The Early Warning Signs

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman I see it and I feel it Liz picarazzi tells sha busy and Jay goz this week in a conversation about the looming recession many are predicting but Liz is not hunkering down in fact she has launched an ambitious marketing campaign that relies not on Google AdWords but on Google Alerts she's also taking some advice from Carrie Smith the founder of Big Ass Fans that she didn't want he when it was first proferred plus how some owners trapped themselves in miserable businesses and Sean Jay and Liz suggest regulations that need to die Jay going off on the way businesses are compelled to pay for unemployment insurance even in Good Times owning and running a business can be a lonely Pursuit our hope is that these weekly conversations will let owners know they are not alone in facing challenges same thing with our daily newsletter the 21 hats Morning Report which in magazine just proclaimed the best newsletter for business owners and which you can subscribe to at 21h hats.com where you can also find transcripts of our podcast episodes and lots of other articles and interviews joining me this week on the podcast are regulars Shan busy CEO of Kinesis which is based in Portland Oregon and works with small businesses on marketing culture and strategy Jay goz whose companies in Chicago include a picture frame business hardest frame service and a home furnishing store Jason home and Liz picarazzi who is CEO of City bin which is based in Brooklyn New York and makes trash enclosures and package bins the episode is titled the early warning signs welcome Sean Jay and Liz great to have you here today I want to talk about something that's been in the air lately all of a sudden we're hearing a lot about a possible recession on the horizon let me start uh with you John are you seeing a change in the direction of the Economy based on your own business in terms of like Market interest and you know do people want to hire us and activity I'm not really seeing anything on the ground I'm seeing a lot of news stories like you and they seem to be sort of centered around the tech sector and I think you know you've just had a bubble in that in that um space for a long time and that's kind of bursting and then I think you'll see large corporations probably follow some suit because they probably wanted to have layoffs for a while but for various PR reasons couldn't do it I don't know I'm not really sure I I've been like looking at the P past recessions and inflationary periods and you know the the FED raises rates 0 five you know half of a point quarter of a point people freak out you know it took them almost a decade to kind of get inflation under control back in the 70s and early 80s and they had to Jack rates up to like 18 19% so I I just I think there's a lot of like hand waving and panicking but in terms of being right around the corner I don't know that I see it how about you Liz so I see it and I feel it how so it came on pretty suddenly I think you know our April was down 27% to Loi and we were down 57% to our 2022 plan it was also April 2022 was the first down month that we've had in 15 months so we're definitely feeling it and that's based on demand not on any supply chain issues that I know you've had from time to time it really is just based on demand there may be a little bit of a spill over effect because if people see on the website that they need to wait 8 to 12 weeks for something and they're on the fence about the purchase that could make them decide not too I don't have any anecdotal evidence other than myself as a consumer how I might react so yeah I mean we can see it in actual sales as I said 27% down to uh last year being ghosted no one likes that we feel like we're being ghosted more that's noticeable so you know we have to think about how do we how do we deal with being ghosted we don't we don't normally get rejected as much I I guess is what I'm saying what does that mean exactly when you say you're being ghosted said what does that mean in Practical terms so someone that you may have like a really great rapport with and you think that they're going to buy and it's just you know you're just waiting for it to happen just suddenly stops talking to you kind of like in a romantic relationship I don't know how old you are but nowaday I've been married 42 years so I don't know what you're talking about Jay had one date and he was never ghosted and that was it so we've been feeling a bit that we're getting ghosted um but then we can also see things like website visits are down so I did a quick search and saw that we're 20% down on web traffic from last year at this very time so those are all numbers you know then they're just kind of the relational differences um I think we've probably gotten more price objections than in previous times which is related to being ghosted I'm making it sound all really bad the other side of it which I'm sure we'll talk about later is that I've been able to offset the redu in my consumer business with the government and B2B work hey Liz I'm I'm kind of curious like you're comparing to a time period that was really Bizarro right cuz like last year people were locked at home they were spending a ton of money on their homes right just like obscene amounts to fix things up because they were there all the time and what I'm seeing now is especially like Oregon was really slow to remove the mass mandate and to allow Gatherings and and we've done that now and people are like I don't want to be anywhere near my house like I'm just seeing just folks don't want to be home and I'm curious like maybe that's what you're feeling as opposed to like a systemic you know economic you know kind of nationalwide recession yes however it is the first down month we've had in 15 months so that kind of takes the seasonality out of it did you use to spend more on advertising and you stopped has anything else changed in the last year no I I don't