Would Your Business Survive a Divorce?

Introduction:

Business owners spend a lot of time preparing for things that could threaten their companies. They buy insurance, build cash reserves, create succession plans, and they worry about recessions, lawsuits, and key employees leaving. But there’s one potentially devastating risk that many owners would rather not think about: What happens if the owner’s marriage falls apart? This week, David Barnett explains how careful planning—including a prenuptial agreement—helped him avoid the worst-case scenarios when he got divorced. Jaci Russo offers almost the opposite perspective. She says building a business with her husband hasn’t strained their marriage—in fact, it may actually have strengthened it by making the cost of walking away so high. Paul Downs, meanwhile, says the subject has barely crossed his mind, and has never come up in decades of discussing business issues with fellow entrepreneurs.

Along the way, we explore how divorce can leave a business frozen in place, unable to make important decisions or investments; whether owners should plan for the possibility just in case; and the remarkable challenge of couples who divorce but continue running a business together. Plus: Jaci reports back on what she learned at a Claude Cowork seminar.

— Loren Feldman

Guests:

David C. Barnett helps people buy and sell businesses.

Paul Downs is CEO of Paul Downs Cabinetmakers.

Jaci Russo is CEO of BrandRusso.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome, Dave, Paul, and Jaci. It’s great to have all of you here. I want to raise a topic today that I’m a little surprised doesn’t get more attention. It’s a risk factor that can have a serious impact on a business, somewhat akin to taking on a bad business partner or not having a succession plan in place, but my sense is that it gets far less attention than those issues.

The topic is divorce, and the risk is obvious. An owner could, without much warning, lose control of a business pretty quickly. I know no one wants to think it will happen to them, but something close to half of all marriages do end in divorce. I guess, first of all, have any of you ever wondered what might happen to your business if you got divorced?

Jaci Russo:
We’ve talked about it.

David Barnett:
Yeah, and I’ve been divorced while being a business owner.

Loren Feldman:
Let’s start with that. What did it mean for your business, Dave?

David Barnett:
Well, it just meant that I lost a bit of focus. I mean, we had a contract before we got married saying that any before-acquired property would remain ours, so I didn’t have to get into any issues relating to the ownership of my business.

Loren Feldman:
You essentially had a prenup?

David Barnett:
Yeah, so that made things easy, because the prenup basically gave guidelines of how the marriage would be ended and the things would be divided up. So it was a playbook to follow, and it made it really easy. So I always tell people, if they’re thinking about getting married, that these are definitely things they should think about in advance.

Loren Feldman:
So your business was existing before the marriage?

David Barnett:
Yep.

Loren Feldman:
Did your now ex-wife have any role at all in the business?

David Barnett:
No, and she had actually acquired a business while we were married, but part of her decision about what she wanted to do is she actually wanted to get out of that business. So sort of selling that business and winding up all those affairs became part of our project to get divorced. So I mean, I helped her out in certain aspects of that, just so that we could sort of put a bow on things as quickly as possible. Because once you make the decision, you don’t want to drag these things out.

I mean, I know people who have been in this terrible state of uncertainty, while they’re trying to organize themselves or separate their assets or organize custody affairs, and it just drags on and on and on. And that’s the worst-case scenario, I think, is just having to try to run a business while you’re dealing with all of these different unresolved issues—and especially if people can’t cooperate and you end up involving courts and lawyers and things like that.

Loren Feldman:
It sounds like you were a little bit ahead of the curve, in terms of having the prenup. I assume that’s kind of an unusual thing to do. Was it motivated primarily by the existence of your business?

David Barnett:
Yeah, well, the existence of my business and a bunch of other assets that I had before marriage. And we were not—you know, imagine that the young couple who gets together in their early 20s, where nobody really owns anything. We were not that couple. We got together much later—well, around the time, I guess, I turned 30. And I had substantial assets at that time, and so I thought it was a good idea, given as you just said, about half of marriages end in divorce.

Loren Feldman:
Clearly, it was a good idea.

David Barnett:
Yeah. Oh, yeah. No, it was a great investment. Believe me.

Loren Feldman:
Jaci, your situation is a little more complicated, in that your spouse is a co-founder of the business that you guys continue to run together. I think you were starting to say that you’ve talked about it.

