The Case for Not Pivoting

[Music] hello everyone welcome to what used to be the 21 hats podcast and is now the business Advantage TV podcast I'm your host Lauren Feldman in this week's conversation Paul DS William Vander bluman and Laura Xander talk about how the crisis has affected their own compensation Paul also explains why he's not planning to Pivot his business even as his sales collapse normally he says his most reliable customers are other business owners when they call to ask about a customer boardroom table Paul and his sales staff know they are likely to buy right now though in the midst of a pandemic that has changed the way people look at commercial space they aren't even calling a lot of people have suggested that Paul who used to make dining tables pivot to manufacturing desks for home offices so far at least he's resisted the idea to walk away from what we know he says and do something that we don't know and that others know very well I just feel like it would be a huge mistake even in Good Times owning and running a business can be a lonely Pursuit our hope is that these weekly conversations will if nothing else let owners know they are not alone in facing these challenges this week's lineup features Paul DS who is founder and CEO of Paul DS cabinet makers which is based outside of Philadelphia and makes custom conference tables William Vander blumen who is CEO of Vander bluman Search Group a recruiting firm based in Houston that works with churches and other faith-based organizations and Laura Xander who is CEO of Jimmy Bean w a digital version of a neighborhood yarn shop that is based in Reno Nevada and also has a wholesale supplier meline TSH in Fort Worth Texas the episode is titled the case for not [Music] pivoting Laura we haven't spoken with you in a few weeks what's going on well right now we are in the midst of trying to purchase a building in Fort Worth for the mine TSH business that's the supplier you bought last year um and the reason you've been spending uh a lot of time in Texas yep I'm there now kind of every other week so I've been home in Reno this week and then I go back to Texas on Monday go back to Fort Worth uh so yeah so we're almost through the due diligence period so we've been doing a bunch of inspections and all that kind of stuff um doing one of these SBA Loans that Jay had told me about so it's a 504 loan um and just found out last night that our bank that we've been with forever um US Bank has denied uh our loan for this so now I got to go find a smaller Community Bank that focuses on small business why did they say they denied it they denied it because of covid um basically in a nutshell and that because we're in the retail and online retail industry um they have flagged all retail as you know just super risky your business is is up though at least Jimmy beans wool your online sales are up right yeah were they just looking at the supplier which I assume their sales are probably lower than expected because of covid is that right um well no now actually they're going up it's just it's complicated so over the last three years we've you know Acquired and that's a really fancy term but we've brought on three other companies um and so from a cash flow standpoint we've invested all of we've invested a lot of money in the future and so when they're looking at our books for the last three years they don't look super they look good and they're they look fine but given the new covid restrictions or the new covid rules and calculations that they're using we're just on the cusp of what they consider to be a safe investment um so and that's because they applied new rules based on if you're in one of these industries that they're um deeming as risky so um yeah so yes Jimmy beans is up um the mine Tash business I mean we've grown the customer base 35% since January wow and our sales are starting I mean they took a dip for sure because it was a wholesale business but they're really starting to pick up we're now booked out through the end of October you know we have enough work to last us through the end of October which is actually more than I want we want to just have um you know eight weeks worth of work is is that the reason you're buying a building to increase your capacity no we're buying a building because the a couple of reasons one the interest rates are really low so you know the so the monthly payment on a building would be about half of what we're paying and rent so that's a big one so there's a huge cost savings there and then secondly um the nature of the work with the kitchens you know and dying yarn it gets really hot uh and we're in Texas where it gets really hot and so we want to be able to put air conditioning in we want to be able to put a new venting system in and we want to do a bunch of things to make the conditions significantly better for the people that work there um and you know the investment for that you're looking at six figures at least so if we're going to do that it's too risky for us to do that to somebody else's building sure and we just you know we had looked at buildings in the Reno area but buildings in the Fort Worth area are about a third the price of what they are in Reno seriously a third yeah wow seriously a third why is that because it's Texas William you got any comment on that no rues yeah I mean because we're the best country on Earth Texas yes yeah it's um Reno has the cost of living has increased so much you know we're only six miles from the California border and we're right down the road from San Francisco we're right down the road from Sacramento and so this Mass Exodus that's happening and I'm sure William knows about this too but you know I'm I'm overgeneralizing but it's like everybody in California is leaving and either going to Nevada or Texas um and so a lot of