think there are any other things I want to come back to what's going well for Liz and how she's adjusting to the situation but first Jay what are you seeing do you sense any softening in your business it's a little soft but after reading all the stuff that's out there in the world we're living in a new world these days not that new and that there's these companies that are extremely well known that everybody thinks they're making money they've never made money they do nothing but lose money and then all of a sudden somebody wakes up and says oh wait we shouldn't be losing money like this so then I don't think you can look at all that stuff and get a whole lot of of information of it other than the insanity starting to stop that's a small piece of this I mean as as Sean pointed out I I mentioned that there have been these waves of layoffs that's concentrated primarily in Tech and I think a lot of what you're talking about is a certain segment of the economy you said you you have seen some softening just a little but it's always hard to tell business or is that looking no I don't have future business I've got just current business Jay makes a really good point Lauren in that Tech is now such a disproportional comp size of the S&P many of us have stocks now that are in indexed funds of which Tech is a disproportionately oversized uh piece of that and so we're watching our stocks go down our retirements go down and this is a classic case of like the stock market isn't the economy but the psychology of the stock market going down ripples throughout the economy and I think that's his what his point is about tech is like these are businesses that we put too much faith in many of them are not that viable in terms of their long-term durability and now they're getting hammered but that has a psychological ripple effect and maybe to people like Liz right where people are like ah this is a discretionary thing my 401k is down I'm hearing about recession even though the fundamentals in the market don't say that well here's a news flash so all these companies that went out there that are doing e-commerce and they've been banging on oh we don't have the burden of of of you know brick and mortar and blah blah blah well what's happened is freight costs have gone up so substantially that if a company is giving free shipping it's probably costing them 15% on sales and rent is 10% so all of a sudden having brick and mortar is not such a crazy idea and and I think you're starting to see some adjustments to that that and the the cost of of Marketing Online has gone up Dr let's stick with uh with our businesses and I think it's clear that it it's early and to whatever extent there is something going on it's hitting people differently I mean I emailed with Paul DS about this and his reaction was um I don't see a recession on the horizon at all and he he said that his inquiries are up I think he said 25% over last year and his uh sales pace is is really strong he just hired a couple of people uh his his only problem is getting raw material uh which is a real problem of course but I'm just focusing on your businesses Jay you said you're seeing some softening are you thinking of doing anything differently no keep in mind how many recessions have there been since 1978 five six seven so I've seen this movie numerous times and I'm not making any big changes I will tell you that people that get this is about fear and fear is not a good thing in business and you can talk yourself into a friend's and like I keep my head down and pay attention what I'm doing so well they don't have to be big changes you can make smaller adjustments you you might decide that there's some you have some openings that you haven't been able to fill during the labor shortage and you decide you know what maybe we don't need to fill those right now perhaps I'm not opening new store not that it was going to away anyway I wouldn't be opening new stores right now certainly but I I would still say 90% of what I do on a daily basis isn't going to be changed any but you're right maybe if if if I have a bad month or two in a row or three maybe I won't hire another inside salesperson that's possible but I just I've made some of my best advances during recessions everybody else was hiding and I kept forging ahead 2008 I bought a big cheap building and it was a game changer so I think that going into defense isn't necessarily the best idea if you still got some gas in the tank so what are you thinking Liz um you mentioned before that there some um business that compensating for the consumer business that is uh weakening we are working on a couple of government projects now that literally came in right as the recession seemed to be hitting so the government projects in terms of Revenue there's a little bit of a delay on that so the numbers that I gave for April don't really reflect the fact that we are working on the project without being paid yet which happens later so the government work has also been good because the success that we had in New York in Times Square and the great publicity we got when the mayor really unveiled our trash enclosures you know in front of 20 cameras it was all over the media we're going to be marketing that moment forever probably that's a nice moment we're shifting our marketing to going to more B2B and more b2g so that trash enclosure was purchased by the Times Square business improvement district which is called Times Square Alliance and there are hundreds of bids all over the country and so we're basically taking that image taking that before and after the basic endorsement of the mayor of New York in Times Square it couldn't be anything better and we're marketing that to bids all over the place so we're starting to get interest from people you know in Philadelphia and in Boston a couple other places immediately based on the news that just happened last month so we're kind of viewing this as like strike while while the Iron's hot um and and it