‘At 5 O’Clock, I’m Going to Send Everybody an Email’

[Music] Hello everyone. Welcome to the 21 Hats podcast. I'm your host, Lauren Feldman. This week, Paul DS tells Jackie Russo and Sarah Seagull about laying off a third of his workforce. Here's the problem in a nutshell. He says, "Last year, January to March, we sold 1.356 million. This year, January to March, $680,000. March is on track to be the worst month I've had since I started taking records. Paul also tells the owners that he used to have a rainy day fund for such occasions, but he used it to renovate his house. He does think the layoffs and other cash savings have put him in a strong enough cash position to hang in there until business picks up. We're getting calls, he says. We're just not getting orders. He's also trying out a digital marketing service that can identify and contact anyone who spends even just a few seconds on his website. Plus, Paul tells us that sometimes when forced to lay off people, you learn things about your operation that you might not otherwise have known, like that you've been overpaying your sales tax by at least $30,000 a year for quite some time. Even in good times, owning and running a business can be a lonely pursuit. Our hope is that these weekly conversations will let owners know they are not alone in facing challenges. In fact, that's the whole idea behind the 21 Hats community, engaging with other owners to get the kinds of insights only another owner can offer. If you're interested in learning more, step one is to sign up for a free trial of the morning report, which highlights the most important news of the day for business owners, so you don't have to go looking for it. Step two is to get on our Slack channel where you can ask questions, get vendor recommendations, and tap the wisdom of a very impressive crowd. Just search the 21 Hats Morning Report to subscribe. Joining me this week on the podcast are regulars Paul D, CEO of Paul Downs Cabinet Makers, which is based outside of Philadelphia and makes custom conference tables. Jackie Russo, CEO of Brand Russo, a marketing agency based in Lafayette, Louisiana, and Sarah Seagull, CEO of Seagull Communications, a public relations firm based in San Francisco. The episode is titled At 5:00, I'm going to send everybody an email. Welcome, Paul, Jackie, and Sarah. It's great to have you here. Paul, the last time you were here, you told us that you'd had to lay off two people and you feared you might have to cut deeper. I'm almost afraid to ask, but how's it going? Cut deeper. We cut very deep. Um, here's the problem in a nutshell. Last year, January to March, we sold 1.356 million. this year, January to March, 680,000. March is on track to be the worst month I've had since I started taking records. We're at 73,000 for the month. So, I did lay off another seven people. We've laid off nine in total. Out of out of I think we had 26 to start with and uh we're down to 18. and sorry 27 to 18. And yeah, the only good news is that I'm glad I did it because I've been able to kind of stabilize my cash position and I now have enough money on hand to run through the end of the first week of June because my feeling is that a we are still getting calls. We're getting a fair number of calls from people who have projects. So the demand has not entirely disappeared, but it usually takes time to turn calls into orders. And so what I've been trying to do is just manage keeping the runway, making sure we have money to operate for another, you know, however long we can do it so that we don't have to seize operations. So, we've laid off the nine people and everybody else is taking a pay cut and I've taken a complete pay cut and uh we're kind of readjusting our output to match what we suspect we're going to be doing per month. So, last year we we were trying to do 500,000 a month. I think that this year 3 320 to 350 a month would be a good result and it's not likely to happen immediately but I think that we're going to see some recovery as the year goes on. That's my thought. I have quick question. Um first is when I had to do this 2 years ago. Um it was terrible but there was this immense amount of relief I felt after I had done and all of a sudden I could sleep better at night and I could I just could think a little bit more clearly like there was a mass amount of stress. So I'm wondering how you're doing with your mental health. And then my my second question is um do you have a rainy day fund for these kind of situations? Are are you dipping into it or does that not exist? Yeah. So, mental health, I'm I'm pretty mental healthy because there there really wasn't an alternative. And when I decided to do the layoffs, I was like, "Okay, now what?" I actually put together a whole presentation for my company that explained the situation as clearly as I could. Here's the numbers. Here's where we're at. Here's where we were at. And the basic problem being that coming off your best year ever, you have added staff and you've added equipment. You've done all this stuff to produce more, but you're carrying a much higher cost. And if the amount of money coming in the door is not nearly enough to sustain that higher cost, then something has to be done. So I laid that all out for them with numbers and graphs and uh and then said, "Yeah, and now now we're going to divide the company into two groups. Those who are laid off and those who are not laid off." And everybody was in this presentation. This was talking to everybody at once. And I did the meeting at 2:00 in the afternoon. I said, "At 5:00, I'm going to send everybody an email and you're going to be either in one group or the other." Uh because what I did not want to do was give the ones who weren't laid off the