companies are coming to Nevada they're coming to Reno because the weather is freaking amazing like it's I think it's the best weather I've lived in what 20 different places and it's the best weather ever um and it's just close you know it's still really close to the Bay Area so um the cost of living and the building prices I mean you know we were looking at buildings and a building let's say a 30,000 foot building or a 25,000 foot building five years ago it sold and we found multiple instances of this five years ago they sold for about 1.2 million and now people are asking four million so it's just you know the growth here has had some good consequences and some kind of tough consequences to swallow and that's with the cost of real estate how confident are you that you're going to be able to get the loan uh I'm pretty confident worst case scenario will US Bank will give us a loan just not for as much as we want we would like to be able to put 10% down um if worst case scenario we'll have to put 20 or 30% down and then they'll do the loan uh but we would prefer to just put 10% down and save that money for inventory and other investment purposes are they asking for that for the larger down payment even for an SBA loan or was it not an SBA real estate loan yes they are the SBA is not asking for a larger down payment they're good with the 10% but US bank now has a cap so if you're going to borrow over X dollars then you have to you know it's kind of like a jumbo loan with a house if you do a jumbo loan then you know there are all these other kind of rules but if it's an SBA loan doesn't the SBA guarantee it for the bank they guarantee 40% I see yeah so there's still some risk for the bank my understanding and I'm not the expert um obviously we need Jay who's the expert at everything um so what you know what we're gonna find out if Jay listens to this podcast when he's not on it yes we are uh but my understanding is the way that it works is the day that we close the bank funds the entire purchase so they're on the hook for the whole thing and then if you have to do improvements and in our case we do we need to do a few things things while we do those let's say that takes 30 days the the bank itself is on the hook for the entire loan and then once the improvements are done the SBA portion comes in and they kick in 40% I see William what's going on with you you know I think we've uh you know our our work is primarily with churches and with schools and churches are not meeting and schools who knows if they're going to reopen and everybody got very strong opinions about all of those things so it's I think we've settled into a new place Lauren of uh what's the way you're supposed to say this coexisting with the virus and figuring out what that means for our company um if people have listened to the show during this pandemic you know that very early on like second week of March we cut 40% of our operating expenses anticipating that we would have a significant drop off for the year uh maybe 25% down for the year financially um it looks like we're going to be down this year but not by that much like we we should end up a little better than that um and uh you know the the the data that we're receiving is showing us that our clients are in better Financial shape than anyone ever thought thought they would be uh for a number of reasons so so we we ended up I think I've mentioned this before but we ended up being kind of a hub of resources for PPP how to apply to get your PPP loan Etc and of the 990,000 faith-based organizations that receive PPP funds we have had Direct real interaction with over 20% of them and we've sent a survey out to say okay tell us how you're doing and it's better than thought uh most of them have not reduced their headcount most of them are doing fairly well financially I think we realized this pandemic for for our particular business with churches and schools is is going to impact us probably at least until this time next summer and we better be buckled down and and and ready to live in this reality for a while but on the other hand that reality is not as Bleak as it looked in March and in April does that does that make sense that makes sense and we're launching a new company a week from Monday so that's kind of fun what's the new company same sector but um so in our world this is kind of inside language but there executive search firms like the corn fairies of the world that do sea work and maybe Executive Vice President searches that's sort of what we do in the church world if if the church has a SE Suite you know just the senior leadership what what we've not ever been able to do is function like a staffing company for for uh people that need a a person that makes $40 to $60,000 a year that usually has a shorter tenure um and so we've spent a long time researching how to do that and we're opening that up why are you doing this as a separate company there are a lot of different reasons I mean I always like to seal things off from a liability standpoint I don't want people it's kind the the the bigger reason though Lauren is it's kind of like right now I'm selling uh I've got a really good Lexus dealership and I'm getting ready to open a Toyota dealership and they're both great products but they're very different and they have different service departments and they have different like it's just a whole different experience so it'll be uh it's called Christian teams uh and odd enough christiant teams.com was wide open like it was $10 or something what we don't want it'll be Christian teams powered by Vander Bloomin and if you people look at the website they'll see kind of the logo for one looks like an inverse of the logo of the other so it'll look the same but we want people to be real clear you're paying a lot less you're also receiving a