does mean that I have to shift my attention away from some projects that I really really loved so as we've talked about before our bear prooof enclosure I now am putting that on hold and I I hated that where in spring and summer normally we Market our our pool boxes our sheds and our new Planters all of those Outdoor Living projects which are passion projects for me they haven't ever been profitable I have to put that down even though we are in the outdoor living time of the year I have to focus just on trash enclosures and to a particular couple of segments it's really requiring a lot more discipline than I normally have but I just know that that is it sounds like that might have been something that you needed to do regardless of the I think she brings up a good point that these are the times where you need to start paying attention to what makes money and those other things put them on hold I think that's smart and I've certainly I'm in that same situation well you guys have been listening to Carrie Smith a little bit too much if you ask me not me how so I don't know carry Smith well when I talked to him wa wait wait Carrie Smith is the founder of Big Ass Fans oh okay yes he bootstrapped it and then sold it for uh half a billion dollars a few years ago um and now has a business an investment uh business he invests in other small businesses interesting guy with very strong opinions what were you refer to Liz well so I had a couple of really great consultations with Carrie Smith last summer um at the introduction of Lauren thank you um it but it was positive it was good and bad he hates the idea of making anything in China uh I suspect that probably came up with you that's one thing that came up quite a lot it was actually hard to talk about anything but that but no I take that back he gave me some really good advice and basically one of them was like put down the package Locker put down the Planters the sheds the pool boxes all the things that I was really lit up about and focus on trash enclosures and stay focused on the market you're in which is higher end you know Outdoor Living B2B and don't try to go Downstream which I was thinking of going into Costco so in just a couple of conversations with him he delivered a lot of messages I didn't like to hear but I must admit I've I heard them and some of my behavior right now is actually a result of him saying put down anything but the trash enclosures get really really really good at those Liz you mentioned uh that you're planning on marketing uh the moment you had in Time Square with the mayor all over the place are you saying that you're going to be spending more on marketing or are you just shifting uh the the type of marketing you were doing to reflect that experience I'm shifting to more um direct sales or prospecting um I hired an outbound salesperson to contact all the bids like in the US we're starting kind of City by state that moment in directly marketing to the very same people that we know have trash in their downtown areas and want a solution for it um you know that's not something that I did two weeks ago but I implemented that really fast because we're getting traction with with um business Improvement director executive directors who saw the news and know that they need it too hey Liz can you clarify what you mean when you say bids sure so business improvement district um at least on the East Coast so like in New York City there's 80 Business Improvement districts Times Square is just one of them so I've marketed to the rest of them as well and I got a lot of purchases from them just actually in the last two weeks oh that's so good and that was a direct result of us marketing that Moment in Time Square to all the other bids who you know are kind of understandably me too I want those as well why can Times Square get those but my neighborhood can't so that has been uh a very good talking point for us and so executive directors are typically essentially the CEOs of each business improvement district and they have them all over the country so that's a decision maker and it's someone who we know is dealing a lot with trash and rats so our message is trash rats trash rats so yeah so so not the procurement right not the not the bottom of the not the bottom of the chain the procurement people but actually the people who are sort of politically and organizationally motivated to bring about change yes so Liz I was asking about the the marketing because when people fear there's a recession coming on often the first thing they cut is marketing it sounds like you might actually be spending more I'm spending more on Business Development and specifically in this area but like I am not spending a dime on Google AdWords I cut that back a while ago but recently I had a really amazing Insight I've been using Google Alerts where I set it up for business improvement district trash and rats and I'm getting all these articles from all over the country that are saying where this is an issue and then we're just picking up the phone and calling them wow that's so good that is a really really great benefit of Google that was Far exceeded any of the thousands of dollars I spent over the years on Google AdWords so I suddenly had a very warm fuzzy feeling about Google it was like literally I felt like I had an adoration I had this feeling I haven't had about Google in a really long time but I realized like they didn't have to charge me to use that Google alert it just comes with it and look at the way I used their tool unlike AdWords actually brought me business Liz this is you're your strategy here is genius oh my gosh I'm so happy for you oh thank you you know I have to tell you you should look into you're calling a business improvement district that's my that's what they call in New York but that's not what they're calling it in Chicago I don't think and I'm sure it's the same concept but you should look into what the terminology in every city is because I've that's not a