The Healthcare Dilemma: Protect Employees? Or the Business?

Hello everyone. Welcome to the 21 [music] Hats podcast. I'm your host, Lauren Feldman. This week, David C. Barnett, Paul DS, and Sarah [music] Seagull tackle health insurance, one of the least enjoyable issues business owners confront. [music] It's renewal season, and the three owners are seeing different systems, different pressures, but similar frustrations. Paul tells us he's facing [music] the largest premium increases he's seen since the Affordable Care Act. double-digit hikes that will cost [music] them an extra $15,000 to $25,000 next year. Sarah hasn't [music] received her numbers yet, but she's preparing for the worst. And David gives us a crossber view from Canada, where universal coverage eliminates the pricing drama, but introduces its own set of complications. It's a candid conversation about what's responsible, what's sustainable, and what business owners are supposed to do when the numbers don't leave [music] good options. Plus, we also talk about what it takes to get a business ready to be sold. While B is Buy Sell [music] recently reported that more owners are looking to get out, even if it means dropping their asking price, [music] that's not exactly what David is seeing in the marketplace. The truth is that small businesses sell for relatively low multiples of cash flow, he says. [music] And so, the real benefit is not actually in the exit, it's in the owning of them. Even in [music] good times, owning and running a business can be a lonely pursuit. Our hope is that these weekly conversations will let owners know they're not alone in facing [music] challenges. In fact, that's the whole idea behind the 21 Hats community, engaging with other owners to get the kinds of insight only another owner can offer. If you're interested in learning more, you can sign up for the Morning Report newsletter, [music] which offers examples every day of owners solving problems and seizing opportunities. Just search the 21 Hats Morning Report to subscribe. Joining me this week on the podcast are David C. Barnett, who is based in New [music] Brunswick, Canada, and helps people buy and sell businesses, Paul DS, CEO of Paul DS Cabinet Makers, which is based outside of Philadelphia and makes custom conference tables, [music] and Sarah Seagull, CEO of Seagull Communications, a public relations firm based in San Francisco. [music] The episode is titled The Healthcare Dilemma. Protect employees or the business. Welcome Dave, Paul, and Sarah. It's great to have all of you here. I wanted to start today with a quick question about health insurance. This is that time of year when many businesses are receiving price quotes for next year's coverage. And we've been warned in a tsunami of stories to expect very big price hikes, uh, much bigger than usual. I'm especially interested in Dave's thoughts on this for reasons he will explain in a moment. But first, Paul, I I gather you got your quotes recently. How did [clears throat] they look? >> Well, anything good about getting health insurance quotes. We offer three policies. One of them went up 14%, one up went up 15 a.5% and one went up 11.2%. And those are the largest increases I've seen since I started keeping track of this data series in 2018. So, uh, is it the end of the world and the sky falling in? No. Is it mean that I'm going to spend probably an extra 15 to $25,000 next year on health insurance, more than I did this year? Yes. And um there you have it. Now, I do want to give you some context. We are near a very large eastern city, Philadelphia, where the market is dominated by a couple of large hospital chains on the provision end. And the providers of insurance are basically a Blue Cross Blue Shield called Independence Blue Cross and then the usual United and Etna that seem to be everywhere. And I only deal with Independence Blue Cross because I've dealt with them for years. And I'm used to the particular flavor of that they deal out of Revolve and I don't really want to experience anything else. um all the all the medical providers in the area are going to take that insurance and not that I'm happy with them, but I just don't feel like switching. So, that's me. And I don't think that that what's happening to me is necessarily what's going to be happening to others in other markets. >> Those increases, which you said are the biggest you've ever had. >> Oh, no, no, no, no. They're the biggest I've had since Obamacare came out. >> I see. Now, before then, I've sometimes saw 30 to 40% increases in the previous regimen. >> Wow. Ouch. Some of the stories I've read suggested that people should expect uh even higher increases than that. Uh did you have any expectations going into this when you uh got your uh your quotes? There's scenarios where if you were a small business owner who was buying insurance through the exchange and taking advantage of the very heavy subsidies that were passed postco if those get pulled away, you might see a really enormous increase in your premiums as a percentage basis. So, um, again, my experience has been that everybody's kind of in a different boat when it comes to health insurance, and it really depends on where you are and what you're doing before you start comparing this year to next year. >> Can you describe what kind of coverage you offer your employees? Are are you happy with it? >> Um, I'm okay with it. Uh what we have is a program that's rolled out by Independence Blue Cross and they actually did this about 15 years ago which was that a small business like mine could choose several plans to offer to their employees and so that we could to a certain extent choose plans that might