The Game Has to End at Some Point

Hello, everyone. Welcome to the 21 Hats podcast. I'm your host, Lauren Feldman. This week, Sean Bussey, Paul Downes, and Jay Goltz talk about their evolving succession plans. There are lots of options selling the business, turning it over to a family member, selling it to an employee stock ownership plan, holding a going out of business sale, just walking away. And they all come with advantages and disadvantages. Sean, Paul, and Jay take us through their current thinking and also tell us whether they've prepared their businesses for the possibility that they could be incapacitated. Plus, would any of them consider instituting a 4 day work week? And we can report that this podcast now has its first B Corp. Who knows what a B Corp is? 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 highlights the most important news of the day for business owners and which you can subscribe to at 21 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 Sean Bussey, CEO of Kinesis, which is based in Portland, Oregon, and works with small businesses on marketing, culture, and strategy. Paul Downs, who is CEO of Paul Downs Cabinet Makers, which is based outside of Philadelphia where it makes custom conference tables, and Jay Goltz, whose companies in Chicago include a picture frame business, artist frame service, and a home furnishing store, Jason Home. The episode is titled, The Game has to end at some point. Welcome, Sean, Paul, and Jay. Great to have you all here. I wanna revisit a topic we've hit upon a few times, which is succession, uh, both in terms of what your longer range plans are, uh, but also the inevitable what if a truck hits you tomorrow question. Um, in part, I'm wondering if, uh, Paul and Jay have made any progress since we last talked about this. But, but I'd like to start with you, Sean. Uh, you, you and I talked a bit in the fall, and I know you were kind of thinking about pulling back a bit from the day to day. Uh, can you tell us what you were thinking? Yeah. Thanks for putting me on the spot. Um, anytime. That's what I'm here for. You probably should lay down for this part, like, you know, the shrink, yeah. Well, you know, I, uh, I got started early in this business. Uh, I've been doing it 22 years and done some great things with with it and have seen others rise into leadership positions and gotten a lot of joy out of seeing their success. And just started to think about creating opportunities for other people to move into positions of more and more leadership, and then also my long-term plan of, you know, what do you do with the business? You know, the options are, you know, typically you sell it. Um, you walk away from it, that often happens, um, and it just sort of dissolves, or, uh, you can eSO it is another option you all have talked about in the past. And I just started thinking about those different ideas. I turned 50 this year, so that was kind of meaningful in terms of thinking about what lies ahead. So, yeah, you can probably hear some of the ambivalence or, or uncertainty in my voice because it's, it's sort of, these are big decisions and complex. Um, so I'm in the, I'm, I'm still in the early stage of of thinking about that and putting it, putting in place the pieces to make it possible to be less of a linchpin to the business. Have you taken any steps in that direction? Yeah, I mean, I, I got started probably 10 years ago when I, you know, I was introduced to the idea that, you know, there's there's a difference between a business and a job, and I think a lot of business owners have jobs that they've created for themselves. And, you know, for, for me, I started to think about the success of a business was one in which you could step away and it would be, it would continue to operate without you. The first stage of that was really getting out of doing the day to day work with clients, and, you know, I've been pretty successful at that. And now, the primary role I have in the business is sales, um, as well as, you know, kind of organizing the CEO and strategy stuff. So I've been on, I've been on the journey, but this, this next phase, which is getting out of sales is, is super hard, um, and then building a leadership team to Um, step in behind me and eventually allow it so that I make fewer of the decisions. That's where I'm at today. Have you figured out what the long range goal is? Do you know which one of those options you would prefer if you can make it happen? Yeah, I, I think the one that's most intriguing to me is um finding a way to uh pass it on to employees and allow for a transition to the employee base. I think selling a business is applauded a lot in our society, but the outcomes I see are often not as optimal, um, from a culture standpoint, from a purpose of the business. Um, so I'm looking for an internal transition, um, if that's possible. On a practical basis, the smaller companies, 8, they've, I've seen numerous studies, 80% of businesses don't get to the second generation. So, so you're right, they're applauded when they sell. The reality is, most businesses just go away, the smaller ones. So I think trying to sell your business is probably the least likely try to transition to your employees, sure, that, why wouldn't you do that? That sounds like a good, you know, plan, which then layers into that. Do you consider an ESOP, which is not necessarily a leadership thing, but it's, it's interesting cause I've gone to numerous seminars lately, and I never even knew anything about them, and it's interesting. So, I think the word you're looking for, cause I'm 15 years ahead of you, is you're looking for some potential solutions, because I don't think you can get to a conclusion. Like, I have a poten I have a couple of potential conclusions, but I'm not, I don't have it knocked down yet, but at least I got some possibilities. You're looking for the possibilities, I think. Yeah, that's actually thanks for framing it that way, Jay. That's really helpful. I, you know, I, I feel like I'm starting early. I think a lot of owners wait until like they're in their 60s or even in their 70s, and, and then the, the door starts to close and the options are fewer and fewer because they haven't put things in place. So I, I don't want it to be like we're driving and then we go off a cliff of, you know, here you go team, here's the business, good luck. You know, I, I, I wanna, I want folks to have time to prepare and And grow into the roles that are necessary to be successful. So I just went to another se I've, I've really, I sat through 3 or 4 ESOP seminars for an hour each. It wasn't that, but with the last