Jaci Russo:
Not getting divorced. We did talk about the detriment that it would cause, not just to our marriage and to our family, but to our business. And so we had to enter into business knowing that we had to make a commitment to it. And we’ve had to stay committed to the business for 25 years and to the marriage for 28 years. And I have often wondered if the complication of unwinding the business is part of the reason why we’ve been so committed to the marriage.

Loren Feldman:
It’s further reason beyond having kids and all the other obvious stuff to make sure you give it every chance of surviving that you can.

Jaci Russo:
I mean, really, because most people—and I haven’t been divorced, but—it would seem to me that in those cases, work is the safe haven. You go to work to get away from the tumult at home, and if you’re going through something as catastrophic as a divorce, then your personal life is upended, your family life is upended, your social life is upended. Your work is the one place where you can go and still be you.

There is no escape for us. We’re in it 24/7 completely together, and not because we are so well-suited, and not because we’re so much alike, and not because we are the perfect pair. I mean, you’ve met us, we’re the exact opposites in every single way.

Loren Feldman:
Opposites attract.

Jaci Russo:
They do indeed, but they also create friction. And so, there are a lot of critical junctures when you get married and have four kids in the first five years of your marriage. When we got engaged, we’d known each other for four months, and we had a six-month engagement, so our 10-month anniversary was our wedding day. You know, our first Christmas together, we had been married for two months and were six weeks pregnant.

Loren Feldman:
And how long after that did you start the business?

Jaci Russo:
I was pregnant with the second kid, so it was year two and a half of the marriage.

Loren Feldman:
You said that you talked about needing an additional commitment to both the marriage and the business. Did you do anything else? Did you take any other steps to try to—

Jaci Russo:
We didn’t. You know, I was 28, he was 27. I still owned my place in L.A., and I had bought a house in Lafayette before we met. So we closed on the house in September, and then we had our first date in January, so I was four months into owning and living in that house with a roommate, and he had just moved back from Seattle the same week I moved back from L.A., and he had not bought a house and stabilized.

And he’d had a very different career in Seattle than I had in Los Angeles, and he wasn’t there as long. So he didn’t have as much time to get set up like I did, and so I knew that there was an imbalance in assets, I think is the fairest way to say that, but I was committed. And so we didn’t have a prenup. We didn’t talk about: what was mine before is still mine after. We didn’t do any of that. We weren’t in our young 20s, but we were still in our 20s, so maybe there was some innocence there. But I just knew that I was making a commitment, and that was it. And losing an asset was going to be the least of my worries if we split. And so we bought a house together, because if he’s going to be a part of this, he needs to have some skin in the game. He needs to be on the mortgage, because I was the only one on the mortgage.

And so now we own three houses. I mean, that wasn’t really any better, I think. And so the other two were rental properties for years and years, but we bought the building that we’re in together. We bought this house together. We’ve bought other rental houses together. We’ve built this business together. We were all in on the togetherness.

And I will—and he will tell you, too—there were some early years that were—and some today years—but the early years were really hard. The stress of being a newlywed, and of these four little kids, and of trying to build a business. I wouldn’t really recommend that as a choice, if you have other options. It was a lot harder than I thought it would be, and I look back on it now with some delight, but also with some real frankness on how hard it was.

Loren Feldman:
It’s interesting, because the stress you’re talking about, I think a lot of people assume that’s what causes marriages to fail—among business owners, in particular—and you’re saying just the opposite.

Jaci Russo:
For us, it was just the opposite, because okay, if I’m going to let all of this frustration and aggravation and dislike—because there’s some days where we didn’t like each other—if I’m going to let all of that bubble up and become the break, well, not only do I have to figure out how to separate this marriage and separate this household and separate these assets and go tell these kids, I’ve got to show up at 8 o’clock the next morning at work.

And it’s not that we own the business together, it’s that we run the business together. And this business would not be successful without his creativity, and he would tell you—I will agree—this business would not be as successful without my business running. And so it really is a combo effort, and our two halves do make a whole. And so I think, even in Louisiana, where it’s really hard to get a divorce—we have one of those covenant-marriage states, which, if y’all aren’t familiar, it takes a year to get divorced.

Loren Feldman:
Wow.

Jaci Russo:
Yeah, and you have to live together during a part of that time, and you have to prove all this stuff. I’ve not done it, so I don’t really know the details of it. Some listener can probably set me straight on exactly how it is, but I know people who’ve gone through it, and they all talk about moving to Texas, because apparently it’s really hard to split here. And so knowing that, and knowing how much we want a stable life for our kids, it would have been harder to break up the business than it would have been to break up the marriage.