be if a family's got a bunch of young kids they're going to be one kind of plan better if they're young single healthy people than another plan. And that's been okay because my employees tend to choose not all the same plan. And uh now getting into the details of it would quickly become kind of overwhelming for one podcast, but let's just say they're Obamacare compliant plans and going by the platinum, gold, silver, bronze. I'm offering silver and bronze plans. >> Sarah, how about you? What's your health insurance situation? So where our plans are administered through our benefit system rippling um which has been great so far because I don't know the how do they do it on the back end but they lump us all together and then they have a little bit more negotiation room um with the benefit providers. So we provide dental long-term disability medical and vision. Um our uh renewal plan comes up on February 1st. So all we've received so far is you know the survey of like are we going to keep what we have or do we want to make any changes. So we have three options for our employees. We pay for the lowest tier in full and then anything above that tier they have to pay the difference. We incentivize our employees to select the lowest tier with funding of their um flexible spending account or their HSA or whatever it is. Here's the caveat though. They like the insurance. I've talked to them. They're like, "It's great. We we're super happy with it. So, I'm not going to change anything." I did this year. Um, my husband switched jobs and I took myself off of my own company insurance and put us on his benefits plan because what we have for my company works really well because I have a lot of young people uh who who are um either just married, not married, none of them have kids yet. Um, so the coverage that I have, you know, it's still a big chunk every month, but as soon as you get into like people with families, that's just a whole different ballgame. Um, which I'm scared about. Um, we are preparing for the worst. Um, and expecting increases. >> In preparing for the worst, have you tried to figure out how much more expensive it might be for you next year than it has been this year? I'm doing kind of a budget um plan for next year. And so looking at it, I mean, I was going to estimate an increase of about 15%. But uh that was just, you know, number out of the sky that I pulled, but um that's kind of what I was predicting. I can't imagine it's going to go any higher, but um you never know. >> Okay, so uh Dave, I'm guessing you got hit with a really huge increase this year. Am I right? >> Well, you mean for my own business? >> Yeah. >> Yeah. I mean, I live in Canada, so Right. >> We um uh the government is our health insurance company, I guess. And it, you know, basically you pay your income taxes. So, everyone gets income taxes deducted off their paycheck and and uh that funds the health care we get from the hospital and our doctors, which is not everything. And so there are uh companies who still do offer uh health benefit packages to their employees. So um you know many of my employees are married and have access to some of these supplemental benefit packages through their spouses. And so I only have a plan for myself. Um and so you know if I want to go to the chiropractor you know that's 80% covered. My drugs are 80% covered under that plan. I wear is covered, you know, like a new pair of glasses every two years, but and I pay for that monthly, which is an extra cost. >> Can I ask Paul a question? Like, how much do you pay for any of the plans in full for your your employees, or is it do they pay a percentage of the options they select? >> First of all, I cover both the employee and their children. >> Wow. >> Because I believe having children is a good thing. And there's certain lower paid employees that I cover the entire thing mostly because the market wage for these employees is not nearly enough for them to be able to afford sharing the cost. For my higher paid employees will pick up somewhere between 60 and 50% of them and their children. And it's expensive, you know, it's it's an expensive benefit, but I I'm not sorry. I do that. I think I've told this story before of a of an employee who came in and asked for some time off because his daughter had stage 4 cancer and we were able to get her all the care she needed uh because he was fully insured and his family and this is a guy who never would have been able to buy insurance on his own. And the interesting thing is that I'm paying him at the moment 28 bucks an hour because I value him extremely, but the health insurance to cover his family costs another $12 an hour. And so he's really making $40 an hour, but 12 of it is just buying health insurance. And uh again, I'm glad that I had that policy because he didn't have to watch his daughter die through lack of care. And it's all worked out. Lovely young lady. Um, but that's just part of what I think an company owner who can afford it should do. I mean, these guys are the ones making us the money through their efforts and I want to uh make sure that they have some security. >> I just think it's interesting that you cover for the lower paid you you cover all of it and then as people become a higher level that you reduce what you cover. Um, I I don't know that I've thought about that option. It's not really if it wasn't so expensive, I wouldn't do it that way. If there was some easy way for, let's say, a 20 to $25 an hour worker to actually afford health insurance, um, rather than me throwing everybody off and they go get it from Obamacare. I don't know what the current state of the penalties for doing that is, but I just