I’ve Never Had to Lay off Anyone Before

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman this week Sarah seagull tells sha busy that the other shoe has dropped a couple of months ago as she shared here previously Sarah lost two big clients in one week now she takes us through her decision to lay off three of her employees including what it means for the business and what it means for Sarah's own role in the business before the layoffs she had gotten to the point where she was working on the business but now that's changed I'm not working on the business she says I am working for clients I'm getting the job done I'm making sure that we're successful with our clients and that is my priority right now plus we also discuss how to choose a CRM why Sarah and Sean's home cities of San Francisco and Portland have been getting such bad PR and whether former business owners are employable I wouldn't hire me says Sarah even in good time zing and running a business can be a lonely Pursuit our hope is that these weekly conversations brought to you by our principal sponsor the great game of business will let owners know they are not alone in facing challenges same thing with our daily newsletter the 21 hats Morning Report when Jak magazine named the best newsletter for business owners and which you can subscribe to for free 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 Shan busy CEO of Kinesis which is based in Portland Oregon and works with small business on marketing culture and strategy and Sarah seagull who's founder and CEO of seagull Communications a public relations firm based in San Francisco the episode is titled I've never had to lay off anyone [Music] before welcome Sean and Sarah it's great to have you here Sarah we haven't spoken in a little while how's it been going that's a loaded question Lauren it's been um a lot of learning curves and a lot of education and a lot of you know it it's has not been the most stressfree end of the year um start at the end of the year so My the biggest update I have is that I had to um resize my company I had to let go three people I'm sorry to hear that yeah I let go the my three top people because we had I mean it was trickle down from the economy we had a number of clients basically say a we ran out of funding B we spent our wad on um uh this new project and now we're we have to tighten our belts until the end of the year and for months I was like okay I'm going to be able to get new business I'm going to be able to subsidize this change and it was just wasn't happening in August because people don't do anything in August it's the worst month ever when you say subsidize this change you mean find new clients find new clients you know and I was optimistic for a long time and like you know then when payroll started getting stressful for me I was like okay I I've just got to do it and it's it's not none of it was performance-based because you know we really had a solid awesome Team all these people delivered on so many things that like and now I worry about dropping the ball on like it was it was out of necessity to make sure that we were going to be um profitable and so um that was a really unfortunate U experience I have never had to lay anybody off before oh these are the the very first ones yeah I've never laid anybody off like I let I I fired somebody because of performance but never laid anybody off because of lack of business but then of course like 2 months later we have all of these folks coming at us with new opportunities so then I'm like okay do I do I hire people do I get contractors like I'm like afraid to step my toe too far into the water now because what happens if that goes away so it's been kind of traumatizing let's put it that way how did it go laying the three people off the actual Act of laying them off well I mean I'm really transparent with my team I always have been like if a client gives us positive feedback I let them know if they give us negative feedback I get I let them know if I worry about them continuing with us I let them know like they know the ins and outs and they actually know the retainer sizes of all of our clients so you know anybody on the team would understand that you know two major clients go there's going to have to be some readjustments so I don't know that anybody was surprised I think that my top earners were surprised that it was them but I think it went as well as it could be because you know they knew that I didn't want to do it but in order to keep you know the roof on I had to Sarah I'm kind of curious did you run at a loss for a while before you made this decision or is it a like as soon as you hit that moment of not making money you made the decision no I I saw it coming so I did not want to run a loss I I can't afford to run a loss and it's I that added stress to me with too much no so I I saw it coming and knew that if I didn't make a change that uh I was going to be trouble cuz I don't have any funding I'm you know I'm not I have no bag no I have no small business loans I'm money comes in money goes out I don't I'm not a giant organization that has a soft pad to land on just in case I have no rainy day nothing you don't have any cash reserves for this kind of situation or oh no I mean well last year remember I was owned by a larger entity right and getting out of that relationship was it was easy in terms of negotiation but I still had to pay them our fair share of you know any computers that we took with us any um software that we had contracted with so I literally finally paid them the final check like last month so I have not been able to put together a um contingency exactly that that's on my plan of things to do like I'm definitely trying to do that but then there comes the tax question which I don't know how to answer but like from a lot of agencies I've talked to they're like it's best not to have any cash on hand at the end of the year because then