Chicago phrase yeah cuz I didn't know what you meant I think you're exactly right and that that would just be more alert for you yeah I mean the the point is during a recession which like I said I've been through many yes there's less people maybe looking for your product but then your competition is almost gone away so it could actually be more effective to be continuing to Market and advertising because your compet I've just learned the competition hides under the table and I've just learned hiding under the table is never a good thing but that's what people do they get it in their head and they convince themselves they should stop spending money and it's it's it's an opportunity to go out there and get more market share if you can afford to so Sean um speaking of marketing I know we've had conversations about this you do not see yourself as a marketing guy or your business as explicitly a marketing business but you have told us that a lot of PE your a lot of your initial conversations start there people come to you looking for marketing help are you seeing a any softening in inquiries uh are you concerned going forward you might get that typical drop off where people stop making those calls during a a slow period yeah I mean I'm just I guess I'm just not seeing it and again I have some Geographic bias here so because we were locked down for so long everybody is just desperate to meet and connect and go to conferences and and I'm seeing just a lot of energy enthusiasm for just doing business but I'm in the B2B space the impact of recessions hits us later than most if it does I'm surprised I I would have thought you would get hit early yeah I I mean I think because a lot of our clients are B2B and not B Toc most marketing agencies service B Toc and so those they get hit first and worst so we get we get hit later if at all we're just not we're not cyclical in the same way interesting yeah most marketing shops still are like they're the first to go I can kind of tell you how it works when things are good the C CEO or marketing person's driving things and when all of a sudden things get tight everyone runs into the cfo's office and the CFO grabs the wheel and says okay we got to cut all all non-necessary expenses and everybody just lays down and plays dead that's what I've seen and I I think that's why the first thing to cut is there's nothing to show for the marketing expense necess obviously there is but it's not on the paper so okay cut the marketing expenses have you seen that in your business Jay or in other people's businesses no because I'm a marketing guy it and I wouldn't allow that to happen Jay's total marketing guy I mean look at like look at like Liz for example what she just described right is a business transformation and that's the space we're in now whereas most marketers are in the activity business right so they're in the like oh we posted 30 posts on Facebook or we you know ran these Google campaigns but they can't connect it to actual results which is why Liz is like I'm not spending any more money on digital right so you know most marketers are not in a place where they can actually demonstrate their value to business problems and so they get fired when times get hard they get fired like that's how it works that's the return on investment like what what Liz just described if Liz were the marketer within her company and she had done those results holy cow they're not going to fire her ever like she's like the best so I I think that's the problem with most marketing is it's not connected to kind of business strategy business results and so thus when times get hard they're the first to go all right let's move to another topic I asked uh each of you to think about the regulations that drive you crazy and that if you were king of the world you would do something about Liz let me start with you is there uh is there something that uh you would love to flip a switch and change on tariffs ah stop them that's been ongoing since uh August 2018 I will never forget that was one of Trump's first and very famous decisions that's four years how big an impact has that had on you so it has had a a very big impact I mean when I first started Manufacturing in China my tariff rate was 2.9% that kind of hurt and then for a while after the Trump tariffs it was close to 20% and then it shifted down and now it's at 11% but I have to compare that 11% to the 2.9 I had before I mean it's almost quadruple and that has really it's just decreased profits um it has we've had to increase prices as a result there's really not a lot of alternatives to offsetting that other than raising prices um and so it really does all trickle down um if someone were to say well just produce in the US as I've discussed on here before even without the tariffs it's so much more to produce in the US so for me I I my motivation or my ability to bring manufacturing back is it's it's not going to it's not going to offset the price of the Tariff it's just it's it's such a big difference okay but so here's the question though is a Level Playing Field everybody's paying the tariffs why is that really hurting your profits given that everybody has to pay the Tariff so everyone's got the same cost structure why can't you just pass it along because at the end of the day people don't want rats running into their garbage so I actually I shouldn't have I misspoke it doesn't necessarily impact our profit it may feel like it um because I do pass it right on you know so I pass that right on along when we have Freight increases as we have have had during the pandemic all that is passed on to the consumer we've had two price raises actually three price raises in in two years do you follow the the politics of it do you have any sense where this is headed so I have to say I was pretty surprised that when Biden took office that he didn't reduce or end the incremental tariffs that was a pretty big disappointment my position on this is most Americans don't understand