one, the guy said something really smart. He said, if you're thinking about an ESOP, you should plan it years in advance. I mean, this isn't something you think next year I'm going to do it. It's not too early to say, I think in 5 years, I'm gonna do it or 10 years. So I think you're smart for thinking about it, cause, uh, yeah, the, the game has to come to an end at some point. Sean, I have a question for you. What's the average length of employment in your industry? Do you want me to answer that industry or or per my business? Industry, and the reason I'm asking that is because I've watched my son progress through the software industry, sort of the dot com, blah blah blah. And it's astonishing to me that he expects to be in a new position every 18 months to 2 years, and that's just totally normal there. And Uh, there's no such thing as loyalty, it's all transactional. And I just wonder, one of the things about an ESOP is it sort of assumes that, your employees sort of want to stay at this company for the rest of their lives or for some significant period of time. And uh is that a good fit? How many employees want to do that? How many bosses think of their employees that way? There's something about the model, which I'm deeply uncomfortable with. And uh and part of it would be, why would you expect people to think that your little company is, is the best place for them for the rest of time? Well, you don't have to. I mean, there're no one's putting a gun to their head. They're doing ESO. If the people leave, they leave. So there's no, there's no obligation on the employee part in this whole thing. You're asking them basically to make some kind of significant financial investment. No, no, I'm telling you, I've stayed through these. It's not what you, that's what I used to think. They're not, no, no, they're not doing a thing. They're sitting back and you're taking, you're taking stock and you're putting it into a trust for them and they're not putting a dime into it, which was quite shocking. So then you leave the, you leave the company to be run by people who have no skin in the game? Like, how does that work? No, no, no, it's. Not, it has nothing to do with who's run, you, you could still be running the company. They're not mutually exclusive. It's not, this isn't a, this isn't a leadership transition. It's a way of hooking some people and having them participate, getting a little more, you know, hopefully a little more uh performance out of people, helping people that have been with you for years. It's, it's a little complicated, but it's not, it's not a matter of You're not putting anything into it. And then if you do it for 5 years and you think, this really stinks, you could just buy it back. It, it, it is reversible. So it is, I'm not, I'm not selling ESOs. I'm half half. I, I, I think I could totally see where this could be a great solution, and I could totally see where for some people it makes no sense. Paul, just to answer your question, I, I think Jay's got it right. Correct me if I'm wrong, Jay. But, uh, there are big tax advantages to this. The portion of the company that's owned by the ESOP doesn't pay any federal taxes yet. The money that the company generates goes into the fund to buy the shares for the employees. They end up increasing the, the share of the company that they own, uh, over time. But also, as Jay says, that doesn't mean that they're in a leadership position. No, the government put this together with some people who, who had this idea, and I think these people are still actually run organization to do ESOP. And it's a way of spreading it around. And yeah, when you first told me about this, Lauren, if you recall, I go, Lauren, that can't be true. It's true. It's hard to believe. It's true. Instead of paying federal income tax of let's say you were gonna pay $300,000 this year, that money for that portion goes into their trust and they end up buying the company. And then when they cash out, they have to pay the tax on it. But it's not too good to be true. It's true. Um, it doesn't mean it's, it doesn't mean that it, it makes sense for everybody, because in my case, I'm thinking, well, why do I need to do that? I could just take the profit myself and pay the tax on it. So I, I don't know. It's, I'm, I'm, I'm definitely not, gee, is this good or bad. I absolutely can understand where for some places, this is just incredibly good, and I'm sure there's cases where it makes no sense whatsoever. Well, how many, what percentage of businesses do it? 0. No, I have an answer to that, cause, you know, I thought that a year ago and I've been playing around with this for a year, and I, and I asked one of the guys, I said, less than 1% of companies in America, there's only, I, I don't want to say the wrong number. It was a very small number when you consider how many businesses there are. And I said to this one big shot, I said, why are there so few companies do ESOPs? He goes, because they go to their accountant and their accountant rolls their eyes, and goes, oh, it's too complicated, and that's the end of the conversation. I'm gonna give you the other part that I figured out. Over the last year. These people are horrible at selling themselves. Horrible. I've sat through seminars. I said to myself, you couldn't have done a better job repelling me from this idea than if you tried. One of them, I just remember at the end, he said, it's really important the firm you hire to help you do this. So, get the firm that, get, get the best you can afford. Oh, well, I can afford about $300 so I'm gonna use the guy on the corner that sells insurance. He's a notary public and he does ESOPs. Like, what a stupid thing. Instead. Saying, this is very important who you use, you should really pick them carefully and don't be as consumed with the price because they'll more than pay for themselves. I mean, they're not, I don't want to slam accountants and lawyers, but accountants and lawyers generally don't make good marketers. So, I've, I've realized if they were better at this, Paul, you would know a lot about this, I would have known a lot about this. They're not even out there. I mean, I only know about it cause Lauren told me about it and put me on a podcast with these guys. Jay's right, Jay's right about that. It, it's uh it's kind of a boutique space that um is not well communicated in terms of the value proposition and the opportunity. You know, kind of getting back to Paul's question about turnover and tenure and are people committed. You know, I'm, I'm really fortunate. I have incredible tenure, and I think the majority of folks there really see Kinesis