We Are Survivors

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman this week two years after the pandemic first hit sha busy Jay goz and Liz picarazzi talk about what they've learned what they're doing differently and whether their businesses have gotten weaker or stronger leading up to the pandemic Shawn still carrying scars from the Great Recession did a series of workshops on how to prepare for the next recession and so in that regard he tells us we you are really well prepared for the pandemic plus public companies are increasing prices aggressively and then bragging on earnings calls about the extra profits those increases are generating is there a lesson in this for privately owned businesses also why does JC more invested in his picture frame business than in his home furnishing business even in Good Times owning and running a business can be a lonely Pursuit our hope is that these weekly conversations will let owners know they are not alone in facing challenges same thing with our daily newsletter the 21 hats Morning Report which highlights the most important news of the day for business owners and which you can subscribe to at 21h hats.com where you can also find transcripts of our podcast episodes and lots of other articles and interviews joining me this week on the podcast are regulars Sean busy CEO of Kinesis which is based in Portland Oregon and works with small businesses on marketing culture and strategy Jay goz whose companies in Chicago include a picture frame business arst frame service and a home furnishing store Jason home and Liz picarazzi who is CEO of City bin which is based in Brooklyn New York and makes trash enclosures and package bins the episode is titled we are survivors welcome Sean Jay and Liz I want to start today by noting uh we are now recording our 100th episode and I guess I would emphasize two things uh most importantly I'm really grateful that the three of you and and the rest of our crew agreed to do this you guys talk about things in public here that a lot of business owners won't talk about in private so thank you for that I would also note uh we certainly picked an interesting time to do this we uh we started right before the pandemic we got just enough time to get to know each other a little bit before uh things got interesting I had been worried before that about whether we' run out of things to talk about that has hasn't been a problem so it's our 100th episode it's also almost exactly 2 years uh since Jay told us that he wasn't convinced the pandemic was coming to Chicago and the reality of the whole situation uh eventually hit us so I'd like to start by by talking about that a little bit um maybe I'll start with you Liz you you weren't part of the podcast team at that point can you go back to years and remember what you were thinking when things got serious sure I was definitely panicked panicked partly because I had just made a gigantic inventory order and was flushed with inventory but lost like 70% of my business in March and April of 2020 so I was very under capitalized and very much needed PPP which you didn't know you would even exist for quite some time if we're going back from the very a yeah so scared from my employees in New York City at the time the co rate was incredibly High um I had several employees became sick and um you know it really was as a business owner really scary because you lose your Revenue you're worried about your employees you just everything it was nothing but worry how about you Sean do you remember what you were thinking at the time yeah I was I guess I in hindsight fortunate in that I had two things which was I had a friend who was um Chinese and and very connected into what was going on in China and what she was telling me and what the media was saying were really different and so it gave me a head start um in terms of my awareness and then I also had some clients who are engineers and they are just very kind of oriented around data and facts they were like this is going to be really bad we're closing our office today and I was like whoa you know so so I think being in a business where we serve other businesses gave gave us a real advantage in terms of appreciating how significant it was going to be so from there you know we took action really quickly uh you know I went through the Great Recession and didn't appreciate how bad it was going to be until it was really too late and so in this time I thought I thought we were going to have another Great Recession I thought for sure you know it was sort of a I was reading papers that were kind of titled things like the economic Ice Age so uh you know we went at everything really hard not only in terms of safety but also strengthening client relationships supporting clients just doing everything we could to really prepare to batten down the hatches because we didn't know that PPP would come we didn't know that the government was going to print money like there was no tomorrow so we went at it really seriously did you start cutting cost did you have to lay people off no we the one thing we we said to the team was the very last thing we do are going to do is impact people's jobs so you know we were willing to walk away from leases we were willing to pretty much do anything other than that and we made that really clear cuz we felt it was really important to provide a sense of safety and dependability just because it was the a the right thing to do and B I I just think that that's what leaders need to do when times are hard um is to really convey that they're there for their people J apologize for taking a a cheap shot at you once again about I guess I'm used to it so it didn't mean that much to me I know you are uh do do you remember when no absolutely no no you'll notice I didn't jump in that was an accidental portrayal