Loren Feldman:
I’ve read stories about couples that get divorced and continue to run their business together, despite the divorce. On your darkest days, did you ever imagine whether that would be possible for the two of you?

Jaci Russo:
Michael and I are not the same person in so many ways, and the way that I approach my life, I absolutely could be that person. I could be the person who still just celebrates holidays together. I could be the person who makes sure the kids buy him a gift on Father’s Day. And I can stay friends after, because I think I operate at kind of that middle throttle.

Michael runs hot and hotter [Laughter], and so he’s the guy who’s got all my stuff in the front yard with a bonfire and has slashed my tires and called in a fake police report to make sure I’m suitably punished for even thinking about leaving. And I don’t mean he’s a violent guy, and I don’t mean he’s a bad guy. I mean he’s Italian, and he’s got a lot of emotion, and they’re all on the surface. And we all live with all of Michael’s emotions, and so he would not be running the business with me.

Loren Feldman:
Not happening.

Jaci Russo:
Even if he chose to leave. Even if it was 100 percent his decision, and I had not done anything wrong—I hadn’t wronged him. Let’s just play fantasy land for a minute, which would be my worst nightmare: He meets somebody else and falls in love with somebody else—which would be impossible, because I’m the only person he spends all day with, and our coworkers, who he annoys—but let’s just pretend for the sake of this conversation, and so he has come to me and said, “This was great, but I’m out.” He would still be super mad at me. I would still be the bad guy, and he still would not run a business with me.

So, no, no, no. There were some days where I kind of sat down, pen to paper, and made a pro-con list, and thought, “This isn’t going the way I imagined. What are my options?” It was a very logical approach to thinking about how to do these things. And when I got to what 8 o’clock tomorrow morning looks like at work, I put the pen down and thought, “Okay, maybe it’s couples therapy. Maybe there’s another way to fix this.”

Loren Feldman:
Paul, have you ever imagined what it would mean for your business?

Paul Downs:
No. [Laughter] I’ve got a great marriage. Honestly, it never crossed my mind until you asked the question, and what a blessing. Yay, me! I’ve had plenty of other problems, and life has delivered a few curve balls to me and my wife, but we’ve always been solid. So probably the closest to that was when my partner and I started disagreeing about the course of business just before the Great Recession, the 2008 one. And fortunately I think that both of us are fairly level-headed, and he was not a vindictive guy. So we had business disagreements, but we were able to keep it professional. But he’s a partner. He’s not my wife. And so I don’t know what I’d do.

I actually have a question for David, which is—and maybe you don’t want to answer this, but —do you think having the prenup in place and the plan and all that actually made it easier to decide to get divorced?

David Barnett:
No, I don’t. There was a big problem on her side that was unresolvable, and so it became pretty clear that this was the way we had to go.

Paul Downs:
Okay, apologies for—

David Barnett:
No, no, no worries. But you know, Loren, you brought up things about whether people can get divorced and continue to run a business together, and I know some people in that scenario who’ve been running a business for over a decade together, even after their divorce. And I also have worked in the past with people who had divorced and continued to run their business and then came to me for help to sell it together when they reached kind of a retirement. And then I’ve also met people who were getting a divorce and worked together and could no longer work together—even though they had to—and tried to work with me to help sell their business, even though they refused to meet with me together.

Jaci Russo:
Ouch.

David Barnett:
So I’ve seen the full spectrum of what can happen in these businesses.

Loren Feldman:
Paint that picture for us. When it goes poorly, what does it look like? What are the risks for someone who hasn’t given this a lot of thought?

David Barnett:
Well, a lot of married couples who work together in a business will divide sort of the areas of operation, or whatever, between them. You know, I think Jaci, you’ve said the business stuff is yours, and Michael does the creative stuff. And so usually, you have the same sort of scenario in a lot of other companies, where one spouse is doing one part of the business, the other is doing another.

And if the relationship is really poor, they often have an employee who’s acting like that child at home who has to carry messages between the parents. So one of them will say, “Oh, tell that other person this.” And then the employee has to go relay that information, and it can make things very disjointed and make any kind of long-term strategy difficult. And these businesses just limp along. You can’t decide to reinvest in new equipment or go get a new loan at the bank for something you want to do, if any of these kinds of situations are in play. You’re just kind of hobbling along on a crutch until you get some kind of resolution that frees the business up.