as something special. Um, I know every owner likes to think that about themselves, but, you know, I mean, what, you know, we just celebrated a 17-year anniversary of one employee, a 10 year of another, a 4 year of another. So we, we really don't match the industry, quote unquote industry in that regard, um. Why I'm interested in ESOPs is that I, I feel like small business is such an incredible engine for wealth creation. That to be able to share that with the folks who've helped build the business is just a really compelling idea. Part of it is, which I don't need, part of it is, you can take a big check out because you can go to, banks have special divisions in the bank to do ESOPs. They love doing this. The bank will lend the company the money to pay the owner if you, the owner wants to get some money out of the company, and the owner can stay around. In my case, I I don't really need the cash. So that's one reason why I'm not running to do it. Um, but I could totally see where somebody could go, Hey, if I can pull a million bucks out of my company, still go to work every day, still run it, and take that money and go stick it into something more liquid, I, I'm sure that's an incredible, uh, tool to use. There is one other factor in why there aren't more of these, uh, I believe, and that is that if you have a business that can be sold, it's very unlikely that you're going to get the best price through an ESOP. Wait, I don't think that's true. That's debatable. I think that that's, it depends what business you're in. If you have a strategic buyer, there's a really good chance that somebody else will pay. You'd have to add on a strategic buyer in a very hot space. For instance, there's one that I sat through the guys in the, the, the pet care industry, and this is interesting news. Mars candy. I put a gazillion dollars into the pet care industry, and no one knows it, but they're, they're buying these gigantic veterinary practices for big multiples. So if I ask the question, I go, could you have gotten more money from a strategic buyer? And he said, Well, actually, I think I could have gotten twice as much money, but I got enough. OK. So the guy running the seminar then says, well, there's other things that can make up for that Delta. and he never finishes it. Like, really, I would have said, OK, that's true in this case, but that's very unusual that you can get twice as much money from it. And that, and I, and I think that's the case. So, if you're in a hot space where they're buying up a bunch of companies, yes, that, that might be an issue. But there's lots of companies there from what I've seen, uh, they wouldn't get more money from the outside. Well, and, and the important thing like, like if, if you have a really well-run business, the return on that investment outperforms a ton of other things you could put that money into. Absolutely. So the value proposition of an ESOP is, if you have a stable, well-run business that's producing good profits over time, the actual money you're going to get over time has the potential to be more than an acquisition, because, right, you an acquisition, you pay a bunch of taxes on it, and then you're done. Like you're, you know, you, you're not getting any more money. So then you've got to take that money and invest it in something else. You know, I, I think you can make the argument that if you have a really well-run business and it's producing great returns, and this is something you have control over, right? You, you have control over this investment versus stock markets, real estate, speculative stuff. Let's take a quick break to hear from our sponsor, Work Better now. I'm here with Rob Levin, co-founder of Work Better Now, which provides businesses with highly talented virtual assistants. Rob, I've noticed that owners tend to have certain questions about virtual assistants. For example, what exactly can they do? Yeah, Lauren, we get this question all the time because people really know deep down that they need an assistant, but they're not exactly sure how it works and what they can do for them. I would say that our clients use our assistance in one of two ways. They will either use them much like I've been using my assistant for the past 8 years as an executive assistant handling my calendar, which takes up so much time, email management, database, file management, personal tasks, creating documents for me, and then a lot of our clients basically operationalize our assistance. So we have assistance with titles like Project Manager, Marketing Associate, Operations Manager, and customer service representative. I think some owners worry they'll spend more time managing their assistant than it would have taken them just to do the test themselves. How do you respond to that? Right, right, right. This is a deadly trap, not only with assistance, but really with any employees, which is, oh, I can do it faster myself. And the reality is you might be able to do it faster yourself. Of course, it's impossible to grow your business if you're doing everything yourself. I was very much uh of a similar mindset and what I did with my assistant is I basically told him what needs to be done and had them documented. I hate documenting tasks, but I know the processes are so important. Now we have a manual full of my tasks. I only had to tell him once that he can follow time and time again, and if he's out, somebody else can follow. And also think about it this way. If you're a business owner making something like, let's say $200,000 a year, which is about $100 an hour, you're Basically paying somebody to do administrative work at $100 an hour if you're doing these tasks yourself. That makes a lot of sense. What does it cost? The cost is $1900 a month. And as you know, Lauren, we are offering 21 hats, readers and listeners $150 off per month for 3 months just by mentioning the word Lauren. There are no contracts, also very important for people to know. Can you a return on that investment. If you're not getting a return, something's not going right. All of our clients are not only getting a return with the first assistant they've hired, but many of our clients are now on their 2nd, 3rd and 4th assistant. Where can we learn more? Workbetter now.com. And again, when you sign up for a 15-minute consult, just mention the word Lauren, we'll make sure to give that $150 off for each of the 1st 3 months. Thanks, Rob. We're back. Getting back to succession, uh, Paul, I think the last time we discussed this with you, uh, correct me if I'm wrong, but I think your succession plan was kind of not to think about it too much. Do I have that right and have you thought about it more since then? That's a solid foundation for my, my planning process. Excellent. Yeah, I've thought about it more because Because I'm, I'm about to turn 60, as Jay observed that when you hit 60, you start worrying about these things and I am starting my 37th year in the business, and when I get to 65, I would like the option to do not this, even though I enjoy it every day, and I'm not sure what what would be as much fun, but I would still like to, to have less encumbrance and So I'm thinking about it. My goal is actually to sell the company. Um, to somebody, I think that we could find a strategic buyer, particularly 5 years from now. And I've seen in my Visage group, we've had 4 sellouts this year to strategic buyers ranging from 20 to 120 million. And these are guys who started off with small companies and just really worked them well. Any of them small manufacturing companies. 