impression that they were just like, you know, dodged a bullet, everything's fine. No, you're going to take a hit, too. And then what I was trying to do also was not go out of my way to humiliate those who were going to be laid off and to present this not as a question of this being necessarily a result of their individual performance or anything. This is being done to us from outside forces and the villain is not in the building. And so that seems to have worked pretty well. I sent out the emails and asked people who were being laid off to actually come in the next day and uh gave told them, you know, like we're going to pay you for a couple of days till the next payroll. Here's what's going to happen. But I didn't want to just like get out and then let them go home and not really feel like part of the company anymore because my goal was to lay people off and in such a way that I would have the option to bring them back if we can get sales back where they need to be. Like I hired all those people for a reason. They're all good people. If sales pick up, we'd need them back. So why do the layoffs in such a brutal way that it destroys people and makes them not want to come back? Now there's been fair amount of discussion in the podcast over the last few weeks of the idea that I would take into account things beyond just uh job performance in deciding who gets laid off. And my comment after having heard a lot of criticism about the idea that you would take into account who bought a house or who had a baby is that in a company my size, I would take all information that I have into account and that I would never set aside any type of information and say, "Oh, that's not relevant." Because all information is relevant. And then I would invite those who feel differently to start their own company and get in trouble and figure out how to do your layoffs yourself. But that's your your prerogative. But this is how I run my company, which is I try to get to know my employees, understand who they are, understand what their situation is. I'm very clear on what they do at work, but I just want to know. And so at the end of the day when I was deciding who was on the layoff list primarily it was are they doing something that we don't need as much of anymore and that's one type of labor or are they doing something that we need but we can get the remaining people to do. Other words, can we take a job? Can we take one person's job and eliminate that position but spread the functions out to other people? Can would would that work? And then the third thing would be, can I get this person back if I lay them off? And that would be a question that would lead me to not lay off someone who I suspect that uh I would not be able to get back. And so if you were someone who I felt had been around a long time and and understood the value of working for me as opposed to somebody else, I might be more inclined to lay you off cuz I feel like I could get you back. And then the last thing would be all of the personal who's got a baby, who's got a house. It's not irrelevant. It's part of the discussion, but it wasn't the main thing for me. So I just wanted to lay that out there for everybody. So, I I think that two like follow-ups on that is that one I I think Jackie on another podcast you you mentioned that you have a different perspective on that and I'd love to hear your thoughts on this, but also I was curious as to whether or not you considered a furlow instead of laying people off like or is the pipeline just not healthy enough to to be optimistic about the business coming back? Yeah. furlow. I mean, what's a furlow? A furl is you send someone home and then what? You tell them don't apply for unemployment or don't look for another job. Like, I just did not feel that that's fair to the workers. If you're laying them off, you're laying them off. You're you're telling them you're now free to act on your own behalf. And to imply that there's some lastm minute savior showing up, I just don't see it. I think that 6 months from now we will be back to some new level of of predictable you know sales will be coming in. I don't know whether they will match last year or not but in the short term I just don't think that that's fair to the workers because you're you're presenting false hope in a way that you can't back up. And so I would rather try to make a more severe adjustment right now and claw my way back from it than try to dangle people, you know, just to to string them along and say, "Hey, it's going to get better." When I really don't think it's about to get better. I'm not entirely clear what the difference is between a furlow and a layoff. Although, one thing I have heard is that in some cases, furlowed employees retain their health insurance. Does anybody know? Well, there's COBRA. I mean, when you when you lay somebody off, you have the legal obligation to offer them the the opportunity to purchase health insurance at their cost, but through your plan, right? But I think with a furlow, sometimes the it's not COBRA, the furled employees just remain on the health insurance plan. I bet that varies by state, and I don't know the answer to that. I mean, when I laid everybody off, February 28th was the last day, but everybody who was on the health plan, I said, I'm going to carry you through the end of March at least. And uh if you want to do Cobra, you can do that, but I didn't want to cut them off like immediately cuz people may have appointment scheduled or something. Well, we pay our uh insurance in advance. So, like we've already paid April. So, if somebody was leaving by my choice or theirs today, they'd be paid for that whole next month unless I charge them back for it. Probably depends on how different