Managing the Unexpected Risks of Entrepreneurship

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman this week Paul downs and Jay Golds talk about the risks they didn't see coming well everyone knows there's a risk that a business can fail because it just doesn't work there are lots of other less obvious risks these are not the risks you lose sleep over but they're real and if you don't manage them you can expose yourself needlessly to a slew of problems because most people learn about these risks the hard way Jay and Paul set out to create a top 10 list of them but I think for those of you keeping score at home we actually hit 11 which led Jay to caution I by no means in telling anybody oh my God I don't sleep at night I'm worried about all these things I'm not worried about them I just keep an eye on them wait says Paul that's another one the risk is that you let this thing live in your head and that it destroys your ability to focus on what you should focus on okay so that makes 12 and by all means please let us know which ones we missed even in Good Times owning and running a business can be a lonely Pursuit our hope is that these weekly conversations will let owners know they are not alone in facing challenges in fact that's the whole idea behind the 21 hats Community engaging with other owners to get the kinds of insights only another owner can offer if you're interested in learning more step one is to sign up for a free trial of the Morning Report which highlights the most important news of the day for business owners so you don't have to go looking for it step two is to get on our slack Channel where you can ask questions get vendor recommendations and tap the wisdom of a very impressive crowd just search the 21 hats Morning Report to subscribe joining me this week on the podcast are regulars Paul down CEO of Paul Downs cabinet makers which is based outside of Philadelphia and makes custom conference tables and Jay goz CEO of the gos group whose companies in Chicago include a picture frame business artist frame service and a home furnishing store Jason home the episode is titled managing the unexpected risks of Entrepreneurship welcome Paul and Jay um I got something slightly different in store today I don't know what we should talk about and I thought I would just throw it open to you veterans and see what we come up with what's on your mind so my topic of the day could be stuff that you wouldn't necessarily know what are all of the risks that we face every single day that I would have never been able to make a list of 30 years ago that have come to pass that I recognize there's probably 10 different things that we have to keep an eye on to manage our risk that's a good topic I mean one that I've been worrying about are the federal cyber security protocols just crib by nisty 800-171 P which anybody doing the business with the Department of Defense needs to comply with and these are extremely complicated and expensive things to deal with and I'm kind of on the fence about whether I actually am subject to this or not because it's certain kinds of information that get handled that require you to have these protocols and other kinds of information that we mostly deal with you don't need it that's risk the whole cyber security thing what you just described does that fall under the uh rubric of managing risk or the rubric of jumping through the Hoops you have to jump through to do business with the government well the government is is asking us to jump through hoops because there is actually a risk I think that we're all aware of of the things that can happen when you've got the internet attached to your business uh which is you're subject to fishing attacks and ious kinds of scams and your employees uh wasting time on the Internet or selling gift cards to strangers you know like there's 10 million things that the internet brings it's a bigger attack surface on your company than you would have ever had like when I started all I had to worry about was a padlock on the door I had a computer guy once tell me and he was dead serious when he said this that the number one risk to bigger companies is one of the executives has their kid come to work with them on a Saturday and they leave them in the office by themsel on the computer and they go to deal with something and the kid goes on to the computer and goes on to some sites they shouldn't be go on to and the next thing you know the entire company is been attacked and he says it happens all the time so you're right it's a way bigger platform to get attack so that's certainly way up there on the list just the whole cyber security it doesn't have to be your kid though your employees do that kind of stuff all abely I'm just going that's one you don't think about you train your employees but you train their kids and and I do have a policy where people can bring their children to the office and uh we don't necessarily invite them to access our servers but they're in our network with their iPads or whatever I'm not really aware you know like sure exactly how the kids's iPad would take us down but there's probably a way so well that's one yeah should we move on to 2 three four and up to 10 well what's your biggest concern right now in terms of managing risk Jay I wouldn't say it's necessar my biggest concern but it's just an ongoing people need to realize that you've got employee lawsuit potential at any time and you need to be aware of what the laws are for what you can ask on an interview and what you can't ask and I understand that most companies can't afford a full-time HR Director but