tariffs if they hear oh they're they're tariffs being put on Chinese Goods I mean I have a family member who thought that China was paying the tariffs I think that's how Donald Trump sold the tariffs when he introduced them well and this family member voted for Trump once and probably twice I'm not sure about the second one but I know about the first and um you can see more my politics are on this but you know I think there's a lot of Americans that are oh we're gonna screw China we're going to put a tariff on him no it it's being tariff on an American small family-owned company who happened to produce in three US states before making the decision to go to China so really gave it my all before I made the decision to go over there so that also really does bother me that the average American doesn't know that I'm the one paying the Tariff they think China is paying my tariff I think and so we've had to really like educate certain family members about how that works that's a fun holiday Sean how about you is there a regulation that you focus on I think that for for me my crusade right now is the cost of housing and the impact of high housing prices on businesses and what I mean by that is it's getting more and more well let's just say almost impossible depending on where you live for you to have the promise of your employees to buy home and I've been thinking about because I'm I'm building a house right now I'm watching the impact of regulation on home building and the cost that I'm incurring from that and sort of thinking about how that ripples through the economy and I would encourage you know especially municipalities and County governments to think about the cost of Regulation um that they impose on building because you're seeing just more and more uh the impossibility of being able to live in a community and I think that impacts businesses dramatically what's the impact you're thinking of Sean is it does it make it harder to to hire um H how does it affect the business yeah so unless you are in one of these obscene Tech sector businesses that can afford to pay six figure salaries to every employee um how can you even run your business you know if you can't if the if the employees can't afford to live in your community that's that's really what I'm talking about access to Talent um the ability for young people to move to communities and to be able to live you know at a reasonable price point um we're just we're just creating that uh disparity in our in our Urban environments and it's it's really concerning um you know that you think about manufacturing right most manufacturing jobs historically have paid what in the 40 to $60,000 range you know in the in the Portland metro right now our median house price is $550,000 that's you know gosh I almost can't do the math eight times the median salary right now well that wasn't so bad when interest was 3% now that interest is 5% that the a whole another animal yeah it's I mean even at 3% it's really tough you know we have to remember you know as business owners our compensation and our personal wealth is really different than I mean you understand this Jay I mean you have folks who make probably $17 an hour right yeah you know I I know you care about your employees a lot and I care about my employees a lot and I want I want them to have the promise of prosperity and wealth creation and that usually is through home buying and it's just getting really tough and I think a lot of if you look in the New York Times for example Washington Post they've done an analysis on this and the yeah I hate to say it but the more Progressive cities are the worse for this um because of their regulation and cost of construction do you think that's the the the primary factor I mean there clearly is a housing shortage in this country and um it it's affecting communities all over the country is it regulation that explains that shortage I'm told it's the 2008 crash is never covered from yeah I mean 2008 crash crushed home construction um but what the problem is is that the cities didn't adapt to that shortage in any way so in many cases like in Portland for example I I'll just give you an example the city you know through best of intentions said 20% of multif family housing now has to be dedicated to low-income uh folks which sounds really great except that now they've broken the financial model of construction for developers and so now what do you do you know basically developers because of that requirement they're moving out of Portland they're not building in Portland anymore and and so you know less and less stock more and more people moving here from San Francisco driving up price it's it's it's just out of control how about you Jay what uh what regulation gets under your skin okay I won't call it a regulation it's just the way the law works works but I could this is fixable in 3 minutes if somebody would pay attention and here's something I think it'd be fair to say every business owner paying for this do you know how unemployment compensation works in your state I'll ask the two of you Sean do you know how it works how many days does someone have to work before you're liable for all of their unemployment insurance one yeah I think it's one one day yeah I think I think immediately you think that if you hire someone and you fire them for days later you're responsible for all of their unemployment you shouldn't be I got to shouldn't be but you may be at least for those four days I don't think their prior employment necessarily should be covered but I I used to run a business where I fired people a lot and they always fired for unemployment well so here's an example of the end of the story is neither of you really do know and that's what I'm telling you so here's how it works in Illinois at least it varies by state I'm guessing right yes okay but here's how it works in Illinois just just as a baseline in Illinois somebody could work for Sears rucking company for 30 years and they come to