Our Government Is Doing This to Us

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman this week Sean busy Jay goz and Liz picarazzi talk about the uncertainty coming out of Washington and the stress it's putting on their businesses Liz for example has had to rethink her supply chain and her pricing on an almost daily basis as the Tariff situation continues to evolve both she and Shawn believe they've lost potential clients who've been spooked by the uncertainty the three owners are figuring out ways to cope but what they find most ging is that none of this had to happen it's like a manufactured recession says Jay plus we also talk about Paul Down's recent comments that when he had to decide which employees to lay off he took into consideration personal circumstances such as who just had a kid and who just put a down payment on a house that's a natural reaction of course but is it a good idea or is it trying to play God 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 hat 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 sign up for a free trial joining me this week on the podcast are regulars Shan busy CEO of Kinesis which is based in Portland Oregon and works with small businesses on marketing culture and strategy Jay goz CEO of the gos group whose companies in Chicago include a picture frame business artist frames service and a home furnishing store Jason home and Liz picarazzi CEO of City bin which makes trash enclosures and package bins and is based in Brooklyn New York the episode is titled our government is doing this to us by the way if you like what you hear on this podcast please review us with as many stars as you can afford and please consider joining our monthly founding member Mastermind We Gather on zoom on the second Wednesday of every month at 12: Eastern time and much like we do here we go around the room and we hear how everyone is doing The Good the Bad and occasionally the ugly we offer support make suggestions and develop real connections of course unlike the podcast what's set on the zoom call stays on the zoom call if you're at all interested just send me an email I'm at Lauren 21h hats.com and I'll I'll invite you to our next session as my guest it's a great group and you'll even get to meet some of the regulars on this podcast welcome Jay Liz and Sean it's great to have you here Liz last time you were on and we talked about your tariff situation you told us that you thought you were pretty well prepared you had set up a bunch of options of course much has happened since then and I want to see if I can summarize it quickly based on your recent LinkedIn post I I think the things we really need to focus on are that when you started manufacturing your trash enclosures in China the Tariff was 3.7% and of course you'll correct me if I get any of this wrong the tariffs imposed by President Trump in 2018 took it to 17.5% then he lowered it to 7.5% where it stayed for 6 years during the presidential campaign he threatened a 60% tariff uh repeatedly so last year you shifted some of your production to Vietnam after Trump returned to office he quickly announced tariffs of 25% on Canada and Mexico you had been looking at Canada as an option before that while raising China by only 10% uh which I guess sounded pretty good at the time that would have put you at 17.5% which is certainly better than 60% but then Trump dropped or postponed the 25% tariffs on Canada and Mexico but instituted a 25% tariff on any steel or aluminum coming into the country from anywhere and that's in addition to any previous tariffs which means your tariffs for your trash enclosures made in China will now face a total Tariff of the 7.5% you started the year with plus 10% Trump initially added uh on China plus the 25% on steel and aluminum all of which adds up to 42.5% so if this actually happens and and we still can't really stay for sure I think you will have gone from 3.7% to 42.5% do I have that right and what does that mean for you so you have that exactly right I'm glad that I wrote it clearly enough in my LinkedIn article it was really difficult to get all the shifts correct um but you have it right the 42.5% is really new for me it's like 3 days old um because on the day that the 25% on aluminum and steel happened that was actually on Super Bowl Sunday I falsely assumed that that was my new China tariff I did not know that it was additive so you thought it would be a total of 25% I thought it was going to be a substitution I didn't think it was an addition and that was really just such a shock this week for so many reasons um part of it is that it's really hard to get accurate information I mean I've spent hours scouring you know Google looking in all the Wall Street Journal all the main Publications you know even talking to my trade attorney and my customs broker they're still a little bit in the dark but one thing that they do know is that when these typically are added on it is additive it's not like a substitute so on I guess it was on Monday or Tuesday hearing from both my customs broker and my attorney that it is in addition um I was really in shock it it took me I wouldn't have been able to talk to you about this a couple of days ago and I wouldn't have been able to talk to you last week so I think the thing that's disappointing is that we spent a lot of time and we were very methodical about moving some of our manufacturing to Vietnam in a proactive way um I mean it's something that I'm very proud of our company and in our partnership with our overseas partners that we were able to move things over and starting to feel really comfortable with Manufacturing in Vietnam um the other thing that in the very brief time I thought that I was at 25% for China and Vietnam I really liked the idea of being