you get dinged for that I don't know if that's true or not I have to talk to somebody who's smarter than I am but uh I just want to make sure that um I'm doing the best thing for the business as well that doesn't sound right to me I don't think you get taxed on cash on hand you're going to get taxed regardless um of whether you take it out of the business or you leave it in the business because you're a pass through entity so really you know the businesses that that empty out their their Accounts at the end of the year more often than not are llc's or multi-partner organizations and then they'll they basically just start the beginning of the year at zero but the thing is in those organizations it's an expectation that the shareholders kick in cash if they if they need it if the organization needs it so you can certainly take all the cash out you'll pay taxes on it same as if you had left it in the business and you know I'm not a CPA here so anybody listening needs to take that with a grain of salt but generally it's kind of a moot point you know the the real issue is is do you have funds set aside for these kinds of situations so that you can you know write it out and how long are you willing to write it out and have you thought about that like what's the goal like how many months of operating expenses you know yeah everything I've read says three months so I'm actually um I have a consultant that I'm working with who is helping me figure out what my operating expenses are what my need to bill is and all of those kind of things so I can be a lot smarter in terms of the cash flow uh now my team's a little bit smaller I mean I still have a team which is great you know we're still we still have clients we're still operating we're still doing a lot of new business but I just want to not be anxious about the next phase of growth yeah so I'm trying to like get a business degree in six months I could probably help a little bit so cuz I went through this process too in 2008 basically the the bottom drop pops out I had to lay off everybody which was we were very small at the time but still it's meaningful right and that was when I was first introduced the idea of months of operating expense in reserve and also the other really important piece is getting your hands around tax liability so you know actually understanding on a quarter by quarter basis and updating regularly what your tax liability is so that you don't get this big surprise and you run out of cash so th those two things I think 3 months Opex which was my goal too when I first started on that journey is ambitious but a good number it'll make you sleep at night if you can do it I think it's a little high if your business has long-term engagements if you are project by project and that they can disappear overnight then yeah I think three months is is what you want to go for for sure Sarah did the layoffs those conversations go in such a way that you could imagine any of these three top people returning to your firm oh yeah no 100% I mean all of them were like yeah let us know if you want us to consult or freelance or or what have you but then you know all these three people are really wonderful talented skill for people and one of them like I think that she probably looked at the layoff as an opportunity to work on some projects that she wanted to work on some personal projects she was disappointed and sad about losing her position but I also think that she saw like okay there's another thing that I can work on one of the people was my very first hire ever we had gotten to a point where like I couldn't teach her anything like um she knew more than I knew about operations and she probably knew this internally that she needed to go somewhere else to give herself more challenges although I'm sure she would consult for me because even she was like well uh you know that the balls are going to be dropped and I'm like yeah I do but you know I'm going to try to keep them up in the air as much and then the last person um she like literally I already had like two or three people ask me about her so I think she'll land on her feet pretty quickly um in terms of New Opportunities and they were all with me for a decent amount of time and I will give them all wonderful recommendations and I I have done my part in terms of introduction introduction to potential opportunities for them so I didn't just like let them go take their office keys and say good luck it's more been more like hey come to this event with me I know there's going to be a lot of people that you should meet and talk to or you know oh I met this person let me introduce you um I want to make sure that they they land on their feet and that when they look back at their career they go oh I learned a lot there I had a good experience and that my boss didn't leave me high and dry when when things got bad how have your your remaining team members responded to this they have taken up the challenge like nobody's business like I am just dumbfounded by they're just like yeah we got this I'm like that's amazing I love you you know I always there was some anxiety at the beginning but the way that we work is so not this is your role this is what you do it's more like okay let's all learn how to make the gears work so that way if someone and this is terrible and I say this all the time at work that way if someone gets hit by the bus we can keep going can you give us a some context like so three people is that half your staff is that a quarter of your staff it's half my staff but then we have Consultants on top of that so it's but we're already talking about possibly having to hire um a junior person like literally like two months later it's like okay we have three possibly four pieces of new business that may happen in the next you know 30 days and if that happens and we're going to have to either find contractors which I'm not a big fan of I mean we have a couple that we like