decided back in the day I'm not doing that. So, want to make sure everybody's got insurance and I want to share the cost as much as possible and I couldn't come up with a single fair way to do it that would allow the lower paid people to actually afford to do it. So, that's where I am. >> Makes sense. >> Dave, are you happy with the situation that you you have in Canada? >> I don't have any choices. [laughter] Well, I'm assuming you're well aware of what businesses in the US deal with. Would you prefer that? >> I mean, it it obviously it just throws a whole wrench of uncertainty into everything. Um, I mean, we we work with American clients and when we look at financial statements and we see, you know, wages and salaries and we see employee benefits, to have that line jump by 30% without any real control over it, uh, I mean, that's tough to manage as a business owner. And if you're in a in a business where you're having a hard time or it's hard to raise prices, etc., then that's going to eat right into your your bottom line. you can compare the, you know, different systems based on what you get as far as the the deliverables, like if you get sick. I've been very fortunate, uh, and other people in my family have had things work out pretty well, uh, when we've needed the health care system. Uh, but I know other people who would be more inclined to say they were disappointed based on their experiences, too. So, it makes it easier to plan, I think. Um, but it's um, like like I said, I don't have a choice. like we can't even choose to pay for health care if we want to. Um, and so there are, you know, lots of cases where people have to wait for a long time to get something like an MRI, for example. Uh, and they might even travel to the United States and pay cash for it just to, uh, to speed the process along sometimes. I mean, that's not a very good outcome either. >> All right. I guess what I'm hearing from the three of you that there are no easy answers to this. >> Well, I have a suggestion for David. Every time you find yourself complaining about the Canadian health insurance, take out a thousand dollars and put it in your pocket [laughter] because that's the equivalent. You know, I got to pay for this crap system out the nose. And uh yeah, there's some things that nominally are good about it. Although it took me 18 months to get a colonoscopy because they were so jammed up. And so it's not Nirvana over here, but it's definitely incredibly expensive. So that's uh that's my advice. >> This is what I hear when I when I talk to Americans, like when I'm if I'm traveling in the States and I'm just having a conversation, people will invariably ask me about healthcare in Canada and I'll say, you know, some people have to wait a long time for certain things. Um you know, I gave the example earlier of a of an MRI. So, some people will have, you know, an ache or a pain and they're not sure what it is and their doctor might want them to have an MRI and that person might wait months for that. When my mother was being treated for cancer, she was getting an MRI every week uh basically to to gauge the progress of her treatments. So, there's a there's a triage mechanism of some sort that's in play to try to make the use of that machine as efficient as possible. And you know, if you if for whatever reason your ranking on this system isn't high enough, it can definitely feel frustrating. You know, we often hear up here that with private medical care that uh because it's a it's a business and you're paying for things that you obviously get sort of a better treatment like any kind of private business. But every American I've spoken to says it's not like that. Just like you said, you know, you had to wait 18 months for a colonoscopy. It seems like you guys have a lot of of problems with the service delivery as well. >> Absolutely. And then I happen to be in a in a major market with a lot of providers. If I was out in the middle of South Dakota, you know, you're in much worse position in terms of getting anything. >> I mean, I think it depends on where you are and and because I too am getting a colonoscopy. Woohoo. My first one in my 50s. >> Congratulations. >> Thank you. Thank you. very excited. [laughter] Got to get it done. >> It the the preparation is worse than the procedure. That's what I'm going to say. [laughter] >> Yeah, I haven't started that part yet. But no, getting it scheduled was like, you know, do you want it next week or the week after? >> Yeah, I haven't had a problem with that one either. All right, let's move on to another topic. Bisby sell, the uh online marketplace for selling businesses, recently released a report that indicated that sales of businesses are up considerably in the US, but the prices they're attracting are down. This was a month or two ago. There was some suggestion that owners were looking to get out of their businesses ahead [clears throat] uh of potentially bad news. Uh this was before the shutdown and you know, given the unpredictability of the tariffs and other things going on. I'm curious, Dave, this is your world. Um, does that track with what you see? >> Well, I mean, the idea that you're going to build a business up and potentially run it for 10 to 30 years and then decide to sell it in one quarter versus another because of some kind of macroeconomic thing you see happening is I think it makes a great headline, but it's not really the kind of thing that I ever see. The truth is that small businesses sell for relatively low multiples of of cash flow. And so the real benefit is not actually in the exit, it's in the owning of them. So um you know the top five reasons why people sell a business, the