Do You Have the Stomach for This? 2025 in Review, Part 2

Hello everyone. Welcome to part two of our 21 Hats podcast year and review special. I'm your host Lauren Feldman. This week [music] we take another look back at some of our happiest, smartest, funniest, and most difficult exchanges of the year, [music] including Laura Xander on how she got the price she wanted to sell her business. [music] Liz Picarazzi on her confrontation with a grizzly bear named Sely. Jay Golds on why he just might be a surprisingly good candidate to turn his business into a worker cooperative. [music] Mel Gravely on why he spent years getting his facilities management business profitable only to shut it down. [music] And Jackie Russo on how she figured out how to train a series of AI agents to deliver 10 fully [music] vetted client leads first thing every morning. There aren't many places where you can hear entrepreneurs talk about the real life problems they are confronting right now today [music] as they happen with no guarantee of a happy ending. But those are the conversations I have every week with [music] David C. Barnett of Business Buyer Advantage, Shaun Busy of Kinesis, Paul DS of Paul DS Cabinet Makers, [music] Jay Goultz of Artist Frame Service, Mel Gravely of Traversity Construction, Shannon Kennedy of the Morgan Square, Jennifer Karen of SB Expos and Events, Lena Magcguire of Spoka Kitchen and Bath, Kate Morgan of Boston Human Capital [music] Partners, Liz Picarazzi of City Bin, Jackie Russo of Bran Russo, Sarah Seagull of Seagull Communications, William Vanderlumman of Vanderblan Search Group, Ted Wolf of Guidewise, and Laura Xander of Jimmy Beanswolf. We also highlight several special [music] guests who stopped by in 2025, including John Abrams of South Mountain Company, Chris Maynard and Justin Jordan, [music] Cathedral Holdings, and Rich Jordan of High Ground [music] Service Pros. The episode is titled, "Do you have the stomach for this? 2025 and review part [music] two." In the first highlight from episode 258, [music] which is titled Laura Xander named her exit, Laura tells us that she spent years taking steps to prepare her business to be sold. She wasn't necessarily looking to sell, but she wanted to be ready if the opportunity came along. Laura, were [music] you actively going out and trying to find buyers or did the buyers come to you? Walk us through that story a little bit. >> No, but um No, I was not actively going out, you know, trying to find buyers. But for the last 10ish years, if I met somebody that either had the money or I knew knew somebody who had the money or I thought it could be a good strategic fit, I mean, I was never shy with, "Oh, hey Bob, it's really nice to meet you. Do you want to buy my business?" Um, literally, like literally. And Lauren knows me. I mean, he knows that I'm not exaggerating. >> How many times do people say yes? >> Um, a couple. you know, a couple we should talk about it. I mean, there were a couple where we, you know, got a little teeny bit farther down the road. Um, a lot of times, you know, even let's say 10 years ago, I'd say, I'm not, and even in this case, I we're not worth what we want to be worth, but I want to put myself on your radar so that when we are worth it or when you are ready to buy something or, you know, add something to to your portfolio, you think of me. So, it was never a short-term, you know, play. It was always a, "Hey, I'm here. Hey, I'm here." Like, don't forget about me. Um, and I just figured when the time was right, the time would be right. So, yeah. I mean, the company that ended up buying us, you know, I we've been on their radar for years, you know, years and years, and they've been on our radar for years and years. >> Did you have a valuation? Did you did you know the number you wanted before you talked to them? >> Yeah, but I've known for years. I mean that's you know I've actively thought about I mean every year we I value us >> you know I mean I I know what I'm driving towards I know what IDA I want you know we know I know what percentage we want for this and that and I know um just kind of intuitively I guess like where synergies would be found. So, if I'm thinking about this company, you know, before I say, "Hey, do you want to buy me, I mean, I've got some kind of like thought behind why it would work and why it would be a good fit for somebody um and where we could add value." So, I didn't go get a formal evaluation. Um, I didn't need to. I've been looking at this long enough that I need >> Why do you say that, Laura? >> Um, >> why didn't you need evaluation? And and the buyer didn't want evaluation? because we said this is if we are not looking to sell it right this second. If you would like to buy us this is how much we need and they could take it or leave it and that's where we ended up. >> Did you end up at that number or did >> Yeah, we did. >> Laura, did you want to stay on? >> Um I was um I could have gone either way. Um, I mean, I told I'm like, if you find me useful and you think it would be helpful um, for me to stay on, then I'm happy to stay on. If you don't want me to stay on and you think it would be cleaner and the business would be more successful if because, you know, as the founder, um, I stepped away, then I'm happy to step away. We're still kind of in that phase, right? It's been 3 or 4 months. We did end up, you know, I took a role as an employee. I'm in I'm in the seauite. Um there are three of us and uh at this point like I think I'm being useful you know and I think that uh the business is benefiting you know from my experience um and I am learning a ton from these other two women who you know went to business school and like they know what they're doing. So, for me, it's while it was unbelievably incredibly stressful for the first couple months, um we're getting it's starting to like level out. Uh and I'm getting to the point where I'm getting to start to read business books again. I'm getting to start to think about things at a slightly more strategic and higher level than I have in a long time. And that's super super exciting. Did you get your price all now or is there a period of time before you get the rest of the deal? >> Um, we structured the deal so that if everything in the world collapsed tomorrow, if I don't know, there's some crazy thing like a pandemic. Um, you know, and the economy completely collapsed, we were happy. So, yeah, I mean, we got the deal that we were looking for. So, You know, we were very lucky that way and they were very honorable that way. And we were lucky in that we were like, look, again, we don't have to sell. I know the business isn't as big and isn't where I want it to be someday. That said, I mean, I had been shooting for a certain val. I wanted our business to get to a certain value and we weren't there yet. So, I was willing to take what it was valued at at the time. >> Laura, how long were the phases? Right. the phase where you're negotiating, then you agree on something and then the phase of all the documentation like can you walk us through that timeline? >> Sure. You know, we like semiformmally signed, you know, a non-disclosure I think in maybe October or so. Um, and then it was I think it was Thanksgiving. >> Wait, October of 2024. >> Yeah. Yeah. >> Right. Not that long ago. Oh, that doesn't seem