and they're dependable and they're great but uh I I really prefer working with people that are invested in the the the business itself yeah that's a that's a big hit gosh I'm sorry you had to go through that and the people that will hire are going to be junior um because the people that I have who are running the show now like they know what they're doing so and I think quite honestly they would be disappointed if I bought I brought in anybody that was um above them like they they do a really good job so we're going to be looking for staffers with like onee experience somewhere and I think that the job market is still pretty good for us in terms of hiring so hopefully we'll have um some good options when I decide to make that jump from what you've told us Sarah it sounds like you've got some potential new business coming in you've got your existing business you have a smaller staff I'm guessing you must be working yourself really hard how are you holding up I am I am stretched like completely I mean it's good I like what I do you know like but I had gotten to a point with my three additional staff we like I could spend a bunch of time on non-billable things where I can work on the business and to be frank I'm not working on the business I am not working on the business I'm working for clients I'm getting the job done I making sure that we're successful with our clients and that is my priority right now I think the on the business versus in the business thing gets overused I spouted that out for many many years and I think it is important to build the infrastructure and to work on strategy and to cast The Vision but I've just really come to see that until you get to a certain size it's very very difficult to manifest that and I think it gets overplayed in the in the conversations and that's interesting Sean cuz you've put real time and effort into trying to extricate yourself from the business haven't you I have yeah I mean it it at Great expense you know I mean I probably make a lot less money because you know I've invested in that but I just meaning hiring up people to do the things that you used to do yep investing in systems that's been a lot of it too investing in systems that allow us to focus on the work as opposed to the administration yeah so those have all been good things you know like we got a a CRM many many years ago we got an applicant tracking system many many years ago we have a whole process for asking for time off and you know it's all there's a ton of technology that has made is very efficient at doing the work and I would also say lastly we hired a lot of contractors over the years to do the work that isn't core to what we do you know so outsourced Finance outsourced HR outsourced it you know like I'm just a huge fan of those things but I do think that when the business is under 20 people there's just a reality that the owner has to play an important part in that you know and and that varies but what that role is but it's really important can you talk a a little bit about crms I have a love hate relationship I've tried a couple and like all of them like I'm just daunted by the onboarding process for every single one of them so are you using one now or not Sarah I have a trial with one and it's called Apollo I think it's called and I've tried another one called copper that's interesting that Apollo's positioning themselves as a CRM because I've always thought of them as sort of a data minor yeah yeah they do both yeah they want more recurring Revenue like all these tech companies do right right but anyway so my guess is Sarah your pain is coming from the fact that you know it's an industry that wants to capture as much market share as possible so they all say they can do everything for everybody right and anytime you have a tool that says oh we can serve everybody it means they serve nobody I know it's it's like it's it's like going to the supermarket versus The Butcher like the butcher you know that they're actually going to know the quality of their meats and their slight cuts and all of that kind of good stuff get to the supermarket you're going to get something that's a great analogy and it's not even like a good Supermarket it's like it's like the crappy one that has all kinds of random stuff and not very good qual I mean it's a massive pain point for every business I run into every client I have either hasn't done it or has done it and it's frust frustrating I'd say maybe 10% of the customers I run into really have their act together it's a difficult space but I yeah I my counsel to to folks is that CRM is not about the technology CRM is about human behavior so can you train your people to use a tool if you can't do that then don't buy a CRM you know like that's it's the discipline to use the tool and I know myself well enough and this is the on the business in the business I know myself well enough that I'm not good at using these tools I actually don't think many business owners are good at using these tools because it requires a skill set execution discipline consistency that business owners don't have they're random they jump all around you know it's like squirrel you know every five minutes so it's CRM is not built for business owners which is why my council is bias system that is as easy as possible to use and then you're going to need some sort of administrative support and that can be a virtual assistant that can be somebody on your team who's admin and execution oriented and you need to make that person the administrator of the tool and part of their job is to bug people like me and Sarah every week and say hey there's a new contact in the CRM because it's tied into your email and it has no information about it where did you meet this person are they a lead you know what industry are they in what's the size of their business you know so you're actually doing constant data hygiene so that your CRM has value that's really good