able to choose which one I worked with based on price and timing so like right now we have a huge order in with Vietnam there's a few things that we sort of want to give to them additional production and we were going to give that to China because we didn't want to jam things up with Vietnam they're still pretty early as a supplier to us China's been our supplier for almost eight years and once the China switched from 25% to 42 and a half% you know I lost that leverage and it feels like I'm less Diversified now cuz you're going have keep giving more business to Vietnam yeah can you do the math on this and just give us an example a typical unit let's just is how much is it $1,000 $1,500 what what is the typical just give me a number um so we would say 3,000 if it was a two module okay so 3,000 okay so it's $3,000 with the new increase how much is that going to increase your product cost on that $3,000 unit well I would say and I should get this absolutely correct but my margin went down about six points so that's $200 I'm probably wrong on that okay whatever it is here's my point this is capitalism everybody's got the same issues you do everybody's got to pay the Tariff my argument is your units are architectural grade look beautiful and people with expensive places are not going to put a Rubbermaid thing out there and my argument is price elasticity wise if you have to raise your price from 3,000 to 3200 most people are going to pay it because their other option is to have their stupid garbage can sitting out there with nothing around them or have a rubber thing so like I think you're going to be just fine I think they will pay the price for it because I just picked up dinner for four of us and two little kids it was $250 to pick up dinner like I did not pick it up I didn't go oh I think I'll go make cheese sandwiches for everybody I mean there's a hundred things we all buy that are costing more than we'd like and we pay it so I don't think this is going to be a killer for you well I know that you're very optimistic about that um but given the state of the whole world and just the uncertainty I think that people are being more cautious about their spending I think that people know that there's sort of chaos if it's not just brewing it's already erupted and they're being a little bit more conservative with the spending Municipal is now 40% of my business um and I do worry that Municipal clients um are going to say this is a capital Improvement that we're gonna wait on that's true and all I got the same issue as you do I'm just suggesting it's not related to the Tariff that's just general business is being you know I'm my business is off also for the same reasons you just described I don't think it's related to the fact that your unit's going to go from 3,000 to 3200 is my point well we don't know that those are the right numbers no actually I would say those are not the right numbers and I I wish I would have been a little bit more prepared but 25% in Vietnam um we're looking at a price increase of 15% and it's probably going to be communicated next week but we're also waiting because the official imposition of the new tariffs is March 12th and if he is just you know lying or he's just hedging then we're going to want to wait or if he's bluffing I mean one argument some people are hoping that he's doing this to try to cut a better deal and I guess there's some chance of That So when you say 15% you mean you think you're going to have to raise your your selling price 15% y so that's $450 I vers are you going to make any profit on that increase or is that just passing along the increase because it sounds like that's not just passing along the increase yeah I mean we're going to maintain our profit at that level profit dollars or profit percentage very different profit dollars actually right okay so percentage goes down Liz one of the questions that I've always had and I knew you were exploring this is the is the Tariff on raw it must be unfinished Goods too not just raw materials yeah so as of the surprise Super Bowl announcement um there's a whole hundreds of additional HTS codes that's the they harmonize tariff codes that they use for customs and um there's hundreds more on there I for many years was at the 7.5% level because I was a finished aluminum product or anybody else that was bringing in raw aluminum was paying 25% that's no longer yeah see I think the public perception is very different you know in terms of reality like I think a lot of people are like yeah this is good because we'll rebuild the American and aluminum you know manufacturing base which is which is crazy idea to begin with but let's just say that's your belief I think a lot of folks don't realize that this this affects everyday products that are purchased that are that are finished in China um or Vietnam and so forth so that's pretty dramatic well let's just walk through that theory though so there's big tariff so someone's going to say oh I'm going to build a plant to make Metal Products Now in America and how long will that take and then how long until he's out of office because he is going to be out they're going to go spend millions of dollars building a new Factory that the day after he's out of office they get rid of the tariffs and I mean that's just happen no it's not going to happen he could get rid of the tariffs before he leaves office yeah right that could be a month from now yeah a couple of things I wanted to make sure we're clear on Liz one is where do you stand right now in terms of inventory do you have inventory do have shipments on the way what's that look like so we are at about a third inventory right now in our warehouse and we have five containers coming over in the next two months three from Vietnam and two from