that long. I thought you were going to tell me a year and a half ago. Okay. All right. Well, that's a long time. >> Is it, Bill? I have no idea. I don't know. >> Well, it's it's because it's brutal. I mean, you just described what I mean, it's brutal. The due diligence to the back and forth negotiations. >> I mean, the process took 5 months like like from the time we like put it down on paper that yes, we were interested in formally moving forward. Um, you know, the dating process, if you want to call it that. I mean, we had been chatting casually and flirting a little bit, I guess, for about six months. Um, but I was also, you know, polygamous. And I was also in a >> dating others. Yes. Dating [laughter] us. >> I was also in other conversations, you know, just coincidentally at the same time. Um, and had gone down the path with some others. But from the time I mean, we started the due diligence around Thanksgiving. I and I I remember that because that was our Thanksgiving, [laughter] you know, were the 155 items that were on the due diligence list. Um, and then we originally had planned to close the deal in January. Um, but to your point, the negotiations back and forth and just, you know, the communication of their lawyer and our lawyer and, you know, then me and the CEO would chat, you know, about some stuff and then some of the stuff would go back and forth. Yeah. Just all the paperwork just ended up taking and then with the election. Um, so not only did we do this over the holidays and a Shopify migration, so a complete platform migration that we had worked 11 months on. So we changed our entire platform that we've had for 20ome years >> that your husband built >> that my husband built. So he's driving that election, Christmas, uh, or I shouldn't say election, but inauguration, um, but election and post election. And then Doug's parents, his dad is not doing well and, you know, is got Alzheimer's now and blah blah blah. I mean, it was just brutal, brutal, brutal. But that took um it ended up taking 3 months. >> You know, though, there's so many things, Lauren, that I would tease out of this that just are so unusual. Just to begin with, the intentionality on building it to sell it is rare. um their patience to keep building the value of it so that it gets to a place where it is more valuable to someone to buy, which means keeping your books clean and all of that. >> I mean, there's just so much that goes into prior to dating and flirting and then finding a a proper mate. >> I just don't I hear people say they want to sell their business and they decide it today and they think it's ready to sell tomorrow. Well, the truth is most of them just >> they just aren't they just aren't ready for that. >> No, I mean you got to go to the gym for a while, you know, [laughter] >> to get bikini ready, right? >> Yes. Yeah. I mean, you just do. And and again, at least my thought process was and I think it was like the E-Myth or something that I read like 15 years ago that was like I think he his was like build your business as if you're going to franchise it. um you know in terms of like systems and processes and everything else and mine was and then there was a book built to sell build to sell or something but it was this is just best practices even if we keep the business for the rest of our lives and we always had that open you know I mean again we didn't need to sell we weren't actively looking to sell it but I always wanted you know I wanted my legs to look good if the right person came along um and you know I wanted to be attractive In episode 259, when your biggest hire ever is a bust, Jackie Russo talks about how thrilled she was when a recruiting firm helped her hire her first big-time salesperson and how devastating [music] it was when the person didn't work out. At the time of the hire, Jackie told us that she'd found precisely the person she needed, someone who hit the ground running [music] and was already lining up opportunities in her first 3 weeks. She had already revamped Jackie's CRM system and had just been [music] a general delight. >> So that is a very accurate recitation of exactly what I said 4 months ago and [music] I stand by all of it. I tell you that you know the firm was reputable. She came highly recommended. I had all those thoughts. I felt all those things. I really thought that this was like a game changer. She made all those changes. They were very expensive, but I supported them and um it has become an an expensive lesson in a list of the expensive lessons of entrepreneurship. So here we are um starting over again. >> Well, tell us what where did it go wrong? >> So the end unfolded um in an odd way. So, fast forward from the quotes you just gave, fast forward 3 months and nothing has developed and we met daily for two weeks so that I could really download everything I thought she needed to know. Made sure she had all the right resources, access to the library of all of our documents, all the things. She wanted to make some big changes, move us away from kind of what I would think of as a baby small business CRM and move us into Salesforce. hired an integration firm um brought in Zoom Info. I mean all the things. So right there I would say is thinking about us maybe as a bigger company than we are. You know she had previously worked for much bigger companies but some startup she had some startup background. So that didn't raise any red flags. She did walk in with somebody that she thought would be a great client. They were not in our um target markets. They they weren't the kind of company that we typically do business with, but she had a relationship with them that fizzled out, but I mean, you know, those things happen, so I'm not not too worried. >> Were they not right for the same reason? Because they were too big for your business? >> No. Uh, they were actually smaller than our typical client, but not a good fit in terms of matching up our industry expertise and process. they would have benefited from us, but I' I've realized later they were never going to get approved budget-wise. Um, they wanted a $500 a month solution and we're not that. So, you know, but no big deal. So, first month goes by, there's no big opportunities, but I'm still allin because it takes time. Like, who pulls this off in four weeks, right? Second month goes by and I'm starting to think surprised. I think I would have had some meetings by now just based on the people that I know and pulling in some relationships. I mean, the agency at this point in two months has probably had 10 discovery meetings and signed a new client. And so, uh, I'm starting to wonder now. We're in month three and I'm definitely starting to say things like, you know, what can I do to support you? This isn't moving as quickly as you predicted. you know, she wrote out a go to market strategy that had very clear path forward and we are well off that path and so I'm starting to say what if and I actually was uh heading to London and arrived and so she had sent an email while I was on the plane that said hey I want to um to do some things differently and I'm thinking okay I mean she sees the same thing I'm saying what's happening up to now is not working to make some changes and that was this odd odd like almost fall off the cliff for the next 3 weeks. It was just a rapid downhill