that doesn't mean that you don't need to be aware of what the hiring laws are so I think it's would be in everyone's best interest to go to a seminar to maybe hire a a labor attorney for for you know a few hours to go through it there are some basic things that you could get in some serious legal Jeopardy in like I said just interviewing people there's lots of stuff you can't ask people on an interview that people are not aware of you know there's one tool you can use prior to an interview that's a relatively recent thing which is just using a chat gbt style AI interface to say hey what you I'm in this state what can I ask not ask on an interview question you'll get an answer in about two seconds will it be a right answer it'll be right enough that for something like that where Chad GPT is looking at settled law I would trust it more than something like Chachi opinion of the Eagles quarterback or something where it just could be made up in any old way I've heard that conversation about what you can do in a job interview over and over again I don't think I've ever heard I'm not saying it doesn't happen I'm not saying it's not important but I don't think I've ever heard of a lawsuit specifically over an issue like asking somebody about their salary history which is no longer legal in in many states that kind of thing how do you assess that risk are you aware of lawsuits like that there clearly are I haven't had one you know so it's not that but I'm sure they are out there the point is why expose yourself at all I mean you just should be careful with and the law keeps changing so you're talking about managing risk I'm trying to figure out we're also talking about the society's gotten more litigious that people now have friend friends that oh you should sue them you know if you would have complained about an interview before or getting fired your friend would go oh that's terrible now the first thing you're going to say is oh you should sue them I mean the newspaper is filled with lawsuits regularly about this kind of thing can I reframe this conversation a different way go for it which is that hiring is one of the things that you have to do as a business owner and there's going to be a point if you start a little tiny business and you're sort of operating totally however you feel like it and you start to grow and you start to add people there's a point where you have to build procedures to do things that you have to do over and over again and when you don't do that you're increasing your risk of whatever the task is so hiring could be one of those firing could be another one internal operations evaluations there's a million different things that if you have not sat down one day and said this is how I want this to go each one of these should have these steps these are the boundaries you're just at risk of a if you tell somebody to do it without a procedure in place they may do whatever the hell they think or you may do that if you're in a bad mood and then if you add to that the likelihood that as you get more and more employees and even if you don't have a big crew at any given time just being in business like I've been in business almost 40 years and I think that if you added up all the employees I've ever had it's too 200 some at this point even though I only have 28 now so the more people are you're encountering the higher the chance you're going to get that bad apple and I had a brush with that in the last two years because I hired an employee who turned out to be sort of a grumbly person and I knew her previous employers and had asked them I always call about references just like Jay tells me to and they said you know they gave me the goods and the bads and kind of hinted at this person is a grumbler but we needed someone and they all said she she was a good crafts person I'm like great so we got her in here and turn enough she turned out to be a grumbler and eventually she quit but I had always been very very careful to make sure that all interactions were just about the job and when she got to her next employer that person anonymously emailed me and said boy she's been complaining about you watch out but nothing actually has happened from it because I had been kind of like let's make sure that we're managing somebody fairly all the way through and I think that that's just an example of how not thinking about your operations is a risk that when you do things by the seat of the pants that's risky and when you design procedures and manage and train and act like a big big person you know like a grownup you're running a company you have to do these things even if they may not be what brought you into the business like I like to make things out of wood I spend zero hours a week doing that now and all of it is spread sheets and management that's kind of the point that's most people's story and and the point is this is called 21 hats those are two of the hats hiring firing you know I do speeches I say none of us went to boss school and everyone would laugh but it's true if you went to boss school they tell you here's some outlines for hiring here's some outlines for checking references I agree with everything you said the one word you didn't say was needlessly exposing yourself it's needlessly exposing yourself a little bit of energy on the front end you can avoid putting yourself out there so hiring is the number two exposure and three you better understand the laws about firing and to be fair part of my perspective is my daughter-in-law is a labor attorney so I hear the stories from her and they're pretty horrifying and I've helped her out as a