China they're all going to be taxed or tariffed at this much higher rate assuming they go into effect uh assuming they go into effect effect but the incremental tariff meaning the unexpected tariff that was not planned for is $103,000 across all five across all five containers across all five so 20,000 per container yeah give or take yeah okay and and let with those uh shipments are are those containers already uh bought and priced or is that inventory that you can sell at a higher price so it's a mix um we've sold about 25% maybe 30 across the five um so there's some clients that are waiting on product they've already paid you know the others we can price at the higher amount the sort of intermediary time is the thing we're a little bit worried right now because until we communicate that price increase and we're pricing at the lower rate we're pricing at the lower rate knowing that we're probably going to be at a loss on those so you know I asked Frank yesterday I was we're kind of arguing about whether it's March 1st March 15th and later I was like this is actually sort of a simple exercise we can lay out how much we're going to sell in the next two weeks versus four weeks at which tariff amount and see how much we're going to lose because as I've shared on here before he's very resistant to price increases understandable but that's also because he's in sales he does not like the idea of people being disappointed by a price you know he's the COO but he also is incredible at sales he's doing a lot of that and I really need to keep it numbers based and say we're looking at this huge amount six figures of unplanned tariff you're basically saying that we're going to go another two to four weeks selling at a price that we know is too low and that's difficult but like I said this March 12th date is coming along and we hopefully will know if he's bluffing then you know so I've been watching what contract are doing with this so this is a big problem for construction because you know especially in commercial they'll put a bid in and say hey I will build this building for x amount and then you know the building gets built like two or two years later that can be a real problem if you know tariffs could put in place and costs go up so they have in their contracts escalation Clauses that are related to things out of their control I'm curious have you thought about anything like that you know where you say hey this is the price but if tariffs are put in place this is the price I think that we will do that the closest that we will come though is saying we're communicating it today and the price is going to increase by 15% or give them the dollar amount on X day so whether we give them one week or two weeks it probably would be good to put something in our invoices besides just you know this price is you know effective until X state but you know the point on contractors and raw materials you know I do hear you Sean because when you put bids on something and you get the job if you don't know that your materials costs are going to come up so much that's difficult you know that's a hard situation the factory in Canada that I met with in October and we went and visited we really liked them we were ready to place an order and a couple weeks after we visited there they got hit in Canada with a 25% tariff on imports from China the Canadian government and as if that wasn't bad enough then Trump imposed I know it's on hold right now but the 25% on Canada so that guy you know another small business owner family-owned business suddenly he's getting cared from both sides he's a metal fabricator he's only dealing with metal that's it yeah what is he going to do I mean he's got a couple of really big contracts that I know about you know because he's shared in the US and he's in a really bad spot wait how much is tariff going up incrementally from what it was you said I mean as of two weeks ago I was at 7 and a half per. okay actually I should maybe three weeks I'm getting confused with time but on I'll January 20th on January 20th I was at 7 and a half% and now I'm at 42 and a half wow so there's a 35% okay it's a big deal Jay I mean it's not like I got it but this is equivalent to someone telling me this is a real his wife was really really really sick and I go I can't believe she doesn't like going to the doctor tough she should have gone to the doctor right here's the case of no one likes raising prices Frank needs to understand there isn't an entrepreneur around probably that we don't like raising prices you go to the doctor when you have to go to the doctor and you raise prices when you have to raise prices it's not any more complicated than they I think that's a false equivalen CJ why because a medical issue is not the same as buying you know a high- price trash enclosure that's going to make your house look better it's totally different no no no no but my point is if you're going to sell it and not make any money the business is going to get sick and if you have to raise your prices to make money that's what you need to do you need to do what you need to do is the message if you need to raise prices you need to raise prices whether you like it or not no one likes I don't like to raise prices it it makes me sick to my stomach but I read it every day in the paper today the guy was talking about eggs went up he doesn't want to raise his prices on his omelet he doesn't want to do that to his customers really 50 cents more is going to put his customers in the in the PO house this is a common problem in entrepreneurship people don't want to raise their prices and I'm suggesting it's not really a choice it's either raise your prices and stay in business or don't raise your prices and lose money how long's that going to last Liz doesn't