people from that area. And so the thinking was, “Okay, let’s focus our recruiting in that area.” I’m like, “Well, why don’t we just hire a recruiter in that area who has connections and knows the market?” So that’s what we’re doing.

Loren Feldman:
That’s a direct reaction to The Great Resignation, I assume, and to the pandemic? I mean, you probably wouldn’t have thought to hire remotely that way before all this happened.

Karen Clark Cole:
It would not have been possible, exactly. And so because we are permanently a hybrid work environment, so now anyone can work from anywhere. There are some technical things that we have to have in place, that have to be set up as an employer in the state in which we’re hiring. So we can’t just go into every state overnight. We have to have it all set up.

But for the most part, it’s totally freed us up to think differently as well. And I think it’s super cool. I think, “Gosh, I don’t want to go to the office every day. Why should anyone else do that?” So it’s allowing people to, again, be flexible and live in a place that they’re really excited about. And we have all kinds of employees who have moved to different cities, like moved to remote islands, moved from Boston to San Diego, all kinds of crazy stuff. And I just think it’s so cool.

Loren Feldman:
Is it working?

Karen Clark Cole:
Yeah, it’s working. It’s totally fine. We’re lucky, though. We’re not in a store where the door has to be open for people to come in. We can do our work on the computer, basically. We come together to meet in person for workshops, for big collaboration sessions. We meet around our clients coming into town. So a client will go to one of our offices, and then we’ll all just go there and meet them.

So it’s sort of like taking the chains off, is what it feels like to me. Everyone’s just more free to move around. And you know, our expenses are much lower, because we generally are just traveling less. And now everyone’s saying, “Do I really need to get on a plane for that meeting? Or can we just do that over Zoom?” And we’ll get in person when we can spend two days hashing out. But if it’s just a one-hour meeting, we would have got on a plane before, but now it’s like, “No, we can do that on Zoom.” It’s just fine.

Loren Feldman:
Jay, have you thought about hiring picture framers in Atlanta?

Jay Goltz:
As she’s saying, we just have opposite businesses. I have very few people who work here who don’t physically have to be here. Because we’re framing pictures, we’re selling furniture. It’s just the completely opposite end of the spectrum. So, no, I’m not going to Atlanta to find a framer. I mean, I literally only have several people who could work from home out of 130.

Loren Feldman:
Shawn, you’ve had some people move around the country. Has that had an impact on your creativity, brainstorming, that kind of thing?

Shawn Busse:
I mean, we just launched a couple of new websites for some clients and some new strategies and brands, and that work is exceptional. I’m biased, but it was truly, truly amazing stuff. And I think the work product is as good as it’s ever been.

I think it was Karen who made this point: The money issue is huge, so there’s gonna be a massive capital redeployment for service-based businesses like ours that can be remote, saying, “You know what, that $10,000-a-month lease, or whatever it was? That was just too much. We don’t need that. We’re going to have a $3,000-a-month lease, or whatever WeWork space, and then we’re going to use that $7,000 and create awesome events for employees to come together and meet and have more meaningful experiences together.” So I think that’s the shift.

Jay Goltz:
So the Ping Pong table is at their house now instead of at the office, basically?

Shawn Busse:
Well, you know…

Jay Goltz:
But they’ve got no one to play with at home. I don’t know if you figured that one out yet.

Shawn Busse:
If they have a keg, that’s really what drives where the location is. But I mean, I’m serious, in that you have to work harder to create culture with an all-remote situation. And I think you’re going to take that money that was going to commercial real estate, and you’re going to use that money for that. That’s my theory.

Jay Goltz:
I’m sure there’s going to be a change in office space. But anyone who thinks, “Oh, 50 percent of people aren’t going.” I don’t believe that to be true. I think that many businesses will function better in an office space. And I think the numbers back me up. I don’t think that it’s a disaster out there for office space right now.

Loren Feldman:
Google and Facebook are taking space hand over fist.

Jay Goltz:
Well, then what I said must be true. If Google and Facebook are taking space, they are the new America. Half the population is going to work for Amazon, Facebook, or Google any day now.

Loren Feldman:
I thought they already did.

Shawn Busse:
Oh man, way to paint the dystopian future.

Jay Goltz:
I was obviously being sarcastic there, for those of you who don’t get it.

Shawn Busse:
Yes, I’m tracking.

Loren Feldman:
Shawn, you did let your office space go. Are you thinking of taking a smaller space?

Shawn Busse:
Oh, yeah. We have employees now in San Diego, Maine, Bend…

Loren Feldman:
But you don’t have any space at all right now. Right?

Karen Clark Cole:
Before that, were they all in Portland?

Shawn Busse:
They were all in Portland. Well, luckily, one moved to San Diego a year or two before the pandemic, which was a godsend, because we worked out all the kinks of remote work through her. And it was so fortunate, Karen, because going to remote is hard. And when we had to do it all at once with everybody, it was not nearly as bad as it would have been had we not had Susie kind of lead the way.