I I I wasn't sure it was coming here it was too hard to even fathom and uh yeah it came I I would also say there's six other things over the last 40 years that didn't happen you know it's just I'm I kind of got numbed getting uh all you know anxious about stuff because five out of six times whatever you think's going to happen doesn't happen so um in this case it did happen and I'm the first to admit thank God for PPP so next question I'd like to ask each of you is your business stronger or weaker today than it was before the pandemic hit I'm the first to say n whatever doesn't kill you will make you stronger I'm my company's definitely stronger we got through more thing and my staff is fine-tuned and you know we're I think we're better off you know it wouldn't have been obvious two years ago that that would happen I had some people that they had done a good job for many years and for whatever reason it was just time to move on to something else and they were worn out or or whatever and it just was the little bit of a the great resignation isn't necessarily unhealthy I mean uh it forced people to take action that they should have taken and in my case um it just fine- tune the organization I've hired like I don't know probably seven eight great new people that are bringing New Perspectives that are excited to be here that you know are Reen re-energizing the company Liz how about you do you think your business in is in a stronger or weaker position today in a much stronger position um thankfully last year we doubled revenue and this year we're on track to do the same um I think a lot of that has to do with the economy improving and uh having a a stronger staff um but I do think a lot of it has to do with the lessons that we learned in the pandemic um particularly around cash flow and supply chain issues so with cash flow as I mentioned earlier we really found oursel uncap under capitalized in those early spring months so what did you do well we we had PPP that was a big part of it um we negotiated extensions on bills with suppliers whether it be the warehouse our our Factory uh our landlord uh extending it out a couple of months um and luckily all those debts we were able to pay off but at the time that we asked for them we didn't know if we were going to pay it off and that was really terrifying um to be on the hook for um all that inventory that I had just you know purchased you know I have I've trade terms with my Factory and then the other thing I would say about being better is everything having to do with supply chain so we used to order every two to three months and we were on that sort of a Cadence well during the pandemic when there was those supply chain blockages as there still are we need to order much larger quantities because we kept selling out um so every bit of the supply chain we've come to understand a lot better um you know even at the very end of it you know when trucks um at the Port we not showing up drivers not showing up to bring our product to uh the warehouse you know that was something that my staff for months was always negotiating things were changing the price was changing the timing was changing so we really had a greater appreciation for how supply chain issues um Can can affect everything they can really affect customers with the timeline we get them product but it also TI ties up resources of the team um I can't tell you how many times I felt like the whole team was tied up dealing with containers trucks you know FedEx shipping tariffs you name it it was really timec consuming and uh we're in a much better place with that we've really smoothed out our operations our Cadence for buying is a lot we buying a lot more at a time and we've changed some of our vendors who weren't very good at Supply Chain management um and that was a big aha we used to work with a company that I'm sure everyone's heard of called flexport that is kind of like the Uber of ocean freight shipping and we found that they really didn't have the visibility onto the containers that we we thought they would have um and so we recently shifted to a smaller Freight forwarder and Freight carrier that um we can just call on the phone and we can find out where everything is and at every step of the supply chain um so that's one big change we made we thought we were going with the big name brand company but they ended up really not having the information we needed shifts with vendors generally speaking we made some very smart shifts with vendors and with processes and that has put us in a really good position how about you Sean same question I I think this is such a great question I think so I'm reflecting on it and I think that it's a if I were to break it down into four pieces the you know the areas of the company I think about marketing operations clients and culture um you know and sort of working backwards from there the the culture uh has actually I think in many ways grown stronger and kind of more connected I think to Jay's point you know stresses can either drive people apart or bring them together um so I think the culture has really actually done really well through this and with with one asterisk which is we've been remote for so long I think it's really difficult for newer employees so I'm trying really hard to make them feel more welcome and to bring them into the into the culture um but those who've been with us a long time I mean largely it's been mostly good there's some pretty big asteris though clients uh I would say they really stuck by us and we also really stuck by them and then I think the two that have been hardest hit would be operations which is you know being a virtual company is really nice on paper but you know missing that collaboration in person and seeing each other and being delighted by somebody coming into the office