very different service experience got it Paul um last time we spoke you were concerned that at a certain point because of the pandemic your your sales were going to really fall off you weren't sure when that was going to happen how's it looking it's here this is the day I'm sorry to hear that what do you mean by this is the day well we track first just the number of people who call us and uh and then look at those calls and divide them into a bunch of different buckets because we know who of those callers are like to be buyers and so we've seen a drop of 20 to 30% in overall search uh or inquiries we call them overall inquiry volume since about the middle of March and usually we have some drop in the spring but not that bad but the the critical thing to me is that we've really seen a a particular type of buyer who we've done a lot of business with just disappear and that would be people just like like me and Laura and and and and William owners of companies who are company's doing well they're moving into a new facility and they want a flagship uh boardroom and those people have just gone you know they've gone to ground and even though uh there's a lot of people who are doing fine in the middle of all this there's I think everybody is kind of worried about whether it gets better or worse and so we're not seeing that level of yeah I'm going to splurge on on this uh this thing that I don't need to be fancy but I'd rather have it fancy so to get back to lexus's and Toyotas they're they're thinking about Toyotas or thinking about nothing as opposed to Lexus and so that's having a big effect on us we are also sort of getting to the point where with the pipeline so dry uh the parts of my company that deal with the incoming inquiries and then the level of sales uh have been built to handle somewhere between four and 5 million a year in business and we are most likely to be looking at 2 million next year so the pipeline is drying up from the front and uh I have more capacity than I need in those parts of the operation now we're still running the shop at full speed but eventually that's going to have to slow down too and I've been thinking all along end of the summer is when this is going to hit us and here we are nothing's changed except now I have to deal with it so that's that's how I'm doing have you decided what you're going to do well there's two ways to think about it it it really depends on on what you think the problem is and what the solution is and uh um the the problem clearly is is co like there's no there's nothing there's nothing else we were doing fine before this uh but there's always something different you could do right so that whatever marketing and sales operation I had on February 1st could have been tuned up in various ways uh it happened to have been working fine and producing the the quantities we wanted but let's just say it was improvable and so that one of the things I could do would be say you know what it's just Co that's it and when the world feels better the buyers will come back and that strategy would be just hunker down and make the cuts to cost as the demand disappears for the different parts of the company and then just shrink uh I don't think we're going to go to zero um but I think we're going to be a lot smaller next year and so I would just scale back I'd cut people uh I would cut hours I would cut cost and go back to whatever we were when we were a $2 million a year company and then the other thought would be okay that's going to happen but if you counter Punch If you go on offense in in places that you could have gone on offense uh then maybe you can turn that 2 million into 2.5 million and there's a number of different things that I would do if I believe that was the right strategy and I'm really bouncing back and forth over which one is is better because the argument against going on the offensive right now is that you know you can do whatever you want it's just the wrong moment and so if I go and hire some you know do some more marketing do some more AdWords buys uh keep my staff all my sales staff on in the hope that we get a Revival uh sooner rather than later then I'm burning my my my reserves faster than I would ordinarily and it may be that all of those efforts it doesn't really matter what I would do um then it just brings closer the day when we run out of resources we just don't have the the same set of resources to survive you know like maybe we'd only last six months from now as opposed to nine months from now and so those are the things that I'm I'm trying to figure out you know Paul we went we're kind of going through the same thing with this business that we bought in November um were doing four times more than kind of what we're doing right now a few years ago and when now granted I'm in a different situation because I have another business that is doing fine so I can subsidize that so I've kind of got my own PPP if you will but um I I just decided we're just going to scale down and we're and we're around the same thing we're like we'll just do two million and that's it and let's see if we can make it healthy at this smaller volume and then if the growth comes the growth comes what I was going to ask you was one how does this relate to cycling um and there's a reason I'm going to ask that but um two like what do you want your life to look like you know how much energy do you have because where I'm struggling and where I ended up was I don't know if I'm ready to like fight to try to grow and to try to do this marketing and blah blah blah when I don't know what I'm fighting against you know I mean it's changing every single day so for us to try out and like actively really try and go get new business when I don't know I'm not sure I fully comprehend what our customers are going through um just it just