11, yeah, uh, one Sam Saxon, uh, who I talked about in my book, he started about the same time I did. In Visage in 2012, and he had a company that was doing, I think, 3 million. He pumped it up to 22 million over the course of the next nine years, and sold it for 20+ million. And they made custom spiral stairs. So he's just really a good businessman, and he had a very interesting marketing uh scheme, and he was able to attract. A group of investors who specialize in taking companies from that size to sort of the next step up. And one thing that's become apparent is Uh, talking to people who've sold and talking to the others in my group is that The ability to sell a business starts at maybe 5 million a year. It gets more, more of a more of an easy step at $10 million a year. And uh and that there are different kinds of investors who specialize in different size steps. So the 10 to 50 people are one group of investors, the 50 or whatever group or the next group of investors, and it's a whole process to run the value of a company up. I believe that's true what you just said. I also believe that the multiple, not I, this is what I've been told, the multiple goes up, the bigger you get. The multiple on a $10 million company is much bigger than a $3 million and 20 is bigger than driven as far as we can tell by sector. So the, the two most mind-boggling deals that I'm aware of, one was in the pharma space. Uh, the owner went to Went to market with a company expecting to get $9 million I believe, and ended up with a $45 million all cash offer, closed it within 90 days. And then there's another guy who's also in a financial services space. He does back end servicing for hedge funds and other and banks. And he has a company valuation of over 100 million dollars. So none of these guys, I want to be clear, none of these guys were in the picture framing industry. That's where they're going next, Jay. That's what I thought. I'm just ahead of it, you know. Look out, here they come. Paul, I'm kind of curious, um, I mean, I've listened to you for a long time. My sense is you're in that kind of $5 million dollar range. Yeah, we, we may, we may hit 5 this year. We were about 4.2% last year. And so it's just getting to the point where, where it's starting to be viable. And so my focus on the next 5 years is to, is to optimize and expand and hit that 10 million mark and then see what happens. Now, what happens if I get hit by a truck? Maybe that's the next question. Go for it. It would be bad. It would be bad. And I'm, I'm not sure what the solution is right today. I have a solution, and I, when I say this, people think I'm making a joke, and I'm not making a joke at all. If you're in this. situation, I bought a big life insurance policy. I got to tell you, I sleep better at night, no matter what happens if the whole thing, if I did get run over by a truck, my wife's fine. There's plenty of life insurance here. So I do believe that life insurance could be part of one's strategy as a backup plan. Yeah, I mean, obviously, I have some, some life insurance, but just the thought of I'm hit by a truck, someone needs to come in and just make sense of it. Now, I'm trying to document that to the extent I can. I don't think that I'm anywhere near like what William Vander Bloemen is doing. It's at least in my mind, and I have information arranged in a way that it would be possible to, to get into the accounts and what have you if necessary. And that information is shared with my, my son actually, and my wife. I think my son would be the one who's competent enough to Get through the issues of just accessing all of the things and getting past the, you know, how do you, how do you get two-factor authentication to work if the phone is at the bottom of the ocean or something like that, he could manage that. So just out of curiosity, the guy with the staircase company that you said went from 3 to over 20, did he start the company? No, he, he acquired it. He, he was, he's an interesting case, so just briefly tell the story. Uh, came from resources and his father was very successful entrepreneur. And this gentleman, the younger, the son, was always motivated to kind of match where his father had been. So he started his first business right when he got out of college, he went to South Dakota and put up 50 houses. Apparently did well enough with that to come back and buy the manufacturing company that he purchased. And then he drove it hard. He was a hard guy to work for, not a bad guy, but just had very, very clear vision and really worked on executing it. And did a great job. So good for him. Paul, have you thought about what exactly you need to do over the next 5 years if you do want to sell the business? Yeah, a lot of it is The, I'm at the moment acting as the general manager, and for 24 employees and 4 million, that works fine. So a lot of it is just getting the, the overall volume high enough so that we can have a layer of management below me, like actual general manager that's not me. And We have a very well-documented set of practices. In other words, how the business operates. It doesn't need me holding the steering wheel every minute of the day. The, the people who work here know what to do and and we have all of our processes worked out. So I think it's, it's something that could be scaled up and could be operated by an outside investor. And I just want to make sure that our financial performance meets the standards required to sell it to that kind of investor. I have to believe there's a wood furniture custom builder in the United States who would see this as an incredible plug-in to their business to get into a whole new market. So, yeah, I do think that's sellable, even at the stage