This Is What It Takes to Build a Business, Vol. 2

[Music] hello everyone Welcome to our special year-end review episode for 2023 I'm your host Lauren Feldman this week we take a look back at the conversations we had last year about the many rewards and responsibilities of business ownership highlighting some of our happiest smartest funniest and most difficult exchanges from the past year along the way we discuss topics such as escalating salary demands how much profit a business should make a new way to sell business the problems with esops how to sell cookies on LinkedIn breaking a million dollars in annual revenue escaping the valley of death and the pain of having to fire a longtime employee even in Good Times owning and running a business can be a lonely Pursuit our hope is that these weekly conversations brought to you by our principal sponsor the great game of business will let owners know they are not alone in facing challenges same thing with our daily newsletter the 21 hats morning report which magazine named the best newsletter for business owners and which you can subscribe to for free at 21h hats.com where you can also find lots of other articles and interviews there aren't many places where you can hear entrepreneurs talk about the real life problems they are confronting right now today as they happen with no guarantee of a happy ending but those are the kinds of conversations I have every week with Paul DS of Paul Downs cabinet makers Sean busy of kinesis Jay gz of artist frame service Mel Gravely of triversity construction Jennifer Karen of SB Expos and events Liz picarazzi of City bin Jackie Russo of bran Russo Sarah seagull of seagull Communications William Vander bluman of Vander bluman Search Group Dana White of assumed to be named successor to paraly Boyd and Laura Xander of Jimmy beans wo in this episode we also highlight several appearances by special guests who stopped by in 20 23 to discuss their Journeys including Muhammad Abdul Hadi of down North Pizza Jeff Braverman of nuts.com Michael Brown of Team shares Brad Herman of texto all Grayson hogard of Grove Cookie Company Lance Tyson of the Tyson group and Ari weag of zingerman if listening to one of these highlights makes you want to go back and listen to the full episode that can be done most easily by going to 21h hats.com there you'll find a transcript of this episode with links to all of the episodes we sample the episode is titled this is what it takes to build a business Volume [Music] 2 as you'll hear I introduce each Exchange in this episode with a few words to set the context in the first highlight which comes from episode 138 how's your Compensation Plan holding up Shan busy and William Vander bluman discuss what it's been like trying to make sense of employee compensation in a time of Co the great resignation a labor shortage and [Music] inflation well I can tell you what we're doing at our office and it's based on what we're seeing you know in the pandemic we had to reorg and reshuffle and we for the first time had to do staff Cuts back in March of 2020 and that left us with kind of I mean we lost some really good people it wasn't like we had fluff but the people that stayed with us through that we are very interested in keeping around and retention is such a big deal right now that I authorize a percentage bonus pool and then our managers go and figure out how they want to divy that out and I authorize the biggest pool percentage wise that that I've ever authorized was that based on your company's financial performance in 2022 or was that based on play the goal of retaining employees it was our best year ever by way better than we thought so it was a little easier to take that step but you know cost of living I guess is starting to come down some but we kind of figured just to make people whole we better do eight or nine% and then we did a little better than that was it just bonuses or did you offer significant raises as well no that's all all raises bonus is a separate issue I see not everybody got that number I mean we offered that number to our managers and said you might have some that deserve 11 and some only eight or what you figure that out that's fine but but what we're authorizing as a company is a significant pool of money to raise annual salaries which is as you know an evergreen cost but we think that um the inflation issue is real and the people we have with us now are some of the best people we've ever had so we're kind of paying it forward in retention and that's based on what we're seeing in other areas that a lot of people really cut down to the bone during the pandemic the people that are left are really pretty critical to the uh business and painful as it is to raise Evergreen costs we're just going to do it to try and show people we understand that it costs more to live than it used to and we want you around for a long time had you had much turnover uh well we did we we did about 7 or 8% the year before so the losses we had were not because of Finance we made some pretty significant shifts in the last 12 months and some people didn't feel like that was their best place to flourish and they moved on and and that's fine wish them well I don't think we had any really nasty departures uh it was just chemistry is seasonal right and uh as we move from one posture to another there's some that enjoy it and some that say that's not my deal and we wish them well and move on but I don't think we lost people because we were not keeping up with cost of living Sean from what you've told us I I gather last year was not your best year ever tell us how you've been approaching employee compensation yeah um so before the pandemic I went really hard at the idea of compensation and making it better because I started thinking about the thing that employees and owners both thread which are those negotiations and it struck me as very odd that you would go through all the effort to hire a really great candidate you get on this really the high of oh my gosh this new person they're so good and then right before they join your team histor typically you engage in this like almost adversarial uh issue of figuring out what they get paid and there's so many problems with that idea just I think of from a cultural perspective but also from Equity perspective and creating gender and race wage gaps and so we what we did is we committed to every two years doing a market based survey of what the positions in our company um pay and then we committed to paying 75% of Market um which is you know not the very top but also pretty pretty significant and then on top of that we built a bit of of a formula to factor based on experience tenure and the organization what the rate of pay would be for an employee so that system was really great you know because we do open book management at the company so there's a real kind of clear understanding of financials and that there isn't this giant bucket of money to raise wages are you transparent about salaries as well Sean we are but in a very specific way meaning that every position that you want to go after will share that range and how that formula works we don't post everybody's compensation on the wall I I think that that's problematic in lots of ways um but if you know somebody says hey I'm a designer and I want to go into the strategy Department what would that look like we'll talk about the compensation range and how that formula works and and then we also post it with every job description which is now required legally in our state anyway so that program has helped us from a compliance perspective a lot and also I think protects us a lot from a a lawsuit and that kind of issue so I I love I love love love love love it it's been great the problem that I'm finding now is it's time for our annual survey we did the survey and holy cow the wages have gone up so much you know we were like I said pre pandemic we were 75% every position has gone up by anywhere from 1% on the small side to probably 14% And then my position which is crazy uh so the CEO role has gone up by 20% Which is just astronomical so now I'm looking at that going like I don't need a 20% raise but these other people really do need raises and so it's really creating some challenges to our model just partly because we weren't hurt instantly by the pandemic but we were really hurt from a marketing perspective over the long term of the pandemic and we're just now starting to kind of recover from that but you know everybody who knows marketing knows that the thing you do today will probably have an impact 6 months or 12 months from today so that's our hurdle right now is that our financial situation is kind of like eh okay and you know how do I stick to my commitments in terms of compensation with a much smaller pie than I've historically had so that's my challenge right now in a Bowman episode a new way to sell your business I spoke with Michael Brown of Team shares a holding company that is buying the businesses of Boomer owners who are ready to retire but in many cases struggling to sell once the business is bought team shares turns the employees of those businesses into employee owners which is intended to strengthen the businesses while also addressing income inequality starting in 2020 and flying largely under the radar team shares has bought more than 80 businesses in more than 40 Industries most ranging between $1 million and $5 million in Revenue I asked Michael to define the difference between how team shares operates and how a typical private equity firm [Music] operates so private Equity uh tends first of all to to play in a um you know generally with larger companies that sort of generally start sort of at least 5 million of profits uh and scaling way up into public companies and take private so their model as as you know some of your listeners will know is to you know to raise money from um foundations and endowments and institutions buy businesses and within 10 years sell the business and so you know our strategy is is not to sell the businesses it is to to let the um employees earn the 80% of the stock ownership through time through service over 20 years so the businesses in the design of Team shar's business model will never be for sale again the the businesses the secession Loop the secession problem for all the businesses we we are working with basically the secession uh sort of Gap is broken or or filled in another way because you don't ever have to sell the business again they just end up 80% employee own and 20% team shes own could you walk us through uh an example just to to show us how this works pick a typical company yeah so we we work with businesses that you know are as low as a million of Revenue up to 10 million of Revenue and you know our goal is over time is actually going to be to to try and address even smaller companies but we would buy the business from the retiring owner and then we would um you know do an announcement with the key employees um to get them comfortable shortly before closing and then you know have sort of you know internal Champions um ready before a more General announcement and then shortly after announcement we would um issue 10% of the stock basically deluding ourselves deluding team shares and issue 10% of the stock to the to the employees across the board it's sort of not a key person program it's for everyone who's there who's an ongoing permanent employee of the business and then we would also hire a president and and we vet them and we put them through a one month training program and then support thereafter because in addition to the financial transaction that needs to happen for the owner to sell their business and and get their some of their retirement proceeds going they also need to transition the day-to-day leadership of the business and so we also recruit um the president so that's that's the that's the the gist of the model and then we transition over um you know 20 years starting at sort of 10% employee ownership and end up with with 80% employee ownership and you've done this I believe uh with about 64 companies in 43 different Industries when did you do the first one the first one I think closed in January of 2020 and we did you know one a month in the first quarter and then we all know what happened um in March and April of that year and so we decided that it was in the best interest of the company to stop doing new sort of retirement um sale Acquisitions and to support the existing companies and at that time is a very small company it was three founders and you know two other colleagues and so we we sort of spent the year supporting those companies get through that very difficult economic environment and start to build software to be you know to be ready on the back end to start um you know doing more more of these retirement Sals you said uh your typical range is between 1 million and 5 million I believe a million dollar in revenue is is not a lot of money and you need to replace the owner with a president who's going to run the business you need to give Equity to employees you need to invest in the business to grow it presumably how does that work where does that money come from yeah there's a couple of questions in there so the way we Finance buying the businesses from the reing owners is are very similar to any sort of financing which is a a mix of equity and debt that we we provide and so that the owner gets their you know a significant amount of their cash out at close and then you know some ongoing payments over time in terms of the size question within there so you we will go as low as a million of Revenue and sort of as high as generally 10 million of Revenue that's just the Topline sales the profits you know can be you know sort of as low as sort of you know $1 to $200,000 after U paying for a president um which is a real expense to the business but we have a couple of goals here so one we are trying to address as many companies as possible and so we all know that the tail skew is left that there are many more small businesses that there are large ones and so to your question around sort of you know how do you make the math work and how do you afford a president generally as we go and address smaller companies a president may start to lead multiple companies um and so that their cost is shared over a couple of different companies whereas sort of in the you know typical today sort of a a medium siiz uh business might be more like four to five million of Revenue and you know the president salary sort of fits fits comfortably in that cost structure and it typically is less than what the um what the you former owner who built the business and you know deserve to pay themselves whatever they want is sort of it's less than than what that cost was historically how do you uh value the businesses you buy and and set a price yeah we value the businesses based on the um the cash flow of the business so to be a little more specific basically the operating profit and also considering sort of what the capex capital investment needs are the business and then we you know we propose a multiple uh based on that number based on our own sort of calculations the businesses financials is that regardless of the industry or does that get taken into account as well is regardless of the industry it's really about the um sort of how steady the financials are and you know potentially what the growth Outlook is do you think you typically come in at market value what a business owner could get if he or she