know what her elasticity is at this point it doesn't really matter is my point think about it I'm not a commodity like eggs okay but I'm just suggesting even though you don't the other option is losing money so the question is do I lose money for sure or do I raise my prices and hope that the price elasticity is such that I won't lose a lot of business but not raising your prices when you have to is not a great choice J it's not binary right it's it's not well she doesn't know if she raises her prices by 5% it could be that the market accepts that she raises her price by 20% the market may not accept that you know she doesn't know that's the I got it but not raising the price she does know she's L money isue Jay I never said I wasn't going to raise prices it's been a matter of by what by what amount I've been totally comfortable I've known for a while that these tariffs are coming and I'm going to raise prices but because it's been a roller coaster with what the number was I didn't want to reset prices because there's a pretty big difference between 17 and a half% which is what I was actually like flying high I thought my Tariff was lower than Canada and Mexico a few weeks ago totally agree and understand all that I'm just commenting to Frank's comment of he doesn't want to raise prices that's my whole point that we don't have to want to sometimes you just have to do what you have to do Jay I mean Frank's not dumb you know it's there's a tension there in terms of how much they can raise but I mean I think lizz's main point here that I'm hearing is it's not so much that she has to raise her prices she knows that's going to happen she's known that's going to happen it is the uncertainty and volatility and that she's being put through by our government I mean that is the issue we need to focus on here right which is the untenable business environment that Liz has to suffer through that her Canadian counterpart is suffering through that other businesses are suffering through that is the point we need to talk about here but first Jay you're obviously very confident that Liz can uh impose these I'm not confident I'm just saying that you have to do what you have to do and I I think it will work never said she's not going to raise prices I never said that I was just responding to Frank saying he doesn't want and Frank also is not saying that he's not going to it's just that will go back and forth on whether it should be 10 10 or 15 I'm trying to give some moral support to having you do what you got to do cuz certainly I'm the I'm in the same boat you are trust me well actually no no you're not Jay here's the thing here's the thing that you don't understand that I understand Liz and I sell a very high dollar product at at a low low volume you sell a premium product to don't get me wrong but a $200 frame is very different than a in my case $100,000 year-long engagement or in lizz's case a you know maybe multiple $33,000 trash and closes these are different sales Cycles there's different psychology to them and one of the challenges she has right she's got 40% of her business in Municipal right what is happening in Municipal right now right federal dollars are being withheld held Federal programs are being tossed up in the air which flows down into the M Municipal place so like her issues are way more complex than a retailer raising the prices of eggs I'm simply stating math so you're wrong telling me that I don't understand this this is simple bth if you're selling something where you're losing money on it it's not a good thing neither of us are arguing to sell at a loss that's all yeah no we're not we're not and and in terms of the sensitivity given the vol ility with you know government and with Federal programs we did lose a municipal client two days ago which I didn't mention I'm not going to say which city it is I don't know if that's definitely the reason but we got a very sort of system generated email saying that the contract that we had signed had been cancelled and it wasn't a crazy dollar amount but it was something where we were getting in the door on something that could have been bigger and I'm pretty sure that that does have something to do with volatility with anything government related anything Municipal related and I'm hoping it's an outlier but it wasn't a good sign do you have a way of measuring the strength of demand I mean do you have a metric that you follow some indications so do you know how strong the demand you're facing this year is as you try to increase prices so the good news is that we have really strong demand including in some new categories um we do have a new product um that's for municipal P clients that is becoming very popular it's been popular in other cities for about a half a year now but New York is starting to look at a little bit more um there's other things that are happening with regulations regarding trash particularly in New York City with business Improvement districts where you know if things go through as they're supposed to business Improvement districts are basically going to get fined if they allow any Trash to be on the sidewalk as of August so they are being forced to containerize but to be forced to containerize without having the budget for it so that thing may go away but I'm feeling like demand is still pretty strong and then the other thing is we are going into some new markets so we just launched a higher ed campaign on Monday and even today's Thursday we're already getting really strong responses to that it's been a category that we have some clients in the past and we've got Harvard we've got four universities here in New York and we have an active Market it to them so what happens if we start marketing to you know universities Nationwide that could help