it's at now. I mean, particularly, we also operate differently, and we, we're the Google people in our industry and nobody else is. So anybody who wanted to acquire that, that kind of channel would want to buy us. And I think that that's really what I'm aiming for. Has anybody ever approached you? I mean, you get the usual garbage emails and what have you. But serious strategic buyers? No, not yet. I think we're under their radar at the moment. Sean, have you thought about the uh hit by a truck question? Yeah, I mean, I've kind of operated the business like that for the last half of it, of, you know, how do we make sure that it, it can sustain if if I'm not there. Um, and I've thought about that for every role in the company too, making sure that there's nobody who's so important that if they don't show up, you know, things just really fall apart. Um, yeah, I mean, if I were to not show up tomorrow, I think the business would do great. Was that your goal? Did you set out to get to this point? Yeah, I think so. I mean, we work with small businesses, right? So you, you often see what I call the the benevolent dictator model, which is, you know, where the owner of the business is the linchpin to everything that goes on in the business. Um, and, you know, that makes you, that can make you feel really important and needed. Um, it's efficient, it's a really efficient way to run a business. Um, but it's hard to take vacations. Well, it's constraining. You can't do $10 million like that. Maybe you can do $4 million like that. I, I think it would be even hard to do $4 million successfully, honestly. I mean, it depends on the business, but in my case, I know, I don't want to be in the middle of everything that's going on. There's no way. Paul, you said something. I, I just wanna know. You said, well, obviously I have life insurance. I can tell you for a fact cause my good friend owns a big insurance agency. Most people at 60 years old do not have life insurance. That's the reality. So that's why most, most, absolutely. Absolutely. You, I, I, I get you some statistics. The kids get out of the house, they're done. They don't have any more life insurance. Well, I have a special needs child, so I know. OK, so for you, right, that makes sense, but I'm just saying, insurance is still pretty cheap. I mean, even at my age at 65. I can still buy a $2 million 10-year policy for like $7000 a year. It's, it's not, it's still doable. I mean, even when you get older, and if you own a business, I think it might make sense because in my case, a lot of my assets are tied up in the business versus I was squirreling away. My 401k plan my whole life because, you know, I'm a lawyer and I just built up this big bill. It did take the pressure off of me, considerably that I don't have to worry about it as much. So I'm just telling people, that's actually really good advice. I, I had to buy life insurance when I bought out my business partner. Uh, um, that was part of the deal, so that she knew she would be made whole if I were to die. Um. And I've kept it, even though it's not necessary anymore, and I'll probably continue to keep it because that way there's, there's a way, there's resources to replace me. Absolutely. To change the beneficiary. The beneficiary is the company, so, you know, I, there's basically there's money there and things would be able to work itself out. Jay, you talked a lot about ESOPs, but you've considered quite a few different options. Um, I think it's evolved a little bit since we first started talking about this. Are you leaning toward an ESOP now or? No, I wouldn't say that. It's out there. It's a maybe. I have no reason to rush into it. I now have my 32 year old son working here, and I've got a 37-year-old son working here who's made it very Clear though, he doesn't really want to run the company, but the 32 year old seems engaged, and he, so I'll see what happens. I, I, it's, it's only been a year. I tell you what, I'm not doing. I don't see myself selling the company. It just doesn't make any sense. Um, even, you know, when I opened up a pop-up store in New York for my Jason Holmes store, I don't know, it was probably in 3 or 4 years already, and I thought, gee, if I got the platform. and my numbers up, I could prove I've got two successful stores now I could probably sell it. And it took me a while to figure out, I'm in such a heavy inventory business. There's a reason why some businesses just closed, and I never understood this. There were some businesses like mine, that if I had a going out of business sale, I could probably generate just as much money as if I sold the company, which isn't always the case. If you have no women. That's probably not the case. But you see these going out, there's companies that make a ton of money and they're going out of business sales, and that's why they don't bother selling, because if you can free up your inventory and, and still get a good markup on it, it, it's, it might be just as good. So, I'm planning on running it for quite a while, and there's just nothing more I can do at this stage other than see how that's going with, you know, my son so far so good. If you did go the ESOP route, that would solve the ownership question, but not necessarily the leadership question. What, what are you thinking for that? Well, you know what, my first thought was, oh, I could do an ESOP and pull some money out, and I now realize I really don't need to pull the money out. That's it's OK. Why would I think about doing it? OK, A. I think I would love to be able to have something for my employees when they retire. And if it's coming out of the federal taxes instead of paying federal taxes, I can give them some of it. Hey, that's, that's certainly something that is, that is, uh, it sounds good. 2, I get some cash out. OK, not a major deal at this point, but all right, that'd be OK. 3, do I think most people would work a little bit harder, knowing That, you know, there, there, it's an ESOP, maybe. I assume that that's probably the case. And lastly, being a retailer, do I think that would be a good marketing thing? They will say, Oh, an ESOP company? Yeah, sure. I think people, I think, I think people like buying from ESOP companies. So, with all that being said, why aren't I doing it? There's just a lot of administrative time. Time and cost to it, and I'm not sure. It's easily $75,000 a year just for the administration part, but, um, I just have to figure out whether it's worthwhile or not, but I'm definitely keeping it as an option. And I continue to go to these webinars because they're interesting, and I, I think I've got most of the info