took the time to to try to sell it uh on the market well these businesses are are on the market of the 81 companies that including the companies that have not yet closed uh I think all but four of them um were for sale by business brokers so they are on the market um and that broker is running a process to solicit multiple offers and you know overall about 50 today historically about you know 50% of our letters of intent are accepted but if you look at the ones where we are um very close to the asking price it's about an 80% acceptance rate which I think speaks to the active choice that that small business owners are making in choosing employee ownership their legacy but paired with transaction certainty where we end up being having a different view on price isn't because we're doing anything Hardball this is maybe one of the Misunderstood things about teames we actually just have a very different view of what the ongoing cash flow of the business is that's generally when we get turned down it's because we just we are at a lower price because we have a different view of what the cash flow is isn't that something that's kind of black and white it is to us but I think that it's not I don't think it's black and white to everyone I think it's very emotional and I think that I think that Brokers and and business owners should I mean we're rooting for business owners everywhere so if someone is going to pay more than what we can offer even though we're we're buying things very much within Market that they should go and they're trying to maximize their estate in many cases and generally we are very competitive sometimes we've actually had situations where people have gone with a higher offer that was only say $200,000 higher than ours but actually the other party didn't have uh financing lined up it's cheap and easy to to write someone letter of intent but team shares closes 90% of its letters of intent which is basically unheard of and so we've had multiple companies that actually had a busted process where they had a they had an Loi signed and the transaction number got closed and they came back you know to work with us [Music] in episode 141 how much profit should your business make Paul sha and Jay talk about the bottom line what kind of return should business owners expect to get on their time energy and capital and what can they do to build a cushion into their annual planning that protects against unhappy [Music] surprises Jay you said you've raised this question in multiple business group sessions and never really got into a satisfactory answer I'm wondering why you haven't gotten an answer to start I mean obviously profit margins are going to vary uh across Industries but can't you get a pretty good guideline for where you should be in any given industry I'd say no I I think it's there's a lot of factors first of all what's the highest bottom line I got a friend who owns a business he's got like a 30% bottom line it's not the picture framing business right no it's not there's businesses that have a % bottom line I would think that most people would say if you had a 10% bottom line that's pretty good there are books out there that you can buy with a bunch of Industries in it of course picture framing isn't one of them that you can look up what is the average profit of a printing company or whatever and I'd say you know 10% probably good retail if you look at the big retailers in America they're usually at five six per. Sean Paul is this something you guys think about I do I'm in a CEO's group where we have a number of different kinds of businesses and the guy who's got the best margins is doing about the same gross revenue as I do but he takes home four times as much money and uh he's in a $4 million business taking home a million dollars a year what kind of business uh he runs a company that does business valuations uh SBA valuations for banks and he's an extremely smart guy who really has everything button down you know it's just like he's my hero in terms of uh running a tight business but he's also running a business where you don't have to buy materials you just have to pay people well let me ask you this because running a tight business certainly is part of it but from my observation of being in five six groups over the years people that have really big bottom lines e and tell me how this I'm going to give you the checklist and tell me if this is true on any of these they've got some proprietary product or you know they got a patent that certainly do it or they've got some business that's been around for years and years and it's got a brand name and everybody wants to buy that or they've got one big or only a few customers and they don't do any marketing because they sell the the Buns to McDonald's or whatever so they've got that advantage or they have got some Market advantage that most people don't have does this guy have a market Advantage why isn't their competition going and doing the same thing he's doing and undercutting his prices well there is he's he's just winning the battle um I think that what you brought up that different different businesses are just different is really the the gist of it and then the other thing would be how do you define profit because I'm an S corporation and I'm the major shareholder I tend to think of we're looking for something like 8 to 10% profit out on a cruel basis but then if you fold in my uh compensation and looking at something called sellers discretionary earnings which is like all the stuff I pay money for but I don't have to through the business all those fancy clothes you wear the fancy clothes yeah the fancy clothes uh the heat for the office all those all those fripperies I was close to 15% on SD last year but I think you also bring up another very important point is that there's a lot of times profitable businesses are profitable because they're not actually doing something that they need to do to secure the business in other words your example of someone who does know marketing but they happen to have a huge customer it's like okay you can if you're not investing in the thing you need to make sure it runs without you or it could survive without you or just anything where you might have been spending money but you just take cash instead and I think a lot of small business owners struggle with those decisions particularly when they're trying to get started they need to support their family and they just decide but you know I can't afford to upgrade my software or whatever it is that sets them up for the future I think the guy you spoke of got two things going for him one is that's a lot of business for a service business so I think like if you're a lawyer or account I think if you can get your sales up to that and you're doing a good job yeah you do have a really big bottom line is one and two is the fact that he's hooked up with the SBA he probably doesn't have any marketing expenses so no no no you know he does these SBA valuations for banks he's not directly involved with the SBA at all okay but still he's probably got 10 Banks he has relationships with no he's got more than that he's got significant marketing expenses oh he does okay he's just very very good at everything he does he runs his business using the traction Concepts and really does it right out of the book and he's just a fantastically good business Paul can you give us a a quick sense of what the traction concepts are the book is called traction I can't remember the name of the guy who wrote it but uh it's it's a it's a set of moves that anybody is running a small business could Implement it's about setting goals and holding people accountable B basically and then doing regular reviews to make sure you're hitting those targets and if you have no idea how to run a business that's a pretty good place to start there's a number of people who who've implemented it in my group and I've implemented a version of it and it's really effective it makes you look at okay how do I actually run this business how do I make sure everybody knows where we're going how do I make sure I have the right people here it just gives you some some ways to go about that and if you were looking for a set of ideas to uh guide your actions it's a pretty good place to start you may not end end up implementing every single thing like I didn't but uh certainly gave me a lot to think about Sean how much thought do you give to what your profit margin should be yeah so um it's a really critical number for I think any business for us we've tracked it every year pretty closely for I don't know well over a de I mean we've been around for 23 years but I I really didn't understand it probably for the until the last 13 or so and that was a real um eyeopener for me and I think that the big breakthrough I had was uh and we were touching on this a little bit are the artificial ways that business owners influence profit either from the income side or the expense side so you know examples are some business owners load up the business with lots of costs to make the business look not profitable because they don't want to pay taxes but then that creates some artificial views of the business which can make it difficult when you like want to get a loan or if you want to sell the business I think it also just clouds your vision of what's going on in the business other businesses Cloud it in other ways in terms of like what you all have been talking about which is like organizational debt so they don't invest in things over time like whatever software people development etc etc so so they may have really good profits but the business itself is suffering and that impact happens over the long term so for us you know I use a really simple idea since we're a service based business and we don't have a lot of product coming through us you know for us we kind of treat 10% as a break even Mark if we get below that um that's red lights are going off what do you mean 10% is the break even point the way I came about this idea was somebody talked talked to me about how you know there there will always be a mistake that you make there will always be some unexpected event you know somebody files a lawsuit against you an employee makes a claim you really screw something up with a client you end up having to refund their money you know there's just so many ways that a business is is vulnerable and what the 10% allows you to do is to have those events happen the things that are out of your control um maybe an economic downturn and you can live to fight another day um you're essentially creating enough of a buffer to build resilience into the business and if you fall below that at least in in my world in my Professional Services world you you're just very tenuous and you you're often having to act reactively and emotionally which is never very good for a business okay so the question is you use the phrase Break Even which is I don't correct me if I'm wrong that's really not break even wouldn't it be more accurate entrepreneur to entrepreneur say that's our loser line like if I run the business and I have a 2% bottom line I'm a loser like that's stupid whereas in your case if you get to 10% okay you did okay you're doing okay could do better but you're doing okay it's the okay line it's not really a break even line it's you're doing okay line is that not true yeah yeah no you're right I mean you know technically zero is break even in a bonus episode selling cookies on LinkedIn Sean and I spoke with Grayson hogard about how he and his wife started a side hustle Grove Cookie Company during the pandemic's early days and then found themselves selling cookies on an unexpected platform and to an unexpected Market businesses looking to build relationships with their clients I had listened to a podcast um actually because I have never been on LinkedIn prior to the cookie Adventure I had listened to a podcast in July that had a busines to business LinkedIn video expert on and her summary and how I took it was if you are a B2B company and you're not utilizing LinkedIn you are missing out on like the biggest opportunity ever and so I got home that day I made sure my password and everything worked for my LinkedIn updated my photo kind of put a new bio in there you know cookies blah blah blah and from there I just kind of hit the ground running with Dent so you know aside from tuning up your profile um and and it seems like you went after the like personal brand as opposed to make about the Grove Cookie Company in the beginning what are the what are the other things you did uh in those early days since you just got on the platform and you didn't have thousands of connections well Sean you you happen to fall right in my little web of connection requests yeah I my real strategy was you know a connection request but with a message not just like rapid fire connection requests yeah I just think you know the slightest personalization and like presenting what you're offering and why you're connecting is like you know it's like meeting a stranger it's like hey why am I meeting you right now um that's how I that's how I took it um from that strategy of trying to build my following and um I got really lucky that there's not a lot of like cookie companies on LinkedIn um so you know you start posting photos of cookies and you talk about cookies and you like angle it from the client appreciation standpoint like that gifting yeah was the unlock I remember you reaching out to me I don't remember exactly how you positioned it but I do remember it was fair it was customized and I get so many requests and all of them go in the trash because I know that as soon as I accept the request they're going to start selling me something um but somehow you broke through that and you know yes I he was selling cookies Sean well that helps that helps but it was more about what he said and maybe if you can remember I don't if your script is the same or if you even have a script I know do do you customize everyone that you sent out so I I do customize it very minor in the customization you know really if you have founder CEO VP or any title in there I'm I'm gonna offer you like a free sample box of cookies in that connection request got it okay so I'm coming in there my thought is and I've learned this just over the two years is like I'm basically get you know it's that reciprocating like I'm sending you a connection request but I'm also sending you free box of cookies if you want it right it's a good deal yeah yeah I think it's a very fair deal you just had to click a button so yeah I actually have the message pulled up I went into LinkedIn and pulled it up you want me to read it yeah yeah hi Sean my name is Grayson my wife and I founded Grove Cookie Company in baverton Oregon if you enjoy out of this world soft and delicious cookies we'd love to connect let me know if you'd like to try a sample box and then I just put our website with like our about like I always kind of forwarded people to our about page because most people want to see that you know right um and yeah and you you responded with the funniest thing I don't remember you want me to read it what did he say yes please Sean goes hey Grayson great intro I get a ton of connection requests and ignore 90% of them because they aren't relevant or it's someone looking to sell me something but free cookies genius and you go your timing is funny too I was just telling someone that the untapped opportunity is for Consumer Brands to use LinkedIn for marketing anyway nice