And sometimes these couples know that either one of them can’t do it alone. So maybe the decision is to try to sell it to somebody else, so they can both go their own ways. In other scenarios, people try to buy each other out. And I’ve participated with those kinds of cases too, because then you get into disputes about: What is the business worth? Is the cash flow being demonstrated on the tax returns realistic for the kind of business that it is? And people can find all kinds of things to nitpick or fight over.

And I remember one case in particular: I had been hired to do a machinery-and-equipment appraisal on a business, and I got called to court. And the other attorney basically kept me on the stand for over an hour asking questions that were all literally in the report. I think he just looked at the report to make a list of questions. And when I was done, I asked the attorney who had originally hired me, “What was that all about? Did he not read the report?” And the guy just said, “No, he’s trying to spend all the money before the divorce settlement is reached.” And so it was literally a case where they were trying to find people like me to spend money on, because the spiteful party didn’t want the other spouse to end up with anything. So that’s how bad it can get in its ultimate sort of supernova, I guess.

Loren Feldman:
I’ve heard all the usual stories about how difficult due diligence can be in a situation where there isn’t that kind of conflict. I can’t imagine what it must be like with business partners and marital partners at each other’s throats. Have you been through that?

David Barnett:
Well, you know, let’s say the couple doesn’t work in the business together. Let’s just say one of the spouses kind of owns and runs the business day-to-day. When they realize that they’re in some kind of marriage trouble, one of the first things they’ll do is start to alter things in the business so that it appears to make less money. Because any sort of settlement, child support, all that kind of stuff is all driven by income. And so, then they’ll start to change how the business is operated, so that it begins to appear less and less profitable. So I’ve helped people on both sides of this.

There was one case where a lady had a business, and her husband, who was getting divorced from her, wanted to put some kind of value on the business. But of course, she didn’t show any profitability, but he claimed there was always cash around. You know, like she was being paid cash by customers, and she would always have money for spending on whatever. And so I did an analysis of what was available, and I said, “Look, according to these costs and the industry normal gross margins available that people typically get in this kind of industry, it would seem to suggest from the costs that the sales are actually this amount, not the reported amount.”

And I kind of walked through sort of why it made sense that the business really had a cash flow that was much larger than what was being declared. And that one never got to court. That report, I guess, was what they needed to kind of encourage the other side to make a more reasonable settlement.

Jaci Russo:
Can I jump in real quick, Loren, with something? I was at a group of small business owners a few months ago up at the Edward Lowe Foundation, and I was talking to a woman who had built a very successful company in Michigan and was just coming out of the divorce. And the man who she had married—it was a later marriage for each of them, maybe even a second marriage for each, if I recall correctly, about seven or eight years in. And in retrospect, she feels like he waited seven years and then filed for divorce to cause exactly what happened, which is they had not had a prenup. The business had been fairly successful before the marriage, but became even more successful after. And he went after half of it, even though he had not worked in it, he had not built it, he had not done anything to it.

And this is a little bit about the answer to your question. It’s also a little bit about, you’ve done a really good job of keeping this conversation gender-neutral. I’m about to not do that. And so there were seven female business owners at the table. We were having lunch, and they started providing a lot of insight and wisdom and thoughts around this, based on either their own personal experiences or friends’. And it was a lot of, and I’m going to paraphrase here: “Girl, you go get yours,” kind of talk. You know, it’s like, “Hey, you built that. It’s yours. You keep it.” And I had, at the time, a good friend who’s going through a divorce. She was a stay-at-home mom. Her husband didn’t own the company, but had become very high up in it. He had chosen to leave, an extramarital situation, and she was being left with nothing.

And seeing it from both sides, in this particular situation, we’re talking mostly about people who own a business and a spouse who’s outside of the business. So take my situation out of it. In those situations, there’s such a fine line between the spouse working in the business or the spouse doing everything else so that the person can work in the business. And I wonder how we fairly or unfairly balance the value of that. Obviously, not my situation, and we can all bring stories to the table. But it’s fascinating to me how gender plays a role in it, and how challenging it is when you look at the word “fair.”

Loren Feldman:
Dave, do you have a sense of how that typically goes when it’s one person in the business, one person not in the business?

David Barnett:
I think you need to ask an attorney, because I think this changes depending on where you’re standing, right? Like, marriage is the only contract that changes based on where you live, and I think in some jurisdictions things like a private business are just automatically marital property, and in other places they’re not.