I think that that's our form of operations um and then uh and then last marketing that's the area where we were most harmed by this our marketing strategy before the pandemic was um speaking workshops and events so like overnight our entire marketing strategy was really um rendered pretty ineffective have you found something to replace that um yes go going on the 21 hats podcast um you know we found uh imperfect Replacements you know um virtual events they're okay um we hosted our Catalyst Summit this year uh virtu the second one was virt both of them were virtual and and I think they were really good events they're just not as impactful as when you're in person um so we're still working on it there will be some companies that are severely hurt by this though that that have taken that approach because they don't have the stomach to tell their employees yeah you know what we hired you to be in the office and we need you to be in the office yeah I've been thinking about this a lot too in terms of how the the folks in our company where they work in in tight-knit teams and they collaborate a lot they actually are doing pretty well through this but it's the folks who are more in a silo type of a role even myself I would put myself in that like it's it was really hard for me emotionally is very difficult these last couple years cuz I'm generally not working on a team in the same way and um that I think that's really hard the remote thing if you're if you're in isolation plus the added stress you know of child care and all that stuff yeah that's hard so Sean that was all really interesting but you didn't quite answer the question do you think you're in a stronger or a weaker position today uh well I mean I I think the questions flawed because he said it was a great question there you go there you go I didn't think I could like you anymore Sean there you go yeah I mean that's that's a typical journalist like you know five things you need to do or 10 ways this company's been successful I'm in pain poor Lauren no Lauren is not one of those list maker Jour I know I just I just think that you know it running a business is so complex and to to really try to understand if you're stronger or weaker you know I I think you got to look at it through through at least those four dimensions that I talked about because we lived through a recession before we had actually been doing a whole bunch of workshops on how to prepare for a recession wow uh leading up to the pandemic and and preparing for a recession and a pandemic is the same thing you you can't affect you can't affect a recession you can't affect a pandemic what you can do is you can affect how you prepare for them and how you behave in them and so in that regard we were really well prepared we were well capitalized we had a real good business model we had no debt we had high levels of Engagement we had great customers so it we did as good as we could have I think to go through it so here's why I asked this uh terrible question it strikes me that everybody on this podcast pretty much can make an argument that they are in a better position today than they were 2 years ago and I'm curious what you think about that do you think that's representative of uh businesses around the country do you think this is just a self- selecting group it's Survivor bias Lauren yeah the ones that are in better shape aren't on this podcast because they're out of business right right no but they we could we didn't nobody went out of business well here but that's what I mean it's Survivor bias you're talking to the survivors right I gotta tell you I'm I'm not delusional the PPP thing was a major Game Changer and without it I don't know if I'd be here I mean it's it's the PPP kind of artificially kept some of us in business that maybe didn't have enough depth to stay through it so well I have a theory please bring it Liz everybody who is in the podcast has either been a listener or a panelist so we're a group of people that are connected to 21 hats we're in inquisitive we're curious we like to learn from each other um I think that those sorts of people are probably going to survive I thought you going to say it was 21 hats that got all of you through it oh for sure yeah no she has a good point that is what I was saying but I'm I'm saying there's a certain type of person that is drawn to 21 hats and we are survivors yeah they're showing up and they're trying to improve themselves no question about it yeah I think that's a great Theory Liz I just read a great quote Howard Tolman who I get his emails every other day and I don't know that he made this up or whether this is his I don't think so he's an entrepreneur in Chicago yes and he writes for ink magazine frequently he used the phrase entrepreneurs are hope dealers I don't know if he made that up I don't think he did but that's an interesting phrase they are hope dealers like most people that I know who are successful in business have a positive hopeful attitude because I don't know how you could survive long term without it but uh so my point is maybe we're all delusional we're just telling you what we want to believe Liz I'm curious were you listening to the podcast when the pandemic hit had you found it at that point I think I had and I do believe it was an invitation from Paul who I've known for several years um so I came in probably right at my crisis point where um I I was having literal meltdowns like emotional meltdowns being scared and worried about PPP and you know I know for me the podcast was very kind of comforting um I know that there was one episode when I think one of the participants got a PPP and the other one didn't and there was a discussion about it and that was really helpful because I was one of those that did not get the PPP in the first trch and I was really