feels like a moving Target so the lazy part of me is like you know what if we can if we can just get by and just hunker down and just make it and the reason I brought out the cycling because you said that you ride is here we go like you're you know you're in a really long race is it worth burning some energy to make it up a hill on the off chance that you might pass one guy that you think and you know you'll never see him again or are you better off just kind of plotting along and just finishing the race as opposed to burning out well uh that's a great analogy because I think about that a lot uh just in terms of My overall approach to my business um you know for those who are listening who aren't cyclists uh this may not mean much but I think everybody can picture what riding 100 miles in a day would look like it's hard and the way I've done it and got through it is you never you never exert yourself at any point like if you're breathing hard you're going too fast and then you get to the finish line and so I've always had that had that basic attitude towards my business because uh it's it's right on the edge of being a lifestyle business it's sort of a been a crappy lifestyle for a long time but it's pretty good right now and uh you know broke and scared that's a lifestyle you're being too modest Paul I I know what you're referring to but you we should point out you you have more than 20 employees and a a manufacturing company that has been in business for how many years okay but Lauren having years 20 employees yeah is is not always is something to brag about or something to be I hear you yeah well 20 you know in the in the circles I've been in lately too 20 is pretty tiny and uh you know we're at 4 million a year and that's like that's just opening the door to real Prosperity I would say in a small business world and maybe that's just because of the people I run with now and I'm well aware that there's most the vast majority of businesses if just do headcount are much smaller than that but it's surprising how getting to that 4 million and that 20 we have 23 employees is not quite you know it's not quite the Nirvana because I'm still doing a lot of stuff myself and if I decide to take six months off the place would close and uh you know it's not it's not really at that point of being self-sustaining although I could see it and I was planning on being there in a year or two but Co really screwed us over so and all I meant I didn't mean that like you shouldn't be proud of the fact that you've built it I just mean that sometimes having more employees is more work and it's more stressful um and so you know having 20 doesn't necessarily mean it's a great lifestyle you know there were times where I wish it was still just me and Doug right no I hear you on that I think that actually if you've got the right 20 people it's not a bad place to be because I'm able to uh come in at work and and spend a pretty good amount of my time doing stuff like this not necessarily gluing pieces of wood together I have enough time and head space to to do other things besides work but it's at the it's at the expense of real security as I said like if I got sick or I was gone for six months this place wouldn't survive and I I think it would need to be somewhere in the six to 10 million range where you can afford that whole layer of management and you've you've you know youve built HR and you've done done all that stuff uh 40 some employee seems to be kind of the where that starts to happen and I'm just not there but we're we're digressing from what am I going to do next I think that um I'm leaning towards just hunkering down and uh because my suspicion is that there's the this thing is going to kill a lot of my competitors and particularly the ones that are a lot bigger uh you know like some of our main competitors areund million plus companies and I don't know where they're going to find the business to support that kind of overhead whereas if I just hang tight I think it's going to be two years for me honestly are those competitors you're referring to do do they um do custom tables like yours and is that what accounts for all that Revenue they do yeah yeah I mean there's people who are just bigger and more established than me so there there there has been a big Market out there that certainly indicates yeah there is and uh and I think that everybody who's concerned about uh what the future of the office looks like I mean those people have got to be really sweating it we at least have flexibility I'm able to do business with a pretty wide range of people and as I was saying we do business with churches and you wouldn't think of churches as buying custom tables we do business with small town Municipal governments and school boards and police departments because we know how to uh make something that's a good fit for our clients resources and those bigger companies are all really focused on the fortune 1000 market and those big headquarters projects and really making beautiful interiors and uh I think that stuff is going to be hard to find for a couple of years and so I hope they all die I hope they all die really quickly frankly so sad my god well wouldn't you be delighted if all if every other wool supplier in the world was gone tomorrow I mean it would make your life a lot easier wouldn't it n for me no actually but we have a different industry because if we do that then maybe the craft goes away um so we definitely there are a couple of them that are jerks that I would love for them to find employment elsewhere uh but no actually ours is kind of the reverse um I want more and more and more competition of small businesses because you know that creates more interest in what we're doing okay it's point of view yeah makes sense but that's just it's we you know this is a different