advice and and I definitely see it as something that someone could do remotely yes um consultant like you know find somebody who lives in a small town in Ohio or Wisconsin or something like that that's perfectly capable of doing this kind of stuff how did you select the one that you have yeah so we did an evaluation process you know where we looked at all the different features and part of our criteria was is it simple and so I would build kind of like an XY chart of you know price and simplicity or complexity and so in the upper right which would be see high price High complexity would be like a tool like Dynamics or Salesforce you know it's like they can do all kinds of awesome things and lots of Integrations and cool stuff but you need like a full-time administrator you can't do it yourself just stop I think it's an issue of you need to find the tool that can most easily be set up to mirror your sales process and and that's the the the other piece of advice that I realized I omitted which is you need to have a sales process like you need to have a series of steps you go through from let's say prospecting to inquiry to qualified lead to disqualification to presenting proposal like you need to have all of those steps mapped out I would do that long before you start looking for a CRM because what you want to do is you want to map the CRM to your process to say will this CRM fit this process and how much work is involved to do that I've had clients use Salesforce and it's like wow the Hoops you had to jump through to get it to work are huge I picked one which I would put in the in the basket of actually not even CRM but just like sort of like sales tracking and that was um back in the day there was pipe drive and there was it was called at the time base super simple sales process tracking and then Bas got bought by zenes and of course they keep adding features and they make it more complex so they all kind of arms race up to Salesforce but yeah that's that's where I went Simplicity well let's get back to our previous conversation a little bit I'm curious s you said your operations person leaving said something about you know some balls are going to drop and you said you knew H how are you doing with that aspect of it so far I'm actually doing fine um I you know some of the the Soft Stuff of like you know remembering people's birthdays and stuff yeah that's that's fallen through and and like award submissions like this woman a week ago I got a box in the mail and it was another award and I'm like oh I miss her cuz she did all of these award submissions for us which is like giving birth I mean they take a long time to pull together all those details and is it worth it you know what it's it may not be worth it necessarily in terms of new business but it is worth it in terms of making the team feel like they're part of a an awardwinning agency when they have a table with all these Awards on it it makes them go oh you know we're doing something that's worthwhile and you don't necessarily get a lot of Kudos from external sources for the all the work you do I mean we do have a range of clients some clients will like be you know flowering us with um thank yous and oh my God you guys are the best we love working with you this and that and some were like okay thanks here's what I need next you know so I think it's important to get some sort of recognition and it makes people feel like they're doing something of significance so I miss her for stuff like that for sure and I have good intentions on picking up that slack but uh I have not had the bandwidth currently to to to do that are you still able to pay yourself yes I'm actually paying myself uh fine you know like I'm paying myself a little bit better now because I factored that into my decision-making process where I was like okay this is the number client cents we have this is the amount of work we have I can actually pay myself uh a regular salary which is good and I am not going to hire people unless I can maintain that salary so that's kind of the part of the the process that I'm going through and we have a couple good things um on the horizon interestingly enough those good things are all based in San Francisco we because our team is all based here in the area have become very well known for supporting local um businesses and events and conferences and all of that because we are physically here um and there's a lot of agencies that say they are based in San Francisco but then you ask the follow-up question of okay how many people on your team are based in San Francisco and it's negligible you're doing a big event in San Francisco coming up aren't you oh my God I'm doing two possibly three big events we're doing the Apec conference the Asian Pacific economic um conference it's basically 21 economic leaders so you know everybody from Biden to the president of China they're all coming um in mid November for a whole week of meetings and conferences and we're expecting 600 to a th000 members of the international media to descend on S San Francisco what's your role I am working with the Press Ambassador in terms of feeding and wrangling of the media that is our job so you know it's everything from um media related events to you know working with them in the filing Center to you know telling local media what roads are going to be shut down because of all of the security and then literally a week later we're doing something called The Fan Expo which is like a ComiCon but it's a little bit more broad it has cosplay it has gaming it h it's like and they do them all over the country so we're doing that and it's going to have um a nice interesting list of of kind of thematic celebrities like um Sean Aston from The Goonies will be there and yeah William Shatner will be there so uh we will be onsite dealing with that and then we're in final talks to be the agency of record for um a company that does VIP experiences at one of the big