pissed and angry I was so angry it was awful that was one of the meltdowns it was the Saturday after the first trch was announced and Shake Shack Ruth Chris Steakhouse and a couple other publicly traded companies received the money and I had one of the biggest meltdowns of my life I don't have that many melt sounds but it was that bad I was so emotional about it I felt so cheated but I'm so glad it turned around like it kind of restores my faith that government can help small businesses but it was a it was a is a very desperate feeling and at the time I was also spending a lot of time with other small business owners who also didn't get the loan so we would get on these Zoom calls and just bash everything bash the government bash you know the treasury secretary we really went to town on him but for me to answer your question I was a listener at the time and it was very therapeutic it was very instructional and um I ended up getting my my way through it Dana didn't get it and Laura and I got it and we had some guilt that we got it and she didn't and we discussed giving her some money that was emotional it was difficult yeah no it was uh that was a difficult period Well Liz if you if you don't if you don't mind me asking what was the reason you didn't get it in the beginning oh it was just the very first trunch and very few small businesses got it oh okay okay so you did you got it eventually I got it in the the next wave which is when most small businesses were funded but very few unless you were had really good connections with banks very few businesses got it in the first tranch or you if you just happened to be at the wrong bank that was the that was just a lottery of what bank do you happen to be at and are they on top of it I mean that was sad yeah not every Bank was eager and I'm no longer at Chase because of the way they handled it and Jay has harped on this a lot but I I will just pile on with him which is if you are a small business it is absolutely not in your self-interest to be with a large bank they do not they do not care about you it's just not what they do and that's the thing is like when you need them they will not be there for you and so to find a Community Bank to find uh you know a credit union like anyone who cares about your business business is better than a large bank because they need to because that's their bread and butter Chase does not need you that's the bottom line yeah that was very clear I'm with a community bank now and it was very deliberate Jay one of the things I remember is before the pandemic hit you were talking about uh your struggles with uh managing your inventory and you were concerned that you had bought way too much inventory in fact yes I think you point you said to me not on the podcast if I didn't own the business I would be fired right now then the pandemic hit and you were very glad to have that inventory I had inventory up the yinyang and then all of a sudden I'm the only guy that has inventory so it turned out to be a blessing and uh yeah that worked out just fine sometimes luck is okay so have you changed the way you manage your inventory how do you you know what there are three gauges on our dashboard there should be when you start out you think it's all about growth and then think it's about profit no the first gauge is cash that's the first gauge that's the one that's going to kill you so there's the cash there's profit and there's growth and I've learned lately especially I just have a backup of I'm okay financially because I as I've discussed many times I took out a mortgage on the property not too much just a very conservative loan and I made sure I got enough cash so the fact is if I have too much inventory it's okay I can afford to have too much inventory it's fine um it's not going stale or something you know for for years you had these Consultants running around talking about lean and just in time and you're such a loser if you have inventory and really what they were arguing against was creating any kind of resiliency in the business and I think what the pandemic has shown is that just focusing on growth and reducing costs exposes you in a massive way and so what cash is and what inventory is and what investing in culture is these are all like resilient tools that help you get through unexpected things and I just think the pandemic highlighted how many businesses were just sort of living on this like hairs thin line between death and and continuing operation there's nothing inherently wrong with inventory if it doesn't go bad if it's if it's solid inventory keep in mind interest rates are so cheap right now with it almost the same as inflation it's okay if you can afford if you can afford to have too much inventory it's it's not a big sin it's when you can't afford to have too much inventory that it's a big sin if it sucks up your cash for other purposes and you don't have any money to pay your bills well Jay Jay you also have the privilege of owning your Warehouse so having a lot of inventory like I do and paying a 3pl to house it those Supply costs those storage costs are massive so I think your inventory perspective has got to be informed um by the by your real estate there's no question that's part of the formula you're right I bought the but I have to tell you I made a what looked like a bold move in 2008 my accountant didn't recommend it I bought the big Cheap Building at a super cheap price because real estate was just you know nobody was buying anything the realtor literally said to me you're the only person interested in this building you need to do something and I actually said well I can't get a loan for it right now if you want I'll buy it on a two year if we close in two years and they said okay so that wasn't just luck I pushed it and I got a big cheap in I got a big