as a lawyer helping coach her because some of the stuff is so easily avoidable you just say to yourself they did what I mean stupidly said stuff that just came back to haunt him that so I do think it's worth whether it's buying a book going to a seminar if you're hiring people you should get a little training on that none of these things are like everyday horrible but if you add them all together you got some exposure to risk and um take back to your point Lauren you'd say well how much do you hear about that I would say add all 10 of these exposures together yeah I bet you once a year something happens I mean that is the reality so if it's not one thing it's the other thing and we need to be you know try to stay ahead of it so managing employees is actually a big risk I would say another one is managing customer risk we do a lot of business with various municipalities and a lot of times the terms of the deal are going to be we're basically going to finance it now when it's the federal government who tells me that I'm I'm like fine I know you're going to pay me I've been down this road when it's a little city in Arizona they human services department they issue a PO and you kind of hope for the best but then at the end of the day you may or may not be able to easily get paid because the one person who issued the PO is now quit and everybody else hated them and you know it's like there's a lot of things that can go wrong even with things that look like they're good and leave you hanging out there after you've done work so make that number four which is a very good one giving credit that's a huge risk and you can't be naive with that you need to understand how to manage that and should you be giving him Credit in the first place and getting a credit app signed knowing who's responsible basically of this 10 things I'm going to say I don't know that there's any one of these 10 that I haven't had a problem with over the years maybe only once in 46 years but each one of these is another exposure so receivables is a very good one that's that's four what did you figure out I made sure my employees know before someone gets credit there needs to be a credit app filled out and either the controller needs to sign off or if it's you know some gigantic company just have me sign it I'll sign it but somebody needs to sign off on it because you just don't give credit to any company that shows up and says oh I I want to get 30 days we have much less problem with with companies honestly it's not not getting paid it's when you get paid and what is trickier is if you're dealing with Municipal and government authorities because they have a budgeting process they issue you a PO it's it's not like they're defrauding you it's just that the wheels of payment may be very very slow okay well I'm in retail I frame thousands of pictures a year there's a rule I've had for many many many years everybody leaves a deposit I mean we're not going to start framing a picture and not get a deposit and if the customer goes well you've got my artwork yeah we can't sell your I we don't have those arguments any customers just pay and I've told many frame shops when I do speeches at the frame show you need to start getting deposits because the problem is sometimes they bring something to get frame it cost more than they thought and then they they change their mind later and they just never pick it up and you're sitting there with their art forever and it's bad so um getting paid is I would put that as number whatever on number four for sure getting paid that's a good one my very first conversation with a government buyer was with a guy from from the Navy and this was back maybe 2004 and we talked about a project and I gave him a quote and he's like great what are your terms I like well we you know we get a 50% deposit boom phone goes down yeah we're the Navy we don't pay a deposit no I got no nobody in the federal government does and if I just if I didn't get my head around that I wouldn't do any of the business that I do the business would be half the size it is because not only does beam willing to accept those terms open up new markets for you but it's a a basis of future growth when you get uh Word of Mouth which doesn't work great in the furniture industry but it works great in some contexts particularly military here's a subtle thing that you wouldn't wouldn't have known this is years ago some places don't take American Express because they charge more and I decided I was going to take it and I didn't use to so I started taking American Express and right as right after I started doing it a customer actually said oh I'm so glad to see you're taking American Express now I used to just bring my personal Framing and now I can bring in the company framing because all she had was the American Express card so I tell people the difference in rate between American Express and Visa Mastercard it's it's not that much I am confident you're losing business if you don't take American Express so that's one of those subtle things you figure out along the way so it's about managing your risk and that so that was four we ready for five yeah insurance right uh insurance has gotten very EXP bet way more expensive than it used to be and my insurance bill is hundreds of thousands of dollars I just sat down with the broker and I realized I'm overin insured I got too much insurance for Too much exposure and I wasn't paying enough attention to it and you really need to drill down every year how much inventory do you really have for instance the one I caught was oh well they've got $500,000 of insurance