stadiums here so like if you go to a concert or a game or something like that and you've paid a little extra for that VIP experience we would literally have to be on site to help manage those which my team of course is like yeah we can do that that sounds like fun so yeah we're doing a lot of kind of conferences and events and and honestly they're totally exhausting and life consuming but they're a lot of fun too it sounds like they might help get the city of San Francisco a little bit of good PR which I'm thinking they could probably use yeah you know it's interesting I have to say that you know I as a former member of the media you know I understand that you're doing your job but it seems like there's this almost attack on San Francisco I go to work in San Francisco 3 days a week and you know there's there's some homeless and there's some you know whatever but it's no different than most cities I've been to I went to a a hotel and restaurant conference the other day I was talking to people and they were like we have tourists coming here and talking to us and saying I don't know understand why everybody says that San Francisco is so terrible they're like it's great they're like the issues at San Francisco are no worse in any other city that it's just for some reason the media has taken hold of this narrative and won't let go yeah it seems it seems like I my theory is that it's transference so so essentially what I think is happening is anger at the tech sector just in general across our society and and essentially San Francisco is emblematic of the tech sector and I think there's a lot of frustration with it I think parents are frustrated with tech because their kids are using these tools that are really unhealthy for them I think businesses are frustrated with it I mean I can't tell you how many software as a service companies have raised their rates without adding any extra value to me in the last year or two it's just I think most of America hates Tech I I'm just going to say it Sean Portland has had some similar issues do you think it's the same explanation there I think it's a different thing I think the issue with Portland is that the New York Times had a love affair with our city for about 5 years and death I yeah it is I mean they had a love affair with Seattle for a while and then you see this news cycle and I'm sure you've seen it Lauren it's it's the hero to villain news cycle where whether it's it's an entrepreneur or a business or a city they're beloved by the media until the the tide turns and then the media can find every reason it can to demonize them because that gets clicks I mean that's at the end of the day that gets clicks and that's what's driving the news good news does not make money well I would say you're going to you're going to take you're going to take it for the media Lauren sorry and I can take it Lauren I came from a newsroom where it was like if it bleeds it leads I mean and that like literally that that is an unfortunate truth and I and I was going to say you know there's a whole range of entities on the media landscape and what you're describing absolutely does exist I will tell you at the New York Times I never had any pressure whatsoever uh about traffic how long ago did you work there I left about 10 years ago but believe me you know BuzzFeed existed 10 years ago no if you were to do survey reporters there's a lot more pressure for them to create headlines and content that gets clicked and plus the burden with the okay you have to write your article but now you have to post it and you have to do this and that it's not so much that people want to have this hero to villain thing I don't think it's they want something new so if there have been lots of stories about somebody being a hero and you come up with some evidence that suggests villain you can fill a 14-inch story that makes that case and it's something different and yes people will click on it but I mean I'm not saying there's some Grand conspiracy to go hero to villain I just think that the natural cycle produces that outcome right just like you said how many hero stories about Portland will the New York Times run it stops being news you got to do something different if you're going to write about Portland yeah but so what what is the solution for San Francisco like that's the big question I mean well you know what's interesting I think San Francisco and Portland suffer from the same problem which is concentration of commercial real estate space without residential so if you come to Portland and you don't drive into kind of like the core urban area that's entirely businesses if you go outside of that which is not very far by the way we're talking like seven or eight blocks it's a totally different environment it's like vibrant and tourists and businesses are healthy and Etc so it's a very kind of for Portland it's a very small area but it's very intense where it's located and that I think is a function of the zoning we're just at about out of time I I want to hit one more uh topic before I let you go which is something that Sarah you referred to a couple of months ago I think I I recently highlighted a story in the morning report about recruiting Services who were interviewed saying that they do not recommend that employers hire former business owners for a variety of reasons we are unemployable Sarah so you better not let your business fall apart and I'm I'm curious first of all do you share that concern would you hesit itate to hire someone who had previously owned a business either of you I wouldn't hire me well the reason why is that like I constantly want to make things better and improve things and if I'm working for somebody who doesn't have that same vision or wants to do it I I I definitely would not hire me I think I'm stuck in my reality a Sean what do you think you know it's funny I I was like looking at your uh your job history Sarah and my prediction