I can tell you, though, the value of having someone support you at home, so that you can focus 100 percent on growing the business is real, because I went 10 years without that person. So I’ve thought about it many times, like, how would my own business be different if I had a wife who was at home helping to take care of the kids and stuff? I mean, there were definitely times when I had to pass on opportunities because I had to take care of appointments at the school, taking kids to their medical appointments, like dentist trips, all this kind of stuff.

At one point, it felt like I was losing six or seven hours a week, just with parenting, that other people were able to put those hours into their business, while being focused—if you imagine someone being at work where all they’re thinking about is the work at hand. I work from home, so the first few years after the divorce, I had to get a full day of work in between 8:30 in the morning and 1:30 in the afternoon, because I had to be at the school to pick up the kids. And then after they were home, I couldn’t do any work, because at that age they needed me to hover over them. It was only in the last couple of years, as they’ve been adolescents and late teenagers, that I can actually work in the house while they’re in the house.

Loren Feldman:
Jaci, you’ve obviously talked about this with other business owners, as you just related. Dave, you’ve got personal experience in this area, as well as helping clients with it. Am I wrong that this is not discussed as often as perhaps it should be as a potential risk for business owners?

Paul Downs:
Probably.

David Barnett:
I think people talk about it all the time.

Loren Feldman:
Really?

Jaci Russo:
Yeah.

Paul Downs:
That’s funny, because the business owners I know in my various business groups, I’m not aware of any of them having a divorce while they were members of the group. That’s probably 25 people. So it could be that I just hang with an unusual group of people. But I mean, divorce is way more widespread. In any 25 marriages, you’d expect at least 10 divorces, I would imagine. So, I don’t know what that says. I don’t know what it means. I’ve never really thought about it, honestly.

Loren Feldman:
You spent years in that Vistage group, and it just was not a topic of discussion?

Paul Downs:
No, never. There were times when people said, “My wife and I are not getting along.” But it never got to the point of there being an actual divorce that I recall. And maybe it just all happened outside the group, and I didn’t know about it. But I think that—I don’t know. I was about to say maybe there’s some correlation between being a successful business person and not getting divorced, but that’s, on the face of it, ridiculous. Because plenty of people

David Barnett:
No.

Paul Downs:
Well, I think a lot of people get to be successful business people by destroying their marriages, at least that’s a stereotype. So, I’m actually quite ignorant. I shouldn’t even be on this call. [Laughter]

David Barnett:
I think there definitely is a correlation, because the wealthier you are, number one, the easier it is not to have some of the problems that people often cite as reasons for the marriage falling on hard times, right? Because if there’s ample resources and money, then you have the cash to do the things that both people want, right? I think that some people maybe get frustrated in their marriage when they feel like they’re not achieving their potential, things are holding them back, etc., whatever the circumstances.

But as people become wealthier and you have more to lose in a divorce, it also creates a greater incentive or reason to try to make sure you work out your problems, would it not? I mean, you hear these stories all the time about people and how much they lost in their divorce, and it’s terrible to think about.

Jaci Russo:
I will contribute two thoughts to that. One, just staying married doesn’t equal happy home. I’m not speaking for my husband and my children, but I am speaking from personal experience. And so, sometimes the divorce would be a better way to go. But to your point, I was curious, and so statistically, families with the lowest 20 percent of income are over 30 percentage points more likely to experience divorce than those in the top 20 percent. So, to your point, it is much harder to stay married when you are poorer than it is when you are richer.

Loren Feldman:
But obviously that cuts both ways for business owners. You know, it kind of depends on how successful the business is.

Jaci Russo:
Sure.

Loren Feldman:
All this leads to an obvious question, which is, is there anything business owners should routinely do to hedge against this risk? Dave, you did something, and you indicated that you’ve advised others to do what you did, in terms of getting a prenup. I wonder, are there other things that you suggest?

Jaci Russo:
I would say that everyone should go to the Paul Downs School of Good Marriages [Laughter] and make sure that they pick the right person and take all of his classes on how to be the right spouse, because they’re doing something right at the Downs house. I would start there. But education, I think, is a big part of it. And I think there’s a lot of data around the more highly educated you are, the better your earning potential, the apparently longer your marriage is going to last.