for art that's in the van I said I couldn't fit $500,000 worth of Framing and art on a van I cut it to a 100 so you know there's there's a few thousand bucks and and there's my sprinkler in my building is it's 100 years old so they're not counting at a sprinkler building it's costing me a fortune but the cost of putting in the sprinklers is a lot it's it's a job again it's one of the 21 hats insurance it's something you need to manage I think one that people might want to look for in insurance that I ran into this last year is the policies that I buy in Pennsylvania we get a premium estimate at the beginning of the year and then they run an audit procedure right that's for workman's comp right for workman's comp and also for liability they want to see what your actual sales were and what I found is that I got a big uh bill at the end of my audit last year and I was like what the hell is this and I looked carefully and they had misclassified all my employees as being in a carpentry situation as opposed to a furniture manufacturing situation and what that meant is the premium the workman's comp premium for Carpenters was something like 58 bucks per 100 and the workman's comp for furniture manufacturing is $2.30 per 100 which is still high compared to other stuff because I'm in that world too I had to take people out of woodworking to what you're talking about and say wait they're cutting mats that's not Woodworking and it was a it was a huge number I took a a bunch of employees and said okay they're not woodworking that's another thing you and then I don't think to this day there's still a category called picture framing so every picture framer in the country has a different Insurance person sticking it under some category and maybe you're not paying attention to it so that's absolutely something worth looking at yeah I mean the risk is that when you initially set up your company and if they're doing any kind of production you want to check and see what the insurance agent said your labor class was because you're paying very very different rates on workman's comp depending on what they think that job is office workers is like a half a percent to your point woodworking is five and a half% well if they put it in the wrong category it might not be a million dollars but you might be blowing $300 a year $500 a year on each employee and it adds up I highlighted an item in the morning report recently that it's become routine for families with kids to have $220,000 car insurance bills I'm wondering if there's a similar impact on businesses that have to own a number of cars uh given I just just looked at it about 20 minutes ago I can give you I got 12 Vehicles not the problem the insurance for the all of my vehicles is 33 Grand okay really yeah 12 Vehicles interesting actually I just I just switched a vehicle that I use um sort of both ways to company coverage because it turned out that I got for the same money a much more like liability and this and that and the other thing that I was not getting from my private insurer so uh I usually ride my bike to work that's my main travel when I travel in my car when I get in my car anywhere it's almost always business travel and so like with a straight face I can say yeah the business could cover this car and so I'm paying 1,200 bucks either way but one I'm getting you know like $5 million insurance and liability and every kind of bling on it and the other one was limited tor which is basically nothing and so that's something that's worth looking at what about health insurance huge exposure do you know what's going to happen for your for next year it keeps going up and and if you have seen I know it has been going up do you have you actually gotten in a package do you know haven't gotten ours yet yes but the point is I'm big enough that I have a person who does this and they're HR and they deal with it most companies don't have an HR department well what if you hire somebody and the person who's in charge the insurance it could be the owner it could be the owner's assistant so you've got someone who really isn't skilled in it doing the and what if they forget to change someone's Insurance to family or something and then all of a sudden something terrible happens it could be a nightmare so health insurance is absolutely a huge risk is someone staying up with the policies and making sure that everyone understands what they have and they're signed up and I think my insurance I actually think I've got a little insurance for something on that I think there's an insurance you have if something gets messed up with that but that's another huge now is that going to happen every year no it might not happen for 20 30 years but it certainly could happen so add that to the list health insurance yeah health insurance is very complicated and I took the opportunity when I was writing for you Lauren to really dig into it and so I have a pretty good understanding of what I'm buying but it's not an easy Market because the big insurers will basically lie to you and about what they're offering is and they also collude within a market to make sure that you can never directly compare the products of two different companies at least that's how it works in Pennsylvania one of the things I've been curious about you read all these stories about the new weight loss drugs and how expensive they are and how a lot of policies do not cover them uh but some do and that at least at larger companies you have a lot of employees who are demanding that they're a large employer cover those drugs has this been an issue for you guys at all I haven't