Have You Considered Not Taking Investors?

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman this week J gos Liz picarazzi and Dana White talk about the advantages and disadvantages of bringing in outside capital and expertise something both Liz and Dana have considered recently I have a background in Russian literature and credit card marketing says Liz I'm now a manufacturer so if I could have an outside investor that either brought that to the table or could help me with it that would be really valuable but of course there are tradeoffs plus we also talk about Dana's looming franchise sales why it's so hard to hire lawyers and accountants and whether there's an opportunity for Jay in framing nft art 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 same thing with our daily newsletter the 21 hats Morning Report which highlights the most important news of the day for business owners and which you can subscribe to at 21h hats.com where you can also find transcripts of our podcast episodes and lots of other articles and interviews joining me this week on the podcast are regulars Jay goz whose companies in Chicago include a picture frame business artist frame service and a home furnishing store Jason home Liz picarazzi who is CEO of City bin which is based in Brooklyn New York and makes trash enclosures and package bins and Dana White who is CEO of paraly Boyd at Detroit base chain of hair salons the episode is titled have you considered not taking investors welcome Jay Liz and Dana um great to have you all here Dana this is the first time we've had you here in a while uh how are you doing bring us up today what's going on I'm hanging in there Lauren hi guys glad to be back busy girl tell us busy busy busy girl so um the Fort Brad contract has officially been awarded to me and so we go into our pre-performance in writing Sign Sealed Delivered Sign Sealed Delivered and writing um think a little bit of blood to um there's um it's done and so we go into our pre-performance conference next week where they just go over the contract we've agreed upon and what we're agreeing to and we put a timeline uh the military is very excited they've already set up a list of bases globally which is exciting um and I've been speaking to my bank about what our relationship is going to look like going forward as these bases roll out do you have a a timeline specifically for Fort Brag when you want to be open no I'm saying just by the end of the year I'm not pushing I'm not pushing it um just by the end of the year the priority is franchising um and getting that off the ground so and plus there's a lot of um administrative work that has to go on with drawings and permitting and Contracting and all that stuff so we're going to do all that um before we get hired but it shouldn't take it shouldn't take to the end of the year but I'm not putting like oh we got to be open by June no we're not doing that wait but you said the priority is franchising tell us about that it is um so we're starting to sell franchises next month uh we have over 90 inquiries in our inbox so I'm really hoping that three of those are viable yeah there's that and how did you generate those 90 leads so those came from press uh we've received a lot of press and we still have press inquiries that we're um talking to meaning you haven't done any Outreach uh no marketing of this opportunity people are just coming to you yep the franchise Times article the CNN article um the Black Enterprise article um a lot of articles have come out and people have read it and want to be some early adopters I had a gentleman reach out to me who owns like three Starbucks and 10 Denny's um and his people reached out and I he's interested so you know that was The Missing Link when you first started with this that I I asked you do you have enough money to get out there and Market this and that was the missing link the fact is if they're coming to you then that was the big hurdle to get over so congratulations thank you that sounds like reasonable that out of 90 you should be able to get you know a few three mhm that's what I'm hoping and then we're still going to mark it we're still going to mark it so into the areas that I think we'll go have you set a price yes I have but I can't we're not there yet so I can't tell you what my franchise fee is yet until we're ready to till we make the um Financial disclosure documents public but we haven't done that yet once we do we'll be able to sell and that that's what you're waiting for that's why this happens next month yes yep and so then there's that and um you know still plotting along here in Michigan with Midtown and you know I've always said it's been time to leave so I have um been looking at a location in Dallas Texas um and I hope to open a salon there by June June July why Dallas because the market is just right for it and in the market research I've done shows you know we've got someone who's um a salon similar to mine she opened in 2020 um she's opening her second location this month in February so it's like wow there's it's just nothing like it down there and so people are right for it so I'll be on a completely different side of Texas than her flew down there saw the location the cost to open is is minimal because it was already a salon uh the it was a corporate Salon it was great clips they left paid their rent for two years and so the landlords are interested in putting another Salon in there and they're being very generous with ti so my you know cost to getting in is is is going to be significantly less than it was like significantly less than it was in Midtown so I can refocus my marketing um I'm just not interested in putting any more money in Detroit it's just not it's just not here between Staffing primarily it's Staffing um it's like it's just time to go to another market and really try it out and we'll see what happens with Midtown but um with Staffing the way it is not saying Staffing is not that way anywhere else in the world but I think it's just really bad here did you sign a contract in Dallas is that a done deal too no um we have four more locations to look at um I have the the top one that I'm interested in again it's the one I spoke of with the Great Clips the former Great Clips that's my top one um but the other ones I still have yet to look at and then that's going to be it I'm hoping to sign a lease or a letter of intent by the end of February wow so what does this mean in terms of financing these opportunities uh you