But really, personal experience, I would say it’s about making sure you’ve got some sort of integration. It cannot be all about your family or all about your business. And so you’ve got to find a way to prioritize each of them at the right time. So I would not be as successful in business if I did not have my husband and children, and I would not be as successful in family if I did not have my husband and children. So, I think you’ve got to have that balance if you’re going to want to make sure you keep both moving along in the right direction.

Paul Downs:
I would say one other thing, which is that Dave having a prenup might sound like, “Wow, farsighted,” but everybody who gets married has a prenup. It’s just written by the state.

Jaci Russo:
Good point.

Paul Downs:
You have the opportunity to have a different prenup, or you’re just subject to the rules of whatever jurisdiction you’re in. The discussion about a prenup is really between the two people involved, and whether one would be offended or one is like, “Wait a minute. You’re gonna keep the business, while I’m home with the kids?” And there’s a lot of different ways it can go wrong, but there is always a prenup.

And, again, I haven’t written one myself, because I’m not worried about it, but my son is getting married. And he’s got assets, and he and his fiancé are planning to do a prenup. And I have no idea what it’s going to look like, but they’ve just decided to do this. And so my wife and I didn’t even think of it for one second when we moved in together and then eventually got married. It just didn’t seem like—I don’t know, we’ve just never had that conversation.

Loren Feldman:
I’ve read and edited lots of stories about things owners should do when they start a business with a partner, the most obvious thing being putting in place some kind of buy-sell agreement. Dave, I’m sure you’ve advised clients on that over and over again. Is that something that would make sense for marital partners, even if one of the spouses doesn’t, in fact, work in the business?

David Barnett:
Well, that’s kind of what a prenup is. I mean, most of it is instructions on how you’re going to go about separating your affairs, which is exactly what those sections of a partnership agreement cover. You know, how are we going to untangle ourselves if we come to a point where we don’t see eye-to-eye, and we don’t want to continue anymore together?

Loren Feldman:
I don’t want to get too personal here. If this crosses the line, please say so, but I think you said with your prenup that you took the business out of play, as opposed to a some sort of buy-sell agreement, which would acknowledge that both partners have some call on the asset.

David Barnett:
Yeah, that’s right, because I was the only shareholder, because I started the corporation before I met her. So there was no ownership, but to the point of the story that Jaci was telling about the lady who was getting divorced after her business grew, sometimes it doesn’t matter. Because you can be living in a jurisdiction where things like a private business are just considered part of the marital property.

Where I live, for instance, if I own a home before I get married, and then I get married, and my wife moves into it, that home becomes marital property—even though my spouse’s name wouldn’t be on the title. Those are the rules here. So that’s another reason why, in that particular instance, that house would remain my property because of my prenup. Now, after we got married, we moved to a different house, which we bought together, and that one was jointly owned.

So this is where people, I think, have to be careful when they listen to a podcast like this, because literally, the rules change depending on what piece of dirt you’re standing on. And you can get married in one place, and then move—like Jaci mentioned moving to Texas—and all of a sudden, the rules of your contract change. I think marriage is the only contract around that has this kind of adaptability.

Loren Feldman:
Have you done any kind of buy-sell agreement specifically for marital partners?

David Barnett:
Well, no, I mean, I tell people things that they need to talk to their lawyer about, as far as the topics, and what kind of clauses and things they need to have in those agreements. The only time I’ve ever given those kinds of ideas to people is when both partners were actually working in the business together.

Jaci Russo:
I think entrepreneurship is hard. I think running a small business is hard. I think being married is hard, being a parent is hard. It’s all hard. But relative to what we have—air conditioning, we have cars, we have planes, we have the internet—we live in a pretty good time. And I feel really appreciative for all of my modern conveniences while I am in the throes of summer in Louisiana. So I think there’s a lot that I can work through and deal with and tolerate to keep my family and my marriage and my business intact, because I like modern conveniences.

David Barnett:
I think that if somebody in the back of their head thinks that a divorce might be on the horizon for them, I think that one of the best moves somebody could make is just to address the problem. Either you figure out a real way to fix things, so that you feel like you’re on solid ground, and both parties are on the same page, and you want to carry on together—or you do the divorce.

One, I think it’s really dangerous when people get hung up for years and years and years in limbo, where they don’t know which way they’re going. They don’t know if they can trust their partner. They start to have ideas like maybe I should squirrel away hidden money or something, in case I need my own resources. And you can’t flourish in abundance when you have that cloud hanging over you. So I think that it’s one of these things where you have to address the problem. It’s almost like an employee you suspect might be drinking or something like that. It can be easy to ignore, right? But eventually there’s going to be a problem. So the sooner you address it and take action, the better off everybody’s going to be.