to meet you Sean and from there like you you gave me that positive reinforcement like oh this is like smart that worked in episode 144 what it means to break a million dollars in in Revenue Liz and Sarah talk about what it was like to pass a milestone that many women never reach but having passed that goal what's the next one for Liz and Sarah and is it possible that profitability is as important as Revenue growth um just asking today I I want to talk a little bit about your attitude toward growth and how it may have evolved over time but first I I just want to note that you've both already beaten the odds uh we've all seen the numbers that indicate how hard it is to break a million dollars in Revenue I think fewer than 5% of businesses one in 20 actually do that it's a huge milestone both of you have done it I'm curious were you conscious of that was it a goal was it a big deal H how about you Liz yeah it definitely was a goal for me and I remember on the day that it happened I was really excited but I was kind of by myself I was working from home that day and I felt like well who do I talk to about this you know besides Frank and so for me it was like a weirdly non-eventful day for a milestone that was so important to me another reason why the million dooll Mark was significant for me is that when I worked at American Express in the small business division we had a program to help women entrepreneurs achieve a million in revenue and they did like seminars all over the country and I remember I took note of that wow this is a very hard thing to achieve like less than 40% of businesses are owned by women and something like only 2% of women-owned businesses achieve a million I mean that was a stat from like five or six years ago but I think it's still pretty significant Sarah how about you were you uh conscious of it was it a goal a big deal no it was never a goal it was actually when I was acquired the person that facilitated the acquisition basically handed me the goal said this is your Revenue you should have this goal for the end of the year honestly it gave me anxiety it gave me stress like I had always just focused on profitability um and not that million dooll goal but the the problem since then has you know meeting that goal um that was handed upon me but now you know working at moving beyond that goal and so that's kind of where I'm in a holding pattern we'll talk some more about that we should point out that you were acquired but recently took your business back and uh are uh running independently again Liz once you hit that goal how did you reset after that did you come up with a new goal did you feel like you know you could relax a little bit or did it kind of rev things up for you I think it roved things up for me actually you know I really wanted to get more more Millions like most people do so when I hit that million I set the goal the next year to get 2 million and I do think it's significant um I don't think I reset I mean for me it was less about the money and it was more about the brand and establishing the business as the goto in a category that quite frankly I'm kind of creating you know luxury trash enclosure was really not a thing until cityin came along so for me success is also you know to be that go-to like you know canva was for easy graphic design or Spanx you know was for shapewear or chbani yogurt was for Greek yogurt I mean those are all gigantic companies but part of the reason they became successful is that they were category creators so for me it was like wow we've achieved this Revenue Mark we've got great momentum we're headed towards being this category creating company let's just keep going in that direction how' you pick the goal of of doubling your Revenue after you hit a million was that based on anything in particular or did it kind of just seem like the next logical step I mean it looked like that's where it was trending and it did also I saw the types of clients that we were getting and they were bigger and the order sizes were bigger and we were really moving from residential to more commercial so I really saw it as an attainable goal how about you Sarah I think you told us that one point that uh your goal going into last year was to double your Revenue how did you uh come to think about it that way I don't know it was just a number um you know it just seemed a natural step I mean mean it was a it was a reach number for me and like I always kind of placed that as it um because I've wanted to grow in a way that I can maintain that is not going to get me in trouble because you know as we've see we saw during the pandemic is that you know clients go away and there are a lot of different factors that can cause a client to leave it can be you know VC funding drying up or um you know change in the market place in general um so I just don't want to my growth to be dependent too much on one category so it's kind of I'm trying to be a little bit more methodic about about our growth and not just go you know of course it'd be nice to have you know extra funds but I also am not just going to take a client because it's going to add to our our bottom line are you still thinking about profit the way you did originally Sarah yeah 100% like profitability is important to me because the way that I've set up my company is so most PR agencies are in around the 20% profitability range that is that is and they end up with a checking account with 20% of their revenue at the end of the year and we give out pretty sizable bonuses when we can when we have that nice pocket of funds and that also helps us maintain our employees and makes people happy and it's a nice way to end the year Etc you know I've been able to maintain that as a minimum but you know it's always nice to to reach towards a 30 or 40% profitability um which gives us that nice um bucket of cash to to play with at the end of the year either giving it away to um staffers or reinvesting in the company how do you try to manage profitability what's the key point there that you focus on oh that's the million dooll question um I have a p&l that I literally look at every single day I'm looking at expenses I'm looking at how much it really costs to hire a person I only have one person on staff who's not billable everybody else is billable and it's literally I it's like you're balancing your checkbook every day and that's how I make sure that at the end of the month you know we're not at zero balance in our checking account like I want to make sure that there's a buffer [Music] in a bonus episode turning a failing Nut Shop into nuts.com Sean and I talked to Jeff Braverman who was CEO of the company at the time but has since kicked himself upstairs to Chairman Jeff spoke about how he took control of the retail Nut Shop that his grandfather had opened in Newark New Jersey and that his father and uncle had been running over time Jeff managed to turn the business into a direct to Consumer Juggernaut without destroying his relationship with his father and uncle just stepping back a minute you know I run into a lot of Second Generation Um business owners where the where the parents are still involved and it sounds like you faced kind of a common situation where there's a status quo there's a way of working it was you know boots on the ground retail presence and you had a vision and a transformation you wanted to bring about how did you navigate you know your big ideas and change and all that and and and also manage your relationship with your family yeah yeah it's it's a great question and I think I I was I was lucky and had a little bit of a special situation here because I think often whether it's a strong patriarch or matriarch but there's someone strong who's reluctant to see control to the Next Generation I've I've had unique relationship with my dad were like in high school I was investing his money and managing his money so there was something a little bit different there there you know I I did come home my freshman year of college I put together a little business plan my dad and my uncle had probably never had a business plan to um you know try something with the internet they gave me a very small budget it did cost me more than that um but you know they had strong belief in me you know like I said when I decided to come into the business and this was exciting I'll speak for my dad he's just a creature of habit uh when the store the store was actually struggling so when there were no customers on a Saturday he'd be nervous and when it was right before Christmas and really busy he'd be equally nervous and and just you know a reluctance to change and kind of you know set in their ways my grandfather was the exact same way you know my dad told me that when he was came into the business he wanted to put in display cases in the store this was like old school you would to know what to ask for you couldn't even see the product and it took my dad years and finally cried to his mom and finally you know she said you know Saul listen to him and give it a shot and they finally put in display cases and sales went up so I think like you know he probably forgot a little bit of that once I came into the business but but but he was certainly more open-minded and one thing that uniquely that they did was they gave me the keys in a much more generous way than would normally happen and there were challenges like at some point I said hey we need QuickBooks and I remember distinctly it was about $299 at the time and my dad said let's wait for business to be a little bit better and I just said no and like you know he just had no choice because I just bought it right MH you know we were dead and on Saturdays in the retail store I put together the case and said hey we need to close we're actually not making any money on Saturdays and they response was well poy saw would never let us close and you know they wanted to start with a half a day and sometimes I just dug in and they didn't have the fight in them but then what happened was things worked so we didn't have a business was not a good business was not making much money and then we start growing and it becomes super exciting yes when we turn on that website again the new version in December 4th 2003 my dad actually said shut it off cuz it was too much business and he was scared scared he couldn't fulfill it just so just nervous yeah and it's like we we we we got this you know like we had uh example but we had a Wholesale customer we had to have a wholesale business because the retail store was just you know going down and down each year and uh you know I just visited them asked them questions said how how can we help you they're like well we really love packaging will you package for us my dad and my uncle said no too much labor cuz for them they didn't want to think about hiring people and I showed them the map I was like oh my gosh we can make retail margin at wholesale volumes let's go so I was the person who packed it right and just kind of drag them along but then it starts getting faster and then we start hiring people and like and it worked you know we grew this business very quickly and profitably and so like I think that covers up a lot of stuff but I think there was a deep love and respect that they had for me which is which is like I'm not saying that's not other places but they were much more trusting and then you know one to my Dad's credit and all of a stubbornness in life because he's pretty dogmatic it was you know he pledged that if wasn't expecting to have a kid to come in the business like he had to kind of go into the business but if he did he would you know give them a lot more latitude so like very quickly like look that retail store of ours got bulldozed in 2005 wow that was 50% of our business fortunately we had the internet that's a symbolic moment yeah and I was there to save save the day and um you know again things work we grew 50% a year for 10 years or whatever it was and you know got paid before we paid our suppliers it just it just a model that worked in episode 146 I can't have a handle on everything I played a little game with Jay where I deliberately asked him questions that I knew were likely to trigger him I don't like to brag but triggering Jay happens to be something I'm pretty good at So eventually I asked Jay about my perception that he's kind of given up on keeping up with technology especially digital marketing technology something I think he could come to regret all right I'm clearly not triggering you with this one let's move on ni try though let me try another one this one's about digital marketing and actually it's something that came up the last time Laura and Dana were on with you they were both talking about how they've used influencer marketing and they both expressed the opinion that it could work really well for you on your businesses you I think you do it to some extent with Jason Hol maybe not with uh picture framing and when I asked you about that I felt like you got a little bit defensive that this is not something that you really want to put your energy into I wouldn't call it defensive maybe dismissive I knew you were GNA get defensive about him saying no I don't cuz being defensive means I feel like you're attacking me I don't feel like you're attacking me I I just I I am dismissive of it because we do it and I just have not seen any evidence that it's working Point Lauren Lauren you just scored a point just so you know thank you thank you you were dismissive of it I think you were a little bit defensive too when I asked you well what are you doing your answer was kind of a quick well we're doing stuff yeah there's no question I would give you this I don't know if defensive is the right word but the answer is I know we're doing a lot of stuff for Jason I know it's working well I hear about it I simply don't have the day-to-day knowledge that I can sit here and tell you what we're doing or what we're not doing which gets to my point of I just don't know every single thing that's going on in the company and some people might go oh well that's terrible you have yeah really it's working okay for me I don't know what to tell you I got 130 employees they're competent they own their job they do a great job I I will tell you this which to me is a lit Mist test of it I was I've been in a business group with six other business owners every single month and I've said this to them at the end of the meeting I could confidently say to all them do you know what you all have in common that I don't every one of you is stressed out they would say during the meeting they're stress I'm not stressed out like I'm not a micromanager it's like it's okay I don't have a total handle personally on the digital marketing but I feel comfortable that my people do do I think we're doing it as best as possible I'm sure not perhaps I need I need to hire a outside firm or something but like I just I can't have a complete handle on everything so that might part I might be defensive about if in fact you're insinuating that I should well go ahead I just you a tool to use thank you I appreciate that no I don't I don't expect you to be able to handle everything yourself that doesn't make any sense at all and I'm certainly not encouraging you to be a micromanager but there's a difference between being able to do it all yourself and being conversent in it and I don't think you've made the effort to be conversent in digital marketing true you're not doing your own taxes either but but you know accounting and