descent. Um it was like she lost her confidence. She was no longer kind of organized and on top of it like she had been the 3 months. I honestly at one point was concerned that maybe something was going on with her personally, but she said no. And I reached out to the placement person and said, "Hey, this isn't going well. I don't know how to fix it. I'd like your advice. Here's what I'm seeing. And I sent, you know, reports, some email correspondents, some thoughts. Wow. Yeah, that's surprising. Give me a couple days to think about it. I said, okay. Came back with an incredibly thorough breakdown, step by step. I I think this needs to be different. I think maybe try that. I thought, oh, this is great advice. Yep. I've done three, four, and five, but oh, six and seven. That's really good advice. Okay, great. I'm going to start working on that with her. And then I get a two sentence email that says, "This isn't working out. I tinder my resignation effective immediately." And I was like, "Where did that come from?" >> Wow. >> And so here we are. >> So, first of all, Kate, you run a recruiting firm. Any immediate reactions to that? >> Yeah. Was it a contingency search? >> Yes, I paid a finder's fee. >> And you had three months to make it work. Did you have to Because usually there's a a 90-day guarantee. Did she leave before the 90 days? >> Well, we we started to realize it wasn't going well before the 90 days. Um there wasn't a time limit put on or there was I didn't go back and look at the document to see. I reached out though to the firm and they were like, "This is shocking. We've placed her before and it's been a great success. We are stunned. If you will trust us, um we would love to write this situation and do that work again and find somebody who's a better fit. No charge." So I have no grievance with the firm. I feel like they are absolutely handling it the level that I would if it was me. >> Yeah. No, that's that's fantastic. >> My takeaway after many many nights of thinking about it is that she's maybe been a part of a bigger team and had the luxury of being in a crowd, you know, like that high school group project thing, and all of a sudden she's a unicorn and there's only one and all attention's on her. And I think the pressure I think she cracked under the pressure, not pressure I put cuz I think I'm I'm pretty laid-back. And I checked with my team. I went back and rewatched the um all of our meeting videos, plugged them into chat GPT. I was like, "What could I have done differently?" And Chet GPT and I think that um she isn't used to carrying the weight on her own and it broke her. Yeah, we we see that a lot particularly because we're focused on a lot of the work that we do around sales is the first salesperson into a company. And yeah, that's you're you're actually looking for a very different person than most uh company larger companies that are looking for just another account executive or sales rep. >> Right, >> Jackie? How are you paying her? >> Um a salary plus commission. And and what what what kind of salary was it? Like a would you say it was a low, medium, or high salary? Like is somebody going >> I say it was high. >> It was it was high. >> It was It took my breath away. >> So somebody who took on the role could have presumably lived on the salary without actually making any sales. >> Yes. Unfortunately, and I did think about that at the time um and and quite a while thereafter, but it was not as high as they originally wanted it to be. So my theory was and and when we talked it all out that the salary plus commission was going to be really, you know, awesome, but just the salary wasn't quite as much. It was more than I wanted, but not as much as they wanted. And so I thought that still left enough, you know, because I think sales people need um they're competitive by nature and so they need a little drive and a little push. And so I felt like we left room for that. But now I think maybe it was too big. In episode 260, it's a bare market for city bin, Liz Picarazzi talks about how despite the advice of some very smart people who encouraged her to conquer her first market, urban areas plagued by rats, before expanding into additional [music] markets, Liz invested a lot of time and energy trying to position City Bin to serve towns, parks, and resorts [music] that need trash bins strong enough to withstand bears. For that investment to pay off, however, Liz would have to outsmart her nemesis, an [music] especially ferocious competitor that goes by the name of Cely. So, I will give a little bit more context [music] with sort of the enclosures. So, Citybin trash enclosures have always primarily been to keep rats out. So, New York City rats, that's what we're built for. We've been known that way and for several years we were getting requests from people in mountain areas where bears are an issue if we had a bear resistant version of our city bin. And so for a few years we said no, but we got enough requests that we realized this is something we should really look into. Why don't we basically trick out and make um a bearer resistant version? Um, it's made out of steel instead of out of aluminum. It has all the bare relevant hardware that you may think of if you go to a national park and you use sort of a paddle handle latch to open the doors. So, we made all those modifications and part of the reason we did it was that we wanted to get a certificate from the IGBC, which is the inner grizzly bear committee. You guys can laugh. Is it [laughter] made up of grizzly bears? >> Um, no. It's made out of some really lovely people actually, but they weren't easy on us. Um, we went through all of the modifications to our product so it met the qualification for IGBC and then we set out to get it tested to be certified. So, there's a testing lab for IGBC at in um East Yellowstone, Montana, and that is where they do product testing for all different types of bear resistant products, trash cans, coolers, trash enclosures. And so, we started our testing in 2023 and failed. Very surprising. I don't like that we failed. >> Why did you fail? So, it had to do with the mounting mechanism, and I don't want to go into great detail, but it sort of had to do with alignment of expectations about how the product would be mounted. And it ended up not being mounted at all. And so, the bear pushed it over in 4 minutes. Um, 4 minutes out of a basically a 6-hour test with revolving bears. every 45 minutes, new bears come in and test the product. So, that was 2023. We made a bunch of revisions, went in there in 2024, last summer. Um, and the bear legitimately got through. The bin was totally mounted. Um, and they it got in the front door. So, um, we videotaped the whole >> How did it get in? So, basically, if you've ever seen bear testing, you'll see that they perform CPR on whatever vessel they're trying to get into. So, they're basically just repeatedly pushing it over and over and over. Um, the other thing they do is that the the food, it's usually sardines and peanut butter, honey, dog biscuits, that's all rubbed all over the exterior, particularly in the hinges and around all the hardware door edges. So, they're smelling that food [clears throat] and that's incredibly motivating. So, they're trying to get in there and they can detect the weak points. The