industry you know we're supplying things for people to make things so that's like saying gardening you know if all the garden shops go out of business and you only have Lowe's you know what does that really do to the gardening industry um M mine's a little all my competitors are lows so if they die tomorrow and the world is left to people like me yeah yes and we only have we have a couple of lows if you will in our industry and actually one of them just died and you're right I mean we celebrated and then we um were able to just hire one of their top employees and she's going to move to Reno and come work for us and um and they you know they were even worse I shouldn't say worse they're they're nice people um but you know they operated under the business model where they don't need to make a profit so they were able to price everything super low they had gotten you know 50 or 100 million in money so they just you know are out spending stuff and they really took a chunk out of our business and there's another one like that that still exists um out of Europe so you're right I I wouldn't mind if they um passed away gently so you would think I'm in the church or faith-based or Christian space so I want every one to live and be happy and you know wouldn't want anything to die um I do want healthy com competitors to do well through this uh unfortunately I'm I've got two different issues when I think about competitors one is we frankly started this industry and we're trying to legitimize a new idea in among a group of clients that are not known for accepting new ideas very quickly right so the more people that are doing a good job of it the better for us just legitimizing an industry because we're Far and Away the largest in our industry but we haven't even scratched the surface we're not the it's not a foregone conclusion that a church uses a search firm or a school uses a search firm yet so I want the people that do quality work to do well the the other side of that is to enter the search world here's what you have to do hang a shingle that says I'm in the search world that's all you know there's no barrier for entry which means there's no quality control which means there are people that that undercut on price and then really do a bad job and it gives everybody else a bad name and and if the pandemic causes them to go pursue other interests that won't bother me a bit well you'd be surprised in woodworking it's pretty much the same thing the vast majority of businesses are started by some guy in his garage and we have to deal with that wishing for your competitors to to die is is chish in a way because in every business failure there's an enormous amount of human suffering and no I don't want it I I don't want that to happen to anybody in any of those companies you talked about what your options uh include uh you and the question of whether it makes sense to you know burn some of that energy and that dry powder now are you thinking of trying other products making something other than conference tables no and and and I've heard that suggestion a lot and there's a reason for that and that is that the almost everything that we could make that we could pivot to there's somebody already there and the way the furniture industry has gone in the last 15 years since we started concentrating on this big tables is uh for much more in terms of Furniture to not be a huge deal as a purchase so now it's it's uh a lot of people have suggested that I should look into making desks for people who are now working at home and the fact is most people who are working at home don't care about their desk you don't see it on Zoom so it's not a Prestige item and also if they feel like oh quick I got to set up an office in my in my uh closet they can go on Amazon or Wayfair and get a 400 standup sit down desk that's perfectly good and it'll be in their house tomorrow morning or you know a day or two later and there's no way in the world we can compete with that and uh so my think my thought is we have a very specialized skill set and uh what leads to a $400 desk delivered in two days is not what we do you need an entirely different operation different level of capital you're now in sort of like a Global Supply Chain world you're in warehousing inventory blah blah blah there's a million things that if we if we even pretend we can do that business and start spending money to uh try to do it we're just going to get our brains beat out and what we actually know how to do is is very specialized very difficult to learn and uh to try to walk away from what we know and do something that we don't know and that others know very well I just feel like it would be a huge mistake AK that makes sense yeah super Fair we don't have a lot of time left I'm I'm curious about one thing and this has obviously been a difficult year with all kinds of changes for all of you H have any of you had to adjust what you pay yourselves what you're taking out of the business yeah I did I stopped paying myself a month ago and um and part of that was uh in preparation for having to cut staff and I want everybody in my company to know that I lead from the front that if there's going to be cuts the first person who gets cut is me and uh that means you know I'm working for free and uh now I happen to be in a financial position with cash Reserves at home you know I'm very conserved about that and I always keep a lot of money hanging around and so I've got three years worth of basic home expenses in my checking account right now and the mortgage is paid off and the kids are through college and I could scale back pretty well trust fund like how did you do that um no I don't come I mean I come from from wealth I would say but it wasn't wealthy wealth and it was mostly just saving it was mostly just saving money over the years