you know what to look for and I'm curious if maybe it might be worth a little bit more of your time sure maybe Laura you are conversing with digital marketing she's 20 years younger than me big difference Jay you are smart enough to figure it out I mean I understand no but she grew I have I have to remind everybody when I started in business there was no such thing as the computer on a desk there was Zero computers she grew up I'm there with you I understand um she's a native uh certainly much more so than we are but I remember when the microwave came out he could do this if he wanted to and I'm I'm just raising the question and hope you're right I could do it if I wanted to I have to decide what I want to do and I'm in the I'm on J side with this I'm just doing whatever makes me happy and I think that especially with marketing we see this in the software world as well but we keep using new terms and we keep throwing new phrases around influencer marketing blah blah blah we've been doing influencer marketing for forever I mean for the at least the last 50 years or 70 years the format has changed maybe it was in print magazines before and now it's in Instagram or blah blah blah well wait a second we should we should Define the because but I just think the principles and the high level approach is the same you get someone popular who has an audience to help promote your product so I I think that Jay well that sounds that's you could be referring to celebrity marketing you know exactly that is a form of it for sure but you with social media you can do something different and for all Jay knows there are people posting pictures of one of his frames on uh Instagram and he could be using that to his advantage and it doesn't matter if the person is famous or not there's a way to to use I just don't think that's Jay's role um I think that that's tactical not for him to do it himself but maybe to know whether it's happening don't you well I certainly could find out if we're doing that I I have to tell you some of this falls on I'm in a new place now you ready I'm in this phase I'm in the whatever phase like whatever really I mean that doesn't sound like you no I I I'm I'm I'm I'm paying attention to a lot of stuff I can't argue with you I will follow up and find out where we doing all that stuff but I I just at some point it's like I could spend my whole day hunting around I don't know I I will ask I think for framing first of all for Jason I feel good that we're doing the stuff right because I hear about it all the time for framing I know we're doing stuff I don't know that it's having any impact I certainly can follow up on it that's what you always say there's two pieces to this that you aren't addressing one is I we are doing it for Jason artist frame service the framing business is a local business it's just not the same thing and when you call influence marketing would you include I've got on my website that that architectural digest said we were the master framing Place in Chicago magazine named us the best framer in Chicago so I would call not okay I just think on a local basis I don't know that that's uh the kind of thing that works on a local basis I thought you were giving me your best shot is that the best you got Lauren seriously you just it seems like the same topic we just cover does work a local basis Jay and I think you've proved my point that you haven't taken the time to to really think about this in the way you would with with other things involving your business perhaps a little surprised I didn't get more backup from Laura on this but to be sorry for you right now Lauren cuz you're not giving your best shot at this I can think of far more things that would get me triggered than that in episode 147 I just cut my pay Paul talks about how 2023 got off to a difficult start for him some of it was personal but it was also business related with sales of his custom conference tables falling way below expectations happily things did improve as the year went [Music] on first of all Paul you were out for a while I believe with Co how are you co was just part of the fun I started by screwing up my knee playing soccer then I got Wicked Co that lasted for a couple weeks and in the middle of that completely threw my back out oh jeez it was great it was great it was a way to have a nice break from work and sit around feeling miserable and intense pain which is what all bosses dream of you could have done that at work you didn't have to be home for that yeah but I'm all better now so thank you for asking glad to hear that um how did the business run while you were home being Miss miserable it ran very well I mean we we are having a little issue which is that I planned my manufacturing operation for 5 million a year and we're off to a 3 million a year start so that's bad uh because we're running through our backlog but I think that we're going to pull it out right the last moment we've been able to run the factory at full speed and uh it's just a question of the backlog shrinking but have some orders coming in and people have been calling us so it's just one of those boss clutch moments when you have to get up in front of everybody and giving them an inspiring speech about how things look terrible but they never are as bad as they look and I gave that speech and the people seemed to buy it and uh I think that we are going to get out of it okay I seem to recall that you've had uh struggles in the early parts of the year and and previous years is this any different than that yes that it's an unexpected slowdown in orders unaccompanied by any other indicator that that should be happening so usually what we would be looking at would be okay how many people are calling us that's like the Baseline metric if x number of people call you in all other years that's correlated with x amount of sales and this year I I'm not quite sure what's going on but the best I can see is that we are heavily dependent on being the last ones into a construction project or a corporate move and usually what happens is those projects take a couple of years to initiate and execute and they don't want the table till the very end so people often don't call us till the end of that project and I'm thinking that it's possible we may finally be seeing a CO lull in my business now it should have appeared the minute people started working from home but it just didn't but if there were projects that would have been initiated in 2020 and 2021 and 2022 that would have been finishing about now and just weren't initiated that could be part of it that's the external possibility internally I can't put my finger on it because we're doing all the same things that we did last year and it was our best here ever you know what I could ask the reverse question I could say how could that not be affecting you cuz I got clovered last year at my corporate art business because the offices were closed who's hanging artworking offices are closed and I took the hit on I think what you just said makes perfect sense I don't know how you couldn't be suffering from some covid backlash from two years ago and it begs the question as the boss it's not like you can just turn off everything I'm not going to start laying people off that are good solid people that I've got years invested into so sometimes you just got to at least as far as I'm concerned sometimes you just got to take the hit well I agree I mean that's that's what I'm doing I had planned to make a bunch of investments in marketing and I'm going to continue to do that and I've also put a lot of effort into building relationships with other companies that are in uh similar business with us but maybe sell a different way and we are getting some orders from people who are very busy just selling through other channels and don't have the manufacturing capacity so it's kind of an tight run thing but compared to other moments I've had this is nothing this is just this is just a little bit you know the backlogs down low but it's not something where I think oh I'm really dropping the ball here now when we last had something like this was actually 2012 and I ended up writing a book about it but when I was weeping in my beer to my vistage group about oh our sales are down and you know I think it's the economy their advice to me was doesn't matter what's happening in the economy you got to look and see what you're doing because that's the only thing you can control in episode 149 we're still buying inventory Jay talks about how the pandemic supply chain issues ended up sticking him with a lot of surplus inventory that is soaking up his cash and greatly exceeding his warehouse space interestingly Jay continued to tell his buyers to keep buying more stuff even if he wasn't entirely sure where he would put it [Music] Jay what kind of year are you off to there's no question that the Market's a little soft if I was to go back over the years and chart the stock market to sales there's clearly a a relationship it's a little soft I'm suffering the end of the pandemic problem which is my guys were out there buying all kinds of cool interesting things for my home store and it was all tied up and could get over here and then who it's all coming in now and I've just got a tremendous amount of inventory and uh it's going to take me the rest of the year to get it back under control but uh is it you say it's still coming in oh yeah I mean it's just you couldn't get stuff the supply chains been have been cleaned up for a while now haven't they um to a degree but you know my buyers literally go around the world looking for cool and interesting products and they got to fill a container and as you know the containers they were tied up and I'm not saying it's happening today but like just a few months ago the stuff started coming in and I just have a tremendous amount of inventory and I got a ton of money tied up in it and it's going to take me the rest of the year to work down but to make anyone feel better who's got a cash crunch even after 45 years it still is a problem and I'm going to work through it as I always have but it's still I I can tell you it's it's just it weighs on you subconsciously just I just it just just weighs on you and I'm not afraid of Bank debt and I've I've had Bank debt for many years but um using up big lines is just is just a little wears on you a little bit lines of credit yeah and it's like we're fine we're paying our bills on time it's just very easy to get inventory out of control when you're buying the way we buy and uh and I don't want to mess the you know it's kind of like cutting uh Samson's here I don't want to mess with telling the buyer stop buying stuff because that's the business we're in we're into buying cool and interesting stuff so I'm not going to put the hold on it but I I do have to work through the uh the glut with the inventory Jay what's the bigger issue is it finding places to store stuff or is it the money that it's tying up well I'm lucky in that my kid happens to be he does development and he buys buildings and then he either eventually bulldozes them and puts up a new thing or he converts it so my son has a couple of empty buildings that I was able to stick stuff in but without that I would have definitely had a problem with stor it's both um it's where do you put the stuff you know Jason home is a it's gotten to be a pretty big business it's very easy to have a lot of money tied up in inventory and it's not like I'm in the you know ice cream business where you just order your gallons of ice cream and you have X amount in the back I've just got a lot of interesting cool stuff that they bought on a bunch of trips and it comes in and it takes a while to cycle through it is there something looking back that you could have done differently or was this just the inevitable you know that's an interesting question um no I mean I have my son here now who comes in and says you know the inventory is high and blah blah blah blah blah I said yeah I'm well aware of it I and I sat down and I said here's what our cost of good sold is here's how much volume we should do this year and I showed him if we just use up 30% if 30% of what we sell comes out of inventory it's going to write itself but but going through this I realized my son's been here for a year and a half I've been doing this for 45 years it's going to take some time before he gets his SE legs because it's not like this is the first time I've been through something like this and from the outside Observer you think you can turn some dial and fix it and it's just not that simple like I said the last thing I would do is go to my buyers and say okay everyone stop buying for the next few months it doesn't work like that I mean there's shows there's there's places they go to they're yearly they need to go there and buy the stuff and it's certainly as the year goes on there's going to be less of that happening but we're going to have to use it up but no in hindsight I don't know what I could have should have done tell them be careful what you're buying I mean they're already careful what they're buying so there's really you know just is what it is it gets down to something that Amy said to me a few years ago companies should have a credit line that's probably 10% of your sales and that's good advice for everyone if you are running a healthy business that's some good advice luckily I had changed Banks and got a bigger credit line and I'm glad I got it now in a bonus episode not sold on esops there's a new alternative Ari winw who co-founded zingerman along with Paul Saga and Brad Herman who co-founded text them all along with hi noen talk about why in preparing their companies for an ownership transition they both considered and then rejected creating an ESA and why they both settled on a relatively untested [Music] alternative so I'm sure you considered every option how did you land on this one well like many people of my age group when we started businesses all those for now for US 41 years ago we weren't really worried about succession planning we were happy if we stayed in business for a few years so in a good way not by accident we have arrived at this point and about 15 years ago Paul uh as he is good at doing started asking these provocative questions about sucession so again I'm going to attempt to explain this relatively coherently but we had early on arranged a buyout agreement between the two of us so that if one of us would pass away uh we had life insurance that would fund the buyout of the hirs of the person who had passed right so if I had died the life insurance would pay out to Paul he would use that money to buy out my heirs so that they wouldn't become owners in the business and that was all good and about 15 years ago he started saying what happens after the second one dies and I said well we have insurance it's no big deal and he goes yeah but where do the shares go I'm like I don't know anyway so that that started a long long series of conversations and the obvious answers for what you do are the typical things you sell the business to somebody else I have a lot of friends who've done that it's a very good way to hit that in quotes cash event that people like you can do an ESOP which is an employee stock ownership plan which uh are friends at great game of business Greenfield remanufacturing are big fans of that I'm not a big fan of it for a number of reasons but one issue that we have is that because we have all these separate businesses you can't do it as