good thing about testing, I will admit, is that it really shows you where the weak areas are to improve it. There's no way I would have known that that door wasn't bear resistant without getting a grizzly bear to test it. So, for the sake of human beings and sake of the bears, it's really good that we knew that because then we looked at the bin after the 2024 test and determined a few key areas where we wanted to make improvements. So, that's the background going into 2025. >> Do you pay the grizzly bears or you just exploiting their free labor? >> Um, we pay we pay for a certification test. And you know, these these bears are somewhat lucky because they would have been euthanized. There are only about 10 bears at this center and that is over the years. So these are bears that all became habituated to human food and therefore you know became not safe to themselves or humans um because they would repeatedly go back to the same food sources um and that can become dangerous and many many bears every year are euthanized because of that. So we're not paying the bears but the bears basically have a a lifetime home. You just saved their lives. You are really going right to heaven. No question about it. >> Okay. So, should I move on? 2025. >> Yeah. Tell us. >> So, 2025, we take a year to make the changes. We set the the date up and we went to East Yellowstone mid July um to test not not one but two products because you can test them at the same time like different days. And the same bear that got into the bin the first two tests, her name is Sely. [laughter] She was the first bear in the lineup. And there's a lineup of an entire day of bear test with six different bears testing throughout the day in shifts of 45 minutes. This bear, Celely, I found out was going to be the first one. And I found that out before I went to bed the night before the test. And I did not sleep because I have seen this bear, you know, in slow motion because we videotape it. Get in there. She's very ferocious. She's very motivated and also she has a lot of experience touching and smelling and being all around this bin. So, she's got two years of familiarity going into it. So, this bear and her sister Condi come out and they're both really aggressive with the bins at first, but soon after they started to give up and they started to go swimming. They were trying to knock over trees. They were playing with each other, obviously looking for food around the habitat and other spaces where the people in the habitat center leave the food. So, long story short, the two module passed um after multiple rounds. So we were totally elated, not entirely surprised, but we were like, "Wow, this took over 3 years of work. We've passed." Then the next day was the next product that we were going to test. And that was sort of we kind of added this last minute, but basically it's a smaller version of the one we were testing. And that one passed. So we passed not one but two products in this session. And we got our official certification last Thursday. >> And the certification says exactly what >> it says it's certified by the IGBC as bear resistant and that is per the test protocol you know that we followed. >> Congratulations. >> Wait, did you get a certificate that suitable for framing? >> I did, Jay. I really did. That was exciting. And I, you know, I'm going to have to send that to you. >> What about a t-shirt? Did did you get a t-shirt with the picture of the bear on it or anything? Can we get some of those? >> I actually I already have basically like stationery and towels and pins with this bear celely. They have all different gear in their gift shop for every bear. And because she was the fiercest competitor that I was most concerned about, like I have a soft spot in my heart for her now because she failed. And um I know how that feels from the previous two years. Do we get to vote now on whether you made this entire story up? Because it's quite entertaining and I feel like I'm on NPR or something and we're supposed to decide truth or fiction. [laughter] It's a great story. >> Thank you. >> In episode 261, would a true capitalist consider [music] a worker co-op? Jay Goldz acknowledged that against all odds and with a few reservations, he'd begun to think that the worker cooperative ownership model could possibly offer a solution to his succession challenge. [music] So, we asked John Abrams, who turned his own construction business into a worker co-op and who wrote a book about employee ownership, to come back on the podcast to help Jay dig a little deeper. I'm struggling with I'll just throw it out there because I read your book. There are three things [music] that each one of them instead of inspiring me put me off tremendously to where I think the first one is this democracy thing. I I think running a business is not a democracy. Someone has to make a decision and if everybody gets one share. So the guy that works um on the loading dock is going to have a a vote as to whether we open another store really I and has no risk in it. I believe in capitalism and capitalism is being rewarded for risk you take and sleepless nights and stress and I just don't know how you mix those. I I just don't know how you mix those two things together. So the democracy >> what were the other two? Okay. The other two is the comment in the book about the whole thing with income inequality in the country. Like that's not my fault. That's not my problem. I I'm not going to own that. That's a bigger picture thing. And then lastly, that CEOs now are making hundreds of times more. Again, that's a Fortune 100 company thing. My argument is, correct me if I'm wrong. Well, no, I'll ask you this question. Doing what you're doing, do you believe that you're an activist or do you believe you're an advocate? Which one of those two? I'm an advocate. >> Very good. That's what I thought. And on my argument is those three words sounds like they're coming from activists of people who have never owned a business, have never signed a note, have never put their house up, have never maxed out credit cards. So, it's very easy for those people to sit on the side. Oh, you should be sharing your really do you want to share the losses I had when I when I come up short for cash? Do you want to give me $50,000 and borrow against your house? >> That is so true. But I have done all those things in save. Yes, >> I'm sure you have. I'm just suggesting that the messaging is >> and I have found I have found something Jade that is not you know it's it's counterintuitive in a way but that when you engage the employees in that way in that that deeply what you get is you get all the wood behind a single arrow going in the direction on the course that you've charted. >> I buy that. >> Now you're familiar with Jack Stack. You're familiar with Jack Stack. Sure. Absolutely. I talked to him about that's where I got the first idea about ESOPS from Jack Sick. >> So, so open book management is a form of democracy. You're sharing it all. You're sharing it with everybody. But the reason you're sharing all that stuff is to give them a way to understand what they need to do and how they can help to make the business successful. And I would argue substituting the word democratize with participative would solve the problem that yeah they should be participating. Absolutely