before going over was like I bet Sarah lasted an average of two years or less at most of her positions and I'm looking at your your track record and it seems to hold fairly true um would you agree with that I would yeah so and same for me I lasted two years at my last quote unquote real job and I think that here's here's the Arc of what happens you come in you see lots of opportunity for change if the business is reasonable they Embrace that at first and they're like this is awesome Sarah's making all these cool improvements Sean's making things so much better let's promote him let's give him more money let's give her more money Etc but then after a couple of years or a year and a half or so like the business starts to be like oh whoa whoa whoa whoa whoa whoa these changes you're bringing are too big too much too much we we need to stick with the plan stick with the system and that's why you don't last for more than you or me don't last for more than a couple years so I think the Nuance of that article should be you can hire former business owners if you're okay with change and knowing that they might only last a couple years because I think the amount of change they want to bring might be too much for most businesses that's that's at least been my experience yeah I'm not a I'm not a good just doer I'm an improver like I want to make things better and help a company do more things and not every company is that shares that same vision and quite frankly I leave when I'm bored like my big thing with my team is I'm like I hope that you're always learning something new right when when I was a TV reporter it was great because I would literally learn something new every single day like one morning they' be like oh you're going to do an economic story and the next story oh you're going to do a political story because I was a general Simon reporter so I was happy to become an expert in the matter of you know four to five hours on whatever topic I was covering and that was fun and and when you stop learning something at your job that's when you need to leave because it's not going to be beneficial for your career or your mental health I mean that that two-year thing is something I look for when I'm looking at candidates I look for the one year two month one year four months one year 6 months you know because it's like you know what I think you should be a business owner like like if I were to look at your profile Sarah like I'm looking at it now I'm like I never would have hired you like it never no thanks I'm sorry I mean I would have been like no she gets bored after a year or so and and she's going to move on and so I think there's some truth to that article you know if you are building a business where you want people to be around for a while business owners are not a good lier you know unless you're going to give them equity and make them a you know co-owner I I just I see it over and over again and like somebody announce you know I've decided to go out on my own and as soon as I look at their profile it's the same story every time one year 2 months one year 6 months two years three months you know they just there's a Persona I I don't know what it is I have to say I I tended to last more than two years in most of the jobs that I had I think you know four or five was more typical for me but I also got fired by more of those jobs than I can even keep track of I think uh and I have to say you know running 21 hats it's it's not clear yet that it's a real business but I've gotten used to the idea of getting up every day and doing what I think I should be doing and going back to following someone else's marching orders oh my God would I would die I would have a really tough time I don't know there's no reason to like you know maybe I'm not going to become the Edelman of the world but like I my intention on building a larger successful you know midside of PR agency and um I know that I can do it and um I just I like being the decision maker and and granted I don't make every decision like I trust my team about a lot of stuff one of my team members looked at me yesterday and was like do you want to look at this press release about this really famous actor that we're announcing for um Fan Expo and I was like did so and so on the team already look at it and she's like yeah I'm like yeah I don't need to look at it then like you guys can make these decisions on your own but in terms of the trajectory of the business and kind of where we go like I like being at the reins and I would really I think I would suffer any other way um I will say I did say the other day I kind of want I I do want to put my resume together which I haven't done for like a decade uh because I've done some um guest speaking at various universities and schools and I coach a sport and I really like working with young minds that are eager to learn and do stuff and I could see myself teaching um what I do at a Collegiate level so yeah I I I could see myself having a boss in in that in a different space but not in my industry because um it would be miserable well I think it's it's a good sign that you feel that way even after the rough stretch you've been through it's just rough it's a learning curve you know I learned something from it I don't think I did a terrible job nobody turned around and said I'm not going to take your um your payout and all of like one of them is coming to a cocktail party that we're going to this evening like you know it's we left on all really good terms because they know it wasn't personal it was it was business all right right my thanks to Shan busy and Sarah seagull and to our sponsor the great game of business which helps businesses use an open book management system to build healthier companies you can learn more at Great game.com thanks everybody thanks for listening 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 n at 21h 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