recover the whole thing because it's a new it's a new customer segment that we haven't it's not a new but it's one where we haven't like in Earnest pursued which is why this is complicated because the point is yes you could have a smaller margin but if you could do better marketing and bring in more business it can make up for it so I don't disagree with anything anybody's saying here it's just it's complicated and all my entire point is most Entre entrepreneurs including myself hate to raise prices and that's an unfortunate just because we hate to do it doesn't mean we don't have to do it sometimes so okay I have one last thing to say on this Jay please don't ever compare my product to an egg it's it's um it's not comparing it to an egg it's comparing it to an entrepreneur who owns a business whose costs have gone up and he says I don't want to raise my prices I don't want to do that to my customers that was the point but I don't think people are G to stop eating eggs they're just gonna pay more for it right maybe they eat less eggs you just made my point exactly so he needs to do what he needs to do and that's my only point just because we don't like to do it doesn't mean that we don't have to do what we don't have to do and and my biggest mistaken business without any doubt in the last 46 years is I've been hesitant to raise prices when my costs went up and it's cost me dearly so it's a sore subject to myself about myself a scenario we've talked about is that we raise it 15% and we don't have any reduction in business like that could happen sure but I need to be prepared for it not to happen absolutely so Jay you could face this situation one of the tariffs that Trump is talking about is these reciprocal tariffs where a different rate would go into effect on every country based on his assessment of how that country is tariffing and taxing products coming from this country into that country so this could affect countries where you buy some of your stuff are you preparing for that are you there's nothing to prepare it's like saying should I prepare myself if I get run over by a car tomorrow I mean I I I'm watching when I cross the street what can I do about it there's nothing to prepare if it happens I'll deal with it when it happens but this is another case of I could give you 20 things that I could stay up at night worrying about and I've chosen not to because I need to sleep so like this is the world of Entrepreneurship yeah but this is more real and more immediate right now and I just point out you you do have a product that has a reputation picture framing for being expensive already so you have dealt with this I deal with it every day absolutely and have you thought through how much elasticity there is there and what would happen same story I just said if I have to raise my prices I can't worry about I guess I got to charge what I got to charge to stay in business so do I think people will pay the point is you you have two choices if you have a choice of if I don't raise my price I'm going to lose money or I raise price and I hope people will pay it I'm going to go with the raise prices and hope people will pay it there's just there's no other option so am I prepared I'm watching it I I bring a lot of molding in from Italy and Spain I mean will that screw up my business sure back to Sean's point this is screwy this isn't I love how the government always says oh small business is the backbone of America blah blah blah yeah doesn't act like it um well this isn't just a re routine government situation this is this is a different government yeah I'm just it's it's not a great it's a bad sit these are deliberate choices this is a very specific set of decisions and I I mean I I'm going to sound like an old saw here but I think this is all about power and control and it it there is not one bit Iota care for small businesses and how it's impacting them not one bit and then that's what's really really disappointing how about yesterday's announcment that government should stop paying vendors just because they can how about that one no well just to be clear he didn't say stop paying he said he that the government should do what he always did as a developer which is sign a contract and then when it's time to pay it cut it and insist on paying less my lawyer told me 20 years ago he said Jay here's how it works in Chicago when you do a contract people follow the contract in New York you make a contract and then you count on the fact that you're going to be renegotiating the contract later on that's like unbelievable yeah Liz you're in New York any truth to that I mean I don't know that I haven't experienced it but I do have a story about a month ago we actually got a call from Trump Tower um yeah for the restaurant in Columbus Circle I think it was in the first floor Frank had a you know a long phone consult sent him the information and the guy asked him to come for a a physical on-site estimate visit and he said no he's like I'm not going to spend my time on that that I've given him all the information he needs and if they're still interested seriously interested but everybody I told about this they're like make him pay 100% upfront we actually do that anyways so if they try to renegotiate anything they're not going to be able to do it because we're already already going to have their money I don't think we're going to sell to them in fact our daughter actually thinks it might be immoral for us to even do business with them good job on raising that child oh man I have one more point though and maybe you guys especially Jay with your um you know encouragement over the years for me to buy a warehouse you know some sort of a big Capital expense in the scenario that I did say manufacture in the US I want to do that