mentioned that you're talking to a bank about the military contracts but you got a lot going on yeah so the Dallas location the barrier to entry is so low that'll that'll come from me um but the uh franchising is already paid for that's done except for the marketing piece um there's money set aside for that um in regards to the military option we're going to go to the SBA and the military strongly recommends it you know they kind of the dod and the SBA kind of work hand inand you know I've spoken with several Banks and they said when you walk a military contract into our bank there's a strong likely Ood of getting approved and I said well I need that to be a guarantee what do you all need to see from me in order to make that so and they let me know what that is um they did say that me being a minority woman and not many minority women walking in with multi-base contracts is is going to work in your favor and One Bank flat out said we don't want to be the bank to tell you no um we don't want to be the one tell you know they actually said it out loud they said it out loud but they also said you're not asking for a lot of money you're not asking for $4 million you're asking for like $100,000 um you're asking for2 200,000 so um and you're not asking for it all at once you're giving us a contract we're reviewing the contract and giving it to our Underwriters your credit is good um this is a separate company um they said even even it even if it wasn't your Midtown location is showing growth from 2019 down 2020 up in 2021 up in 2022 so far so it's not we're not seeing anything bad the 100,000 or 200,000 that you mentioned is that what you're thinking per location yes yes and we're having that call the pre-performance conference next week to you know hit home with that number is there's a lot of things I need to go on you know concurrently and I you know it's like we need to know the money amount but once we know the money amount we need to start construction so what's the magic number there you think you can do $60,000 a month yes I'm looking to do 50 to 60,000 a month there because their average when they weren't barely doing anything back in 2018 was $4,000 a month okay you in retail these days no matter where you're at it's getting harder and harder for the typical retailer who does $2,000 a month to stay in business just with the rents and utilities and stuff it's it's that tiny little stores are getting harder and harder to stay in business and on a military base that's larger than the size of Detroit I'll be the only Salon they haven't had a salon in four years wait didn't you just say that they were already doing a certain amount of business what that was the average before that Salon closed was $440,000 a month before it closed four years ago yes I've got a question uh Dana about kind of the pace of things with working with the government um so I actually just found out yesterday that we won a government contract congratulations that we have been working for a while um it's going to be a pilot that then could turn into much more expanded footprint of our trash enclosures all over New York City um but now that this is happening I have to think about how I'm going to finance that and how long is it going to take and like I know when I start meeting with them in the next couple of weeks that will become clear but the initial communication just made it sound like they only pay upon delivery which is completely not going to work for me so I'm curious with you that when you kind of found out that this was moving ahead um how soon were those those questions answered or clarified for you almost immediately I have people I'm working with um that used to work in the Pentagon with Apes um directly and so they've been able with who tell us who that is Apes is the Air Force and Army Exchange so when you are on base they have that's like the mall owner yep the mall owner um so they are on behalf of the military and so they it was was an urgent request for them and so they're responding urgently urgently in regards to funding it was we can't help you get funding but we can give you everything you need that makes funding compelling and so they've and even the gentlemen that are working with me that are a retired Pentagon officials that have worked with Apes before have said they're moving very quickly considering apes and the military they don't work quickly at all and they've done this within a couple of months you've product and I'm offering services and I'm I'm going to be a brick and mortar in their in their Mall in their exchange so I think it's it's a little different and I don't think you're working with Apes I think you may be working with a different division of the military oh ours isn't military ours is actually New York City oh New York City contract okay yeah that's yeah I don't know yeah I mean I we're a subcontractor as well we're not a prime contractor so there's that level in between so you're saying they'll pay you a p delivery is that how it is apparently that's what it is but that I mean we would have to finance a lot of product um so I I would want it to be done in installments but I just don't know how much leverage I have on it should I just be thankful that I got this and make it work no I think if you have a signed Po from the city of New York I would think that a bank would easily lend you the money and that's a huge distinction you made between being a primary contractor um and that's what's so exciting about the opportunity on Bas is that I'm I'm coming in like Starbucks um a lot of small businesses don't they come in and you know they say okay we'll try you out no and so when you come in as a primary contractor with AES they take care of your marketing all you have to do is give them the Conta so that's exciting and it's something that's never um been done before especially with a minority woman um a global multi- based contract is is huge what do you mean they take care of your marketing they actually do your marketing for you MH they put it out on their television their radio their social media and you don't have to pay for air time my god do you have any control over the message that goes out m i I devise the content they look at it and they say yep that's great and they put it out just as long as it's something that's tasteful right it's not something crazy um and it's not you know promoting products or services that aren't in line with you know like I can't promote a strip club on Bas like you can't do that