no problem. I just think there's baggage with that word. >> Let's do that. Let's do that. >> Just to be clear, Jay, I think created a formulation where he suggested that if the business was deciding whether or not to open a store, somebody on the loading dock would have an equal say to Jay. And I don't think that's what you're envisioning, John. That's a great illustration. So you have 130 employees. If if this becomes a worker co-op, you will probably decide I mean the the way you do this is you create a small steering committee that you choose who are trusted employees and leaders in the company to figure out the nuts and bolts of this transaction. And that group of people is going to figure out, well, how large should our board of directors be? And maybe that's going to be seven people. Maybe it's going to be 10 people. Yes, those seven to 10 people would all have an important voice in whether you opened up that next door. But those people are going to be the people that you would want to be involved in that decision. They're not going to be just anybody. >> Okay. No, I I like I said, I haven't given up on the concept. I'm just telling you, reading stuff and being a business owner, when I start hearing some of those words, I think, here we go again. >> Wait a minute, Jay. In the very beginning of this conversation, [clears throat] you attacked big business. You said, "I would never I would never sell to private equity." >> I don't want to. I But I'm not attack I just don't want to do it. I'm not attacking it. If somebody wants to do that, go knock yourself out and do it. I couldn't care less. I'm not I'm not attacking it. >> I have a different view, but it doesn't matter. >> Jay, I don't think you're arguing in favor of pay inequality. I think you're arguing that small businesses are not responsible for creating that problem and shouldn't be responsible for solving it. >> What's the difference between the lowest paid person in your company and the highest paid person? >> Uh, five times. You are a worker [clears throat] co-op. I'm sorry. In episode 264, you're shutting down a [music] profitable business. Mel Gravely brought closure to a story he's been sharing in pieces over the past year. You may recall that he bought a facilities maintenance company a couple of years ago that he was convinced he could scale [music] only to discover that it was hemorrhaging money. Mel dug in, diagnosed the problem, fixed [music] it, bought out his partners, turned the company profitable, and then decided to shut it down. Why close a business that's making money? Mel explained. I'll start with the end of the story. On July 31st, [music] I ceased operations of this company that I bought back in March of 2023. And um it is a facilities maintenance facilities management company think everything that a facility needs um but not including the environmental things. So we didn't do janitorial or things like that but lawn care snow removal gutter cleaning patch and paints small you know refreshes of conference rooms. Um I am a btob entrepreneur. That is what I know the best. I'm not a a business to to a consumer um guy. And so that's the context of who I am and and and what this business was. So let's talk about what happened almost after day one. Uh I realized that I had partners who um weren't interested in scaling the business. Um they were having their own internal conflict. They had gone from generation one to generation 2. There were four young individuals who were firsttime business owners. They had been in the seat for 6 months prior to me buying in. and they just struggled with themselves and so it made them unavailable to help us scale this. Number two, by May we had put together the financial statements that they did not have when we bought them and realized that they lost money in 2022, the year before we bought it, uh to the tune of close to a million dollars. And uh year to date through May, they were on track to lose another million that year. They were at about another uh half million dollar loss through May of 2023, the year we bought it. And uh meanwhile the partners are just really going after it. They're having different they're having challenges. And what I did while they were struggling is I went about trying to get this thing back to profitability. So we I like to do this. We went to the customer and we said, "Hey, here the open book. Here's everything that's going on." And by the way, when we got the financials together, uh Lauren Jay, I saw something I'd never seen before. Negative gross margin. I I didn't know that was that was possible. It really means that we were paying the customer to do work for them. We were losing close to $2,700 a day paying the customer to come there and do work. So, how did that happen? Labor costs have gone up 22% since co our bill rate to the customer had gone up 4%. Um, the customer had asked us to assign additional management staff and safety staff in various locations for things that they wanted to happen. We did that with no means of recouping it and it was just a challenge. So we went in front of the customer, took us months, but we renegotiated a deal um the terms of our contract. They were very willing to do that when they saw the evidence and uh by July we had a business model we thought would work. So we ended 2023 profitable. Um we went into 2024. Um but again by this time our partners are really struggling to get along with each other. They decided that the only way out was to sell their business. So, they packaged it and put it on the market. I was concerned about being left with a a new owner I didn't know, a new partner I didn't know. So, I put mine on the market next to theirs and we decided we'd sell them together. So, for the next 6 months, we were trying to sell these businesses. Finally got a buyer. Worked on that for a few more months. Deal fell through at the last minute. Um, by this point, it's just a drain on relationships. is a drain emotionally on people. We've got a profitable business now. So, I decide I'm going to double down and we're just going to run it. Um, my partners continue to struggle with each other fighting back and forth. Meanwhile, what I hadn't talked about is the emotional roller coaster this is putting my myself and my wife in. Um, because we had to put another million dollars into the business. I, you know, at 60% owner, I put in 600 grand, my partners put in four just to get the balance sheet back, right? And so we're hanging out there financially and I'm not sleeping and it's pretty stressful. And my wife just finally says to me, I don't care what it costs. Just get out. And I thought, man, super clarity. Her point is is that at some point it's just time to get out. So I've got a profitable business. My wife is done. She's like, [snorts] I'm finished with this, right? Um get out. So um I pulled our advisors around, tax advisors, lawyers, my team at Tri Construction. Mel, remind us diversity is your main business that you in in the past year stepped back from um moving from CEO to to chairman. Someone else is running the business, but it's a much larger business. >> Much larger business. The business I'm talking about today is last year we did about 8 million. Triity will do 170 million. So just they're much larger. Um and a very very talented team. So we we