help me do that can you guys give me a loan so I can set up manufacturing here in New York no bank's going to give me that loan the SBA which is o being dismantled they're not going to give me that loan in fact I think the only way I could do it here and this may sound really scandalous is if the Chinese funded me to set up a manufacturing facility in the US because that's part of what they're doing I'm not pursuing that but let's just say I got serious I'm an American I want to manufacturer in the US a and I need Capital to do it I'm not going to get it from anybody because no one is going to be stupid enough to think that we're ever going to have a Renaissance of manufacturing in this country I just don't see it happening or not not in the time the timeline where it would matter you know I I I do see that as a larger Trend that there is more and more manufacturing and more and more reshoring but the idea that you could do that within the timeline of your business is pretty unrealistic I think or or probably not in lower price stuff I'm sure there are some cases where you can start Manufacturing in in the United States but there's plenty of Cheaper products that we just we're not going to go backwards and start manufacturing cheap products we're not going to open no one's goingon to open up a shoe factory in the United States well you know there is manufacturing here you go to you know any any any City in any state you'll find a machine shop and many of these machine shops have thousands probably millions of pounds of aluminum and steel flowing through them nearly all of that material is coming from other countries and those machine shops serve the defense industry they serve the Aerospace industry they serve consumer goods you know the the tendrils that go throughout our economy and terms of raw materials the these kinds of things will will dramatically affect costs and you'll just see higher and higher costs because there's no way for that machine shop to change that reality there's no way for them to get alumin them somewhere cheaper it just doesn't exist folks just don't understand these these consequences so we are going to be accused because I think we already have been of going oh we're going to left wing on this and I just don't think this has anything to do with leftwing rightwing it's business realities of those of us that are in business don't believe that the tariffs are going to do anything positive for the small business owner and the uncertainty of it as Liz is living through as I'm almost living through is very bad for business and this isn't going this is this is this is very difficult for small businesses we're the voice of small business not left wi not rightwing the voice of small business this is the reality of the business Market that we're dealing with now I mean I get it too I don't do manufacturing but I have a potential customer uh that's up in Maine he's a manufacturer he makes uh cardboard cartons he gets almost all of his material from Canada and you know the the thing is is he can't the the the production in America is just not large enough to fulfill the need uh of folks like him and so he was talking about working with us and what does he do he calls us up he's like hey let's pick this conversation up in Q3 you know he's kicking the can down the road because he doesn't know what's going to happen and that discussion I am convinced is happening everywhere I just hit it myself I was that guy yesterday the radio station that I was on for years wants the to you know do a good promotion with me and I was very excited to do it and I had to tell him I need a couple months to business has been soft and the fact is I got to pay the advertising bill as much as you might think oh gee if business is soft now it's time to advertise well the cash flow from that is not immediate so I just had that conversation I had to kick the can down the road on that so this is trickling through to your point this is trickling all the way from us to all of our suppliers and the part that's frustrating is it's largely self made I mean this isn't a normal recession it's like we're manufacturing a recession we're man it's crazy well and also you know there's going to be some incredible inequity with it too because you know I pointed out in my LinkedIn article I manufacture at a plant outside of Shanghai well so does Elon Musk tesas half of them are manufactured outside of Shanghai and they probably leave the port of Shanghai just like my little containers do is he going to be tariffed at 42 and a half% what do you think what do you guys think do you think he's paying 42 and a half percent when it comes over here no way no way I mean that's to my larger point that I keep making on LinkedIn which is that this is a fty play this is about paying fty to the United States and to Trump specifically and those who he has favor with will get exceptions to the Tariff and knows that he does not favor will pay the Tariff this is entirely about that power and leverage it's not about manufacturing and there's a lot of us that are going to pay a lot of legal bills to try to get an exception or get reclassified that are going to fail at it I mean I tried the last time um maybe I was dumb I I filed on my own I didn't use a lawyer for it but no it's incredibly it's super hard I had a client who hired a lawyer and went through battle after battle after battle after battle and then lost and guess what they're no longer a client right so another example so first we got to deal with the uncertainty of it which is very difficult then we got to deal with okay do I build it into the price and if I don't build it into the price how am I going to make up for it am I going to start looking for new markets and make it up in volume maybe and