but you know is they already know who I am and what I do they've seen you know some commercials or some marketing stuff we've done before and they're fine with it have you thought through how much money with all this opportunity that you're comfortable borrowing yes and so it's a matter of per base that's why it's important to start at the big ones because what I don't want to do is borrow for a salon that's going to only make $55,000 a month that's going to slow it down if I borrow $100,000 for Fort Brag or let's say $150 or $200,000 and the average is $440,000 a month you pay your fees that's a pretty aggressive Payback right it's not something that's going to take me 20 30 years to do and so that's what I'm looking for and so I'm not looking and also that's why the the timeline is very important I'm not looking to open one and then you know a couple months later open the next one no we need to give oursel time to make sure it's working and then let's say okay now where do we go to next so the roll out for this even though they wanted to be aggressive um the roll out for this is I'm I'm I'm slow and steady as the pace for me same thing with franchising slow and steady is the pace for me just so we're consistent and and it's around for the long term you know I've seen franchises just roll them out like sausages and you know next thing you know you don't hear anything about them in 5 years and that's not what I want I want to be a 30-year business a business that's been around and franchising and on bases with corporate locations for 30 40 50 years does the franchise actually create positive cash flow with the money they give you on The Upfront does that cover I'm sure that covers the expense of starting them up but is there actually profit built into that there is on my Pro fora yep and they're very the franchise Consultants once we went through that number they were very happy with um the uh profit off of the franchise fee so that'll sell Fun basically yep and they are franchise ores that take their profit and you know go do things with it that they shouldn't for themselves um we've put in my salary we've put in my staff salary and we still have a large profit so for me it's about putting that money aside um you know to help with the franchise he needs it or what it's not about oh let me take the profit and go buy a car no it's okay let me I'm very cautious because I've been in a business that doesn't make money and so I want to make sure that there's money on hand and that was very important to me when we were building out the proforma for the franchise Liz I want to ask you a little bit about your financing plans uh for your growth uh but let's take a quick break to hear from our sponsor work better now I'm here with Rob Levan co-founder of work better now which provides businesses with highly talented virtual assistance Rob I've noticed that owners tend to have certain questions about virtual assistance for example what exactly can they do yeah Lauren we get this question all the time uh because people really know deep down that they need an assistant but they're not exactly sure how it works and what they can do for them I would say that our clients use our assistance in one of two ways they will either use them much like I've been using my assistant for the past eight years as an executive assistant handling my calendar which takes up so much time email management database file management personal tasks creating do doents for me and then a lot of our clients basically operationalize our assistance so we have assistance with titles like project manager marketing associate operations manager and customer service representative I think some owners worry they'll spend more time managing their assistant than it would have taken them just to do the test themselves how do you respond to that right right right this is a deadly trap not only with assistant but really with any employees which is oh I can do it faster myself and the reality is you might be able to do it faster yourself of course of course it's impossible to grow your business if you're doing everything yourself I was very much uh of a similar mindset and what I did with my assistant is I basically told him what needs to be done and had them document it I hate documenting tasks but I know the processes are so important now we have a manual full of my uh tasks I only had to tell him once that he can follow time and time again and if he's out somebody else can follow and also think about it this way if you're a business owner making something like let's say $200,000 a year which is about $100 an hour you're basically paying somebody to do administrative work at $100 an hour if you're doing these tasks yourself that makes a lot of sense what does it cost it cost is $1,900 a month and as you know Lauren we are offering 21 hats readers and listeners $150 off per month for three months just by mentioning the word Lauren there are no contracts also very important for people to know can you promise a return on that investment if you're not getting a return something's not going right all of our c clients are not only getting a return with the first assistant they've hired but many of our clients are now on their second third and fourth assistant where can we learn more work better now.com and again when you sign up for a 15-minute consult just mention the word Lauren we'll make sure to give that $150 off for each of the first three months thanks Rob and we're back Liz you would already told us in a previous podcast that you're hoping to double your sales this year uh what are you think in terms of uh financing that growth so I have um an eidl loan that I was able to get and that is actually kind of sitting in account waiting to to spend more on marketing and sales um as well as to finance growth from large orders um so I feel pretty good with where I'm at I shifted away from an SBA I had had an SBA for I think five years and I had three more years on it at a higher percentage trade at the at the time I thought 6% was good but when you can get something for 3.75 you're going to take that so I'm in the idol and um you know with something like this government contract I probably will need to go and get more um from a bank we'll see but those are my financing plans in terms of equity last year Lauren as you know I I thought a lot about that and I met with a couple of potential investors and and in both cases I realized it wasn't a good fit I think it could be a fit in the