pulled all that together and we came up with a strategy. So, I I bought my partners out um for less money than they had put in in that last trunch. So, they put in 400 grand and I bought them out for less than that. So, I've got some positive equity from that. We've got a profitable business with with equity on the balance sheet. And um we just decided to bare bones this thing and run to the finish line and close it in in July. So, I announced that to the customer in March to give them time to plan. Um they asked me for an extra month because I wanted to go through June which is my current contract year. We went through July to give them an extra month um because they needed a little bit more time and we just stripped all the cost out of it. Ran very lean so we could maximize profitability. They went through an RFP process, picked another supplier. We worked on a transition with that supplier. They hired all of my people except for two. And now we're in the cleanup phase. So, um, clean up phase meaning, making sure all the invoices right, making sure everyone's paid. But I think based on the projections that I've got in front of me, that we should be able to come out of this thing and [clears throat] I still have a shirt. It may not be on my back, but it still has I still have a shirt. So, that's the chronology of it. And [clears throat] we should be done with this by the end of the year completely, we think. >> How did you make the decision to just close it down as opposed to take another crack at selling it? I did take a quick driveby on selling it to people who were familiar with this customer particularly, you know, when you've got one customer, when you've got a contract that is on paper ending in this coming June, which we would have resigned, but it but I hadn't resigned it yet, and you've got payment terms that are 120 days, you're very not a very attractive buy target. In episode 266, your employees want a career path. Can you keep them? David Barnett, Jay Goldz, [music] and Kate Morgan react to a Reddit post from an owner who is really struggling with managing employees. [music] "Is this just what having employees is like?" the owner asks. "Please tell me I'm not the only one losing my mind." I started the conversation by reading the post. I don't even know what to do anymore. We went from a small team of [music] 3 to8 since April and I thought hiring would solve problems but really it just created new ones. [music] Like now instead of being stressed about delivering, I'm stressed about training people to do the work. We had this new guy just joining seems smart with good portfolio and spoke well during the interview. I put off a complete day to talk with him about everything that we do, tools we use, our process, file organization. He's proactive asking questions and taking notes which made me think finally a good candidate amongst them. Next day he calls me over to his desk and he asked me something about where we keep docs uh which I clearly had explained to him yesterday. Are you kidding me? It took him just a day to forget that. And it's not just him because someone who's been here a month still sends email to the wrong person and there's many cases like that. My business partner says we need better documentation. But when I'm answering the same question on repeat being behind on client work and starting to get sharp with people who are just trying to learn, I know this is an investment and that after six months they'll be solid, but right now this is very timeconuming and I'm not sure it's worth it. Is this just what having employees is like? Please tell me I'm not the only one losing my mind. >> Yeah, I can I can I can answer this. >> Please. >> Uh he's he's investing in the wrong place because every business has systems. The problem with his business is that the systems are in his head and he hasn't properly documented how they do things and he has doesn't have some kind of playbook or or company wiki or you know these things go by different names but there you should be able to sit down with a new person and say here is the flow of how we either you know handle a client file or how we manufacture our widget or whatever it is the business does that we go through these various steps and here are the different people in our organization and here are the job descriptions and the roles that they cover and here are the tools that everybody uses and this is, you know, your role and this is the stuff you're going to be doing and here are the tools that we have, you know, established for doing those roles and it's all right here because nobody can drink from the fire hose in one day and learn everything about a business and expect to have it top of mind. There's always going to be that need to refer, right? Well, where did they say they did this? Where did they say they did that? And if it's if you instead of spending a day trying to teach someone everything, you you show them how to use your documentation so that they can find what they need on their own or know what other people in the company are doing the same tasks. Maybe they can go talk to their colleague instead of the boss, right? That's what's missing in this organization. >> Yeah, I I would agree 100%. For my team, we are so well documented. I love it because I have my own specific track that I train new employees, but then I can push it off to everybody else so I don't have to deal with people because I'm not the most patient person. >> I think that is incredibly valuable. And right, there's another piece of this I wonder though, which is in addition, did he check their references? Where did they come from? Maybe they were just fired from the third job because they can't remember doing I don't know. I I just I I'm not >> You know, it's interesting to me that he said he thinks they'll be solid in 6 months. Um which suggests that maybe he did hire the right person. >> Why does that make you think he hired the right person? >> He thinks they're going to be good um down the road. I get it. >> He's frustrated that they're not picking it all up right away. As Dave said, despite, you know, not having uh the processes in place that would make >> he emphasize he spent the whole day with them. And my argument is that's part of the process. The other part is to find out why they leave their last job. He didn't mention and they got, you know, great references. I didn't hear that part of it, so I don't know that that isn't part of the problem. In episode 270, welcome to employee ownership without the hype. Special guests Chris Maynard, co-founder, [music] and Justin Jordan, CEO of Cathedral Holdings, a 100% employeeowned ESOP, talk candidly about their ESOP journey. They are big proponents, but [music] they don't sugarcoat it because if I recall correctly, you did have an issue shortly after you sold to the ESOP [music] and and I only know this cuz you you shared it publicly previously. Uh I think your business did suffer for a while and if I remember correctly, you even had to kick some money back into the business. Am I right about that? >> You had to bring that up, didn't you, Lauren? Yes, I did. [laughter] >> Yeah, I I we we entered what right after the transaction really what we uh affectionately call Death Valley. And uh for whatever reason uh you know in the fall of 2011, we hit a