it's this is very tricky and it requires lots of 21 hats to figure it out it's accounting it's sales it's costs it's real estate they're all interconnected as you just said about buying a building all these things are interconnected as to how you navigate all this stuff and um it's just not getting easier and the part that's particularly frustrating is our government's doing this to us yeah all right I want to move on to something else in the time we have left as you guys are all aware a couple weeks ago uh we had a conversation in which Paul DS talked about how his businesses off some of the related to issues we're talking about here I suspect but he had to lay off a couple of people and he talked about how he decided who he would lay off and he acknowledged that part of that uh decision for him was taking into uh consideration the personal circumstances of his employees including things like who would just put a down payment on a house and who just had a kid and it was part of his a larger point he made which is that this is what he kind of loves about being a small business owner there are a lot of challenges but he really likes his employees he enjoys getting to know them and kind of once you get to know those things it's impossible not to know them but it opens an interesting discussion which we've had a little bit on the uh 21 hats slack Channel I'm curious what you guys think in at a time like that is it a good idea to be thinking about the personal circumstances of employees or is it a better idea to just focus on what is best for the business for the organization I don't think it's a good or bad I think it's a personal decision that business owners have to put up with a whole lot of risk and trouble and and everything else and I believe every business owner has a right to do whatever they want to do without discriminating and certainly there's a limit to that you know but if you've got someone who's a single mother with a special need kid and you've got another employee in a similar job who um is a zillionaire because they got a big inheritance does that person have the right to make I I believe that as business owners whether it's right or wrong from the employee standpoint has a right to do what they like and the employee has a right to be pissed about it and quit I mean that's two things can be right well Jay I think the owner H we I think we probably all agree that the owner has a right to do it is it is it a good idea and does it potentially create more problems than it solves well it certainly doesn't cause a problem for the person they didn't lay off could it cause problems sure absolutely no absolutely it cause problems but you I mean it it does send a message if people figure it out and where do you draw the line would you also pay someone more because they have a family support to support than you would someone who is single what about a trickier one that you've got an employee been with you for 30 years helped you start the business has been there through good and bad and they're kind of losing it a little bit they're not as productive as a younger person that's there do you lay them offers or do you feel like hey I owe them they they help me build this but this is very tricky stuff and I don't believe there's any quote unquote right answer to it Sean or Liz what do you guys think I think Liz should go first because especially based on like you know you came you came out of the corporate world right and there's a much larger data set there yeah you know and then you've owned a small business yeah so I'm curious what you say I mean when it's in a large Enterprise I think that it's probably much more objective in a way um you have to do it that way you can't have sort of specific criteria like in my small business I've really only had to lay off for cause like performance or stealing but um the only other time I did major layoffs was during the pandemic when I laid everybody off until we got the PPP so I don't know if I'm the best to talk about it but I I think though if I was faced with the situation I probably would take family situation into consideration especially if I cared about them and like right now I care about all my employees you know I will protect them and actually you know this is a separate topic but I have six Venezuelan employees who aren't feeling very safe in this country right now and um you know they all have papers obviously I I've employed them but we've got ice all over the place in New York now and I've told them you all need to have your papers with you at all times if anything happens let me know um and you know even like getting a driver's license you I have installers that drive all over New York in in Vans one of them can't get his driver's license which means he's Limited in performing his job so I probably fall in the S side of sort of caring more about my employees but also because I have a smaller business I'm not like Jay I don't have a 100 employees and I'm not like Paul I think he probably has you know 4050 right now I have eight I think Paul's around 25 uh right okay no listen and I the fact of the matter is you can try to protect the employees you can't completely and and I would never personally say oh I would never take anything in consideration except for job performance there's people that are with you through thick and thin that you know will do anything for the company and there's other people that you know are just clocking it and they're fine they're they're valuable employees but I we have every right to say you know what this guy's always there for me no matter what happens and the and same thing on this employee side they have every right to be pissed about it if if they feel like they're not being quote quote unquote treated fairly whatever