cheap factory warehouse base now but you're right that's absolutely part of the formula I can afford to sit on the inventory I'm not really paying any overhead for it yeah like for me I've started to include um storage 3pl costs in my cogs um because if I don't look at that it really distorts the actual cost of goods sold what did you call it Liz 3pl what's that uh third party Logistics so that's my um the warehouse out in New Jersey that does all of the in management and also the shipping of our online purchases I would say to you I'd be thinking about I don't know what the exact situation is I can only tell you ppp's for sure the greatest thing the government's ever done the next one is the the SBA Loans buy a building for 10% down all I can tell you it's made a huge difference in my business well Jay the last time you said that on one of these episodes my husband Frank who's a COO heard it and he kept talking to me about buying a warehouse mhm which we're just not in the position to do at all I wish we could our storage costs are so high I wish we could but you've definitely planted it with him it's really smart investment it really is well especially with you know the cost of capital be we're at this weird moment where cost of capital is really low but inflation is just ratcheting up so if you can get fixed assets you know I think that's to your advantage if I can put my accounting head on I got to tell you your return on investment when you only put 10% down in a building is phenomenal you only got 10% down versus putting 30% down which is a conventional loan so if it works and you pull it off it is it is you you could never have as good an investment as that so keep it in mind Liz you mentioned before that you have ongoing supply chain issues uh you've talked to us uh in previous episodes about your efforts to start manufacturing some of your uh products here in the US have you made any progress with that so we are going to be moving ahead with a s small production of one of our trash enclosures with a metal fabricator in New Jersey not too far from us um we began talking to them kind of in early fall but then kind of put things on hold the pricing on it is higher than we want to pay as I've discussed before but we want to do this as a test to at least have a US Factory or two as options as well as you know maybe we are going to have certain products that we we would produce there that would be at the higher price the USA price it's definitely something we're striving for and we also have a couple of government contracts in the work works and if those require made in the USA then I'm going to be very glad to have that vendor but my bids are going to be about 30% higher than they would be on product that's manufactured in China now when you say you have to bid at 30% higher have you tried to keep the margin the same or did you just take the margin down because you're you're still making the same dollars if you know what I mean just because you pay 30% more for the product doesn't mean you have to sell for 30% more have you changed your markup on when you're paying more I think we could I wouldn't want to do it like across theboard thing which is why I I'm trying to kind of keep it segregated to something that's product based so let's say we might use that factory to produce in steel um and we normally produce in aluminum so I could see that being something where then the the the premium in there is because it's steel not aluminum even though aluminum is more expensive but it has to do with the application of it we use the the steel ones are used for Bear prooof enclosures I think people are getting more and more sensitive to the ma in America thing there I don't know what the number is there's clearly a point of no return where they won't buy it but I'm pretty confident people will pay more to get made in USA the question is how much more and I don't have an answer to that well it's also an issue though of I mean now we have uh a war going on in Europe uh the likelihood of all of our supply chain issues going away anytime soon just seems pretty remote I'm looking to diversify I see that this year I'm probably going to start producing in China and in the US I'm actually also looking into Mexico because all of these supply chain problems I need to have the flexibility to place orders wherever I want you know I if I want if I have a great order and they they don't want my four-month lead time they demand two then I want to be able to produce in the US and not charge a ton more but right now I don't have any options because it's all in China so for me it's not about totally getting it out of China because as I've discussed here before I have a very good relationship with my factory and I really don't want to disrupt that um but I want to have the option to produce in other places and also to appeal to certain clients that would require the ma in the USA all right I want to uh bring up a topic that Sean suggested uh which is how easy it seems to be for big companies to raise their prices but let's just take a quick break to hear from our sponsor I'm here with Rob Levan co-founder of work better now which provides businesses with highly talented virtual assistance Rob I've noticed that owners tend to have certain questions about virtual assistance for example what exactly can they do yeah Lauren we get this question all the time uh because people really know deep down that they need an assistant but they're not exactly sure how how it works and what they can do for them I would say that our clients use our assistance in one of two ways they will either use them much like I've been using my assistant for the past eight years as an executive assistant handling my calendar which takes up so much time email management database file management personal