health insurance companies work. But in mine, if even if I had prepaid through April and then I went into the portal and just canceled someone today, I would get a refund for that. Yeah, that's how mine works, too. Yeah. Well, maybe my agent doesn't like me as much as yours because that's never been an option that anyone wanted me to consider. Well, you know what? Let's not let's not go down the road of bitching about health insurance, but there's what they tell you you can do and what you can actually do and at least in my case very different things, right? But so as far as like taking people's personal um situations into account, Jackie, didn't you say on an earlier podcast that you're a little less, you know, it's more about the health of the business um than taking people's personal lives into account. And I'm not putting that on you. I'm just like I'm on the fence. No, it's okay. I I probably did. I hope that I said it kindly. Um, but for me, I am very grateful that in our, you know, we're in our 25th year now, I have not been faced with the same decision the same way that Paul has. And so, I don't really know how I would respond in those situations. I hope I never find out. It's a club I don't want to join. Um, I do know that when we talked about it a couple weeks ago, because this was starting to to percolate, I remember thinking, you know, when I look at our team, we we're lean, you know, so I I'm just going to eliminate the PR person, you know, eliminate social media. It's we're cross-trained and we've we don't have redundancies. And so, we'd have a real pickle if I was going to start laying off people because it would have to be almost a a department. Um and that would eliminate a service line that we're paid a retainer for. We've had um a couple of clients, you know, over the years say, you know, something's changed for them, they need to rework the scope. You know, we we've had to make some modifications, but the ad agency world is notorious for get a client hire, lose a client fire, and we've tried really hard to not fall into that pattern that other agencies do. And so, um, I think part of it is just a lot of dumb luck on my part. Not really great skill sets on my behalf, don't get me wrong, but we luckily have not been in that position. And we're monthtomonth, so it's not like a client's bound to a 10-year contract, and therefore, I sleep at night knowing they're not going anywhere tomorrow. Any of them could leave at any time, but our average length is 6 and 1/2 years, and our longest is about, I think, 12 or 13 right now. So that gives me a little bit of comfort that I don't have to make this decision anytime soon. But you know, our economy is a bit up for grabs right now. So although it's not affecting our business at the moment, if it affects my client's business, there's a conversation that has to be had. I'm in a similar situation as you. We I don't have a lot of redundancy, but I want to say that it was Jay on this podcast that once said, um, your business is not a charity. And I have to say that I kind of align with that. So when you make your decisions, you have to make it based on the health of your business. And if you don't, you're going to impact the people that remain. And I kind of align with that. And I know that's a little bit on the harsher side, but when I lay people off, like um when I had to do that a couple years ago, you know, it was not a great experience. Um I did sleep better afterwards, but I did everything in my power to get those people new positions. And uh I'm happy to report that they're all in great places. We still talk, we have lunch, we get get cocktails here and there. like they're all in a good place and some of which is because I helped make some introductions for them or you know pointed them a right direction. You know I did what I personally could to kind of help them get over that but I had to make some really tough decisions. I let go people that I really admired who had been with me since day one who were like knew where all my skeletons were, but they did work that I knew I could do. Let me jump in here. I wanted to say Paul, you said that some of the comments you took as criticism. I don't think very many people, if any, meant it as criticism. I think there were kind of two strains of reaction to to what you said about taking those personal things into account. First of all, everybody acknowledged that you laid it out in terms of one of the things you enjoy about being a business owner is getting to know your people and seeing them every day and knowing what's going on in their lives. And certainly no one would be critical of that. Well, some people would be. I think that that the Yeah. I think that what I heard from I mean I can't quote word by word but uh a desire on the part of some commenters to say like no don't don't take that into account. It's not it's it's not fair that there was a a feeling that employees should be judged by what happens in the building only as if that's actually possible to tease out the exact contribution of each employee. I think that would be very difficult in my case but you know maybe it's possible like if you had a team of just salespeople you could just tell who whoever sold the most they're the winner and whoever sold the least they got to go. Like there's some jobs that are very easy to score, but mine just isn't. So, by the same token, I think some of the people who raised questions would also question whether you can have perfect vision into the personal lives of your employees and and right and that's what they were saying. Um, and maybe this is a fine line to draw. I think it was more along the lines of I would do it differently than Paul is doing it wrong. Um, I I think there