future but I want to be I want to grow more I want to have more established let's say government contracts which I think would be very valuable to an investor and I also really want to get some of the Kinks worked out in you know supply chain issues we've been facing and I don't know if I'm in ready for an investor right now but I am going to kind of PR to be ready for next year so deely double sales again get some these strategic contracts um and you know I think that could be really attractive um with with a couple's investors if if you want to know what kind of went wrong um in one case I was really excited about the investor because his firm comes from the manufacturing industry and for me I saw it very attractive that I could get financing but that they would also bring the subject matter expertise to the table um as a you know past American manufacturer um that was a that was a little bit there was a stylistic difference what do you mean so this this investor you know potential investor he incredibly successful he sold his business a few years ago um for a lot of money and he put it into an investment fund um and now he's investing in in other businesses um so the principle of it is really is really great um it just turns out that you know I felt like he had an abrasive personality some of the feedback was really delivered in a way that I didn't like but I will say I did take feedback about your the way you run your business yeah yeah feedback about that or kind of the making assumptions that that were wrong and he would have found out were wrong had he had You Know spoken to us more but I think the ultimate thing for me was that in in the last meeting that we had I was doing employee reviews that day and I had an employee review with an excellent employee and at the end of the review I asked him if he had any questions or concerns and he only had one and it was what's going on with that investor it doesn't sound good and I really listen to that because he's really valuable to me I don't really know if the investor would or wouldn't be valuable to me but I know that that employee is so that was something that was really telling I I have two questions first of all just out of curiosity this this person who was the investor you said was extremely successful well did he did he actually start the business yes okay so he sold it and now he's got money to invest my other question is have you considered just not taking on an investor and funding your own growth and not having to answer to anybody because that's what I did and in looking back I have to tell you I'm very glad I did it my way because I got nobody to answer to and I'm just in good shape and I see lots of people that took an investor money and it didn't go well and if you have to you have to there's no argument some people have to take an investor money because what they're doing so Capital intensive I don't see your business being that Capital intensive that you couldn't self fund it have you thought about that I have and I I don't like the idea of having a boss above me um especially if she or he really can't give great advice so if it's like a VC that's coming from the software industry they're really not going to know my business unless they've been a manufacturer in the past and they really get the sense of like the cash flow and what's needed so I think it would have to be an investor that fit from a subject matter expertise perspective um but you know my husband and I own the business we really like our life right now um you know we can walk to work it's like 15 blocks away we don't have to answer to anyone our business is growing we have a wonderful team and it you know the Spectre of an investor coming in and disturbing that Harmony that we have is something I need to look at you know everybody thinks you got to get investors now and that's just simply not the case and it's it's most businesses do not have investors and the people that I know that are just happy campers out there making making good money and having nice lives they don't have investors that's I just I just and I'm afraid that people start to think that well if you want to be a big shot you have to have some investor money and I I don't believe that the case that's not the case at all and I I don't know that your businesses needs it depends on how fast you want to grow like I've had people come to me and say Dana you know even on this show it was said you know look why don't you just take on an investor who can put a lump some of cash in and you can roll these you know sites across bases out boom boom boom but me and know since you know I was last on this show I've had people approach me oh what a great opportunity you know would you consider taking on an investor and my answer is no and I and I'm with Liz unless you've walked in these shoes you're not going to understand unless you've been a hair traffic controller and you've worked the desk and you've answered that phone when a stylus is called off if you know the Staffing concerns we have um a lot of investors that have approached me see the financial gain um like that I'm interested in selling down the road and they want a piece of what I sell but they could care less about the problem I'm solving for um and what it's actually like to be a part of this business and so I want a partner money would be great but I want a partner and even if that partner isn't in the indust industry I want somebody who respects the years in that I have enough to sit in the back seat um and ask questions not side seat drive and so that's why right now yeah I have a great opportunity I mean they just sent me the graph and wear contract for Germany the other day but no they taking got an investor what are you spending it on and what are you doing and why isn't it making more money well Staffing you know I'm not interested right now slow and steady as a space and it takes me 10 15 years to grow it oh well I can tell you the math is simple most businesses many businesses I just throw out a number that I believe to be pretty close my guess is most businesses could grow 20% a year which is tremendous growth and sell fund if you're profitable enough which you should be 20% of your growth is going to really get you where you want to go very quickly in 10 years you're going to go from a million to 10 million so it's it's that I don't think that's a bad option and um if but there are clearly some companies that need to to get investor money because they're an exploding