I'm a cheap skate you know I would how old are you 58 I I would never go anywhere near Alexus dealership yeah so Huck my son he's 11 um so you asked about that Lauren we haven't paid ourselves in a couple years we've actually been paying to go to work because we've been investing so much back into the business but so yeah so I have uh an extera that's got I don't know how old it is five or six years old seven years old and it's just a box you know it's dirty it's nasty and my son um has been going to this little camp and he rides around and this guy's his PE coach has a new car and so Huck says we're like look next year is going to be a better year it's going to be much better we might actually get paid we might make some money um he's like Mom if you make money can you please buy a new car and maybe you could get some plastic surgery and then maybe you could buy designer clothes like Louis Vuitton and look like all the other moms I'm just like so okay all right thanks great is anyway is it is it a terrible question to ask how you've done that for so many years I mean you must have some resources because we did the same thing that you did I mean my husband you know I just I blame it on the Midwest but he's from Wisconsin and I came from nothing so we've always been Savers um and we've all our lifestyle has always been one that we can support if only one of us has a job um so we just have saved everything you know so we have the same thing you know we've probably got five years worth of saving or we did you know had years and years and years worth of savings I'm curious Laura your business has been doing you know reasonably well at least well enough the last few years that you've been buying other businesses um do you do you regret not paying yourself the last couple years I don't no because I see the big picture and the long-term like Namaste is the um handbag line that we bought three years ago and we didn't spend a t well no we did spend a ton for inventory and stuff we turned that into a million-dollar business within 12 months you know with huge margins um and then you know the same is going to happen with this meline Tosh business that we just sunk everything into so in two years um it's going to it's going to it'll pay for itself over and over again so no it makes Doug he's very uncomfortable and very nervous because you know that big bucket that we had um has dwindled down and is down to I wouldn't say nothing but it's closer to nothing than we're comfortable with does your H we're right on the cusp does your husband have a have a different job or is he getting money out of company too no he he works in the business W yeah he works in the business yeah so he's a the software designer and does everything for us so we just have gambled I mean I think is you know the bottom line is we saw the industry changing and we decided to try to change differently from everybody else by kind of vertical integration um same same same here Laura and Paul uh back in March when we reduced our expenses the first expense that got reduced was my salary went to zero and uh has stayed there and uh then then I asked our lead team to take the biggest cut after that and then uh we left people alone if they were making I think it was less than $75,000 or something like that because frankly the money we would have saved by cutting their pay wasn't enough to offset the impact it would have on their life so we we we kind of did a little bit of Robin Hood pay cuts you know and uh that began with me and then likewise with you Laura we're not uh we're ve we're we have no debt um we have you know we're cash based not even a cruel based accounting which I know is primitive uh we don't sock away a ton of cash we keep pouring it back into the business and expanding and taking calculated risks um but uh uh you know time will tell whether we were right I think that that what I'm thinking of is I'm 58 I've got hopefully at least 10 years but not too much longer than that and that the wise Financial move over my whole lifetime now is just to preserve the company because that's that's a pretty good proportion of my uh net net worth and as I said if I can stick it out for two years I think it's going to be a very different competitive landscape I'll get I'm sure I'll get all the money back and then some if I can do this completely agree completely age good for you and more power to you I mean I don't take joy in seeing businesses disintegrate at all but but I do think many Industries and ours may be one of them it's now turning into a kind of a last man standing game who who can pull through this what we thought was a blizzard turned into Long Winter and now is actually a little mini ice age you know so yeah I I couldn't agree with you more I've had my salary cut fairly dramatically this year I I didn't suspect that I was the only one on this podcast getting paid uh and I'm not sure what to think of that but you're a journalist you don't make any money anyway right that's right uh so the percentage cut doesn't hurt as much exactly guys we are out of time uh all too quickly once again thank you for taking the time uh and thanks for talking about things that that often don't get discussed thanks for listening everybody this episode was produced by Jess thubron founder of blank word Productions remember we started the 21 hats podcast to help business owners feel a little little less isolated to let them know they aren't the only ones fighting these battles if you got something out of this conversation please help us reach more people tell a friend subscribe and review us wherever you get your podcasts follow us on Twitter at 21h hats and let me know if you have a question or a comment or a topic you'd like us to cover my email address is L Feldman 21h hats.com see you next time [Music]