you and you think all right they need a job I'll give them a chance and you work with them and in the 30 at 30 days you have bought the farm you are responsible for all of the unemployment at 30 days and my argument is you need to explain that Jake okay so someone works for you for 26 days and you say you know what this just isn't working out when you say you're responsible for all the unemployment you you don't the business doesn't fund all the employment uh unemployment compensation collected by an employee yes absolutely that's my point absolutely here's I'm going to tell you exactly how it works and I'm sure of this the person works for you for 23 days you decide you know what this is a bad fit they can't do this job you fire them okay you have no unemployment there's no unemployment exposure they can go to unemployment they're not going to pay now they work for you for 35 days anything over 30 you are responsible for all of their unemployment Jay what you're saying that you pay every cent of the unemployment compensation that an employee collects every cent plus 30% yes it's the big secret I've never met anyone that understood this I've done speeches to probably 10 or 20 groups not one person has ever raised their hand and goes yeah I've got to handle it no one understands this and if here's how it works now so you hire this person they end up getting 13 weeks or 26 weeks of unemployment now that's probably going to be something in the neighborhood of five or $110,000 here's the problem you don't get a bill in the mail that says oh Liz here's a $10,000 bill for that guy remember Bob the one you did a favor for you thought was going to work out and you fired him here's a bill for $10,000 that's not how it works it goes into your rate and then your rate might go up 0 2% but how many business owners are paying attention to their unemployment rate from my experience Next To None I've I've never met anyone that knew what their unemployment rate was so your unemployment rate goes up from 3.2 to 3.6 on every single employee and you are paying every single dollar of that unemployment plus a 30% markup and that is how it works and most people do not understand that almost I I like I said I don't think I met anyone that did that's an expensive thing so my argument is would it be so terrible if was 90 days you had a chance to get in some states it is 90 days um I got to tell you this is shocking but absolutely true I went to a seminar on unemployment rates that a lawyer from the Department of Labor Illinois was running and some guy was complaining about some unemployment he had to pay for some guy he fired legitim that he didn't think he should get it and the lawyer goes well it's not like you're paying the it's not like you're paying all the unemployment I hit to correct the lawyer I go excuse me and he didn't argue with me he didn't know how it works himself it's real simple you get the paperwork it says right on there in black and white here's what you paid out here's the markup we divide that by your like the first 12,000 or something you and that's the rate it's right there in black and white but most people don't look at it and when I say most I don't mean 53% I mean 90 some per of people have no idea how that works and all it's doing is putting a burden on us instead of Sears paying the unemployment we're paying it except Sears is out of business so the government figured out oh better to sticking the the employer that's still in business and someone that went out of business it's really not right and it's certainly not helpful to people that are looking for a job let me ask you this Jay you you're running a business for 20 years and no one ever files for unemployment you never you know for whatever reason it never happens so you've been paying at a rate that whole period you've been kicking into the system a significant amount of money after 20 years of that an employee leaves your business for whatever reason and collects unemployment is that going to drive your rate up even though you've gone 20 years absolutely no no here's how it works back in the day when I was hiring and firing because I didn't know what I was doing 30 years ago my rate got to the maximum 7.2 now I didn't have one claim for three years so my rate that the Brock bottom it's like I for it's like 1.8 or something and then that's 1.8% of your total payroll no not total the first 12 or $133,000 of of Labor the point is look at me with 130 employees the difference in paying 1.8 versus 7.2 let's just say round numbers 5% we're talking about D I have a calculator 130 people it's around 12,000 I think 12,000 time 130 that's on a million5 we're talking about $75,000 for unemployment we're talking about paying $75,000 a year for unemployment insurance that if you're running a good business shouldn't be that high and and and it's about being more careful who you hire it's about making sure sure that you figure out whether they're going to work out if you can by 30 days and it's about contesting them if it's not legitimate yeah contesting him takes so much time though and you you'll usually lose I mean the the better answer is be more careful who you hire frankly that was the most important part of that but I will tell you with 28 days we asked the manager how's Bob working out yeah not great okay we should move on because it's very expensive well it also depends on the business you're in so one of the things I like about my current business is that I don't have much turnover I have a very consistent staff whereas my previous business which was a handyman company it was like a revolving door and some of those guys knew how to work the system so they would come in and work for like 30 days then they would stop responding to job orders and they would just file for unemployment saying that there wasn't enough work there are all sorts of situations but my cost related to unemployment when I first started the business may have been about 2% but by the