now, but, um, I'm still looking into it. That was all interesting, Jay, it didn't answer my question, but which is what? Which is, have you thought about what you would do as far as leadership if you went the ESOP route? Well, oh, my son's here. I would expect to hold on to the majority interest and my kid would run it. I have very capable managers, but I don't know that any of them have the skill set to, to be the CEO plus, they're all getting older. I mean, they're in their 40s. If I plan on, I could easily, I hope to be working at 15 years. So they're going to be a retirement age. So even the people that are working for me now are not really the people that would be taking it over, whereas my kid's 32, he'd be all 47. So, maybe the person that could run this company I just hired and they're working in the showroom now. You know what I mean? Well, you referred to, uh, William's plans previously. He's been in on these discussions and he's the one who has clearly given this the most thought and taken the most active steps to try to prepare either for the truck or for uh succession. Um, and the other big difference is that he has, um, he's had somebody he's kind of considered a clear number 2 at his business. I don't think any of the, the three of you do. Are any of you concerned about this? Would any of you like to have a number 2 right now? I don't know why you think I don't have a. I mean, I have, I have multiple number 2s. Well, maybe that's why I didn't think you had a number 2. Yeah, I mean, my, my goal is to build a leadership team, you know, of which there are, you know, multiple roles and responsibilities in that, and we're Making great headway on there. So, that's why I feel like if if I were to get hit by a bus tomorrow, I know that the people on the leadership team, either one person could step into my CEO position, or all of them could work together to make things happen. I have great confidence in them, for sure. Paul or Jay? Well, first of all, I'm confused. He just went from a truck to a bus, and I'm trying to figure out whether he's trying to be more socially minded with bus runs over us. But, um, I, I, I think that the number 2 thing is much easier when you're a $50 million company and you can go pay someone big money. I think when you're smaller, it's difficult to have a number 2. I it's is exactly what he just said. I have a bunch of people that are running the company. There's no one person who's, you know, waiting to take over. I don't have anybody who has the skill set, and I've asked, Would you like to? Well, not today, since I'm doing it, but um, why would they be just the pro, why would they be working for him if they had that skill set? Why would they be there? My, my point is they probably wouldn't. That's the problem with the smaller business. Paul's any any smaller, no, any, any $4 million business. I don't know. I think it's, it's not necessarily that there isn't a person who would want to do it. It's more that I don't want anybody to do it while I'm doing it. Uh, I, I'm pretty sure I could find someone to run to do my job, and given what I, what I make doing it, uh, I could offer a market wage, and it's certainly an interesting job. It's just that it's not, it's not worth it to me at the moment because I, it only takes me about 4 hours a day to run this company, and the rest of the time I do other things. I mean, I'm here, but I, I wouldn't want to pay someone to, to do that. But that's the point. It's not worth paying that person. You'd have to pay them a good amount of money. It would cut your salary dramatically nobody, nobody wanting to work in my company. No, I'm suggesting that that person that would be working in a company would want to make more money, and they probably would have left to go do that because you're not gonna want to pay it because there's not enough. To go around at a smaller company, that's the inherent problem. Yeah, well, I agree, I agree with that. I don't have that problem. I don't, I guess I'm confused by the premise. The premise is, OK, so let me explain it shorter than Jay is going to do. This company kicks off $300,000 a year and uh basically it gets split between profit and and and my salary. And if I have to hire someone at $150,000 a year to do my job, there's just not enough left over for me to sit around. Well done. There we go. And when we can get to another 67 million, you know, whatever, then there'll be plenty of money for that, because I don't have infinite desire for income. Is that part of your plan, Paul, to try and grow that additional, get, get to 10 million? Yes, absolutely. Because that's, that's part of what makes the company more attractive as a sales proposition. Is the idea that it's not the owner personally managing it with all the all the inside knowledge that I have, that it could successfully be handed off to a management team, and then the owner demonstrates that, and that's very valuable to the next owner. It's like, OK, he was able to do that, and it's still working. I think that that in itself is the big transition is whether you can demonstrate to an outside investor that you've already done that handoff once and it's worked out. It's a difference between a profession and a business. Are you trying to sell your barbershop or you're the only barber there? That's not a business, that's a profession. So you'd have to have people working for you to do the work. I'm just ch Jay, I'm just, I'm challenging you a little bit on your, your, the fundamental premise. I understand Paul's situation and, and the financials behind that, but I, I can say for my business, for other businesses we work with that are small, 20 people. 