no um my employees walk an average of six miles a day on the shop FL so what about their kids and wives and husbands though well I have one who's on the larger side and uh he tried the drugs for a while I you know I actually don't know what I think he was covered by his wife's policy so it didn't show up for us but I have a feeling that this is something that's going to work itself out over the next 10 years that the companies that are producing these drugs are going to do everything they can to keep the price up and because there's there's such a demand for them there's going to be political pressure to bring the price down and it's just going to work itself out some way Jay you have 130 plus employees why why do you think it hasn't been an issue for you first of all maybe it is I haven't checked lately I I haven't heard about it um I I'll have to get back to you on that one I don't know I don't think uh I don't think we've had any issues and maybe if it's not covered it's not covered so I don't know why I would have heard about it I mean if somebody is out there that did try to get the drug and it's not covered by insurance I don't know why I would have heard about it they just would have not done it or something so but here uh let's move on to the next one what's the best way of burning your building down what do you think the best way set it on fire this is one of those you could be the greatest business person in the world and do everything right and like all this going to to take is somebody oh my feet are cold and they plug in their space heater into three extension cords wound around the thing and the next thing you know your building burns down um space heaters are extremely especially in a place where they're plugging them into cords I'm not a fireman but I would guess that that's one of the leading ways of burning your building down so this is a problem I have got a big building that you know the heat isn't exactly right and sometimes it's too hot in one area and too cold in others and I have to regularly go check to make sure no one's sticking a a a heater in and then oh I unplug it at night yeah most of the time it's it's a problem it's a potential everything you have could go up and smoke because one person plugged a heater into three extension cords and so that that's a quickie but something to keep an eye on well we've run the space heaters all winter because my office is freezing but we do have sprinklers in every office okay but at night does someone go around and make sure they're all unplugged I usually do okay not unplug everybody knows that they should turn them off the question is do they they do okay then you you're managing it I got it the point is you are managing it and that's what you need to do I think that all of my staff's aware that we're in a wood we're in a room that's completely filled with drywood and veneer and it would burn like pile of gasoline if if anything happened we have had fir started in a couple of machines that are there's certain Machining operations where the sawdust gets packed down as the tooling hits it and then that can heat up and cause a fire which happens to a lot of shops do you have to pay extra for your insurance because of what you just described no I mean my insurance guys have been in here because it's a sprinkler building and we keep the placees clean I mean we have insurance walk through everybody is like wow this place is sparkling compared to most shops and so I don't believe I'm being downgraded on it my insurance just isn't let me see what I paid for everything last year it's just not a huge percentage of our um mine is my insurance for everything is running about a percentage and a half of my gross sales that's workman's comp on that's that's you know the fire Insurance everything that's a real number yeah I was 1.02% last year okay no not that far off Jay what do you think it was 10 or 20 years ago I know it was less because this sprinkler thing didn't come up they tell me my sprinkler system's too old even though I have a brand new pump the pipes are old it it had to have gone up I know what the number is half a point I it probably used to run 1% of sales and now it's running one and a half percent of sales uh can we move on to the next one I got more I told you 10 I don't want to Short Change you uh the whole uh you got a website and someone goes after you because it's not 88 compliant we've talked about that a couple of times yeah I just I just after that show I actually went to my guys and said here take a look fix it and what did they do I charged me 500 bucks they went through it do you know if they made any real changes I think if I got sued by those people I would just say listen for five grand I'll write you a check get the out that's pretty much how it works no and that's all they're trolling for business that's pretty much how it works I hope you didn't just invite Paul I they're what are you going to do they're out there you know like there there's certain types of of the risk is not so much the five grand or the or the crazy actors out there the risk is that you let this thing live in your head and that it it destroys your ability to to focus on what you should focus on yeah I by no means are telling anybody oh my God I don't sleep at night I'm worried about all these things I'm not worried about them I just keep an eye on them I just it is out there though all right so here's one um which you for sure have just the workman's comp um somebody could get really hurt I had a guy years ago there was a pile of Plexi like I don't know 20 sheets of plexiglass which