Market uh and they got to get out there with it I I've seen plenty of businesses grow 10 to 20% a year and turn into big companies big enough companies I should say that's kind of the key big enough like if you could get the $10 million you're making a lot of money and life is grand well I'm open to it but for me it's not just the cash it's the the subject matter expertise so like I'm an accidental manufacturer I have a background in Russian literature and credit card marketing you know I'm now a manufacturer so if I could have an outside investor that either brought that into the table or could help me with it that would be really valuable that would be really differentiating um but the other thing about often with investors particularly if they're VCS is my sense is that a huge chunk of the pitches that they get are for software and technology companies and I guess if that's their Forte I don't really like them evaluating me according to that yard stick you know it's a totally different business so there's a bit of me that's like maybe I would be unattractive to them absolutely they're looking for Grand Slams they're looking for something that's going to turn into a you know $300 million business unicorns but there are other kinds of investors who would be interested yes they're not it's not VC no it's private Equity just to play Devil's Advocate one of the reasons a lot of companies consider taking on uh private Equity is um they're concerned about competition they're they have a product and they want to establish themselves as quickly as possible before someone else steals market share are you at all concerned about that so I may be naive but I actually still feel like I'm in a in a fairly blue ocean by being so differentiated as like the premier go-to trash enclosure like we're totally different than anything out there and when people want us they want us but someone else could do that too right they could they could and there have been attempts I mean I I've had a couple of patent infringements including and very disappointingly of a client who who completely um knocked off my bin so you know that was a situation I've heard that as well I've heard you know Dana aren't you worried about it and you know with it being my business model being really new you I have nine years ahead of anybody who's starting even if they started two years ago I've got seven years ahead of you so I'm not really worried about it and that's another reason why I'm franchising I think that you know the growth of franchising helps that establishes it without me having to take on an investor um I think my hurdle with an investor and establishing myself in the market is that again you're dealing with a problem that the people with money don't really see as a problem because they can't relate they don't understand they don't know what it's like to grow up sitting in a salon all day um and it's one of those things that once there's you know a hundred across the country and they're established on Military B basis they're going to go oh why didn't I think of that um but I've had you know even people that have worked for me you know they go and they open it uh their own and they don't last because it's a lot more than just you know letting people walk in and and doing it there's a lot of moving parts and you have to get practiced in doing it before you're ready to scale even if the money is readily available you have to know how the salon operates and that takes time Liz you told us that because of the supply chain chaos you had placed a a much larger order than usual um for your your products from China um and that you were expecting that to be delivered has that actually arrived yes so we actually have two waves um one wave was on product that we ordered nine and a half months ago um and it arrived and um we actually got an additional Warehouse in Brooklyn um to store all of those and then we continued to have uh the warehouse in New Jersey um but the next delivery that we get which will be in February that's actually the one that's three times larger than any order we've ever made and so um you know our our supply chain is is growing you know it's it's growing more complex some of the difficulties with the with the blockages in the chain are no longer issues now our issue is just that our you know our sales are growing our operations are becoming more complex yeah so those containers have come over and it's kind of exciting because I haven't felt like I had control over my inventory really since ever since I started mass production it's always been in a warehouse so I love the idea that it's near us in Brooklyn our inventory is our most valuable asset and um we're really excited for the our installers to be able to come straight to the Brooklyn Way Station pick up product and go in and install it what do you mean you didn't feel like you had control what was it that you weren't able to do I have dealt with a a couple of warehouses that behave in an extortionate way uh to put it nicely and um they do things like they try to change the price on you when you have stuff coming from the port about to go into the warehouse they one guy would not let me put my product in his Warehouse that I had been in for over a year until I agreed to the terms new terms of pricing which were over double what we were paying at that time that happened in April of 2020 at the height of the pandemic so then that sent me out shopping for new warehouses which was the most ridiculous thing in the world we were in lockdown and I was literally trying to find a warehouse so it was that sort of thing where I felt like there was a power play um interestingly enough we're still at that warehouse we worked through the issues but that was such a horrible feeling that this thing that for me and my family th that inventory that's huge that's cash you know our house is up against that inventory so if someone behaves in that way I'm going to view it as a threat and I'm going to find other options you know that's funny you say that because some guy that I knew growing up gave me some really insightful advice about 20 years ago he said to me you know in business you ultimately have three potential enemies Partners landlords and Banks and I never forgot that and you know what I got rid of I never had a partner but I got rid of the bank and I don't have the landlord so here's a case of youo landlord problems so it I'm suggesting to anybody that if you could structure your business to where you