end of it because all these guys had either been fired for cause or left on their own my rate was close to 8% that's a lot of money it was crazy amount I was aware it was happening and because of that I tried to fight a lot of them but then I realized that was a big suck on my time and I figured you know what this is just the cost of doing business and then yet again it gets built into your price to your customers there are companies that will fight those for you that they're I used to use one I don't use them anymore cuz we have very few cases that need him but there are companies will fight him but the problem is if it turns into what he said she you know like in that case he said she said oh well no I didn't get that thing you know that's a I could see where you didn't win some of them because they're going to go to the poor guy that needs unemployment whereas at least if you're in a retail business like mine they didn't show up for three days they didn't call in they violated our policy I I do win them sometimes but I don't have a lot of them to begin with so Jay you said you could make this change in in three minutes I get the change being somebody in government needs to say yeah let's move the 30 days to 90 done where does that money come from then I'm paying it I'm paying it no if you weren't oh then it would have to go to their previous employer perhaps but they changed that rule about 20 years ago that's how it used to be somebody said oh wait instead of going after companies that want out of business let's just go after the new sucker and let let them pay it well that's what I was going to say your example was Sears it might be hard to get that money from Sears these days exactly so what would happen if if you're if this change that you're suggesting was made the government should take the bazillions of dollars that Sears paid in and pay it out of that I mean they just shifted the responsibility from government to employers it's not right it's just not right here's the problem it's really not fair to the employees because you're more hesitant to give them a chance because you know you're going to get stuck it could cost you $10,000 of unemployment but how does that how does that work Jay if like let's say somebody works for me for 10 years they quit and then they go work for you for you know 33 days 33 days now am I and they didn't work out for you but why am I having to pay for their unemployment you're not that's the point if I fired them because they couldn't do the job but that's what you you're arguing that I should be paying for their unemployment right no no no no if if you if they quit your job maybe they don't get unemployment I mean I you know I'm not trying to fix all social skills I don't know how that could work the point is I should pay it I mean who should pay the 10 grand let's figure this out should Shawn pay it he quit the job on you you had nothing to do with it okay should I pay it I gave the guy a chance and it didn't work out for 30 days or should the employee take the hit which one of us should take the hit on that that's the question the government okay maybe well somebody's got to pay for it yeah maybe at some level that money's got to come from somewhere this is a whole another conversation around you know how much we put on the business to care care for societal needs so it's funny I had a uh listener question all teed up to ask you guys uh from Ann merrow who runs long thread media in Colorado and it was about how Unemployment uh rates work for businesses and how to manage that so you you've kind of answered that question that I had tup uh and did have one follow-up question which is what Liz was getting at which is I think everybody assumes that it's impossible to contest these things in most cases when is it worth trying when do you try to contest it Jay I just had one I win them I don't do a lot of them anymore but here was the situation I had a receptionist she was not doing a good job she was constantly being she it was she was a management problem my managers were throwing up their hands and said this isn't working she storms up to me one time and I was a little friendly with her I talked her here and there and she goes I can't I can't report to so and so anymore so I said to her you know what she's the manager you know I'm told that you come in late regularly that's really a problem and I have to tell you I'm not going to apologize for them for holding the standard of the company I have to tell you if this job isn't right for you just tell her you're going to be looking for a job and she will be happy to work with you to so you can go get a new job and it doesn't have to you know it doesn't have to be adversarial that's exactly what I said to her she doesn't show up to work the next day she doesn't show up at all she goes down unemployment she actually tells the unemployment adjudicator I think they're called what happened she calls us and she goes what's the story so my HR person repeated exactly the owner of the company told her just tell us you're looking for a job and we'll work with you and you know what the adjudicator said perfect that's what I wanted to hear she was aggravated with it like where do you come off just storming off the job I mean she didn't get unemployment oops what defines that situation you have to have rules you need to have the rules in place here's what our attendance policy is here's what late policy is and and you got to follow the rules if if they're just quote unquote not doing a good job you're G you can't win you just can't you have it has to be something that they have control over like coming to work on time like coming to work but if you just go you know what they were sloppy I don't they had an attitude problem you're not going to win you're just not um it's it has to be something they have control over I would add a fourth piece of the puzzle you know first is be careful you hire second it's the 30th day before that figure out