were kind of two strains of thought. One was from someone who wrote on the 21 Half Slack channel that trying to do what you're trying to do is a version of uh playing God and and I can understand why you would take that as criticism. That was the most extreme uh comment. I think there was another uh conversation uh that was more along the lines of once you start looking at those personal factors, it it's it's a lot like paying somebody differently because they have a family uh versus someone who does the same job but is single and that you get into dangerous territory there. I am vehemently against that you should never pay people differently because of their situation. I feel very strongly about that. In fact, what I do with my my team is I have pay scales and ranges for each position. The team is very well aware of what those those ranges are. If you're starting into the position, you're offered this. If you're more senior and you will graduate up, you know, to the higher end of that position. Um, but I do not pay people based on their personal situations or anything else. If if you're hired in a job and you do that job well and you do it so well that I need to promote you, then I need to promote you into the next pay scale. I'm not going to pay two people that are doing the same jobs um different amounts. Like I had that happen to me personally when I was younger in my career. So now forget that. That's never going to happen to me. Like I'm never going to run a business that does that. What if you had an employee who was uh working remote and you're paying your your most of your employees based on San Francisco cost of living. You got someone in Ukraine or you know Costa Rica. Would you pay that person differently? So I don't have people working in Ukraine or Costa Rica. Am I asking you like what would you do in that situation? I pay them the same rate. It doesn't have to be Ukraine. It could it could also be it could just be any place way cheaper. It could be Lafayette, Louisiana. I was going to say we are in the same situation as Sarah, but the opposite. We have the same structure. We have the same scale. I mean, it's probably the same scale. We also have a scale. Um, we do it based on time, experience, etc. And it's a Lafayette rate. And so we have a real hard time uh recruiting people from big markets because it does not align with their lifestyle. Uh but it would not be fair in my opinion for me to pay somebody less just because they live in this town than somebody who lives in a bigger town that has a different standard of living. Oh, I have the same problem in my industry. So I'm a lifestyle consumer lifestyle agency. We do do some tech but not very much. It's not what we put on our our our banner, right? But tech PR agencies in the San Francisco Bay area are a dime a dozen. Tech companies retainers are like, you know, twice as much as um a consumer retainer. And so we just don't pay um as much as those tech agencies. So when I'm talking to somebody is like and I'm potentially hiring them, you know, one of my questions is like, do you really want to do consumer lifestyle? Because this is the situation. You are never going to make as much money as if you go to go work for a tech agency. You're never going to make those dollars um working for a small to midsize agency, but we get to do really fun [ __ ] Excuse my language. Like, and that's how I I seed it. But like I can't keep up with um like some of these larger tech oriented agencies. I just can't. or even agencies that have a really robust tech and a lifestyle consumer. I can't keep up with them because they use those tech retainer dollars to offset the lifestyle retainers that are less generally. Well, I'd just like to say that uh I kind of stirred the pot on this one. I kept bringing it up because I found it to be a really interesting topic that I thought smart people could disagree on and take different positions. It was not my goal to stir up criticism or to make you feel even worse at a difficult time. So I'm I'm sorry you took it as criticism, although I certainly understand. You know, if the podist that's fine and I I can take quite a bit of criticism. As I said, anybody who wants to run their company differently should do it. And uh if you came and ran my company, you might run it differently, you might not. Everybody's got a different decision here based on I think the main thing being company size. How easy is it to classify your employees and uh whether you have any desire to get beyond just the the first level of evaluation and if you don't then don't do it. I think Paul has thick skin. He's been doing this for a long time. Well, also I'm I'm always convinced I'm correct so it makes it easier to ride. I'm not but like I you know there are certain things that I'm like I feel strongly about. You have figured out what works best for you and you got to keep doing that. Well, a lot of it is that I have stats and records going back, you know, decades. So, I have a very good idea of what normal looks like and when it doesn't look like normal anymore, I can at least make a case for why I decided to do what I was going to do. And it was interesting that having given this big talk to the company, there were basically no questions about, well, why are you doing this? Like, they got it. I laid it out for them. Like, we we have to do this. If we fail, everybody goes. If I don't do this, we're going to fail. And so, it wasn't really something that seemed to be like, why did he do that? Everybody was like, yeah, we could see it coming. And you laid it out there and here we are. We're on board. You know, Paul, that's an interesting point about transparency because, you know, I've heard owners have this conversation