tasks creating documents for me and then a lot of our clients basically operationalize our assistance so we have assistance with titles like project manager marketing associate operations manager and customer service representative I think some owners worry they'll spend more time managing their assistant than it would have taken them just to do the test themselves how do you respond to that right right right this is a deadly trap not only with assistant but really with any employees which is oh I can do it faster myself and the reality is you might be able to do it faster yourself of course it's impossible to grow your business if you're doing everything yourself I was very much uh of a similar mindset and what I did with my assistant is I basically told him what needs to be done and had them document it I hate documenting tasks but I know that processes are so important now we have a manual full of my uh tasks I only had to tell him once that he can follow time and time again and if he's out somebody else can follow and also think about it this way if you're a business owner making something like let's say $200,000 a year which is about $100 an hour you're basically paying somebody to do administrative work at $100 an hour if you're doing these tasks yourself that makes a lot of sense what does it cost the cost is $1900 a month and as you know Lauren we are are offering 21 hats readers and listeners $150 off per month for 3 months just by mentioning the word Lauren there are no contracts also very important for people to know can you promise a return on that investment if you're not getting a return something's not going right all of our clients are not only getting a return with the first assistant they've hired but many of our clients are now on their second third and fourth assistant where can we learn more work better now.com and again when you sign up for a 15minute consult just mention the word Lauren we'll make sure to give that $150 off for each of the first three months thanks Rob and we're back as we recently highlighted in the morning report public companies are not only raising their prices but they're bragging about the extra profits those price increases are generating on their earning calls which seems like a pretty bold move to me Sean is there a lesson in that for small businesses uh what what are we to take from that oh man well I mean that's probably the reason I wanted to hear some other opinions on this I mean I think these large corporations there's really no penalty for them talking like that you know I just don't think it it influences buyer Behavior really in any significant way and I think it influences you know stock price which means it influences the bonus plans for the executives it's just this self-fulfilling cycle of crap that hurts us all um anyway uh so I'm just sort of curious though you know how in elastic or elastic it is in the small business space you know I know if I were to go to my customers be like yeah inflation we're going to raise your prices by 25% you know I would lose customers um not only that but they'd be really upset with me especially if you told them that it's going to greatly increase your profits yeah right yeah well you know what it gets back to the price elasticity thing which is simple so the question is if you raise your prices 10% are you going to lose 10% of your customers if you do you're making more money because your costs have gone down by 10% now the question is are you going to lose 20% of your customers and the problem with entrepreneurship is most people are worried about oh my God I'm GNA lose all my customers and that's simply not the case if you got to raise your prices you got to raise your prices I'm not surprised that public companies are um raising prices and bragging about their profits um to shareholders because that is what corporations do um I don't want to say I don't fault them but I'm not really surprised but the biggest difference I would say with small business is that if we raise our prices and I have twice my second price raise during the pandemic is actually happening this week the reason isn't to increase our profit the reason we need to do it is to recapture margin which is the obvious one but it's also to be able to invest in growth it's to be able to have a salary for both my husband and myself our entire income is tied to this business so while I wouldn't tell my customers I'm raising prices so my husband and I can both be paid that actually is the reason I would never say that I'm only saying that here among small business owners but public corporation would never have that as an explanation it's going to be the benefit to shareholders that's the message but you just said this is the second time while the pandemic's been going on for two years which means you raci your prices once a year there that's what's normal I mean that's what we're supposed to do it it is but it's it's taken a while for us to come around to that J we we have like a lot of businesses a little bit of guilt for raising them but this one was really important to do um and we were able to really recalibrate our pricing across everything um which has been important too because it really helps us with our margin analysis if it's not um it doesn't fluctuate as much are you raising your prices for products across the board by the the same percentage no they're actually it depends on margin um and volume let me tell you a a entrepreneur story about raising prices that is the most tragic story I can think of being in Chicago the greatest thin pizza in Chicago um was right near me here and his rent went up this is a real story so he goes ahead and he decides he needs to own a building so he buys a building two or three miles away opens up there left his market and then went broke and I'm