we use it fell on him and he got hurt and then someone tried to pull him out from under the pile and they screwed up his rotator cuff because they yanked on his arm so like safety now if you're in an office probably not much exposure but you know people fall downstairs um lighting um are the stairs you know marked properly is there a good banister just safety people get hurt at work we have an ongoing safety program and then I also give all new employees a talk about workman's come like guess what you is the most common injury and they're like I don't know it's like carpal tunnel no a new person with a knife in their hand slic themselves up and need stitches oh that's funny you say that because when I was in college I cut my finger I was working in a fuse Factory and I reached in there and there was a sharp thing and I immediately right after getting the job had to go for stitches and yeah so we've been I think we're up to about 2200 days without a lost time injury right now just people changing tires no one tells them don't pull the wrench up towards your face when you're loosening it push down it happens all the you know you got the wrench on there and it snaps off little stuff like that so yeah there's all kinds of way of getting hurt yeah or what are we up to nine N I got I gotta contribute on Jas been doing all the heavy LIF ahead I gotta think um let's see we did customer risk payment Risk insurance what are what are the nine we got at this point I'll let you know when I publish it all right burnout how about that that you're you're going along and you just sort of hit the wall either you or one of your employees the employee is suddenly quitting that's a risk because you may have built your operations around this person does this thing so well I just don't think about it anymore you don't actually know what they're doing you don't actually know how it gets done and you don't realize that their performance is degrading or something is going wrong and then one day they walk in they're like see you later and then what do you do that's an constant risk one that I mitigate by always making sure that we have two people who can do critical operations you have a bench yeah and it's hard to do that when you're really small yes because the smaller you are as a company the more likely somebody is doing eight things and the less likely it is that the boss understands what those people are doing all right let's make that one number 10 and let me fill in eight and nine well wait a second before you go leave that Paul have you ever felt like you were hitting that wall uh I feel like like uh like I bounce off the wall at intervals and the amplitude and the magnitude of the force of hitting the wall has been lessened as I've become a better boss and the company has gotten larger there is a phase in the growth of business where you're trying to do whatever tasks you have to do and manage the business and deal with employees where there's like a maximum stress that I think it's about 12 employees for me I'm right there with you that's when I was just like nonstop I was I just couldn't put out the fires fast enough and at that point I was probably in my early 30s I started to think oh I guess this is what business is you're supposed to put out fires all day long and I was wrong and you may well at the same time when you're in your early 30s be starting a family and then you got all that going on right where I was now at age 62 I'm much better at managing the business the business is big bigger it's more resilient we have a better place in the market we make more money it's just that stress can go down if you do the right things and if you can get your business over that hump but there's going to be a moment when you when you're really in it and it's just hard to do anything other than just get through it stress should go down because you get better at running the place you have better people you keep better people you train people better and you start to figure out how to keep the B and I tell people to make them feel better when they're torturing themselves this doesn't take five years uh it takes I was I would say I was quote unquote out of control for probably 15 years just and I didn't have a mentor and I if I had myself to tell me now I could have saved myself a lot of grief and I tell people all the time it's largely hiring and firing largely like my big line that people always like is if you're putting fires out all day long get rid of the arsonists I mean and they're not necessarily bad people they just can't do the job and it's going to continue to cause you grief so hiring and firing properly does decrease the stress dramatically so how many do you think we've gotten to Jay I think we've got eight but I've got two more easy ones stealing people steal I mean not a lot but there are people that steal and you do need to put some controls in I knew a law firm that the woman the office manager used her credit card for hundreds of thousands of dollars of charges for her personal house house and they weren't paying attention to it so it does happen and you need to think about how to keep an eye it's not like in the old days it was a cash register maybe you just made sure no one took cash out of the register in other business I knew a guy his CFO this was a big company they leased cars when someone would turn their lease in early he would say oh you know what I'll let you out of it just send a check to blankety blank to a number and he pocketed all the money he stole like a million dollars over four years from this guy and he sued his accounting firm