over and over again through the years and there some owners who look at it and say, "The last thing I want to do is share my numbers, my sense of how the business is doing uh with employees because at some point if things aren't going well and I do that, it's going to scare everybody. And nobody wants to think that the the leader doesn't have control of the situation. Whereas what you're saying, I think, is you have credibility because you've been sharing those numbers all along and you didn't have to work real hard to convince people that this is a difficult moment where, you know, the actions you've taken were necessary, right? Well, part of it is that there's a very clear external enemy here involved who's [ __ ] us over. You know, it's like it's not just obscure what's happening or we can't figure it out or we don't have any way to understand it. But Paul, let me stop you there because I've asked you in the previous times you've been here if you know why your business has fallen off so much and it sounds like you've achieved a higher degree of clarity. Tell us why. Yeah, my product is at the end of the day it's sort of a luxury product. So, when do people I mean, first of all, there's a group of of of jobs we were working on that were in Canada. Well, they called me up said like, "Fuck you. You're an American. We're not doing any business with you." Okay, I know who did that. And then the other thing being that you have a lot of people who are just not pulling the trigger because there's just this air of uncertainty in the market. We do well when people are pretty clear what tomorrow is going to look like. And that's been for better or worse the situation for a long time. And then all of a sudden we get into a world where incredible forces, economic forces are being unleashed or shaped this way, that way almost at random and without ever settling on any particular state of being. You know, like are the tariffs on, are they off? Is it this much? Is it that much? Nobody knows. And so it's perfectly logical for people to not buy the luxury product in that environment. If they felt like, oh, we can spring for the expensive table last year, they just don't feel like that now. And the behavior is crystal clear. There's nothing else in the whole information ecosystem that's changed. We're the same company, same product, same people, same pricing, same internet presence, same kind of, you know, like everything is the same except the overall atmosphere out there of whether people are confident or not. And you see this in the stock market falling. And I think that in the last podcast, which I listened to, Mel Gravely was like, "Yeah, recession's coming cuz people are clutching." No, he said it's here. Yeah. Well, I mean, we're getting calls, so to that extent that there are still people out there who have projects, but we're not getting orders. People are sitting on their hands. So, to me, it's just pretty clear what's going on. I've seen confidence collapse many times. That's what really causes recessions. There's always a precipitating event and then as a result of the event, everybody's like, "Oh my god." and then they stop spending money and that causes the real damage. And I think again it's it's just not hard to pick out what's going on that's causing that to happen. I asked you this last time, are you inclined to try to do anything different to find business? The only thing that we tried differently is that we we recently got uh access to a service that allows us to see who's browsing on our site whether they call us or not and actually has pretty uh pretty good demographic information on people who are on the site, you know, like for even a 30 seconds. And sort of surprisingly, we can see who they are, what firm they work with, get their email, what pages they visited. That's a little scary. It is kind of scary. You have to share this. You know, my my AdWords guy was like, "Hey, would you be interested in this?" And then I started looking at the information. I was like, "Oh my god, this is great." But uh the question is, if someone's just browsing on your site, they haven't signed up for anything. There's, you know, there's no cookies or anything. This is just somehow they're sniffing out this information and if we reached out to them, would it be too creepy? So, we are trying in a limited way to reach out to certain people. If we saw that it was someone who is a good potential client who spent, you know, 30 minutes on the site looking at 20 pages, we could craft an email saying, "Hey, you were looking at this. We just want to tell you, you know, we we're here to help." And so we just started sending out a few of those emails and I don't know whether that's going to work or not. That's the only thing different. What's the service? Are you willing to divulge that? Uh what's it called? Hold on a second. I love this kind of stuff. I have had the experience of going to a site and putting something in um in my basket uh and then deciding not to buy it and then uh they've reached back out to me and say, "Hey, you forgot to Oh, yeah. All the time. This isn't that it's not there's no baskets, I say. We're just able to see what they're doing." But even with a basket, you don't you don't type in your email address. So they're able to see what Lauren is viewing and then figure it out and reach out to them. Well, yeah. I mean, this is really startling. It's called Visual Visitor, and I'm getting it through an agency that manages my AdWords spy. I don't really know too much about it, but the amount of information on each person is really startling because it's presented to me in a portal and I can click on the name and I get a little popup that has all their personal information, their