talking to him now a couple of years after the fact and I said why didn't you just raise your prices to cover the extra oh I couldn't do that people complain when I raise when I raise it 75 cents and I said to myself you just put yourself out of business cuz you listen to that one jerk out of 10 who complained about the price who probably paid it anyway all he needed to do was raise his pizza price $2 and he'd be around today and I'm still mourning the loss cuz this was this was pizza of the Gods and everyone that works for me so more I'm telling you it was I don't know how he did it it was magical I'm still mourning this and I realized that all someone had to do was convince him stop yeah we always have a customer complaining about price it's not the majority it's the oneoff and get over it and yeah so as lunch comes around I'm warning it again now two things have been brought up here one which is many many businesses fail to build their financial structure around paying the owner a market-based wage so like Liz you're like well we need to make a living it's like yeah actually the business needs a CEO and the business needs a COO right those are costs and most myself included I was guilty of this for many years we underpay ourselves and we were driven by emotion to do that so that's problem number one um and then problem number two is what Jay talks about which is we're scared to raise prices or we're scared to charge enough in order to make the business you know really a viable goinging concern and then we kind of excuse it away with like well I get to pick my own hours or D it's like yeah but there's also a ton of risk in what you're doing so you actually really need to make some money here because no one you know you can't you don't get unemployment if if you go out of business the number one mistake I've made in business there's no question about it I was growing like crazy doubling and I had a very small bottom line and I should have raised my prices 5% it was the simplest thing in the world and my accountant didn't tell me and the banker didn't not tell me I just kept banging my head against the wall and it was stupid I should have raised my prices 5% and it would have slowed my growth down a little bit and it would have doubled my bottom line or tripled my bottom line so that is a that is a rookie mistake in business you need to get paid Liz How concerned are you about this week's price increase and whether it will be accepted or not I'm not super worried about it we are a premium product we're an expensive product most people that we sell to are buying expensive things and expensive things during the pandemic have been you know price increased as well so I think that people are used to paying they are used to having prices raised on premium products the one that we need to be careful about are customers who have out outstanding estimates so we did a little bit of kind of a splitting of the list the messaging is different for each one um because we do want to give people who have outstanding estimates an opportunity to pay I think we gave them until April 1 um but that's also a mechanism for us to encourage them to pay because then they do know that it's going to increase um and you know we're we're looking forward to seeing how our sales are in March cuz I think it's going to stimulate a lot of those people to move ahead well that is smart and responsible and I'm sure they appreciate getting a last shot to get in on it but Lauren your your question's a little false and that it's not will it be accepted yes yes no this is a good one you said will it be accepted the answer is some will accept it and some won't and the problem is the person that goes oh my God that's too much money you're going to think oh it's because I raised prices no they would have said that at your old price too so there's you know there's no exact way of knowing but there will certainly be some business loss but it'll make up for you know it'll be made up for the fact that everyone else is paying the right price well is you do have an advantage in that you're not selling to repeat customers who are acutely aware of what the price used to be and offended that it's going up you're looking for new customers mostly right no actually that's not right about 30 to 40% of our customers are repeat customers whoa wow well that makes sense these are uh property managers who are expanding their yes I mean in the B2B space for b2c yeah it's one and done but for um property managers Architects developers you know government that whole class um they they are repeat business and we'll see we haven't had a lot of push back here's the opposite question how would they not expect there to be a price increase for God's sakes who's going to think you're going to be keeping the prices that doesn't make any sense everyone knows it's going up they're waiting to see whether it's 4% or whether it's 11% that's all and and what is do you know what the percent's going to be well on some products it's going to be 5% on another it's going to be 25% where we've been underpricing it for a while and I'll presume that the 25% because that raw materials went up a lot which we hear about every single day in the news so I don't think anybody should be shocked all right we've got just a little bit of time left and I have just one more foolish question to ask which is for you Jay uh I've been thinking about this for some time and it it just never quite coalesced but I'm I'm I'm curious you almost always answer questions and discuss your business in terms of your picture framing business you rarely mention Jason home Your Home Furnishings business and I'm just do you not feel as invested in that I it's so simple I started the framing business I'm fully involved with the framing business and I have much less to