own the property and you don't have to borrow from the bank anymore and you don't have a partner you're in a happy place that's all I can say because there's not much else that can go that wrong in your business if you don't have one of those three things going at you because a landlord could put you out of business finding warehouse space right now is exceedingly difficult well the thing that we're preparing to do within the year is to consolidate everything in one place so I'm sending one rent check a month instead of three so right now we pay the warehouse we pay our office rent and we pay for uh a wood shop that we have offsite um so that that all adds up at the place that I my business is at industry City they would have spaces that could accommodate all three of those needs at the same time but we just didn't we didn't want to sign on to like a 5 or 10 year lease yet because of all the uncertainty now that things are smoothing out we're really excited to be able to do that again but we wanted to transition to it Lauren just you know when you say Warehouse bace you're reading a lot of publication you know there's a lot of demand for these gigantic warehouses for the Amazon of the world there's still plenty of buildings out there for sale that are 20 30 40 50,000 ft I mean you can go online at any second and there's plenty buildings that are out there that are empty in the smaller side I don't think there's a shortage of those in SBA Loans you can buy a building with 10% down which is a beautiful thing then I would worry though that I would be in the warehouse business why only one Warehouse to to if we didn't fill it out I would feel the need to sublease and that would be a distraction well but that's another way of making money and having room to grow into it because if you want to grow your business that's going to be an ongoing problem of outgrowing your space I mean I started in 2,000 ft and now I've got uh 140,000 ft and it just you know if you're growing you need more and more space and the reason I was able to do it is luckily I was in a building that just was an abandoned factory district and for 20 years I just kept taking up the space of the people that were going out of business and then I started buying buildings and that is going to be an issue going forward so it's a question of do you control your own destiny or not and one way or the other you're going to have a real estate issue I'd rather control it than I control it you had points in time where you were leasing space out to other businesses weren't you Jay yeah when I bought my building now that I've been in for 20 years I had you know I probably had 10 people renting office SPAC and slowly but surely I didn't renew the leases and I've taken over the whole building was it difficult to manage no not at all it's way better than having to continually move your business because you outgrew the space I mean it's just not that big a deal to find somebody who needs to rent you know so you buy a 40,000 foot warehouse and you got 10,000 ft left over there's plenty of people looking for a 10,000 foot space and uh the point is okay you might think oh I don't want to be a landlord okay well that's fine but if you don't do that you're still going to have a problem so now you're the tenants you got a bigger problem I mean I'd rather be the landlord than if I've learned anything in business better to be the landlord than be the tenant that's all I can tell you I've seen so many people getting big big squeezes because they're landlord what happened to landlords um many times they eventually die because they're older to begin with and then the kids take over and the kids just want to sell the building or they want to fight with each other and it's like a regular ongo when when I was in my my building and the the uh it got handed over to the kids my lawyers said to me he goes oh that's going to go on for years he was exactly right the the the adult children were fighting with each other for three years trying to figure out what to do with the building and luckily I was able to move out because it it was they it it became a big mess this is ask any lawyer these transitions with real estate with kids and stuff they're frequently all messed up and you're the tenant it turns into your problem and uh that's why I say you own your own building you control your destiny and I I think that that's generally not always most of the time a good thing Lizzie you have that big shipment arriving this month you said how long do you think that product will last how long are you good for so we have three containers coming over one of them is already sold out as of yesterday we ran out of our most popular color which means no one can have that color until we make another order and hopefully get it in four months and you haven't placed that order yet is is that for financing reasons or no it's because we sold a lot last week literally I see we realized you know so I I told Frank your husband yeah I can't believe we ordered three times more than he was comfortable with and yet we've still sold out by third and we have a color running out and I I mean I know that we're figuring it all out but there was a little bit of a sort of I Told You So I remember at one point over the summer we were having a fight in our backyard about shipping containers literally we were having a fight about the size of our order you wanted to order more he wanted to order less yes I basically said whatever number that you come to me with I'm going to triple and I did you know and it's it's because he's new to the business you know it's very risky for him he doesn't look at Cash coming in over time that flow he only looks at what the bank account is at that moment and it is terrifying to place a commitment for three times what you've normally done when the bank account doesn't look like you can pay for it all at that moment so the idea of financing future sales he was getting used to is this partially the result of you're having more experience as in entrepreneur than he does yeah I think it's definitely it's partly that and I feel like I had greater appreciation of how bad the supply chain issues were because I understood that if we can't get bamboo then that's going to affect you know the factory which is going to infect the the paint thing and so I understood even before we really knew how long it would take to get over that it was going to take way longer than we thought so I realized that if we didn't place a