number one thing is burnout, boredom, and fatigue. Then there's divorce, poor health, the need to relocate, and finally retirement. I guess if you were thinking over the last year that you might want to retire, and then you felt there was something maybe negative on the horizon, it might give you an incentive to act a little more quickly. Um, but I I I don't think you can say that there is a bunch of business owners sort of waiting for the right market conditions to to pull the trigger on a deal. Uh, most people are operating their business because they need it and they need the income it provides. Um, and then one of those five things I just mentioned kind of happens and then they they need to go to market. Paul, you've I think maybe a year or two ago, you told us that you had started to think about preparing for an exit and that there were things you wanted to accomplish with your business to to get it ready for a possible sale. Are you still thinking along those lines? >> Yeah, absolutely. Um, and I think that there's two possible paths for my business. One would be selling it to somebody who doesn't work here now. uh some external party and there's things about my business that are that would make that attractive to some buyers particularly that we have this very good SEO position with Google that we've been able to maintain for uh 20 plus years now that reliably delivers somewhere between 1,200 and300 potential buyers every year. Paul, you told us last time you were on that you're terrified that you might lose that advantage as people start. >> I'm ter I'm always terrified that I might lose that. >> Well, especially now because of the rise of AI. >> Yeah, but >> I have I have a lot of opinions on that. [laughter] But keep going. >> Okay. So, that's the main asset uh that's independent of anything else on the business. In other words, if you bought the URL and you controlled it, you would have the opportunity to to talk to 1300 people and figure out whether you could um you know find a way to add that to an existing business or whatever. Here's here's the stream of people. The second thing would be an internal sale to my to somebody on my team. And I've been a little skeptical about whether anybody was interested in doing that or capable of doing it, but I just did a round of reviews a couple weeks ago and two people who are longtime employees uh expressed interest. You know, I got a lot of questions about when are you going to retire? What are you doing? And and I tried to be clear that I saw two possible ways to do it. You know, sell outside to a stranger or keep it inside. And both of these people, I think, could do it. They couldn't do it by themselves, but they could do it together. And so that would be a much simpler sale, just basically selling the stock. And I would be perfectly happy to hang around and continue to help them out. And I presume there would be some kind of note I would have to uh issue to them that they would pay off over a period of years. And I'm leaning towards that at the moment just because the 1300 calls are a thing, but how you turn that into product is a much more complicated process and really relies on maintaining a the team we have now and expanding on it. In other words, I think if you were just an outside buyer and you walked in here and tried to run the business without knowing as much as I do about the business, I think it would be difficult to get going in a successful way. you would probably see defections from critical people and uh or just the lack of understanding of the business and the technical aspects of it might cause some issues. So that in order to prepare they're two very different things. For the external buyer it would be highlighting the the strategic value of acquiring and then making sure that all our systems are airtight so somebody could walk in. For the internal buyer, it's mostly about uh educating them as to what I actually do all day and then making sure that somebody is doing those things. Does that make sense? >> Yeah. I mean, I understand what you're what you're getting at. The you what you're trying to decide is what your exit plan is going to be, your exit path. And when um I actually did a presentation on this Tuesday morning in front of a bunch of business owners and I I plot the different exit strategies on an XYaxis chart with one side being how lucrative the strategy might be and the other axis being the degree of control over the timing and the execution. Because if you if anybody puts a business up for sale, they're relying on this stranger who's out there somewhere in the wilderness appearing in a timely manner with the resources and the desire and the and the ability to make a deal happen and perhaps make a banker happy to to advance funds for a loan, etc. If you have two prospective candidates inside your business who could take over your business, then you you could sell it to them, but it doesn't necessarily have to be a one moment in time event. You could create a multi-year succession and sale plan where they come on as small minority shareholders to start with and then increasingly take over management jobs that that you do. uh and then over the course of several years they could buy successively more and more shares from you uh and eventually buy the business. And you know that kind of exit plan can have a great degree of control because you can actually sit down and make a plan with them. And you can also avoid what is a potentially big killer of any small business which is a huge amount of leverage because if they are buying the stock from you little by little over time then there may not be a need to go and get a big bank loan. Whereas