one esap even if we wanted to you literally can't do one like employees the employees work for each business so The Zing train employees work for Zin train right the employees at cornman farms work for cornman Farms so you can do an esap within Zing train but you can't do an esap for all of Zingerman's there's other issues with esops in my unprofessional opinion also I think Brad's gonna raise a few of those too when we get to his story okay okay so you can you can leave it to your heirs which we weren't going to do or you could go public which is another version of selling it I didn't really like any of those you could also sell it to your partners right and they could inherit it but the problem with that and I'm not saying this would have happened but is that it doesn't eliminate the thing that you sell it to them and then five years later they sell it so us giving them a deal to get it in the interest of keeping it local and in the community is isn't really that helpful if it just gets flipped to you know some big multinational five or 10 years or 20 years later around the time we were struggling with this I was reading EF Schumacher's book which is uh celebrating its anniversary this was 1973 so whatever that adds up to 50 years this year and in there uh it's not the main point of the book which by the way the book is fantastic but he wrote about the Scott Bader Commonwealth in England and Scott Bader was uh born in Switzerland moved to the UK I think 1923 started his own business in the chemical business and in 195 51 having attained a fair bit of success made the same sort of decision Brad has made and we've made now which is essentially rather than selling the company or leaving it to his kids he wanted to preserve it to benefit the people who work there and keep it self-owned and so he created what he called the Commonwealth and they are now celebrating their 100th anniversary so it worked I love this because it it allowed the business to stay local because part of what happens when companies get sold is like all of this great stuff that not like we're the greatest thing in the world but we've contributed a lot to the community in terms of jobs quality of life contributions etc etc and all of a sudden when headquarters shifts from an arbor to whatever Abu Dhabi or New York or San Francisco or wherever over time and no matter what the good intentions of the people who made the purchase were they move on and more and more decisions are made further a field the power shifts away the money shifts away and you really lose that connection with the community and this model I love because it allowed us to prevent all those things from happening soari if I heard you correctly you read a book you heard about a company that did this a hundred years ago in the UK what made you think you could do it how'd you take the next step what made me think I could do it I guess when I have a good feeling about something I'm not always right but often there's something to it and I just do what I have typically done with so many things start talking to other people who I respect about it and with this one I actually got a lot of naysaying because it really hadn't been done much in the US and there was a lot of you know that'll never work why would you do that you're giving away the company it doesn't make sense why wouldn't you sell it to the existing Partners who's this coming from Ari who's the skepticism coming from many people business owners Partners employees yeah yeah all all of the above not from everybody and I understand it I mean it's was a different model it it goes against commonly held values about maximizing your value and getting your money out after Decades of hard work and in a way it goes against the entrepreneurial mindset that we're going to sell it to our existing partners and in 30 years they're going to flip it for a lot of money and it goes against the common value of extraction that you know to Brad's point that we wouldn't just turn around after 40 Years of hard work and sell it and move to Florida or whatever with all the new money that we got so we're basically gifting the organization to itself but we feel good about it and we're not we're we're able to get paid out make a living over time and and everybody hopefully can come out ahead but anyway over time I just kept asking like that's what I do I just I don't force it but I don't give up on it either and uh Maggie from Zing train Maggie bis the one of the partners at zinc train was one of the people who thought it was a good idea and one day I don't know three years ago she called me and she said uh hey I found this guy and I think he knows something about this Pro this program that you could talk to so uh he was a guy who had worked for organic valley and I called him and he said well I'm not really the expert but there's this place in Oregon organically grown uh is a large organic produce wholesaler and they have done this and they know about it and so so I called the woman who was the CEO at the time she since moved on and we had a good talk partly about why esops don't work and then about why this can work and then they had basically spun out a small subset of a couple folks who were very passionate about this this type of program who uh essentially I describe it as like they were like zing zing trained but for Perpetual purpose trusts and so we worked with them uh alternative ownership advisers over about two years so they guided us on on doing this work before I ask Brad to explain how he landed uh on this as well I I understand there are a lot of Concepts involved here and a lot of goals but any owner thinking about this is also naturally going to think what do I get for my many years of work and I just want to make sure we're clear it sounds like you're not getting a Payday at all this is a gift am I understanding this well it's it's it it can be done in any way you design it within the legal construct of it Paul and I will get paid our salary for a while I don't know what we agreed on 20 years or whatever so that we can keep living I mean I think that the idea of this is that it can be done in a way that allows the founders or owners to exit with Grace and do perfectly fine it just yes it is giving up the chance to turn around and sell 40 Years of zingerman for a lot more money than we're going to get the way that we're going to get it and that's where our ours is going to look different well I mean it is going to use the profits so I mean essentially it is giving away at the end of the day but they are going to use future profits to to to pay off a loan to Founders so there is a valuation there is a loan and it is going to get paid off but we do get a lot of flexibility as to how that happens as well and I and I suppose you could involve a bank if you want as well there certainly is a lot of flexibility in how this is executed you also could just write it in your will that when you die it goes into a trust as well you know and you get paid nothing and here it is so lot lots of different ways that it can be done all right Brad how did you wind up discovering Perpetual purpose trust and deciding that that was the right option for you guys well I think that the Genesis of it is that my business partner Ari and I both by the way are incredibly fortunate to have business partners that have become a part of our person and I think that's a key part too this whole conversation has to happen with aligned business partners we feel like we've built something that people really enjoy coming to you know a place that people really enjoy working and that has a positive impact on them and their families and and everybody else that we work with and we think that's worth preserving so we have the big hairy audacious goal of being a hundredy old software company now most software and service companies you know the the goal is to have the giant payday and we think it's I don't know like Ari we are more than more than comfortable on the path Less Traveled and we want to see if this thing can outlive us and and last to be 100 years so that's inevitably like starts you on the all right well how do we do this you know employees owning it to us uh feels like capitalism at its best right like people getting to uh think act and feel like entrepreneurs and keeping that entrepreneurial spirit because they get to to participate more than they might normally in in the fruits of their labor and I think that's awesome and I think it's a maybe a remedy or an alternative to the capitalism as bad guy that you know I I had probably programmed in my brain as a young lad in business school they taught you that in business school well you know maximize shareholder return like I think that was like programmed into our brains I see and and I think that there's there's something to be said for you know what maybe that's off and maybe a business does have responsibilities Beyond just maximizing return for their for their shareholder but as I alluded to I'm not getting paid nothing you know we have a profitable company I live a wonderful spoiled rotten life already and and we're not going to get nothing as we transition to this trust we put a value on it and and set a formula and and roll but the way we got to trust though is we looked at esops you know it feels like it's a it's been 10 years it's probably been four but we we've gotten to know a ton ton of Esau s and and ask a lot of questions about those very good friends and and values driven companies we also explored what I call like do-it-yourself employee ownership explain that there are a few folks one who's been super helpful is Carl Ericson at Atomic object in Grand Rapids Michigan we went up there to go sit down with him and and his team and say tell us about this and essentially he's slowly selling the company to his employees and bringing them on at into the fold as partners in in the escort okay great you know like it works but there's a couple things that didn't didn't quite work for us on that number one it's going to cap you at 200 participants we had some H1B noncitizens that wouldn't have been able to participate and it really lends itself to a a more sophisticated employee it's going to complicate your taxes you're going to be getting k1s you know there's no more 1040 EZ once you go down this road so those are the reasons that we didn't go for do-it-yourself employee ownership um despite it being our preferred option at the time we ended up uh going down the ESOP route uh in in the absence of better options believe it or not but we ended up pulling the rip cord on it about a week before we signed all the papers and uh it wasn't going to work the way we wanted and I probably honestly should have pulled the rip cord a lot sooner but that's my fault and we spent a lot of time and money explain what happened it must have been pretty intense to make a decision like that at the last minute well it starts with incompetent advisers being honest you probably could could have nipped this in the bud sooner for us or said it doesn't work the way you think it does but that kind of opens us up and I'm sure there there's plenty written about what folks don't care for with esof for starters they are comp complicated as all get out I mean I was laughing earlier uh learner is on my top five on strength finders so I'm not afraid to dig into complicated things I think I'm a pretty sharp guy and five months into an ESOP I was perpetually overwhelmed with complexities and having to have things explained to me over and over again uh not because I couldn't get them it's because there's 57 million different ways to do it and I think there certainly is a um a contingent of folks that think esops are almost intentionally complicated you're not going to put an ESOP in without an army of advisers um on the financial side the trustee side Etc I mean it's it's certainly an industry of in and of itself other thing we didn't like is they're inflexible like if you make a mistake when you do it it is incredibly difficult to unwind you know because the Department of Labor is your boss and they're going to think you're trying to take care take advantage of employees I would hasten to add I'm sure all all three of us know lots of owners who chose the ESOP route and are glad they did I know a lot of people who are you know they promote it with Rel religious fervor okay yeah I mean many good friends of mine too so some call me after this but one of them is is what Ari and I hit on earlier that we love about the trust model is risk of sale we were only going to go to 20% ESOP it was going to take us 10 years to get there but we were absolutely absolutely not going to go above 50% ESOP and the reason why is our company is recurring Revenue software of service high margin it's all the sexy things that private Equity firms want to acquire and at the same time all esops get a you're not getting a great valuation you know when you sell to your employees I mean if you're trying to maximize your absolute maximize every dollar you can get out of your company no employee ownership model is going to be for you okay like that's not really going to work well for you or be your best option so we were fearful that if we got to 51% ESOP that a uh you know some private Equity well-funded Firm is going to come in and tempt our trustee with I I'm going to give your employees a 50% return today and have to do it out of their fiduciary responsibility and then at the same time the ESOP folks tell you oh we're going to put poison pills we're going to do this we're going to do that and what is it it's just more complicated stuff that you got to figure out now to prevent something happening later and you just you just don't have any of that with the trust model and that is like straight away like checkbox number one that we love and it sounds like Ari does as well is that it's in a trust there's nothing you can do about it in episode 155 being isolated is just a bad idea we closed with Shan asking Paul and me about the first 21 hats live event which took place in Chicago in May and which sea had not been able to attend by the way we still have a couple of slots open for our next 21 hats live event which will take place in Fort Worth in March if you're at all interested go to 21h hats.com or shoot me an email to learn more all right so so the real question though you know Lauren is a terrible self-promoter what about Chicago tell us about that do you want Lauren to tell or me to tell I want you to tell us uh Paul like why' you go and what'd you get out of it well why did I go uh I've as I said at the beginning of the show I I believe there's always value in just meeting a new group of people and I really like a format where you actually have some time to sit down with every single person and get to know them a little bit I also have faith in Lauren that he's going to put together an event that that's just basically valuable I mean he's been to 10 million small business conferences I believe so you have probably know what's what's good about him what's bad about him and it was a chance to meet some of the people I'd interacted with on the podcast but have never met face to face and uh I would say that it was a well-managed event uh there was never any useless downtime or everything that Lauren planned seemed to be well thought out Jay goz deserves a huge shout out for being an extremely gracious host and Chicago is a nice place to visit and the weather was good so yeah it was good and Lauren has