okay they're not wrong but it's not that black and white in a small business Sean did you have something you wanted to say yeah um I've thought a lot about this question and I really enjoyed reading on the slack uh Channel some other perspectives on this especially you know from folks who felt like they were on the short end of the stick uh in these kinds of situations since you said that Sean can I read you one of those one owner wrote uh let's call it what it is we leaders get blinded by our love for individuals and the mistaken notion that we are responsible for their well-being when this happens our decision-making moves away from doing what's best for the organization and towards playing God determining quote unquote fairness and other esoteric outcomes obviously a very different perspective yeah and she also talked about absolute inequity right where early in her career that's someone else by the way you're oh that was somebody else but yeah some you know favoring certain employees because they had families over employees who didn't have families and I was reminded of a a friend of mine years ago who you know she had chosen not to have kids and she worked in an industry that was predominantly female it was in um speech language pathology and just the frustration she had where you know kind of a a revolving door of co-workers who would go on maternity leave and then she would have to do the job of two people while they were out and she got no more additional compensation for that you know so essentially it was this two-tiered hierarchy uh within the company and it is tough because we do have even policies that favor certain groups over other groups you know so that idea of it being an entirely objective what's best for the business is is actually not true you know we we say hey it's important to have maternity leave or paternity leave or you know uh more recently we've started to recognize that like care for family members who are dying or disabled is important and so we want to allow that benefit so it's it's difficult because we have moved the world of kind of social well-being into the business world and that gets messy the word Fair shouldn't be entered there's there is no fear life isn't fear and the guy that said whoever that was is just you you read about who said the play God you know what we're human beings if there's someone that works for you for many years that's been extremely supportive to the company I don't think that's playing God that's taking care of people that have taken care of you so I don't completely reject what he's saying but I half reject what he's saying there it's not black and white and it's I think one of the points he's making Jay and I'd be curious to get your reaction to this is you can't have perfect vision into your employees lives you can't know for sure who's dealing with what you may know a lot but you could also get it wrong and that's that's a risk too how about the most this sounds like a good thing but the 401K matching you know what talk about if you want to talk about fair so the person who makes the most money who's got the spouse that makes a ton of money maxes out their 401k and gets all of the benefits of the match and the guy or the woman at the bottom who's making $46,000 a year that's just trying to put food on their table has no savings whatsoever that person gets no match the 401K match is the most inherently unfair thing that's ever been come up with but people do it that's a good point the people that need the money the least are getting the benefit and the people that need the money the most are getting nothing and I have a company that I've got the math in front of me I half of my people aren't in the 401K at all and it bothers me but you know I guess you know one thing I could offer maybe that's helpful is when we were facing the pandemic and we're like oh boy we're in trouble here and you know it's a hard decision like are we cutting individuals are we cutting everybody across the board you know we had built I'd say a pretty strong relationship within our culture to where we went to the team and we said hey does anybody here want to sacrifice and we actually had quite a few people raise their hands you know say hey you know what I could work three4 time I could work half time you know I could take the next month off you know so so that's something that we were able to do I think because we're a small business because we had really fostered a culture of care for each other I think it gets harder as you get bigger but that idea of you know it not being by Fiat not one individual's decision um that worked for us uh you know I don't know that works for everybody it's very tricky it's not black and white and like I said two people can be right they can both the employee can be right that they're not being treated properly and the employer could be right that you know they have a right to do what they want to some degree and it's it's very tricky it's it's one of these ethical dilemmas that for which you know I think some people feel very ardently oh you have to do you have to be objective you know but like the idea that there is objectivity is you know kind of challenged to begin with you know as we've Illustrated with a few different examples I think it's important to think about the various possibilities and ramifications of any course of action here so hopefully we've helped some people think it through even if we have come up with a definitive answer at the end of the day it's about what you can live with yeah my thanks to Sean busy Jay goz and Liz picarazzi a lively discussion appreciate all of you guys sharing thank [Music] you 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 at21 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]