if if they are going to buy it in one transaction then likely they'll you know have to borrow some money and then all of a sudden they'll experience a great degree of stress having to make those payments. Right. And and I mean, you've talked on this show about the ups and downs in your particular business, that added stress of a bank payment can really make the difference between someone being successful or not. >> Is there some third path? I mean, I suppose just keep the business until I suddenly drop dead is uh a third path. Well, there are variations on it like like some some people will sell in in in small tranches to the buyer and then once they reach a certain level like maybe if these two two people own like 40% of it then they go buy the rest in one fell swoop. There's there's different variations on this idea. But once they have been in the business and doing all the different roles that that you do, it becomes easier for them to to number one to run the business, but number two to then qualify for financing because a lot of the fears that lenders have have to do with can this buyer run this business. And if these are insiders who actually are in the business and know the business, it becomes easier again for them to borrow. Paul, this would be less of a concern if you follow the scenario that uh Dave just laid out, but if you were selling to an outsider, one issue I think might be how dependent the business is upon your personal efforts in the day-to-day running of the shop. Have you been thinking about trying to extricate yourself from the day-to-day a little bit? Well, I already have in a lot of ways and the operational role of salesman and and engineer and delivery. I mean, I've done everything in the company and I don't have an operational role at the moment. Now, I do dip into sales now and then when it's a project that I think has potential, but nobody else on the sales team wants to touch it. And I do quite a bit of of uh just sort of maintaining a lot of behind the sort of mechanical things that somebody needs to do like maintaining our GSA contracts. They're not rocket science. They just somebody needs to do them. I do all the HR and I manage all the money. And none of those things are so complicated that I couldn't teach someone else to do it. Um, I mainly do them because I don't particularly want to pay somebody to do it right now because it gives me something to do and I still enjoy going to work. You know, I like being there. I think that the biggest intangible is that people are used to working for me and I have a very particular idea about how I want to run the business and the people who are here seem to like it. So, if new people took over, and this would be a huge problem if it's an external buyer, that's the most likely thing to cause problems that they just bring in a different culture and a different approach. But, um, that's where I'm at with it. I'm mostly doing things that I like to do or uh I'm willing to do because they're too much of a pain to explain to anybody else. >> Sarah, you're uh you're still young. You've never even had a colonoscopy, but have you started to think at all about a possible exit? >> I love that I'm in my 50s and I was still young. Thank you. >> You're welcome. >> All that Botox. Uh hello. I live in California. >> Yes. So, my husband and I actually went to a financial planner yesterday and you know the the the guy sitting there and it was kind of our intake um session and he looked at my husband and he said, "Well, when do you want to retire?" and my husband had a a more concrete vision and then he looked at me and asked me that question and I was like don't know. [laughter] But here's the thing is that there's two things that I've been thinking about a lot is is at one at one point I want to be able to have my company set up in a way where I can suddenly look at my team and go I don't work Fridays anymore, you know, where I'm like able to trust the internal infrastructure to keep things going and I can have a little less of a a a rigorous work week, right? Um, and then the second thing I'm starting to focus on is and and I haven't touched this really, but like, you know, what are all the metrics and numbers and data that a potential buyer would be um looking at if I were to be bought by a larger entity? Um, I have been bought before, but I was much smaller then. So, it was a little more of a funky process. But >> you sold your business to a larger company and then you actually bought it back. >> I did. And it's interesting that it that's apparently not rare. Uh this in this IR firm I worked for um a long time ago. Um they were bought bought by a larger entity and like the owner just posted on LinkedIn saying, "Hey, we bought ourselves back." I was like, "Okay, but I wouldn't want to if I sell, it's selling for good, right? But I want to be able to have resources and and you know perhaps you guys can send me in the right direction of like what are the you know the 10 to 20 things that I need to have really dialed in to be very attractive to somebody who would want to buy us. I don't want to sell today. I have no intentions on selling tomorrow. But you know when I get to that point where I'm like I don't love it as much as I do. I mean my age is starting to show. Who knows? I want to know that I'm not gonna have to like figure that out um at that time. I want to make sure that I can push a button, pull a report together, and be like, "This is us." So, that that's kind of my story right now. >> I bet Dave has a ready answer about what you should be thinking about. >> Give me answers. >> Yeah. Well, I've got a whole program called Exit Ready that you should