LinkedIn, a summary of what their business is, what the company does, and then all the pages they visited, how long they spent on each page. So again, we can identify people who are clearly thinking about, oh, I'm looking at all this stuff cuz I want to see more. And the thought being just like reach out in a very gentle single email, hey, we saw you're on the site. We saw you were looking at this stuff. How can we help? That's it. So, I don't know whether that's actually going to work or not. No, but you have to do that stuff. I mean, I'm sure that Jackie probably uses a similar program for her PR stuff, but you know, every email that we send out, like, we can tell how many times you've opened it and where you've opened it from, so we know when to follow up. This is not necessarily for prospective clients. It's more for our media relations or influencer relations, but having that kind of intel, it's like it just makes it so you're more thoughtful with how you're going out too. You're not spamming people and just doing these like mass distributions which don't result in sales for anybody. Well, that was my thought that if we use the information, if we have this information about who they are, what their role is, craft something that says, "Hey, we think that we can help you in these ways." And be pretty specific about it. Jackie, I'm curious. Are you familiar with this uh type of service? And would you use it? We do use something like that. Um, the web team doesn't really let me attend their meetings anymore because my ideas apparently wasted time and annoyed them. I'm using air quotes. So, but we do have a suite of of tools and you've got some tools like a HubSpot for example where we'll do everything you're talking about with emails, the hosting of the website as well as u who's coming there. What we're ultimately talking about really are UTMs and those unique trackers can be embedded in ads, emails, links. So then you can track everything and where it's coming from and where people go from there and then you'll know more about their habits. And the point of it and the reason why I think I'm not bothered by it. I know some people are really disturbed by privacy and data. But my thought is if I'm in the market for this widget, then I want people to give me ads for that widget. I would rather that than I get ads for all these other things that I don't care about and I'm never going to be in the market for. Yes. customize the experience for me, please. The one thing that does freak me out is when I'm talking about something in my house and we have we have Google Home. Um, and then uh I randomly I get uh served up ads after talking about something I know that I've never searched for. Well, you let that thing into your house. I know I did. It's probably in the terms and conditions somewhere that you accepted like, "Yes, we will read your mind and send you garbage. You agree?" And it's a lovehate relationship. I'm basically like, "Oh, that's weird." But I move on because honestly, like I know a lot of people are into like worried about privacy and and all of that. And I I respect that, but like part of me is like my life is not super interesting. So, I'm kind of an open book and I don't really care. But that's just for me personally. There's some um discussion around is the machine listening to you or not. Obviously, there's also some discussion around the ads have been out there the whole time. But once you talked about it or someone else talked about it, that kind of opened the filter in your brain to see the ad that was always there. Uh interesting. I don't think that's I don't think that's it. I think I'm not taking sides in the fight. I'm just telling you razor. It's way simpler for Google to have that thing listen. You can do all kinds of voice analysis now and just serve you up an ad. That makes a lot more sense from a business standpoint than, oh, we're just going to fire ads and hope people notice them when they start talking about, you know, like whatever kayaks. I don't think that's happening. I'll do a test. I'll randomly talk about snowshoes in my kitchen um over the next couple of weeks. See what happens. I I don't need snowshoes. I don't care about snowshoes, but I'll I'll I'll do it and see whether or not it gets served up anything. I'll report back. Well, and I tell you what, I have an um alexa right here in my office. So, I'm also going to talk about snowshoes. Snowshoes. How much I want snowshoes. Maybe going skiing later. Need some snowshoes. And I'm in Louisiana, so we'll see. If an ad pops up, we will know. It's very intentional. Screenshot it and share it cuz I will be honest. Yes, I will. We'll we'll share it on the the 21 Hat Slack channel. Yes, I will. Paul, early on, uh Sarah asked you if you have a rainy day fund that you are uh opening up now to to get through this. Well, I had a rainy season fund and then I renovated my house and now I've got a rainy minute fund. So, but one of the goals of doing the layoffs sort of at the first hint of trouble was to make sure that we are maintaining our cash position. So when I did the layoffs, I had about $450,000 in the bank, which would have been enough for maybe four weeks of operations, not even if at the previous staffing levels. And we were expecting some payments which came in and uh we're continuing to do work and and send stuff out the door. So right now I have $850,000. Now I put in some of my available cash left after the renovation. I put in 150 grand, loan that to the company just as an extra cushion. But we've continued to improve our cash position, which I'm happy about. And a lot of that is because of cutting costs and uh uh also just adjusting our spending to a lower level of of output. So I