big order that we would be perpetually sold out and so we were sold out for about four months like literally of everything on our website it said lead time 14 to 18 months on some products we still have that that must have cost you a lot of sales I would think it did I said imagine how many sales we could have had if that 14 to 18 week message wasn't on there so you know he gets it now he had to go through it during a pandemic to really understand that but so how big is your next order going to be be I don't know yet I'll tell you I'll tell you in a couple weeks I don't know your husband at all so this isn't about your husband I can tell you that part of this is DNA there are some people Lauren and I know someone that we've talked to who says well he would expand but his wife won't let him borrow money I mean there are just some people that can't handle it period end of the story there's some people that can't handle the risk of being in business and I don't know that you can change that and I'm not saying anything about your husband I'm not saying that that's the case but in some cases there are some people that there's a reason why most people don't own their own business there is a reason the biggest reason probably is people can't handle risk I I take risk on stuff I don't think anything of and other people would be horrified and it took me a long time to understand that I'm the odd one not them I did a speech one time the guy goes Jay if you uh how can you grow your business without borrowing against your house and I just laughed I go well when you figure that out could you please call me and tell me how to do that I mean most R preneurs I know have done what they had to do to finance their business and that's the way it goes yeah and the financial literacy I mean I've had 11 years to you know work in my two businesses and understand you know cash flow and whatnot but he doesn't yet know that and so like tomorrow we're we're actually going to sit down for two hours in the afternoon and watch some videos about cash flow statements balance sheet and pnls and understand how things flow between them because if you're looking at cash flow in that way you understand that you are going to pay a ton to get inventory but it's going to be cash it's going to be an asset and then you sell that down and it turns into Cash again that is a cycle that I understand now but I think most people wouldn't understand and Frank is still kind of getting around too so like I said he's going to look at the bank the checking account balance and then he's going to look at how much the next 3x order is going to be and that's going to be a freak out unless we look at the cash flow statement and plan it out and see how the revenue coming in is going to pay for easily that huge inventory that we're purchasing from my experience of talking to entrepreneurs they frequently they don't know the difference between profit and cash flow people go I'm having a cash flow problem no you're having a profit problem you're losing a lot of money it's not the same thing a cash flow Problem by definition truly should be that you're profitable but the cash is getting sucked up in either inventory or receivables or equipment and so if you're not making money that's a profit problem it's not a cash flow problem and what you're describing is truly cash flow so that's smart to go walk through that because most people do not understand that they they do what your husband they look at the checking account and it's it's not that simple I mean and the bank will probably lend you 75% against your receivables if you have receivable maybe you don't which would be best yet and usually from what I've seen banks will probably give you 50% on inventory which could help or maybe less they don't love inventory because inventory disappears that's what they tell me all right well is please tell Frank that if he wants equal time we'll uh we'll figure out an opportunity for him to join us and uh make his case he'd love that and he'd be very good at it I bet he would we're we're running short of time I want to hit a couple other things uh before we move on one is I I've been hearing complaints Lately from a number of people about just how hard it is dealing with uh the Professional Services you have to hire as a business owner especially lawyers and accountants and I'm wondering if any of you have have struggled with that it's a problem I my brother-in-law was always my lawyer I never had to deal with outside lawyers and at the end of the day most lawyers are not looking for entrepreneurs business they're trying to do business with all state or something get $100,000 legal bills I found it difficult to find a lawyer who will give their full attention and to to a small business and the the accounting firms um I'm I'm looking at what they're you know I have a case of I've been with the same firm for 23 years and we were paying for reviewed statements for 23 years and it wasn't until my kid got in the business he goes dad why are we getting reviewed statements and I said well it's for the credit line at the bank and he said you know we're paying $20,000 a year more for those he said really so I asked my account and I said I'm going to get rid of the bank line soon why would I want reviewed say well in case you want to sell the business I go yeah I'm not selling the business not bad for him though getting another $20,000 uh a year for I mean not happy about that not happy about that at all so yeah I mean I'm not saying they're they're all like that but I think it is a challenge finding um professionals that uh I don't know what the word would be that play fair reasonable conscientious dedicated to your business uh I don't know I there's certainly plenty of good ones out there have you figured out how to identify them maybe by talking to other business owners and asking for recommendations perhaps I can tell you this here's how not to do it because I've done it you know they all take care of each other that's the nature of the Beast the banks send business to the accountants the accountants send business to the the banks and like lots of times it's really looking out for themselves like oh I got to give this guy a lead because he gave me one I I hate to be I hate to sound cynical it's not cynical it's experience it's I'm sorry you got to look out for yourself because Commerce before conscience I mean if if an accounting firm gave a really big account to the bank I can assure you the bank is