because they were supposed to watch it and he spent another half a million dollars or some crazy number in legal fees and he lost because the accounting firm had in their agreement that if the owner or the CFO is doing the stealing they're not responsible for the audit so this cost them a lot of money and that's that's the worst example but there's smaller examples you need to put some controls in place did you have anybody ever steal anything from you I'm sure I have that you were aware of yes the the the ones that I'm aware of are employee uh falsifying their time sheets yeah and so that's an instant fire tools tools I'm I'm pretty I mean we have so many Tools in this shop you wouldn't believe it it's just like your place there's just thousands of them so I've come to the conclusion that it's actually cheaper to just let some stuff disappear than to actually Implement all the procedures that would be required to manage that and prevent it and I'm not sure it would prevent it anyway we have as far as I know a pretty honest group of people and so it's never it's not zero but it's not anything that bothers me all that much I think people take stuff home and just forget they have it or something have your attitudes toward risk changed a lot through the years I would say I'm willing to take small losses more because in the overall context of the size of the business it's peanuts and the other thing is that you just get crustier you know you you kind of have to you have to learn not to let every single thing bother you and you have to be kind of coldhearted about an evaluation of am I going to make a big deal about this thing or that thing you know I don't really remember what I used to think about these risks a lot of them I just wasn't aware of or they just didn't exist back when I started but I've become I think more tolerant of it because I'm better at managing it just learn to take things and story like okay it is what it is I used to get all bent out of shape oh my God someone it's like you just you have to deal with it that's the point if it happens deal with it that's all so I I would say what I think what we're both saying is yeah there's some risk it's part of business deal with it that's all spend your time looking for business I think that the other part is to to try to get your business in a place where it's supporting you to the extent that you can take a small loss absolutely if a $5,000 go away check to somebody who's hling you is going to put you out of business you've got a bigger problem than that person and so trying to make sure that you're building a prosperous capable resilient organization is the actual answer to all these risks that means you have to do a bunch of small things constantly you have to be a manager as opposed to just the brilliant leader or whatever you went into the business thinking it was going to be at a certain point somebody has to manage the organization and at different sizes that becomes a different answer to that question of how do we manage this organization as I said at about 12 employees you're at the peak of the boss being stuck in it now where I am at 28 employees I've been able to get out of all my operational roles so I don't really have too much more to do besides sort of keep an eye on things and do the occasional HR stuff let me pay that off a little bit because I 100% agree with you and the reason is once you start getting more than the 12 there now all of a sudden you can pay someone more to be a manager that you couldn't pay when you had eight employees so yes you now have critical mass to where you can now hire somebody to take some of the responsibilities from you whereas that's difficult when you only have seven employees so yeah that's what happens and then when you get to my size I've got people in charge of every area so I'm not doing a whole lot but doing interesting podcasts you get to be the eye of saon you know you just like focus on whatever you focus on and it's nice I like it this is the best place to be when you're running a business is get it to a certain point and okay it took me a long long time to get there but that's not that's not everybody tell me how old you were when you'd say that all right I've got this under control how old were you I would say it was about 2018 2019 it wasn't that long ago so you're saying 5 years AG go in your mid to late 50s yeah I mean that's sort of when I felt like okay I've I've seen a lot I've done a lot I've Gotten Good Advice I've learned what to implement and what not and I've learned how to do the basic things I need to do with the business and you've made a lot of mistakes that you learn from course I mean for for for decades and that was because I started from a place of complete ignorance and it took me a long time to fill in the gaps but that's because we didn't have the benefit of 21 hats no that's now that 21 hats is here people can cut that that learning curve way down so I absolutely agree with that in on this list that you guys have generated all of the risks you've mentioned I would say are kind of they're sort of the ancillary risks that inevitably come up if you're running a business but you haven't mentioned anything related to the basic fundamental entrepreneurial risk of starting and building a business everybody knows those I would argue that the 10 things we listed most people including me would have never even thought about when they started their business so that's why we're trying to fill in the blanks are do you think about that differently does it all fall into the same category of risk or is entrepreneurial