do with the home store I'm not the buyer there I wasn't my my con I mean it was my idea to open a furniture store but I have some very talented people that have been running it for since the beginning and I'm far less involved with it so it's it's not the first thing that comes to mind when I uh I mean there's no comparison I'm I'm 10% involved with that business and 90% involved with the framing business so it's just it's not my area of expertise could you describe what your role is um how involved do you get in you all of my employees would like to know that too so my involvement is over there's occasionally I'll talk about you know the bigger picture stuff I am the proverbial I'm working on the business not in the business I might talk about you know margins or inventory levels or but I've learned to stay out of the day-to-day stuff because it's not my e they buy some stuff and I think I say I used to say it out loud I don't say anymore I go who's going to buy this and then 30 seconds later someone comes oh my god look and and I I just learned I I'm I'm it's not my expertise so um I you know I over see a little bit but um not much and uh it's in in framing I'm not that involved there either you know like I used to be but I've been involved from the framing thing from cutting the frames myself to putting them together to the whole thing and then the furniture store if I had to jump in and replace somebody my I couldn't do it it it's it's not my thing which is the bigger business actually well the furniture store is bigger than the retail framing though if you take the retail Framing and add the hosale frames I sell nationally it's about the same size so the furniture is a major yeah it's it's a major piece of the puzzle I'm the first to tell you if I in a million years I wouldn't have predicted where I would have ended up 40 years ago I no one's more surprised than I am I I can't tell you I had some master plan I just you know I I think I'm fairly good at seeing an opportunity and leveraging what I know and the fact is all of my businesses are connected by Design little double meaning there did you get it they're all related they all got customers that want nicer stuff and better service authentic customer service they're in the home furnishing so they are connected in that but they also have a design element so it was a natural progression was it your idea yeah yeah no I figured out you know I remember very few things from college but one of them was if the railroads understood that they weren't in the railroad business and they figured they were in the transportation business they would own all the Airlines and I realized I'm in the home furnishing business so when I was really busy in Framing and I had some extra space on the first floor I thought gee I ought to sell something else to the customers that are waiting and I started selling home furnishings and that's how I got into it so it's that's called horizontal integration selling different things to the same people and um but it was not my expertise to actually execute it you know one of my prouder things is I have a guy that's a key player in that business that has a theater degree and was making $112 an hour when I hired him and now he's the major guy running the thing one of the the major people so I'm I'm I think I'm good at two things uh leveraging what I have and two is Finding Diamonds in the Rough and developing them and keeping them and making them happy and that pretty much describes my whole business so you're not wrong I'm far less involved with the home store though which frustrates all my framing people when you meet someone and you tell them I work for to training service some of them go oh I know it but then when you say I oh I also want Jason home oh my God Jason home I love Jason I take all my friends there when they're and it go into this whole thing and it's like it's like we feel the people in the FR feel like we're the stepchild and Jason Hol is the star it is what it is I mean we sell n Jason home has a national presence we're selling nationally from on the website I think honestly this could be a whole another show which is specialization versus horizontal integration and for a long time the message was go in a niche do one thing do it really well stick to your knitting yes right that was like that's the whole good to great message Etc uh and you've gone the opposite direction and I think we're starting to see now like especially with like bigger companies like apple where they're both vertically integrated and horizontally integrated like they're the ones who are winning no and so am I I sell wh sale bu other frame shops so I I have done both but what I didn't want to do is start opening frame stores around the country CU like I have no interest in doing that right yeah all right there's your next show or some show down the road Lauren good job Lauren excellent 100 congratulations to you for pulling this off Lauren yeah congratulations yeah and good question to end it with that was a great question oh thank you Sean all right my thanks to John busy Jay goz and Liz picarazzi as always uh thanks for sharing wait wait don't leave yet if you have a question or a comment that you'd like the 21 hats owners to address send it to me by replying to your Morning Report or by email at Lauren 21h hats.com that's L ren21 hats.com do it now before you forget and don't be afraid to tell Jay what you really think he can take it and if you got something out of this conversation help us reach more business owners tell a friend subscribe and review us wherever you get your podcast follow us on Twitter subscribe to the morning report at 21h hats.com this episode was produced by Jess dubron founder of blank word production okay now you can leave thanks for listening everyone [Music]