Loren Feldman:
Let’s move on to another topic. Jaci, you just attended an AI workshop yesterday put on by Anthropic. You had already attended Alan Pentz’s cohort and learned a lot, and I think gotten ahead of the curve for a lot of businesses. You’ve spoken here about how you have agents finding leads for you, qualifying them, helping you reach out to them. What did you learn at the workshop you went to yesterday?

Jaci Russo:
Well, you know, I’ve been teaching AI for marketing classes, and so I think I’ve got a really good handle on integrating it into our sales and marketing process. But I’m always looking to figure out how to do it better. And so in reading my favorite source of business news, the 21 Hats Morning Report, I was alerted a few weeks ago that Anthropic was doing these classes, only 10, across the country, and one of them happened to be in Louisiana. And I thought: Well, what are the chances? It’s like they’re just coming right to me, and so it was just down the road in Baton Rouge, about an hour away.

They do two sessions a day. The morning session was already booked solid, but the afternoon session was available. And so I jumped on it. As I mentioned to you, I registered, and then didn’t hear back, so I got very concerned that I didn’t make the cut. So then I registered again for a different one of my companies, and magically was granted admission. So I was very excited.

Loren Feldman:
It sounds like AI must have failed there somehow.

Jaci Russo:
Well, I don’t know. I don’t know, because I had a different company with different answers, and so that could have been the magic rubric that triggered the yes. But regardless, I thought the whole setup was pretty impressive. Shortly before, they sent over some information to make sure that we were not just on Anthropic’s AI, which is called Claude, but specifically on the Cowork version. I’ve done most of my work in the online Claude chat, and so that’s where you put in a prompt and it gives you an answer, and you ask it questions, and it gives you answers. And it’s really great for a lot of that research and writing and sales and marketing stuff that I do so much of.

Cowork is local. It is on your desktop. It is not on the internet. It looks different. It works differently. It is still by Anthropic. And so I have not done as much Cowork as I would like. Alan’s class spends a lot of time in Claude Code, so those are the three levels of Anthropic’s AI: Cchat, which is the online thing; Cowork, which is the thing I’m talking about; and Code, which is really programming and coding, obviously vibe coding, as the cool kids call it.

And so to dip myself into this Cowork thing was really great. So we came pre-loaded with Cowork on our laptops, and there were, I don’t know, maybe 40-50, of us in the room, maybe even 60. But it wasn’t a huge room, and it wasn’t a ton of people. And it was a lot of specific work around how to properly use Cowork. And they walked us through in the morning a lot of foundational fundamentals of how it works, how the privacy works, how to use it.

Loren Feldman:
Was it aimed at beginners?

Jaci Russo:
No, I would say it was more intermediate. There were some things that were definitely below my knowledge level, and there were one or two things that were right at or maybe just a hair above. So it was intermediate, I think. It assumed that you already had Cowork on your computer. It assumed that you’d already been using Claude. When everybody raised their hands, it was unanimous. Everyone in the room had been using Claude Chat, and most of us had been using Cowork for something. And I think I even spoke at one point about my first Cowork project that I did months and months ago, as soon as Cowork came out.

We keep our PO. numbers on a Google sheet, and so everybody in the company, when they need to assign a P.O. number, does it on the Google sheet, because not everybody has access to QuickBooks. And that is a barrier to me, because I need them all in QuickBooks for invoice matching. And so I built a little skill in Cowork for it to go get the information out of the Google sheet and go into QuickBooks and create the P.O. form. And gosh darn it, if it didn’t just do it over and over again, just like it’s supposed to. It was kind of impressive.

Loren Feldman:
So, you’d already done that before you took this workshop?

Jaci Russo:
Yes, yes, yes. And so I knew I could do those kinds of things. I was just looking to see what else. I am not as imaginative as I like to think I am sometimes. They walked us through in the morning, the fundamentals, like I said. The afternoon was actually building things, and so we went through these steps with them at an online workshop that they had built that made it really easy.

And so it started with customizing it to you, which is how I always teach in my classes that we should begin. Because the more that Claude knows about you and your situation—and in my case with marketing, your voice—the better the output is going to be. The more it’s going to sound like you and not AI. And the same thing as here, even though it’s more skills-based, not marketing, and tone of voice and conversation and messaging-based, it’s still important that it knows you, and who you are, what you’re about.