go through cuz it it exactly does all of this. And uh I I tell people they should go through it like like two to 15 years before they think they might want to exit. But in particular, this is all you have to do is put on an empathy cap and think about your business from a buyer's point of view because there's basically two questions. The first question is what is the demonstrable steady cash flow coming out of this business? That's going to determine the the price of your business. The second question is will this cash flow continue under the new owner stewardship? And that that's the prickly question because that's when you get into well are there, you know, systems and procedures and all this kind of thing in place. Is everybody dealing with Sarah or are there employees that do these things? Uh is there a customer concentration problem here? So, you know, do you have five clients representing them 50% of your revenue, for example? And so, all of those questions are going to basically help the buyer determine if they want to do the deal at all or if they're going to need to structure the deal to manage the particular risks that they that they turn up. Yeah, I that's really interesting. I I don't want to interrupt you, but like I I have this conversation on a a regular basis with my team where I'm like, listen, I'm really resistant to any one person becoming too connected and bonded with one client because it doesn't it doesn't do anybody any favors cuz like if that employee leaves and the client's like, "Well, where's my person?" Right? Or um you know, it just causes problems in that space. And so my clients uh I really I don't think there's any clients that are like Sarah's the person. I really try to make sure that the the team is showcased for their contributions and that I'm just there for the uh the the vast knowledge of having worked in this business for a really long time like I can help turn things different ways. So I do think I have that. Do you have one client that represents a a big chunk of your overall revenue? >> My old story is that um I used to um and then that imploded in my face in 2023 where I had three four large clients with huge retainers all leave at the same time for different reasons like VC money running out, they made a bad investment, whatever it is, it wasn't based on our work. And I had to lay a bunch of people off because of that. And I had been told by so many other people like don't go to the end of the driveway for less than $10,000 a month if in retainer or whatever. Um, and I listened to that for a really long time. And so after having gone through that terrible of experience of having to like let go of people that I really really liked and valued and were great contributors, I reworked our entire thing. So now our retainer levels are much more modest and but we have a lot more clients. So the the the balance of that is that we have to have a ton of systems in place um to find those efficiencies cuz right now we have 22 clients. >> Yeah. So, it it sounds like you're doing a lot of the of the right stuff and uh you know, the buyer of your business is either going to be someone else who's already in your industry. Uh maybe they're they're they're looking for a a footprint change. So, maybe it's an East Coast firm looking looking for a West Coast office or something like that. You know, I've recently helped a client of mine make an offer on a janitorial business and the business had one client that was 30% of revenue. So, it kind of mirrors what Sarah was saying about her business a few years ago. And the buyer ended up making an offer with a large degree of seller financing with an offset amount if that client ever left or the revenue went below a certain level in the first 3 years after the acquisition. And you know, the seller didn't like that and ended up rejecting my client's offer and didn't want to talk to him anymore. My client followed up with the broker about a month later and found out that the subsequent two buyers made similar offers because everyone who's going to buy a business sees the same problem. And Sarah, when you lost those four big customers, you were able to lay off some people and get your costs in alignment and you survived. But if you were approaching that year with those four big clients and you had a giant bank loan that you had just taken out to buy the business that you were running and you lost those four clients, no amount of job cutting would have saved you. You would have ended up, you know, having to close your doors. You would have been bankrupt. >> No. and and the way that I do things now is we're yeah we have some bit bigger you know midsize and smaller size and whatever but like any one client I don't like clients leaving like I'm we spend so much time getting to know them and and really diving deep into them but like things happen and budget shift and change but no one client should have an impact on my staff like I don't want that to ever happen again but I also gives me the flexibility of being like, "Hey client, I see that you are having some other things and um I don't ever want my services to be a burden on you. I want my services only ever to be a benefit to you." So like we sign contracts, but like I am probably one of the most flexible agencies out there because I'm a small business. I understand the the um challenges that pop up and I and I get it. Um, and I'm always happy to work with people because I'd rather have the continuity [clears throat] um than the cash. >> The tricky thing there, Sarah, is with all those clients you have now, some of them are going to grow and do well and without your even noticing it initially. They