if you think it's going to work third one is contested here's a fourth one tell them to their face you know what I'm concerned this isn't the right job for you um you keep making the same ER over and over I've talked you six times about it and then they go on their own they figure out this is the wrong job good for you good for them everybody wins but you have to have honest conversations all right we're just about out of time I want to hit one more thing which is uh the New York Times recently ran a story which pointed out that a lot of people don't realize how wealth tends to get generated in this country and that uh a tremendous percentage of it comes from people who build unsexy small businesses which is kind of intriguing they were talking about things like car dealers or you know HVAC companies did they mention picture framing they did not Jay wow once again getting no is that a sexy business or unsexy business there you go why they didn't mention it but the it was based on studies the the story also pointed out that studies indicate that as we all kind of know money doesn't necessarily buy happiness um and based on these studies the things that do generate happiness are sex exercise and gardening the obvious question for the three of you is are are you getting enough sex exercising gardening anybody I don't do two of those things you have to figure out sure you want to know J well I will say gardening is is a great activity if you're into it so for me anything having to do with Home Improvement or gardening puts me in that sort of state of flow that you lose if you're just too stressed out a lot so I mean I am not a great Gardener but I know that when I turn off my devices and I get my hands doing something um and I know Sean is a lot like this as well that can make me really happy and when I don't do it it's pretty noticeable like if I work too much and I don't do something that turns off my head it's going to show up somewhere else in my life so I I definitely think that's um true and um you know for me it was the same when I was in corporate I mean um part of the reason my first business started was that I was doing a lot of home renovations to soothe uh the pain from working in a large corporation where there were too many meetings so when I had the chance on the weekend to do gardening or Home Improvement that was like really cathartic and that led to my first company so again I think what makes you happy sometimes it is the most simple things um I think often it's something where your device is off um that can you bring you that happiness my cousin Neil who runs my home store said to me one day it's too bad you don't have hobbies and I said are you serious my business is my hobby I like going to work every day I like writing advertising copy I like figure stuff out so I don't need a distraction I like what I do every day and I I you know the extent of my gardening is pulling weeds which is cathartic I feel like I've gotten rid of the Invaders but other than that I feel the same way I like mowing the lawn it's a great article I mean I think I thought it was there was a lot to think about there especially around businesses that I wrote down what I wrote I wrote unsexy monopolies you know so like like these businesses where they kind of own a geographic region and are doing something not that remarkable but there's just no competition I also have to say there's just there's a lot of joy in just making customers happy there's joy in doing a good job in in having employees that are happy and having customers are happy yeah I think a lot of people build miserable businesses because they think that's what they have to do to make money miserable in what sense Sean well they just start from a p&l spreadsheet perspective as opposed to like how do they build something where they show up for work and are happy about showing up at work and I think like Jay is a good example right he's happy to go to work and I think Liz is happy to go to work even though we have hard things we face like the th that we get joy in going to work and I I think so much of the mentality is around are you growing fast are you making enough money you know and it's just like well what about Joy like where do you and and how do you create that with your work and I I find that a lot of folks don't ask that question they just hate their customers I mean if you talk to company I there's a lot of people that just hate their customers that complain about their customers all the time their employees yeah and their employ absolutely yeah all the time I see that I you know that's unfortunate and and unnecessary I might add yeah it's totally unnecessary folks get trapped they get these golden handcuffs on where they've built a business that's a certain size and they've built it on customers that they hate and then they're screwed because like that flows into the culture they get turnover I mean it's just brutal so I think you got to start from a position of what's going to give you Joy what's going to make you happy and then you know folks will feel that so what you're saying is here's my thing you want to build a virtuous cycle instead of a vicious cycle yes yes yes amen let's end on that all right my thanks to Sean busy Jay goz and Liz picarazzi as always thanks for sharing [Music] guys wait wait don't leave yet if you have a question or a comment that you'd like the 21 hats owners to address send it to me by replying to your Morning Report or by email at Lauren 21h hats.com that's l r n21 hats.com do it now before you forget and don't be afraid to tell Jay what you really think you can take it and if you got something out of this conversation help us reach more business owners tell a friend subscribe and review us wherever you get your podcasts follow us on Twitter subscribe to the morning report at 21 hats.com this episode was produced by Jess dubron founder of blank word Productions okay now you can leave thanks for listening everyone [Music]