such an interesting mix of people I got to say we were in Jay's boardroom and I'm looking around the room I'm like there's something really weird happening here and what it was is that first time my entire life where I was in some kind of business situation there were more women than men and and I you know huge shout out to Lauren for being able to find a diverse group of of people to get together that really reflects what the future of business is going to look like of all the people who are there I know Liz pigazzi best because she and I have known each other for a number of years and she would probably be the one to comment on this but I have a feeling that for your average founder who walks into a room of 50 plus year old white guys there's an intimidation factor and so I was just really happy to see successful business owners in a mix of demographics that really looks like the country and that's so unusual so six stars for Lauren for putting that together I I did not pay Paul to say that but I would have what did uh what did you learn from it Lauren what would you get out of it you know for me it was I I viewed it as an opportunity to kind of prove that there's real potential to to create a a 21 hats community and that if you brought people together they would connect you know I made some mistakes I definitely learned some important lessons doing it but it it exceeded my expectations in many ways you know it almost felt like a family reunion you know the the group group came together really quickly and just seemed to feel really comfortable and we we discussed some difficult issues uh and you know people people let their guard down and and you know to to Paul's point one of the things that I did decide based on all the business conferences I've been to previously is you know the one thing I've just heard over and over again is I just wish there' been more time to get to know the other people who attended the conference there seemed to be some really great people there so I I did go all in on that there were no speakers we just talked and I felt like it worked I think that that's a huge plus honestly we we all got together for drinks the first evening everybody was arriving and there's sort of like a you know like H strangers how are we going to get along but everybody there was absolutely worth knowing there there is a depth of knowledge and then a generosity to share what people knew about their own particular business their own particular particular sector that they worked in and there was a broad range of people doing different things and it was just super valuable to have that time without being lectured to and uh yeah so kudos to to Lauren in episode 157 embrace it leverage it or die Laura Sarah and Liz talk about how they're starting to think about how they might use AR arcial intelligence and what impact they think it could have on their businesses a topic we will surely come back to in [Music] 2024 spent this week really talking and digging into chat GPT um did a presentation you know with our marketing teams and everybody about how I mean for me how I feel like the media is really doing a disservice um and scaring so many people and so many creative people I mean our teams are terrified that they're going to lose their jobs and you know so we had an hourong conversation and I put a presentation together about how this is just an amazing tool that if we can all lean into it like oh my gosh like what we can accomplish is ridiculous we just have to think a little differently and change our skill sets you know learn to ask the right questions as opposed to learning to write the right sentences give us a hint what what is the potential that you see for your business oh well content for sure like I mean we can be just content juggernauts you know and just pump out content five times faster than we've ever done it before and are you sure it's going to be as good as you need it to be absolutely yeah I mean you don't take away like the human side of it and that was the conversation that we were having is you're not going to just like produce this content and then blindly put it up I mean you still need humans with big brains to analyze it to edit it to curate to make sure you're asking the right questions um and then the editing ability to be able to go in and say hey can you edit this paragraph you know and you just throw it up there and it fixes like all the errors and it restructures some of the sentences um I don't know about you guys but I get stuck on especially when my brain's moving too fast even just structuring a single sentence or a single thought sometimes so now I got this best friend that I can just pop it in there and I write rephrase rephrase this sentence and maybe I have to do it three times but then I'm I'm like ah perfect that's exactly what I was looking for I don't know if I've ever heard such a big endorsement for this from a business owner oh my God I'll send you the presentation that I put together I mean it's lifechanging like I'm so excited the content that we can put together for like just blog posts or social media or whatever I mean give me a list I threw together give me the best place to knit in every state in the country right I mean how much time would it take you to like pull that together now all of a sudden like I can come up with all these lists I can come up with all these ideas hey I just made this sweater and I loved it what should I make next and then it'll tell me I mean how cool is that that's really cool I second her endorsement 100% yes it kills me I mean with with with the human touch but yeah yes absolutely I've used it a lot for like planning for example I was talking to a client about um Awards program and I was like God I don't want to sit there and write down the bullet list of all the things that need to happen to develop an awards program so I literally went to chat gbt I was like give me a list of all the things that I would have to do to start an awards program exactly and it did it and I was like all right I'm GNA take that one out that one out that one out and that one out it's irrelevant we did the same thing with like um I said give me a marketing campaign for XYZ and then our marketing team is relatively Junior so it would have taken them I mean first of all they'd be completely intimidated they don't know how how to put together a marketing campaign so it's not that it's the end all be all but it just gave them it's a mentor you know it gave them a structure and so then I said okay now give me the marketing plan so now they have a plan you know so it's a teaching tool the first question was structure a campaign or yep give me a campaign so it came up with like slogans and it's just it's a Kickstart and then the next question was give me the actual plan and and that laid out how you roll it out step by step yeah so the human brain is not meant to remember it's meant to process I'm like this is once again another way for us to think at a higher level right so let this do the leg work um and let it do the repetitive tasks like writing product descriptions you know once we can teach it our tone and what words we do want to use and what words we don't want to use our team's so sick of writing product descriptions and then and that copy and it end they all end up sounding exactly the same anyway we're so excited to bring on this new yarn um so this helps like give them a bit of a break so that they can focus their energy on more creative stuff and stuff that only humans can do Laura I just highlighted uh a story in the morning report I read it about how Shoppers are starting to use chat GPT to to search and actually uh make purchases does your presentation does your thinking include anything along those lines um I had not but I sent the article that you put out this morning I just sent it over to our entire team before this podcast and was like this is a mustre I want everybody to read this and um then let's talk so no I mean we're so excited about it you know I mean just the potential it's just a tool and you know what I told the team is I'm like it's a nail gun you know sometimes you need to use a hammer because it needs to be perfect and it needs to be exact sometimes you just need a damn nail gun you know and you just want to pop it through so and that becomes the skill the skill becomes when do I use the hammer and when do I use the nail gun I haven't even downloaded it if that's what you call it what do I download it in the App Store no you just type in chat GPT into your browser and it will pop up and you log in and it lets you start doing it w you just you type in a couple literally you can type in prompts that are like um draft me a quote uh about the importance of trash enclosures in major cities yes in terms of prevention um of you know rats and mice and other things that could impact People's Health and it will give you a quote I guarantee that you'll be like oh damn yeah that's good in episode 159 you're in the Valley of Death sha Jay and Jenner Jer talk about what it's going to take for Jennifer to get to the point where she can hire managers who will take some chores off her plate and allow her to stop working 12-hour days 6 days a [Music] week so Jennifer you're a Professional Services business yeah we are convention management and trade show sales okay so people you got to have it's people powered yes and so you're at the $3 million Mark somewhere in that range yes uh and you I think you said in the last show I was listening to around 30 people yes you're in the Valley of Death I've heard that before so what does that mean Sean so she's big enough to we like systems matter and she needs talented people and she needs to offload the work like J is talking about but not yet quite big enough and the next number is probably four or five million for her where it like starts to stabilize again Valley of Death really hard she's yeah and you know what I have to tell you that was my life for for five 10 years that you know when you're smaller you can do everything yourself no problem I don't care what you do it all yourself then you start to get really busy and then you get to be where you're starting to get a little overwhelmed but you can't go and buy a tenth of an employee so now you're overwhelmed for a while and there's that period which I guess you're calling the whatever you just called it is going from I can't afford somebody but I'm overwhelmed in until you finally can get it over the hump of okay now it makes sense yeah and I I absolutely live through that and it's difficult my mentor said the same thing she said the 2 to 5 million for us it's brutal is Valley of Death she said once you get to 5 million she said even maybe four and a half million for me once I get that life's going to change a lot but that means I have to put the systems and structure in place now can we change the word from Valley of Death that's not real inspir I don't think you're going to die I think it's a matter of it's the valley of being overworked yes but I don't know that it's the Valley of Death here's why it's I think an app metaphor is like it kind of goes back to the like pioneer days if you're going to cross a desert you got to have a lot of resources a lot of water a lot of food because by the time you get to the other side of that desert you're about out and it's like if you get halfway and you turn around that's pretty deadly too it's that it's that between Zone where you have to have a lot of resources you got a really bulk up and and I think to Jennifer's Point like you've got to reinvent all your systems which cost money I bet your margins are shrinking like crazy with all this growth yes like you're probably in the single digit realm at this point and maybe you were in double digits before all the growth is that true or I mean is that kind of uh I'm not quite in single digits yet yeah okay but it's a downward number and I I'm prepared for it because investing in in systems and structure to be a $5 million company and to give myself not working six days a week I like your desert metaphor I've got more bad news for you like I think your margins are artificial because you are doing the work of two or three people and so those salaries are not in your p&l good point yeah and so your margins are prob you need more professional people at this point so that's the hard part you've got to make those hires you're the woman in the salon who's cutting hair of 30 40 people a week and just you're right you're you're a profession to some degree like he saying but there are some tools here that no one ever no one usually don't hear about one of the tools is perhaps you just raise your prices 5% and put some more margin in there because if you're growing that fast and you got the demand I believe that that is one of the number one mistakes entrepreneurs make is they don't charge enough and I that that's always been my number one problem so that would take the pressure off all of a sudden you can go to hire somebody now because you're going to take in another 150,000 bucks and it works do you think you could do that Jennifer uh yeah I think so um I think as we get new clients it's hard with Legacy clients right but with new clients absolutely in episode 161 escaping the Valley of Death we hit several topics and then have a surprisingly entertaining and enlightening conversation about of all things insurance I kid you not I'm wondering how how many of you have uh business Interruption insurance I do because I was told 30 years ago that if you don't have it the insurance company's not in a real big hurry to settle your claim whereas if they're paying for your business Interruption they they get in gear and get it fixed quicker and and uh that makes sense to me Jennifer or Sean I do I have it could I tell you what it says and how much money I have absolutely not that is yet another thing I have to put my eyesight on I have a lot of insurance somebody once told me I'm over insured and I really don't know what my insurance does I have something called like director's insurance and I don't really even know what that is well that means that anyone who works that is is a director which you don't have I don't even know why you would have that if they get sued they get covered or if you're on a board like if somebody sues 21 hats maybe you're covered for giving that advice yeah I I need to I'm going to put that later next year but I I have to re-evaluate what I have and why I have it yeah I found a service that I'm really bullish on um last year where you you actually pay them for their expertise and they help you evaluate your options in this Arena wow and what I like about that is that insurance brokers are incentivized to oversell you because they make commissions and so this basically you're paying them for their professional advice they're not actually selling you the policy so that I found that to be really valuable because that you're exactly right Jennifer like it's hard to keep track of what you actually need and I was underinsured in some areas very very badly and overinsurance and I called the agent and I said you know I don't think I have enough liability coverage goes well you've you've got what's average and that kind of says it all I go I'm not the average client I own a successful business and if I get into an accident they're going to go after me and he and I change Insurance because of that because like he really didn't get it that was a bad answer I shouldn't have the average