Then we move into connections, because you want to connect all these different tools. And so I’m on Pipedrive as our CRM. There’s no connector for that yet, which is a little bit of a roadblock for me, but I put in a request yesterday, so I expect it to be soon. But if you’re on HubSpot or one of the other bigger CRMs, that’s already got a connector. And then it was a matter of, so Outlook is connected, and Google’s connected, and the CRM is connected, and QuickBooks is connected, so now all your things are talking to each other. And to Anthropic’s credit, they built a bunch of small business-specific skills that are there now at the ready, and so when you go into Cowork on your desktop, and you go into the skills, you can go see this laundry list of things. And it’s like shopping, and you can go pick the things that you want it to do.

And then there’s some real work on doing it smart. And I think one of the biggest takeaways I had was what doing it smart looks like. And it’s really about starting with these four moves: Map the task that you want it to do by hand. And so, whether you use a tool like Scribe, where you do the whole task and Scribe records it and then creates a set of steps for you, which is a really great tool that I use all the time, or you literally write it out by hand or type it into a Google Doc. But step by step by step, go through the whole task you want it to perform, so that you see all the steps.

Then step two: delegate what parts are going to be done by Anthropic and what parts are going to be done by the human, because there still needs to be some human involvement: approvals, a little connector here, or a review there. Then describe the brief by output, by audience, by style, by content, by connections, by behavior, everything you want to have happen and how you want to have it happen, and how you want it to look and feel when it’s done. And then run it, so that you can verify what worked properly. So run last week’s task again, but with this now, and so now you can compare your human version, last week, to their version, and see where it got it right or got it wrong.

Make whatever tweaks you need to make, and then you’re golden. And so things like a daily report, you could run a daily report for your cash flow, and so you set it, and now every day at 8 a.m., that skill will run without you asking it to. And it will go into your QuickBooks, into your CRM, into your Google Sheets, wherever you keep projections, and all the different things. It can run all these reports, and then present you with a daily cash flow report.

Loren Feldman:
What are you going to do? What task are you going to address first?

Jaci Russo:
You know, that’s a great question. What I am starting with is continuing to improve my sales and marketing. That’s the thing that I feel is always able to be improved, always able to be fine-tuned, always able to be leveled up, and so that’s always where I start. Next thing I’ll bring in is probably going to be some of our accounting processes, like the P.O. number. You know, I’ll keep doing more and more of those, because those are such time savers. The accounting stuff is not my skill-set, not my joy, and the more that I can have someone way smarter than me, like an AI, do, the better my life is going to be. So, that’d be awesome.

And then I’m working on some stuff around onboarding, because as I’m always preparing us for growth, I always want to make sure that our onboarding processes are right. We onboard, for example, 10 to 15 interns a year, and so the more I can do to help them start off better, the better off I’m going to be. And so that’s great for them.

And then it’s about retention. We do a really good job with client retention, but we could always be better. And so, where can I use the tools to improve those processes, so that we are streamlining our communication to our clients, our reporting to our clients, our dashboards for our clients, and better communicating the success of the work we do for our clients?

Loren Feldman:
Do you know if they’re going to be giving this workshop anymore? If somebody listening to this is interested in checking it out, is there a place to go?

Jaci Russo:
We were city number five, so there are five more towns. When I glanced at the list today, just out of curiosity, the only one that wasn’t grayed out was Baltimore, so that told me that everybody else was already fully booked, except for Baltimore.

But I will say that it sounds like they’ve gotten a really positive response, and that they intend to maybe do more of these. And if someone has a chance to get in on it, do. I know from personal experience that Claude has a number of online courses that you can take through Claude for free, and I would highly recommend people do that, if you can’t get into the in-person classes, because the information is pretty much the same, and it’s helpful. I mean, there’s a lot of, you just have to kind of get in there to figure it out. There is a lot of that. You can only watch it so much from somebody else doing it before you start doing it yourself, and then get comfortable with it. But it is nice to have someone guide you through it a little bit, because then, as you’re getting in there, you feel a little better about how you’re doing it.

Loren Feldman:
My thanks to David C. Barnett, Paul Downs, and Jaci Russo—and a special thanks to our sponsor. This episode was brought to you by Grasshopper Bank. Thanks for listening, everyone.