25 people, 15 people, that, that it isn't a, that there are folks ready to step in and lead the company if the CEO were to step down. $4 million in revenue doesn't necessarily mean you only make what I make too. I mean, I know a guy in my Visage group who's got just a different business. $4 million in revenue kicks out a million dollars in his pocket, and he could easily, he could easily hire somebody if he wanted to. It depends what your margins are. It depends whether you've got, like, I'm in the product business like Paul is. If you're, if you've got high paid people working there because they're doing the work, well, that's a different animal, and you don't have cost of goods sold and all that. So in your business, that's probably not true, but in a lot of businesses where you're selling a product or something, there's, it's not about the people as much. You're almost in a, you're in a professional kind of business where the people, the law firm, accounting firm, same kind of thing, you're selling. You've got high paid people working there because that is your product. So yes, in that case, I'm sure that's not true, but in other cases where that's not the case, I think it's very true. Paul's a very good example of what I'm talking about take a 50% pay cut. Paul, this is probably a topic for another day, but can you just give us a quick sense of what do you think it would take to get to $10 million? Do you think you'd have to make big changes to double your revenue? Um, well, yeah, I mean, we have to have twice as many customers. OK. There you go. Now, work work back from that and what we need to change. Well, we, we basically need to expand the entire operation, but I think that what's holding us back is that we have, we're in a particular way of approaching the market, and most of the people who are buying and selling the product I make do it a different way, and we need to make some inroads into that half of the market. That's the fundamental problem. Other than that, the scaling of it is where I have one skilled cabinet maker now, I need two skilled cabinet makers, where it's just like that's just math in terms of the ratios of how many people for a particular amount of revenue. You would have to grow 14% a year for the next 5 years to double your sales, and that's not easy. I don't think that that's out of line. I mean, in the last for the last 12 years, we've grown at 10% a year. So it's not. A huge difference. Well, it's 40% more. It's, that's, it's a pretty big difference. I'm just, I'm not saying you can't do it. It's just that's a, that's an ambitious number 14% a year. Well, let, let me, let me say that it's probably harder to get from 0 to 1 million than it is from, from 4 to 5 million. And so that you're in, we're in a different place in the journey. We're just way more capable than we were a few years ago, and I'm confident that we can do that. And 14% is It's maybe a stretch for manufacturing where you actually have to build it, but it's not an unusual growth rate. There's nothing scary about that. Paul, you made an assumption like, hey, to double our income, we need to double our customers. Is there any way for you to offer something different that has better margin, increase your prices? Are you constrained by the market? What's the situation there? If I actually knew the answer to that question, then maybe I wouldn't have the problem, but My sense is that it's not much more complicated than that, that our biggest problem is that people don't know about us, that at the moment they're finding us by just doing a Google search and then they find us, but that doesn't, we don't really have a brand presence and in the, in the other half of the market, having a brand presence is pretty important. And we're in a good position to communicate our value to that half of the market now. We're a well established player with an incredible client list and a long track of being able to do the job. So that's what I'm focusing on for the next few years, is thinking about marketing in a different way. All right, I want to hit a couple more points before we go and we're running short of time. The next thing I want to talk about uh involves you, Sean. I believe you're the first owner of a B Corp to join this podcast, which prompts an interesting question. What's a B Corp? Yeah, so I mean, the short answer is it's a commitment to sort of triple bottom line community environment, stakeholder employees, rather than shareholder primacy. You're really factoring in other, other elements to the business besides just uh how much is the bottom line. You go to a third party who assesses your practices and gives you a score, and you have to meet a certain threshold in order to become a certified B Corp. And what does it take to do that? You know, we, we did it back in 2016 in the beginning, and it's gotten harder and harder every year, so the process is becoming, become more Uh, rigorous. Um, it's, it's a lot of documentation and a lot of uh policy around how you behave. You know, do you have, for example, open book management? Do you have um clear paths for Advancement. You know, there's, what do you do about recycling and you know the the things you throw away. You know, so there's all these different dimensions then you actually operationalize to illustrate your commitment to um more than just the bottom line. Has this paid off for you? Was it worthwhile? Yeah, I mean, gosh, you know, I can, I can draw lots of lines to becoming a B Corp that have been Pretty powerful. Um, my director of strategy, her job search started with looking at B Corps, and she found us through the, the, uh, listing of B Corps in Portland. So she's been incredibly impactful in the organization. And then she helped bring in our director of people and operations. So if you just like start to connect the dominoes here between becoming a B Corp and the human capital that we have in the company, it's, it's undeniable. Um, when we, when we go out to the market and try to hire for positions, we get so many candidates, it's, it's incredible. Um. And they're great candidates. So, a lot of that is your, your, your brand position. So just as like Paul was talking about his brand position for his customers, I, I think B Corp is really powerful for employees and recruiting. So I see that as the primary one of the primary values of it. That's very interesting cause I didn't think, I thought your answer was going to be, oh, well, I kind of think, no, that's very tangible, that's very impressive, and that makes sense. I didn't know that. Thank you. That was interesting. Yeah, I mean that, I don't really know what industry to put us in because we're sort of bridging this gap between consulting and marketing. Um, the turnover rate in, in those spaces is, you know, 2 years, 3 years is pretty average, and we have remarkable tenure. We've had no voluntary turnover in the last 2.5 years. It's really powerful, and I think a lot of folks are just now discovering the need to commit to recruiting, um, because they've done it so poorly, uh, for the over the years, and, and so there, this is, this is part of that strategy. Sean, I can see your point with uh potential employees finding you through the B Corp list. How do you think it's affected your existing employees and why do you think it's kept them uh there? Well, I mean, a big component of, of being a certified B Corp is your employee welfare. The policies you have, the, the way you operate, how you treat your employees is measured. And so, you know, fundamentally, B Corps are gonna be better employers, uh, just hands