may become a bigger part of your portfolio than than you realize. Have you thought about what you would do in that situation? >> No, but I'll let you know when I do. [laughter] It's It's not a terrible problem, I suppose. I mean, >> no. And we have we um I'm I'm knock on wood, we've got some interesting things coming to us next year that I'm really excited about that you cuz we have a lot of we have a lot of kind of small to mid-size businesses. Um but we have a couple marquee brands that may be coming our way that we're really really hopeful for. Um, and those are the clients that when we get those are going to take us from being I think I've said this before on the podcast is like my my business is a pimply teenager and we're we're looking for all those opportunities to figure out how to become an adult. Um, and uh I don't know what I don't know, [laughter] but I know that at some point there needs to be more structure in everything that we do. um so that we can continue to scale um because if we don't figure that stuff out, it's going to be really hard to scale. >> Can I can I bring us back to an earlier part of the conversation, >> please? >> Um I had mentioned earlier in the in the podcast that um the benefit in owning a small business is in the operation, not the sale. And so Sarah, your question was about, you know, an ideal exit or what buyers are looking for, etc., etc. If you got a whale of a client showing up on your doorstep, that was going to be 40% of your revenue, for example, according to what I just told you, that wouldn't be good for the resale of your business. But if you knew you were going to be serving that client for the next 3 or 4 years, it would be better for you to take that client and earn the money from working with them and then have a quote unquote disappointing exit when you go to sell because of the position you put yourself in. be because the money you would put in your pocket over the three or four years that you serve that client would more than offset the the the reduction in value that you might face negotiating with a buyer. >> That makes sense. Yeah. I'm not going to turn people away if they're like, "Hey, we want to sign a three-year contract and give you all this money and it aligns with the stuff that we do." I'm not going to turn them away. It's just being more flexible and having a a larger rain of of retainer and retainer options has made me feel more comfortable in that I don't worry about a particular client staying or going um because my P&L is is is fine without them. But that's a good point. Um, but hopefully, you know, over the years my modest retainers will become a little bit higher and my modest retainers will be a little bit different and then I'll have a variety of of larger modest retainers um as I grow. But, um, yeah, I'm not going to I'm not going to turn people away. You want to hire us, I will figure out how we're going to do that. Bring it on. Sarah, we exchanged emails earlier uh this week and you said something about feeling as though you are uh building your plane while you're flying it. >> Yes. >> What were you referring to? >> It's exactly this. I mean, I did a lot of things this year that I mentioned. I hired a fractional CFO, fractional HR person. Um I actually this is my favorite recent um thing is that the first person I ever hired um uh recently came back to us and I'm so excited and she she fills an operational um role in [clears throat] the company and [laughter] a lot of the systems that are in place for my company are things that she created. So it's nice to have that because I I just don't have bandwidth to do that and nobody else really that's not their thing. So, but building the while you're flying is is is not just finding those efficiencies for um the client work, but it's also figuring out how do we think about what we're going to be doing in 5 years and build the process now cuz um I know Paul was talking a little bit about the traffic that he gets to his his site and I of course being the curious person I am, I went and I looked at his domain authority property and I looked at the the amount of organic traffic that he does coming to his his site, which is good. Um, but it's not based on external links. It's based on internal content and information that you're providing to people. So, you're doing really well on your keywords. you're just not you're not thriving based on backlinks um from uh you know authoritative websites like um you know New York Times and Washington Post and all that kind of stuff. >> Well, he had a lot of links from the New York Times a few years ago. >> Yeah, I [clears throat] know. But like >> yes that but >> there's there's been like could I just jump in? I mean, first of all, we got put into into decent or excellent organic positioning way back in 2002 and three just by sheer luck and without doing anything smart to maintain that got all the way through to when Lauren hired me. And then I had period of four years when I had a zillion back links from the New York Times and that was kind of like a turbo booster and that ended. But uh we're pretty dug in and I think that that's a big part of success on the web is how dug in are you? How long have you been successful? So now that we can do that helpful strategy which is in my mind what should be the baseline for every website. But uh how I got there in involved some very authoritative backlinks. But yeah, but you here's the the thing is that it's shifting now because when somebody used to go into Google and search for uh a new um conference table and and go through the first and second page of Google, they're now switching to, hey chat GPT, where's a place that