don't have a rainy day fund lying around normally. I mean, I I always like to have cash, but what I'm doing is trying to manage day-to-day operations to prevent cash from disappearing. And uh one of the interesting things is that when you lay people off and then start looking into their email accounts and various other aspects of their performance, you discover some things. And uh uh like for instance, my purchasing manager had never signed up for tax exemptions on many of the vendors that we use for our goods. And just by simply not doing that was spending something like 30 to 40,000 bucks a year in in sales tax that we didn't need to be paying. So when I saw that, I was like, what were you doing that uh that you saw that this time? Well, I I had to go in and and and sort of start looking through all of our vendor accounts with various people we buy stuff from that were associated with this gentleman's email and logged into his email and started looking at all the emails and and realized that when we were getting order acknowledgements that there was sales tax on a lot of these things. And I was like, "Oh my god, please don't tell me we've been paying an extra 6% on, you know, half a million to $750,000 in purchases every year for God knows how long." And sure enough, that's what was going on. So, one of the things about laying people off is that somebody has to pick up the pieces of what they're doing. And in administrative positions, there's often that can be a bit of a surprise when you realize someone just was not doing something fairly basic and didn't seem to recognize that that was an issue. Paul, for anybody who might be wondering if they're in the same position, why was there a sales tax exemption? Oh, well, this varies by state, but in Pennsylvania, if you're a manufacturer, pretty much everything you buy is taxexempt. And that's just a state law. Like there's several different categories for a sales tax exemption, but one of them is are you a manufacturer? The another one that's pretty common is are you reselling this? And so that if you if I was buying reams of paper and selling them to people, then I should not be paying sales tax to my wholesaler, but I should be charging it to the person who's I'm selling to. Some of the stuff we do falls under that, but most of it is just like anything I buy. If I buy coffee cups, if I buy a machine, I buy it's all taxdeductible because I'm a manufacturer. And that, as I said, may be different in different states, but that's how it works in Pennsylvania. What's the mood like at your company? Now, it's difficult for me to answer that question because of course when the boss walks around, everybody is uh behaving differently than if they're not being observed. My feeling is that the mood is pretty good considering what we just went through. And again, because I made a very clear case of why I was doing it and what I hope to accomplish by doing it and the fact that the sales have continued to be miserable sort of points to, hey, he was probably right. And the fact that we're not running out of cash is also like, yeah, he probably was right. the people who remain are chasened because they know that a they are going to take a pay hit, but they could have been laid off. So, when you lay off a bunch of people, the survivors are almost always smart enough to put a smile on their face and try to not be the next one. Um, and I told people like, "Hey, this sucks." That in my email to the ones that are laid off, it's they started with, "This is not your fault and this is not my fault. this is something that was done to us and this is why it's happening and I think that that makes it easier for people to accept too. Now, of course, you do take into account performance when you're making these lists and so there is a tendency to clean house to a certain extent. So, some of the employees that I got rid of were on the more troublesome end of things. Although they were doing their job, they were causing more drama than necessary. So getting rid of people like that is also a mood booster for everybody who who remains. And uh I don't know my feeling is that we've come through it about as well as you can come through something like this. And having heard like from my son about how layoffs happen in bigger corporations, I think I did a pretty good job. And uh we tried to to give everybody a sense of of humanity going out the door and clearly explain why we didn't have an alternative. And I think that's about as best you can do in these situations. Sarah, when you laid people off, if I recall correctly, you chose to lay off some of your more senior people, um which I think you told us at the time really surprised them and maybe others. Um, did that work out the way you hoped it would? Oh, it was very stressful. Um, so I was in a situation where I had to cut cost and you'll see this at much larger companies that the the as soon as you get into that like with the seauite roles, your tenure is a lot shorter um because there's a lot of pressure on you in terms of delivering for the company, but they're also really expensive. For me, I had to make cuts that were going to make an impact on my cash flow and my bottom line and my revenue. And I had to do that with the most senior people because it was going to have the quickest impact and the fewest people. That said, it was not the easiest thing in the world because I was left with competent or awesome like you know really motivated junior people but that were all of a sudden thrown into hey you you need to start working on strategy too and you know I'll help you with that and we'll we'll work on that. My biggest problem was I had had um a social media manager who was fantastic, who had been meet with me