insurance when you own a successful business you need more insurance and State Farm is not for someone that owns a business usually it's it's you know it's commodity yeah right it's it's yeah well add that to the hats that we have to wear is understanding no that is one of the insurance is one of the hats for sure yeah do you have an umbrella policy Jay absolutely and I tell everybody this I was I just did a speech yesterday to a bunch of designers and they were talking about insurance they laughed when I said this but it wasn't meant as a joke it's legitimate if you've got kids and the day that they get a driver's license you ought to get an umbrella policy because your risk has gone up dramatically when you've got teenage drivers driving your cars it just makes sense and people laugh like it was a joke it's not a joke if you got more than one kid that much more I mean before your kids are driving you have a moderate amount of risk in your life the second you stick to 16-year-old in your car your risk goes up dramatically so I've had an umbrella ever since then and I can tell you what it cost because I know it it was like I think it's $350 a year for a two or three million it's not expensive Jay what's the name of the insurance you can get for when an employee sues you do you do you know the name of that um yeah there is a name for that um here's how you can get sued you give health insurance to your employees and whoever's in charge of it forgets to sign somebody up or something happened the person has a heart attack goes in the hospital Rings up a $300,000 Bill and oops we didn't have you signed up oh yeah you did tell me to sign you up oh I was on vacation that week and I forgot to do it I mean that's omissions I think it's called omiss that's one oh I have that one too I just pulled up my list hey Jay so you mentioned that you have people traveling the world as buyers right yes do you have special um health insurance for like Health disasters no so I bought some recently there you go it sounds like you got everything yeah well it was super cheap um honestly it wasn't that expensive Jennifer is this insurance specifically for people who have a health problem overseas yes if it doesn't mean you have a health problem it just means if something happened overseas that I covered I covered Health expenses and then emergency evacuation oh wow there's only one thing I know for sure Jennifer you have the greatest Insurance salesperson ever that's the only thing I know for sure or I'm incredibly gullible no no I think that that's remarkable you've got stuff I never even heard of so J honestly that was a concern of mine is if I have an employee that's in in um a foreign country and something happens right it's not very expensive to cover emergency evacuation and um and the expenses because you may or may not be in a country that has socialized medicine yeah right uh I found it Employment Practices liability everybody listening to this show needs to get that if they have employees it it's like I I went for years without having it Jennifer do you have it yep he's got I I I have quite a bit of [Laughter] insur in episode 165 the toughest conversation Paul talks about the dawning realization that he's going to have to do something about a longtime employee who's been spiraling downward not surprisingly he's trying to balance the needs of both the employee and the business he's also trying to to figure out how he would replace the employee one of my sales guys is I think entering some kind of Doom Loop or at least in a bad patch where pressures on his personal life are are leaking into what he does all day and that's causing him to not be as effective A salesperson and then as he doesn't make sales then that increases the pressure on his personal life because he's not about you know blah blah blah blah blah so so that's what's going on I want to throw in to all of us that are bosses that's a thin line between supportive and doing the right thing and where does it get to where it's just it's hurting the business to a point I am right there because I just ran the numbers on this this guy we have two salespeople and we basically distribute the jobs as for the most part it's just like car salesman one comes in goes to this guy the next one goes to the next guy so after I just ran the numbers and since the beginning of 2021 to 2023 one guy's gotten 366 leads the other guy's gotten 370 leads and the guy who got 366 sold 3.7 million and the guy who got 370 sold 6.5 million wow so that's 2.7 million difference now I know that in any sales team there's always going to be the best one is going to be usually not real close to of the second and third that there's an uneven distribution but this is starting to become serious money and I'm like I'm not sure we can tolerate this much longer how long's he been with you 10 years yeah no been there done that you know and now here's a guy who's in his early 50s and he's not I don't know where he's going to go if I let him go but well here's my question which has been very helpful to me you know we said it around years ago and I said to everybody for those that remember Jack Welch from GE he was always like The Driven take no hostages fire the bottom 10% and and there's been a book written about him how he helped destroy Corporate America because all of his lieutenants went out and screwed up the companies they went out to so let's just say that Jack Welch may he rest in peace is a 10 and Mr Rogers is a one so the question is where do we want to be as a company and my argument is if you pick four or five you're probably going to go out of business so we all decided we we think we should be an eight and when stuff like this happens when we cut people some slack and the reality is I'm probably a seven seven and a half whatever but it was very helpful because at some point when you cut someone some slack somebody once said to me well Jay we're doing that because we're an eight we're not a 10 which is true so the question is if you buy into that concept that to be a healthy profitable company but not necessarily the most profitable and you don't want to be just that driven that you're going to have no compassion for human beings I don't want to be a 10 that's the point so if we all agree we want to be somewhere between a seven and eight the question is where does the seven or eight go to when a guy starting to cost over a million dollars with a sales yeah I'm I mean in my heart I'm probably like a slap you and I have to really I have to really slap myself in the face to get up to about a six and uh but that is the toughest conversation because there's two things you have the conversation and either he he straightens up and starts going the other direction or you totally destroy them and in my mind the easy way is just wait and see what happens which is okay in a lot of cases I certainly have done that I I'm not arguing with that if it takes care of itself to some degree it it does but in every day it's costing me money too and it's costing the company money like if this guy was performing even as well as he did three years ago we would be well past my goals for this year and uh I mean just today he kind of poo pooed a job that it's not 100% lock that it would be a sale but it's about a 65% and he just is having such a bad attitude towards things so I don't know I'm probably going to have to do something soon but the other piece of this is that if I have a talk with him and he storms out and quits then I got to do his job because there's nobody else who can do it and uh I'm not dying to do that although I could do it and so I think the real solution is I need to start hiring for this position and just bite the bullet and maybe have one discussion with him and say I'm about to do this I I would tell you the word that I've used which is this is not sustainable I mean that is the appropriate this isn't sustainable and then and when you say you destroy I would I would argue you're not destroying him he's destroying no no my my old partner used to always say that like you don't you don't do anything to employees they do it to themselves and and that's yeah like I'm not a malevolent boss running an exploit of organization so I is actually true in my case that the employees go off the rails for their own reasons and and our job is to help them if we can but at some point there's only so much we can do and we owe it to the company to take care of business that's right that's right you're threatening the team and then you got to [Music] go in episode 171 we haven't signed a new client in 8 months Jackie tells Jay and Laura that she's gone to a 4-day work week and then something Jay quickly picks up on she also tells them that she's now gone 8 months and Counting without signing a new client the longest such stretch in the business's history could those two things be related Jackie you went to a 4-day work week this year correct we did on April 1st which everybody thought was a joke but it's still happening so jokes on them and uh we did it as a 3-month trial and we found lots of pros and lots of cons and it took some work around and figuring it out we don't charge by the hour and so we are have always been Project based and as long as the project gets done on time everybody's happy so it's been about managing that so the projects stay on track and the people are still off on the Fridays wait wait wait there's two key questions a is is this four days a 10hour days to give you 40 it's 48 hour days so everybody's working 20% less correct and B is anybody covering the business on Friday well uh we have a couple of part-time people who are still college students and uh we didn't want to cut their hours and so we gave them the option of still working on Fridays if they wanted to and so one of them opted for that trust me when I tell you this maybe it'll work out beautifully I just find it interesting and I'm not making any judgments sure I find it interesting you just said this is the first time you've ever had such a long period with new business and oh we went to a 4-day work week hm how interesting that was six months ago yeah yeah everybody's working 20% less hm interesting I hear you and that question has been posited before so I have given it lots of contemplation went back and looked at the numbers we have had the same number of uh discovery meetings we have had the same number of proposals we just have had less yeses how is that possible that people work 20% less and they're getting the exact same output out well it's funny you would ask Jay when I thought I wanted to do this I went to every employee oneon-one and had a chat and said I'm considering this tell me what this would be like for you and the two people in this company who spend every day saying things like my list is too long I can't get it all done blah blah blah when I went they were the last two people I talk to and when I went to them I said I am most concerned about you because I know how busy you are I know how much you have on your plate we're done at 5 everybody needs to go home and E dinner with their family I don't want that to change one of them brings their uh kid to daycare and I didn't want them to not be able to do that anym by leaving the house early so how can we do this you tell me and both of them the people who never had enough time always late on Deadline said we can do it I said okay let's do a three-month trial the two of them were the first two people to say this is working they have not complained once and when we did our three-month recap in one of our professional development sessions Melissa was guiding this conversation because I'm like I'm out we're going to talk about it we're going to make a group decision so she had everybody go around the room and talk about pros and cons and their personal experiences the person who the most um frustration with workload and biggest concern who has not had a problem with any of that since we went to 4 day week was the first person to to say this is important this matters I can't go back it has saved my marriage and I was like well that's more important than anything else so okay we'll find a way to keep making it work and is an outsider business person I'll be interested to ask you in a year yeah I think having people work 20% less and having them go oh no this is working out great oh my God what a surprise people like working 20% less and making the same money oh my god really at work people are happy with that wow so I don't know I I don't know you know what I find I find that they work faster they work more efficiently they ask more questions in the beginning so why couldn't they have done that for 40 hours there you go probably could and I know we're not going to be as profitable I have no doubt about that okay that's a fair statement and I I respect that no doubt I'm willing to trade some profitability for some happiness you know what I fully respect and can appreciate that the question is the word sum yeah that's the question well and I don't know how much yet you know I give it a whole year after a year we'll really have a good look at the [Music] numbers in episode 173 the I hate marketing approach to marketing sha talks about his 100 day plan to get everyone in his company more involved with Outreach trying to make more connections that will attract more clients but Sean also shares his ambivalence about marketing why he doesn't like to tell people he's a marketer and how he struggled to formulate an effective pitch to potential clients that fully encompasses the more holistic approach his company offers interestingly it turns out Mel has recently put his Construction Company through a rebranding process very much along the lines of what Shawn is talking about [Music] Sean the other piece of context that Mel may not be completely aware of is that as you've explained to us previously you've kind of had a LoveHate relationship with marketing and you've gone back and forth a little bit in terms of how you want to pitch what you do you don't like to sell yourself as just marketing you like to take a more holistic approach and you know look at how a company operates uh in total how are you addressing that now as you do this outrage over 100 days what have you decided in terms of how what what exactly you're pitching yeah I mean I'm probably a guy who knows marketing and who hates marketing I mean just just in terms of like how it's normally practiced it just drives me crazy as a discipline I I think there's so much snake oil and salesmanship in that discipline and I also think that you know it is it is very complicated as a as a domain meaning that if you send your kid to school and and they take a you know class in marketing or get their degree in marketing the kind of stuff they're going to learn it it it does not apply to our clients I mean 90% of it it doesn't apply to small business it very yeah yeah exactly so I I found that like when I would go to a party and somebody asked me what I do if I say the word marketing most people like that ends the conversation so like like literally seriously yeah seriously I totally understand what he's saying absolutely I've been thinking of that ever since College like oh you're getting a huh what is that no I I think you're right well that one of two like maybe in your your era they didn't know what it was in my era it's a distrust it's a it's a like I I don't you know it's not Universal it's probably 8020 20% are did you pick up on that subtle