risk one type of risk that you think about completely differently than these everybody comes to it from a different place too when I started my business I was a kid I had no obligations and so that I've been sort of boiling the Frog as I went along that the risk for me starting a business in 1985 were pretty much zero like it either was going to go or it wasn't and what do I have to lose nothing and so if you have quit your corporate job and and just emptied out your 401K and you bought a bagel shop or something now that's a risk because you don't really know whether you know what you're doing or whether it's going to work and I think that one risk we haven't talked about too and it's a huge one is does your business fit within the broader trends of what's happening in the economy in other words are you fighting an uphill battle against vast forces that are raid against your product service offering are you selling fax machines yeah exactly and I've benefited in the last few years from a real broad tread in my industry which is my competitors work forces are aging out and so there just aren't that many people who can do what we do the number of that of my competitors goes down every day and so we're sort of like the default guys for a for a lot of projects and that's that's a Tailwind that's happening but if I was starting a wood shop today I would have a whole different way of thinking about that which is where are the people I'm going to need and I've been able to to get myself into a place in the industry where we're one of the most attractive places to work so we're sucking away Workforce from other people but if you're starting from nothing and trying to establish credibility that's difficult now that you have something to protect I mean you're not that kid who is just getting started with no obligations do you look very differently at investing in your business do you think about that risk in a different way well that's funny you say that because in my insurance meeting I realized that if everything burned down it's very different at my age than when I was 40 that I'd have to think twice what am I going to do with the money from the insurance company so yeah I I absolutely have changed the way I look at risk and about investing in stuff and I don't need as much insurance as I used to so I and I have to tell you it kind of snuck up on me because you could walk away if you wanted to at this point now I could but I couldn't 20 years ago yeah I mean I'm I'm thinking about risk sort of the intersection of risk in your in your private and your business life too so I'm taking a big risk right now in spending a fair amount of money renovating my home home so that it's set up to be a place where my wife and I can age in place over the next 25 years and that's taking a large amount of my available cash but I'm assuming that my business is going to support me over the next 10 years that I know how to run it in a way that will get me all that cash back and then some and then I'll hopefully be able to sell the business so um when you own a business you not only have an expanded set of risks but you also have a a a device that creates wealth hopefully and I think that when you get to Jay's age or my age hopefully you've built a wealth producing asset that is somewhat predictably producing resources for you to deploy any way you want over the future or you have wealth or you put enough money away somehow now I've never been able to do what you did which was segment out a real estate investment from a business like that's just hasn't a lot of reasons but I'm still renting it well you didn't have to I had I was you know growing and I I can't tell you I was that smart that I had some kind of global plan I just oh I need a building oh there's a building so but it's pretty clear that any any business you start if you can own some real status along with it that's hedging your risk I was going to make that number 11 which is landord risk no you're landlord that's a risk better to own the building SBA loan 10% down can't say it enough if you can find a building you can afford that you know like we've been we've done the math on on what it would cost to build or move and it's way more than it costs me to rent right now so I'm just like shrug I'm paying the landlord whatever I'm paying him you know what I had a feeling we would figure out some way to spend an hour chatting uh thank you both yeah get the old crusty guys here and let them rip my thanks to Paul DS and Jay goz appreciate you taking the time and sharing have a good week everybody one thing before you go everything we do at 21 hats is created by entrepreneurs for entrepreneurs to help us all learn together if you get something out of listening to these podcast episodes consider joining the conversation you can do that by joining the 21 hats sounding board a slack Channel where you can tap the wisdom of a very smart crowd or by becoming a founding member and joining our monthly Zoom Forum where you can be part of conversations much like the ones we have on the podcast you can sign up for both by subscribing to the morning report if you have any questions you can email me at Lauren 21h hats.com and if you get something out of this podcast or out of the morning report please tell a friend tell an enemy tell every business owner you know your word of mouth owner to owner will always be the most effective way to build this community for all of us thank you it means a lot this episode was produced by another entrepreneur Jess steron founder of blank word Productions thanks for listening everyone [Music]