looking for somebody to send to that accounting firm whether it's the right fit or not sorry I that's what I've seen Jay it is it's very timec consuming to try to find an alternative so I've had three accountants in 10 years which I'm kind of feel ashamed of but I don't no you shouldn't be shame on them no I know that's what I need you guys to tell me but I'm the common denominator but you know the thing that happened most recently was we knew we wanted to change accountants um I had uh my operations manager call around to a bunch we had a bunch of interviews I think there were eight interviews and we could tell that seven of the eight accountants seemed to be more focused on service than product businesses and that makes a big deal with the accounting and it was it was very apparent so what we decided to do was stay with the accountant we were with and tell them the things that we were seeing that we didn't think were right and you know his cogs were completely messed up because they were expensing inventory instead of putting on the balance sheet so we had these waves of like huge expenses hitting like three or four times a year and that was the you know payment to our supplier so we've turned it around but I guess I bring this up because it's been very stressful to me but then I also had someone like working like a month or so on this and she became very frustrated with it um so if you tie up a resource to shop around for a new accountant or lawyer or insurance agent you got to really know what you want and and you have a good filter I don't think I've always had a good filter but I do think now I will because finding an account that can be great at product and knows on inventory is a very different thing than some someone that does Services Jay does that surprise you are you that an accountant firm would struggle with uh product versus Services I am flabbergasted that they would expense and when she said Cog that's cost of good sold I am flabbergasted that they wouldn't that they would just go take an invoice from A supplier and write it off as an expense versus understanding when inventory and taking inventory that's like basic and I have an accounting degree which I've never practiced but I mean that's like basic first class and accounting for God's sakes I think the lesson is you said having a filter the first lesson is and I'm I had to learn of myself is stop assuming that all accountants or lawyers know what they're doing and they're great at what they do for your small business that is a natural thing people think oh he must he or she must know what they're that's not the case I mean it's shocking but that's simply not the case I'm sure you were shocked when you found out that they were expensing your inventory for God's sakes well just to not complete badmouth them they would then correct it but they would only correct it like every few months and that was annoying to have to ask them to do that well clearly you shouldn't be having ass them to do that that's amazing well there's a difference between most of the accounting firms really do tax returns and then there's running the business internally and the fact is like in that case I use a plug number for my for my cost of good sold meaning we bring in the shipments we we just whatever the sales are we figure x% is for material and then we cue it up when we take physical inventory to get it right but at least it's running at about the right number and that's something you do internally I don't I mean it would take a smart accounting firm to understand it to help you with that and they I'm sure they do exist I just you have to go looking for one all right we're almost out of time last thing today Jay I got to bring this up today in the morning report I quoted from a story about how buyers of nfts who are buying digital artwork are frustrated because they can only show it on their iPhone or their laptop and they want a way to frame it and hang it on the wall um and let me just quot collectors spent $21 billion trading digital art and collectibles last year up from 67 million in 2020 um Jay this just illustrates we are in the beginning of the end of civilization this is going to be planet of the ape soon as soon as picture framing goes away it's just wait wait wait what picture framing go isn't this an opportunity for you well they're putting it on a screen on a on a on a a monitor so they want a frame but but if you change the picture on the monitor the frame's not going to match so they want to do a video a uh digital frame on it I'm not so sure in 10 years that that's going to be taking over the art World cuz I still believe in art in texture and paper and canvas this well that may not go away but people who spend $20 billion on digital art are going to want to do something with it yeah they need a digital answer to it because what I have is picture frames so I could say oh I'll put a picture frame on your video display but that frame's not going to go with all the pictures unless you just put a generic frame on there which okay now you're in the trim business I just I don't know Jay this may be your way to take on a little venture capital I don't think so you've gotten very creative with I know you work hard on trying to irritate me at every podcast but this one really I have to give you this is a yes it is I'm watching what's going on with that it's clearly fascinating but I don't believe that it's taking over the art world and I don't find any solution that I have for them to take my beautiful molding that makes the picture look 10 times better and makes a package to go stick it on their video screen and they're going to change pictures every 15 minutes I I haven't figured out nor am I spending any energy on that so all right I give up my thanks to Jay goz Liz picarazzi and Dana White as always thanks for sharing wait wait don't leave yet if you have a question or a comment that you'd like the 21 hats owners to address send it to me by replying to your Morning Report or by email at Lauren 21h hats.com that's l r n21 hats.com do it now before you forget and don't be afraid to tell Jay what you really think you can take it and if you got something out of this conversation help us reach more business owners tell a friend subscribe and review us wherever you get your podcasts follow us on Twitter subscribe to the morning report at 21h hats.com this episode was produced by Jess Theron founder of blank word Productions okay now you can leave thanks for listening everyone