passive aggressive my era your era I I I literally was going to call that out I was like wow yeah all right all right I'm just glad I want you to get the rules of the game here yeah man no well I just I mean you you were talking about how people didn't understand you and I would just say my experience is different in that they actually tend to like they stop the conversation because they're not interested and and I found that really interesting and and I think that's because there's so much marketing going on around us and so of it doesn't live up to its promise that we just have a hard time with it so I have an inherent frustration with marketing right in that most people are especially in the B2B space I'm in the B2B space they are even more skeptical my clients are often Engineers you want to talk about a customer that doubts marketing more than anybody else it's an engineer sure so what I realized in looking at my clients the ones who are really winning at the end of the day I mean just killing it I realized that what we're doing and you will like this word Jay is we're helping them gain alignment across their organization right so the culture believes in what they're doing the culture is amplifying what they're doing the employee retention is really high people want to work for that company right so that's on the inside then the outside the customers are getting a great experience they can't get anywhere else so they become a word of mouth for you so if you just say marketing most people are going to think oh do you do AdWords it's like oh God you're killing me here you're right so here's this here's the hidden truth the marketing industry is designed to to sell marketing services to marketers within large companies like full stop that makes perfect sense it's a silo right so you have an agency that does digital advertising you have an agency that does branding you have an agency that does content marketing they want to sell their siloed services to an internal marketer who is that marketer probably doesn't have a lot of influence within the leadership team which is why they got fired in the recession and so they're working with silos of activities it's totally ineffectual but when the econom is good people don't look at it and they just kind of keep crank in the wheel um Mel I'm kind of curious what your perspective is on this well I I tell you Sean you are you have nailed your value proposition though be and you have also nailed the Dilemma B2B I run a construction company full of Engineers 100% stock full of them and we just went through a rebranding exercise and when even I heard rebranding I was unsure what my team meant and what it did though is it aligned Us in the organization around our value proposition Clarity around our purpose and values how we talk to perspective clients core competencies all of those things came out and it was so much more yes and we changed our colors slightly and we made our logo lower case and it looks much nicer but that was after we did all the other work and it took nine months of and a lot of money but if you said to me Mel would you spend twice that much to get it don't tell the consultant but I would I'm really curious about this why' you hire the most expensive one well we went through an RFP process right not a bid process I want to be clear about that they all gave us pricing but but it we weren't ever telling them we were going to pick the lower bid but they they had the clearest process they were able to articulate that process and and why it was so important to the outcome and they would not accept a a refresh they said no we we we don't want your 50k to do a refresh because you're going to be mad at us so if that's what you decide we'll pass and that made me pause yeah wow that's a good story [Music] in a bonus episode our salespeople built or born I asked sales expert Lance Tyson about the common problem of getting salespeople to take updating their CRM tools seriously Lance it turns out doesn't have a lot of Sympathy for the Mis creant I think that's an expectation problem here let me give you an example I was down with a couple Executives and with an NHL team and it was a small sponsorship team and I was having breakfast with a guy let's say a guy named Cam and a guy named Ryan and they were talking about their culture and things like that and I and I said and and this actually came up and they were talking about our people will not g in CRM I go why I don't understand why they wouldn't and what have you done to get them and they're like you know we literally talk to them you know about all the reasons why they should how it's good for the business how it's good for them we've had contest we've incentivized we rewarded them I said okay so the so what you're telling me is you have five people or six people that are insubordinate that's what it sounds like I mean so you know what they do in a ship with insubordination just make people walk the I we're not going to do that right I said so they go what could we do I said well you can bring a horse to water but you can't make them want and they said drink I go right but you can put salt in the roats so I said just just make an announcement that hey here's the expectation for CRM that in order to to have a deal these are these are these are the absolutes and just make an announcement that that if this isn't filled out completely these are the parameters that you run the risk of getting a delay in your commissions or reduction in your commission and they go HR will never buy that I said I didn't ask you whether HR was going to buy it or not I said you just make the freaking announcement and I said just trust me run the test I just just put it out put it out in an email and make an announcement the next week they had 95% of compliance wow right but but the point is like the expectation there in episode 176 we need to go back to marketing for humans Paul Jackie and Jay get into a conversation about negotiating salaries with new hires the conversation turns on this question is it a bad sign when job candidates get a good face salary offer and nevertheless ask for more money I'll tell you the Breakthrough I had though lately this is really interesting we're hiring an assistant HR person now we're doing the other thing we're playing by all the rules we put the range in the ad now fair enough they say that your response gets much better so we put right in the ad whatever it was 45 to 55 it's right there out in the open we interview her we like her she says I don't have a lot of experience fair enough we offer her the job we give her a little more than halfway up like whatever 51 and she comes back and she says gee um can I get three weeks vacation no we're not we give two weeks to begin with and then she comes back again and says can I get $2,000 more now we're starting to get uncomfortable like you know what maybe she wants to make more money she she did answer this ad she knows she has no experience so since the ad said 45 to 55 she certainly shouldn't have expected the higher of the range but this is where it gets interesting we thought long and hard about it and rather than we send the offer we sent her an email that said you know I have to tell you I'm starting to get uncomfortable this might not be the right fit we told you what the range was we made you a good faith offer after giving it a lot of analysis we think this is really a good offer and she comes back and she admits and I give her credit for this she goes I'm sorry I'm sorry if you were offended I took my advice from my my mentor and somebody else that works says Jay everybody's been told every day between YouTube and Tik Tok and everyone oh always negotiate your salary that isn't good advice because there's some cases where that's not going to come off well so the answer is from now on we're going to go we're going to make you an offer and we just want you to know it's non-negotiable if that doesn't work for you just don't take the job and that way they don't have the pressure of thinking they left money on the table and we don't have to go through this can we hear from Jackie on this has it been a problem for you well it it hasn't been a problem for me I don't hire as often as I think y'all do so we have a set team that we've kind of been set for a while we also have an internship program so we basically test drive each other for three months through the internship program and the best of that Bunch makes it to a part-time paid position and then when they graduate a full-time position so it's kind of a stair step of we're all making sure we're on the same page the whole way through which really helps we also did a round of raises over the past year and so our payroll increased by almost 100% And we added in that no work on Friday's thing that Jay loves so much so we're kind of sitting pretty with my inbox is probably hit with five times more resumés now of people looking for jobs that aren't even open and that's kind of changing the negotiating seat for me for when we hire next so that's my question though is there a negotiation or do you say okay you give them the number they go great I'll start Monday is that's exactly how it goes here's the number thank you very much I don't want to negotiate starting salaries I give them a good faith offer that I think it's worth it we don't try to get the cheapest we we think of their experience and we we put the range in the ad so we we're playing Fair it's all right there and transparent so we're so Paul tell us your view on that uh well I don't think you can really knock someone for trying to negotiate if it's a moment when negotiation is not an unusual thing I mean when you're when you're working out a salary why wouldn't you ask for something more I think that a an employee who has the guts to ask for something you know I would be like okay you get some points for for trying I want them taking the job knowing that they're not making what they want to make uh that's not necessarily what it works out to now with when I negotiate it sort of depends on who I'm hiring for but I often will on hourly people uh we can legally ask what they were making and so I do and then I ask what do you want to make and I get an answer and often times if it's someone who is attractive to me I'll say I'll pay you that and I'll even pay you a little more to start with and here's the deal if you're no good I'll fire you and uh but if you're good you know you're worth it that's very different you've they've told you what they're looking for you gave it to them that's not negotiation you gave them what they were asking for no but but I'm saying that I live in a different information environment you're trying to get information that you can't just straight out ask but you're also making a very negative judgment on someone who's sincerely doing their best to to take care of themselves and given given the Ze Guys these days is oh yeah it turns out that a lot of people are really bad at negotiation and maybe if you can just get your head around it for one day you might actually get a great payoff maybe you should try it like I don't blame someone for trying it okay the point is said you can't you're wrong you can't but I can't I can do whatever I want you can do whatever you want maybe you don't want to hold it against them I do I put in the ad here's the range I very clearly said here's where the number came from you don't have as much experience and we lay it all out we tell them this is what we believe the number is and I'm going to just I don't really want to negotiate [Music] it in a bonus episode The unlikely plan that launched down North Pizza Muhammad Abdul Hadi talks about how he opened a pizza shop in Philadelphia that has made lots of best of lists while also taking on a social Mission here was the plan first buy a building in one of the most troubled neighborhoods in one of the poorest big cities in the country then open a pizza restaurant despite having no experience in the food industry and do it during the pandemic when many restaurants are failing and hire only people who like Abdul Hadi are convicted [Music] felons how did you come to the conclusion that you could hire only people who have experience being incarcerated because I I saw that they don't have a space that they can claim as their every other demographic of people like has something that is like for them right what do they have that they can claim like there we only do this for y'all like this is y'all and that was like for me what I wanted to bring to light and understanding too that they are in and out these top tier restaurants around the city they just don't get the the light shined on them so this is what I wanted to be able to bring them forth and have the voice and you know the presence in the industry that they never was given it was always being somewhere behind a decorated chef and never like on the Forefront hiring is hard um even if you aren't trying to provide a a service like this and even if you don't have this Mission people make mistakes hiring all the time nobody bats a thousand do you feel it's harder when you restrict yourself to hiring people who've been incarcerated actually my my my staff turnover rate and then I'll answer the question after you ask me that what's your staff turnover rate Muhammad the same five individuals that started have been there since we opened the doors Year One wow so to segue into the next part of the question that the original question is that you said it hiring is hard regardless who it is Masters phds you know whatever right so the fallacy that people think that oh because this person is form and incarcerated Y how do you deal with that number one thing people say well what if they still I've worked with people that weren't formally incarcerated and those are the people that stole from me and did deceiving things not the ones that's been formally incarcerated so the stereotypes out there you know are wrong right and yes we had some people that came through maybe didn't work out here but we also referred them to other restaurants they still working in the industry in some capacity but the thought that just because they are forming incarcerated it's not going to work is is wrong a wrong way of thinking because you know a lot of their characteristics being resilient having to show up and you know working and making what less than a dollar an hour right all of these things that they have to go through being locked up in jail right they have the work ethic right it's is are you going to give them a chance to to show and are you going to give them an environment that's conducive to growth right because now when we we talk about down pizza like this is a family more of a family environment where everybody has a shared experience right so nobody's living in no no one Shadows of who they think they are it is what they it is and they are who they are and they don't have to worry about nobody judging them because of that so when you put them in an environment like that that's where growth lives right where they don't have to hide where they can come in and be the best version of themselves and that that's a wrap for 2023 my thanks to the entire 21 hats podcast crew especially our producer Jess thubron and thanks also to our sponsor the great game of business which helps businesses use an open book management system to build healthier companies you can learn more at Great game.com thanks for listening everyone we'll see you next week [Music]