bit of a drought uh you know in terms of uh sales and performance and for the first time in our lives we were under bank covenants. We had taken some level of debt uh for the transaction. We sell our financed a good amount of it, too. But, you know, I I found myself starting to uh really perform differently and run the company differently than we had previously. You know, one of the reasons we didn't sell to an outside suit or a a competitor or a private equity or anything like that was because, you know, I never wanted the numbers to determine how we behaved. But I found myself doing the exact thing that I didn't want uh you know, if a private equity owned company or a competitor had bought us. I was micromanaging our sales team, you know, nagging them about closing business and orders. And I remember distinctly sitting in front of our banker uh one morning. We had a monthly meeting and and we had failed covenants. Um and he looked across the table at me and he said, "Chris, what keeps you up at night?" And I I said, "Are you kidding me?" [laughter] I said, "Every time I close my eyes, I see your face." And you know, I just it was this haunting feeling. And you're right. I'm like, my partners and I got together and I just said, "Guys, listen. I can't live like this. I don't think it's good for me. It's not good for our business. You know, let's kick some money back uh to the bank, get outside of these covenants, and get back to doing business the way we've always done it. And we did that. And once that pressure was off of us, you know, we're back off to the races again. >> Did you think there was any possibility that going ESOP was responsible for the the decline in performance or was that just a coincidence? I think there was a there was a level of um you know probably disengagement from us as selling shareholders and senior leadership in terms of uh you know a distraction you know for six or eight months nine months of that year uh you know really being heads down on you know trying to get a pretty complex uh transaction done. Uh, so there was an element of that. I think Lauren, I think some of it was there was a bit of bad luck, you know, in terms of timing, but I think the important thing is that, you know, we recognized some of our mistakes, I think, and we had the wherewithal to get out from under a rock and get back to doing what we do. >> Lauren, let me let me contribute a little bit to that, >> please. So if you can imagine a business that had run for decades without debt uh we've had small revolver debt up until 2011 but in essence no debt I think no covenants no debt all of a sudden you leverage 100% of your business 100% everything it changes the way you think it changes the way you you you run the business how you manage the business manage people the pressure that that brings no surprise does to anybody will change the way you behave and that I think is as much as anything contributed uh along with what Chris shared. So we closed in August but the month of September and the month of October was one of those odd arrangements where the market was weak. We didn't have the type of revenue we typically were accustomed to that just happened to span two quarters. two quarters where we held covenants. What started with a quarterly review became a monthly review became a weekly review to almost a daily. How are we going to change this? Uh and that's where the generosity of the reselling shareholders allowed us to reset. When they brought uh a portion of their closing assets which were pledged dollars back, it allowed us to take leverage which for us our senior leverage was four times even. We dropped that down to three and all of a sudden we're off to the races. It changed everything. Debt is the issue. >> In episode 272, "I have to figure this out." Jackie Russo [music] told Liz Picarazzi and Ted Wolf about the steps she's been taking to try to make sure her marketing agency doesn't get left behind by AI. For example, she took a class that helped her create AI agents that almost immediately started freeing up her time while also producing client leads. So, one of the things [music] that um I built during class was a new business tool. I've been spending a lot of time completely revamping our new business program here at the agency and I'm able to save I'm going to say conservatively 30 hours a week now >> of your own time >> of my own of my personal time >> which that's a lot. Um, and so what we have built is a tool that every day and what it ends up doing is delivering to me an incredibly wellvetted set of new leads in specific industries with an incredibly detailed assessment. And so it serves >> start from the beginning, Jackie. 30 hours is a lot of time and new leads is something that every business cares about. How does this work? >> This is what it does. And I'm going to use business banks as an example. It will go out every day and find for me 10 business banks that completely fit the criteria of what the perfect client is for me. And that criteria is very detailed. It will find the person in charge of marketing. It will find their LinkedIn profile. It will find the company website. It will find their competitors. It will compare them into a B score, budget, authority, timing, and need. and then an we added an F for fit. So, it's a BAT score. Um, it will rate them and it will write a first draft email for me identifying specific things we've done that are aligned to things that they need and throw all that into an email for me at 6 a.m. >> Is that working? >> Oh, yeah. >> Amazing. >> Yeah, perfectly. >> How is all of that information even publicly available? >> Well, I tied a bunch of tools together, Liz. I'm so glad you asked. Um, so I have some scrappers, as one of my um, classmates called it, a scraper, and uh, four different AI tools, different platforms, all working together in a daisy chain to deliver that information to me. >> And then you get 10 leads every day. >> Well, I chose that number, Lauren. That's one of the factors. You can just pick whatever number you want. Um, but 10 is a good number for me because I want to be more focused on quality over quantity. And what are you doing? >> Well, I'm connecting with them on LinkedIn and I'm starting a relationship. I'm getting to know them. I'm reading what they're writing. There's still some human element, I think, to do a good job. I'm not ready to turn my entire life over to the robots. >> So, you're not just making a cold call to these. >> No, no. That's not my business. Other people that would make sense to them. Um, but so, no, I will uh get to know them. I'm not just going to slide into their DMs and say, "What's up you up?" I'm not there's no you up messages here. Now, the ones that make sense, we do invite them to be a part of our podcast because, you know, we're always looking for B2B marketers, but that's not everybody. I I we only release a podcast a week. Like, how could I possibly keep up? And so, it helps put them into different buckets of they would be a good podcast guest. They have this immediate need right now. They have a long-term thing. Send them this um material that you created a while back that would be relevant to where they are right now. it it guides me through that process and gives me steps and then um I have another tool that once the human me