Karen Clark Cole:
I feel the same about our offices. We had some practice that would have killed us if we didn’t have it.

Shawn Busse:
Yeah. Loren, to your question, I believe in collaboration in real space. I really do, and I want to get back to that. But we have really cool, awesome employees who have made choices to move to other places, and I want to support them and keep them in the fold.

Karen Clark Cole:
Can I just ask—I might have missed that episode—you just said, “Everyone’s working remote. We’re going to shut down the office and figure it out later.” Or what happened?

Shawn Busse:
We shut down the office almost a year ago. We had a clause where we could get out of our lease, and we exercised it. So we went from being a moderately remote company to fully remote, and we’ve done a little bit of WeWork stuff, but then we keep getting these variants. And it was like, we thought we’re good to go, and then delta. And then delta is starting to wane, and we’re like, “Oh, we’re good to go,” and then Omicron. And so we’ll get back to space, but it won’t be the same.

Jay Goltz:
I’ll tell you what I’m looking forward to. This mask thing—it’s not the end of the world, but I literally have half a dozen employees, I’ve never seen what they look like. And I see them every day with the mask on.

Loren Feldman:
Well, Jay, let me ask you. We’re at that point right now. Isn’t there a change in Chicago or Illinois?

Jay Goltz:
I think it’s about to happen. It could be that in a couple of weeks we’re done with the masks, but—

Loren Feldman:9
Are you just going to follow, if the mandate goes away?

Jay Goltz:
Yes, I believe so. Because I’m telling you, I go into a room sometimes, I don’t even know who’s in there. I don’t even know: Is that a new employee? Looking at someone’s half face, it’s a little tricky to figure out, “Did I already meet them?” And it’s not ideal. It’s not the end of the world, but it’s not ideal.

So I believe—I’m going to guess—that in a couple of weeks, we’re going to be done with the masks. We’re going to tell employees, “If you want to wear a mask, do what you’d like. But we’re not going to tell customers to continue wearing masks.” Because in Chicago, I look at the COVID dashboard every day. It’s down like 90 percent from where it was a month ago. I mean, it’s dropping straight down. So I think, I’m hoping, in a couple of weeks, we’re done. I’m hoping.

Loren Feldman:
Well, to Shawn’s point, there could be another variant.

Jay Goltz:
Maybe?

Shawn Busse:
I don’t know.

Jay Goltz:
Listen, we just remind people who haven’t listened, Karen told me two years ago, “Oh, it’s gonna come to Chicago.” And I was like, “Yeah, right.” I mean, that’s how things have changed. She was the first time I ever heard about how bad it was, and I was skeptical that it was coming to Chicago, and here we are two years later. It just shows you that, “Wow, who knows?”

Loren Feldman:
All right, we’re just about out of time. I want to ask about one more thing. We’re getting close to tax season here, and we’ve talked about this before on the show, but I think it’s something that a lot of business owners are missing. And that’s the Employee Retention Tax Credit, which for certain businesses can mean a lot of money. And I’m wondering if the three of you have looked into this. Shawn?

Shawn Busse:
Yeah, I think Paul described it as a giant pile of money in the previous episode (“It’s a Pile of Money”). And it was just not on my radar, because our financials weren’t amazing, but they weren’t terrible. So I was just like, “Oh, I’m sure we’re not eligible.” So two things that I think are worth paying attention to: One is, they changed the parameters of it to where it originally was a 50-percent decline in gross receipts, and then they changed it to 20 percent for 2021. If you had a good 2019 and a mediocre to poor 2021, you could be eligible for it.

Loren Feldman:
But let me interject. It’s not done by the year, I don’t think. It’s done by quarter. So you could have a very good year, but a bad quarter, and still qualify.

Shawn Busse:
Yes, yes. So that’s huge. And then the second test for it, which is really interesting—and I’m looking into it now, which is what’s called a Government Order Test, which means if you’re impacted by government shutdowns, you can be eligible for it. And it seems very broad and very vague, but a lot of us were affected by government shutdowns, so I think it’s worth looking into. I think it’s worth talking to your CPA about it. And ideally, get a CPA who knows what it’s all about and isn’t just kind of going through the motions. That would be my advice.

Loren Feldman:
Jay, if I recall correctly, you looked into it after that conversation with Paul, that episode.

Jay Goltz:
We are getting something from it. It was a moving target, because a month or two before, I was told we’re not eligible, but then I’m told we are. So no, we are getting something out of that.

Loren Feldman:
And my guess, Karen, is you are not getting it, because you probably did not have a down quarter.

Karen Clark Cole:
No. No, we did not.

Loren Feldman:
How unfortunate! My thanks to Shawn Busse, Karen Clark Cole, and Jay Goltz. As always, thanks for sharing, guys.

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