I can buy a um conference table and have it custom made? >> Well, we we're aware of that. Yeah, I mean the last last week and I don't know whether you heard the episode but we specifically talked about my recognizing that this is the issue and kind and a self a homebrew strategy for trying to address it and I would invite others to refer to that episode rather than me go through the whole thing again. But yeah, everybody can see that coming because nobody knows exactly what the playbook should be. But it's a big problem for my industry as well because you know how do we quantify the work that we do with traditional media, influencer, social media, all that kind of stuff in terms of its searchability on these platforms. It's no longer impressions. It's no longer backlinks, you know, like how do we say what we've done for the company has value? And so my industry is, you know, spiraling a little bit because we do know that um earn media is still very key. >> So those links do still matter. >> They still matter. Um but they don't >> it's third party validation which >> but you can't track it because somebody who finds something on chat GPT is not necessarily clicking a link and going to your nobody's going to see that it's being driven to your website. But you can take on faith that getting that kind of [laughter] >> You think I can report? Hey guys, >> I understand that this remains something of a mystery, but my suspicion is that many of the things that helped you with your SEO will also help you in this brave new world. And I think, you know, being linked to by the New York Times will remain a good thing even if it's harder to measure. >> Yeah. No, I'm just saying that. Like I can't go to my clients and this is where I'm like trying to think about five years ahead of time. I can't go to my clients and be like well you know we just we think that it's good and it's it's giving you brand awareness and driving traffic to your site. We can't tell you give you metrics behind it but like you know we think it's good. So like that's where like everybody in the like PR and comm's industry is like how do we quantify this? How do we prove to our clients that everything that we're doing actually is valuable to them? because [clears throat] when it comes down to it, they want to know that they're getting their dollars worth. >> We only have another minute or two. Dave, have you thought about this? And uh are you concerned about being able to track where your leads are coming from? >> Uh no, because I, you know, I was in university studying uh marketing and sales and advertising when the internet was first born back, you know, in the early 90s. And you know when the internet came along, they had this great idea that somehow we could attribute every customer we ever met to exactly a moment in time when they clicked the link. And I know that's not true because when we get a consulting engagement, we have a little space on the engagement agreement where we ask, "How did you ever hear about us?" And people will put all kinds of different things that, you know, sometimes I'll put that person's email into my Mailchimp account and find out they've been on my email list, you know, for 2 years. But on the engagement agreement, they'll put that they it was YouTube, right? So So which team gets the the score or the check mark, right? Was it the email list or was it YouTube? The the fact of the matter is you do all kinds of stuff to make sure people know about you. And uh it's really difficult to absolutely know where or how somebody found out about you, especially because we still have a lot of offline loops in how people function. Now, people spend most of their day offline. And if somebody is listening to me on YouTube and a friend of theirs expresses an idea or concern that I can help with and the friend says, "Hey, I I'll follow this guy on YouTube. You should check out." You know, that's not going to show up in any kind of attribution. So, I'm not that worried about it. I do stuff to make people aware of us and the and the work that we do and hope that it works. I guess it's kind of like uh um you know, Paul, don't you uh sacrifice some money every month to the Google gods or something like [laughter] that? Isn't that what you said before? >> Absolutely. Just throw cash at them. I don't expect anything from it other than they don't completely remove me from my position in organic. So Sarah, uh, on a scale of 1 to 10, how big a crisis do you see looming, uh, for your industry in particular in terms of the attribution issue you raised? >> Well, I think people know that the value of what we do is there. It's just the magic um, finding the secret sauce of how to quantify and report on it. Um cuz we're in reporting season right now where all you know our clients want to hey how did we do this year like in all those metrics and it's still there we're still pretty standard way but we had to kind of reinvent the wheel a little bit um and figure out how we're going to do that going forward and all of the platforms we use um they're also trying to figure that out like what are the triggers and and levers that they can track um that give us an ability to say, "Hey, more people are finding you directly because of us." >> Well, I'm sure we will discuss that further. Uh, for now, my thanks to David Barnett, Paul DS, and Sarah Seagull. Thanks for sharing, everybody. One thing before you go, everything we do at 21 Hats is created by entrepreneurs for entrepreneurs to help [music] us all learn together. If you get something out of listening to these podcast episodes, consider joining the conversation. 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