says yes it goes into our CRM and there's a whole bunch of automation that happens after that. >> So Jackie would you say that that's the equivalent of what your employees would normally be doing or a person would be doing but now the agent technolog is doing it. I would tell you yes. And um not only am I doing it, but I have two employees that are also doing it and we're comparing [clears throat] our notes because we all have different sets of leads that come to us and we do different things with them. So we're doing some ABC testing. >> Yeah. >> And then I would also tell you that as this works, which we're two projects in already, so so far so good. >> Um so two new clients have come from this effort in >> very short amount of time. >> Okay. And so no, now I'm going to have to start hiring to handle the new work that this tool is creating. >> In episode 274, Three Branches, Three Brands: [music] Anatomy of a Rebranding, Rich Jordan took us inside a marketing challenge presented by his successful acquisition of home services businesses. [music] In conversation with Shawn Busussy and Jay Coloultz, Rich explained how he wrestled with his options and ultimately decided to do a total rebrand under a new name. I asked Rich how he picked [music] that name. So, you know, we you know, we we talked about culture earlier um and shared mantras and and and how important this is to to us. Um, so we we have we have 10 core behaviors at Sanford and and across the other branches as well, but certainly like most most embraced at Sanford. And uh, one of them, which funny enough was like was voted the team's uh, top core behavior is seize the high ground. Do the right thing even when not easy or profitable. and you know sees the high ground is a little bit of a throwback to my military background and and uh has a little bit of that flavor to it. But uh we and I mean of the 10 core behaviors I feel like we lean into that one more than any other one. Of course you know we're dealing with uh dozens of customers every day. Um you know things go ary occasionally. we have to go back out, fix stuff, do stuff for free, refund money, like where another contractor might argue with you and try to nickel and dime and and uh split hairs. Like we really lean into that sees the high ground. >> It always surprises me that companies don't do that. That you don't lose money once in a while. So, good for you. I'm sure that's a major reason why you're successful. >> I I think so. I think it's a hu I mean I think that um that core behavior and and a few other things that go behind it operationally I think is a [snorts] huge part of our growth story and our satisfied customer base and in in many ways you know it's one of those things that like you want you want to try to be able to say things that your competition is not willing to say right and for us like one of those things has been we offer a lifetime workmanship guarantee anything we touched. It's like done right or we're going to make it right. And like we totally stand behind that. >> Whose lifetime the customers or yours? [laughter] >> Well, yeah. You know, I play pretty fast and loose, Jay. So, I don't know if we want to do it on my lifetime. [laughter] So, like, you know, that's very much tied into the sees the high ground core behavior and certainly something we we uh lean into every day. >> That all said, now that I've given a quite lengthy prelude here, our new name is High Ground Service Pros. And uh it's been really cool. I did the reveal of that name to the team about a month ago. Just seeing like sort of like the buy in um from the team around that, you know, the fact that they had been like taking that core behavior so seriously, living that and then now seeing it on the side of the truck. It was very cool because, you know, I was worried not just about our customers, but I was also worried about the team and if they're going to if they're going to like it, if they're going to buy into it and the uh the response was resoundingly positive. You know, you've really tapped into something that I believe my 116 employees buy into, which is they feel good knowing that we're taking care of customers. Like, I feel great that I took what my grandfather taught my father who taught me who I taught them. I feel great about the fact that my employees get it that they want to take care of customers and they've been trained to take care of customers and they're proud of that. And I think that's what you've done and I can see where they would be proud of that name because they get it. I think one of the toughest things as a technician if you're working for the wrong company that you know doesn't lean into that is, you know, you're standing in a basement with a homeowner with a broken furnace and, you know, it might have been our fault or maybe we installed it improperly and then you got to tell that customer that it's going to be another $1,500 to fix it. >> Rich, how did that name emerge? Did you have a whole long list of names that you considered? Did you test names? What happened? It was kind of cool how how it happened actually. So we, you know, we decided we were going to entertain this idea that we would change the name and my branding agency came out on site for a full day and it was the uh like the creative ad writer, like the copywriter, like sort of more of the sales and operations focused um partner of the two. So they came out, spent the day with us from like 8:00 am to 10 p.m. interviewing me. um you know some of my key leaders, the rest of the team, went out to dinner really like really just immersed for a day and then they left and we stayed in like loose touch for a few weeks and and really it was that that creative just kind of like stewing on what he saw while he was here and then he you know classic kind of marketing advertising um like you know pitched me on a few names And actually, you know, I went into that meeting and I was like, I hope these names suck. You [laughter] know, I hope he just I hope he just brings me some some names that I can just shoot down. I was like, cuz if we can stick with the Sanford name, that's going to save me like 300 grand on the rebrand. [laughter] And one of the ones that he put in front of me was High Ground. And it basically just like knocked me over. >> You had me at hello. Yeah, I basic I' I think I think verbatim uh my response was, "You son of a I can't be." [laughter] And that's it for part two. We'll be back next week to start the year with a brand new episode. And remember, if you enjoyed this podcast, don't forget you can meet many of the podcast regulars at the 21 Hats live event in Cincinnati. You can get more information at 21hats.com [music] or by emailing me at lauren ln@21 hats.com. My thanks [music] to everyone who contributed to this podcast this year and happy new year to everybody listening. 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 [music] 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. [music] You can sign up for both by subscribing to the morning report. If you have any questions, you can email me at lauren21hats.com. [music] 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 [music] you. It means a lot. This episode was produced by another entrepreneur, Jess Stubberon, founder of Blank Word Productions. Thanks for listening, everyone.