for years, just somebody who got that [ __ ] done and like really delivered for clients and I had to let her go because she she was expensive. Um but the person that um was junior to her that I expected to fill those shoes wasn't ready for it. And um I had a misperception of what her skill set was because I I wasn't managing her necessarily. And so that had a unfortunate domino effect where she eventually left the company cuz she found another position. But it wasn't it wasn't a clean departure. Um, and I was very fortunate to happen to find another human to fill that role within two to three weeks and someone who I will literally bend over backwards to never have leave because she knows what she's doing and she's always trying to, you know, enhance the services that we provide. So, long story short is like if you're a business owner, yeah, you can cut from the bottom, but that's not going to shift your P&L as quickly as you want it to. Um, so it worked for me, but I think it also meant that you got had to dive back in and get more involved in the dayto-day operation. Right. 100%. So, I went from being, you know, 50% billable, I back to, you know, close to 90% billable for clients, which took my foot off the gas of finding new clients and establishing new relationships and all of that. And um I had to do that. Um, and what's funny is like when you become less billable and you rely on your team to deliver, there are things that they do and that they create and new systems that I I'm not necessarily in the weeds of everything that they do. So, there was a not a learning curve, but a I had to refresh myself a little bit. Paul, are you taking on tasks now with with a smaller crew that you didn't have to do before? Yeah. Yeah. Absolutely. I mean that that's that's part of it. The the the work is there and as I said figuring out could we reallocate somebody's load to other team members successfully was part of my thinking. I did end up laying off from all levels of the company too. Some some of the more highly paid people. It did it does have a big effect on the payroll. And I was able to negotiate one position that was salary and commission to be 100% commission. So I'm getting the full service of this person without having to pay the salary. In other words, it just lowers my cash load and if sales come in, you know, he'll he'll make money. So, it was all about trying to make sure that we've dialed back our spending, that as much as possible, we've continued to provide all the services that we need to for each other. But at a lower level of sales, you don't need as much of everything. So, you know, you if you needed three project managers and two or one, it probably do the job if you're doing a third of the sales. So, it's just thinking about it that way. How do we uh maintain capacity and cut costs? Jackie, last time you were here, you told us that you were a little bit surprised that given all the uncertainty in the world, your business uh was holding up quite well. Is that still the case? It is, but I feel like talking about it out loud is going to somehow jinx it. I'm not superstitious, but I'm a little bit stitious. And I mean, I'm knocking on all the wood I can find. Yeah. So far so good. I'll add mine that like we're fine, you know? We're we're fine. Don't say that. I mean, that's fine. That's how you bring the I don't like being fine, though. I I want to be better than fine. Like, we're fine, but like fine's pretty good right now, right? And Jackie, I also think it's good to to say it. I think Oh, Lauren, I understand. But people need to be reminded that he, you know, businesses are different and even in a really bad recession, even if that's where we're headed, not everybody does terribly. No. And I agree. And look, we we've come through 9/11, which was a huge blow at the time. We had a ton of hospitality clients and nobody was traveling. We've made it through the '08 financial crisis. And at the time, we had a ton of business banks and regional banks who really were hit hard with the housing crunch and interest rates. We've been through three that I can count oil downturns and we're in oil country. Like up until the mid uh 80s, I think 47% of employees in this region were employed by an oil and gas company. Like now it's 7%. Like that's how much this industry has changed over the years and you know we made it through co so we've weathered some big business storms. I don't know if this is going to be one of those the biggest one of those. I mean it feels like something big is brewing and I'm grateful that so far we're fine. All right. Uh on that note my thanks to Paul DS, Jackie Russo and Sarah Seagull. Thanks for sharing everybody. One thing before you go. Everything we do at 21 Hats is created by entrepreneurs for entrepreneurs to help us all learn together. If you get something out of listening to these podcast episodes, consider joining the conversation. You can do that by joining the 21 Hats sounding board, a Slack channel where you can tap the wisdom of a very smart crowd or by becoming a founding member and joining our monthly Zoom forum where you can be part of conversations much like the ones we have on the podcast. You can sign up for both by subscribing to the Morning Report. If you have any questions, you can email me at lauren21hats.com. And if you get something out of this podcast or out of the morning report, please tell a friend, tell an enemy, tell every business owner you know. Your word of mouth owner to owner will always be the most effective way to build this community for all of us. Thank you. It means a lot. This episode was produced by another entrepreneur, Jess Stubberon, founder of Blank Word Productions. Thanks for listening, everyone. [Music]