down, um, because they're, they have to actually kind of walk the walk, walk, how does that go? Walk the talk, talk the walk, I don't know. Anyway, uh, you're basically, you're driving your company to be a more employee centric organization, um, if you become a BCcorp. I, I think that's just almost inevitable. And maybe, or in my case, my average person's been here 11 years. I have many people been here more than 20. I'm running a company that I believe has many of those same things, but I don't, I, I can't imagine I would go through all the efforts to do the. B Corp thing, from what you're telling me, I don't think in my case, it would change the hiring process, but I don't think it necessarily means if you're not a B Corp, all you're doing is worrying about the bottom line and not taking care of your employees. Oh yeah, no, no, no. They're not mutually exclusive, that's the point. So one of the values we have from a, from a customer facing standpoint is we have more and more clients now who are asking us to help them with this process. So they're like, hey, we want, we want to realize the value of this, we believe in this, this is our, this matches our values and belief system. How do we do it? So, you know, we're able to help them on that path. I would say, Jay, there is an advantage in that you're now part of a peer group. And so your ability to learn from others who care care like you do, like, like that's pretty powerful. I'm sure that's incredibly valuable. My question is, do you think being in Oregon has anything to do with you, I don't think it's a coincidence you're in Oregon versus you're in New York. I, there's there, we're everywhere, Jay, really, it just fits so well. It just fits so well, the organ, you know, stereotype secret handshake or anything. Like you're walking down the street, you see the guy, you give him a little uh it's more of a wink. They don't actually touch each other. It's a wink. Yeah, we have tattoos, lots of tattoos. I thought B stood for Birkenstocks. I didn't know. I mean, there, there's some very famous B corpse. Patagonia is a good example. Ben and. Barry's ice cream is a good example. Uh, there's a there's a grocery store chain that's pretty pretty significant here in Oregon, the New Seasons Market. Um, so it's, it's kind of like a classic, um, like some big marquee companies that have done it, and then a whole bunch of small, small folks. Let me hit you with one more topic before we go. Uh, I've been reading a lot uh lately about companies that are interested in switching to a 4 day work week. Uh, best I can tell, there's a lot more press notice going on about this. An actual converts to it. But there have been a number of studies that suggest that companies feel they get more productive doing this and that it could be, uh, an interesting benefit to be able to offer employees during the great resignation. Have any of the three of you thought about it at all? No. I want to implement a six-day work week. Yeah. Well, well, that's gonna bring the employee applications. If you're doing 6, why not go 7? What, you know, you're already there, why don't you just do 7. We have a policy of flex time, and I have a number of employees who just, they've arranged a schedule where they're not doing a full 40 or they're they're doing it in 4 days. So It can, it can, I don't think it necessarily needs to be a company-wide policy in order to implement it, but we've, we've had you've done a version of it. People can work 4 days at your shop and most prefer not to. And as far as I can tell, a lot will do will do 5, just no problem. And it's harder to get them to do more and it's hard to get them to do less. And I think that in our case, a lot of it has to do with the job is just hard, it's fatiguing, and We offer unlimited overtime and uh we have few takers because uh it's just hard work and after the end of 8.5 hours, you're worn out and you want to go home. So that's my take on it. Anyone else? We're sticking with the 5 days. 5 days works. Customers actually expect service, you know, I, I'm open 7 days a week, so I, it'd be very difficult to be doing 4 day. There's no way that a factory runs 4 days. So you could have staggered 4-day work weeks, but the transition would be an issue. But to your point, it's fatiguing to stand there or sit there in a factory for 8 hours. Now it's 10 hours. That's, that's, that's not easy in most companies. Sean, you're not a factory. Have you thought about it at all? Yeah, I mean, those studies are really interesting. I mean, they usually have knowledge workers, you know, that's our jam. I love a three day weekend, it's everybody does, um, you know, cause it's like you have time to get the personal stuff done and relax. But I don't know, I, it would be, it would be tough. Um, I think that the compromise we've made is just lots of flexibility, just tremendous flexibility where we work. So, You know, I've got employees on the east coast now and on the West Coast, and so the time zone difference, so, you know, folks with children, so when they get their work done, giving them maximum flexibility on that, and then also a very generous PTO program, that's how we kind of thread that needle. Um. I don't know if formalizing it. I don't know, I have to think about it. I think the, the basic thought behind it is that it doesn't really matter uh in a knowledge economy shop, uh, like yours, when the work gets done much of the time, it's just a question of whether the work gets done and that flexibility can be attractive to a lot of potential employees. The one challenge though, that I see, if you're, let's say you're a shop like ours, we do a lot of collaboration. So it just as important as this to have flexibility, so too is it that there are times when people can connect with each other. So that's a, that's a different tension that I think different knowledge workers have to worry about, especially as people are starting to spread out where they work from and our different time zones. Lauren, are you thinking of going to 4 days because uh. If you talk to your staff about that? Well, I'd have to cut down to 6 1st, but I, but I am thinking about it. Um, my thanks to Sean Bussey, Paul Downs, and Jay Gatz, as always, guys, thanks for sharing. I appreciate it. Wait, wait, don't leave yet. If you have a question or a comment that you'd like the 21 hat's owners to address, send it to me by replying to your morning report or by email at lauren@21hats.com. That's L O R E N at 21 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 Thuberon, founder of Blank Word Productions. OK, now you can leave. Thanks for listening, everyone.