We Get Paid to Judge People

[Music] Hello everyone. Welcome to the 21 Hats podcast. I'm your host Lauren Feldman. This week we welcome a new regular Kate Morgan who joins the podcast along with Paul DS and Jay Goltz. Kate is the CEO and founder of Boston Human Capital Partners which provides recruiting and HR services mostly to other small businesses. After a very difficult stretch caused by the pandemic, Kate's business has been growing again. But Paul and Jay think she's leaving money on the table. They think she needs to raise her prices. I mean, responds Kate. We're growing in an industry that we're seeing shrinking right now. And so, it's one of these things. Do I want to scare the squirrels and jump up our prices? That's where I've been struggling. Plus, are HR people supposed to protect the employees or the business? And after having to lay off a third of his workforce, Paul gives us an encouraging update on how his business is doing. 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. In fact, that's the whole idea behind the 21 Hats community, engaging with other owners to get the kinds of insights only another owner can offer. If you're interested in learning more, step one is to sign up for a free trial of the morning report, which highlights the most important news of the day for business owners, so you don't have to go looking for it. Step two is to get on our Slack channel, where you can ask questions, get vendor recommendations, and tap the wisdom of a very impressive crowd. Just search for the 21 Hats morning report to sign up for a free trial. Joining me this week on the podcast are regulars Paul DS, CEO of Paul Downs Cabinet Makers, which is based outside of Philadelphia and makes custom conference tables, Jay Gold, CEO of the Golds Group, whose companies in Chicago include a picture frame business, artist frame service, and a home furnishing store, Jason Ho, and Kate Morgan, who is CEO of Boston Human Capital Partners, which is based in Boston and offers recruiting and fractional HR services. The episode is titled We Get Paid to Judge People. Welcome Paul Jay and especially Kate who is joining us for the very first time. It's great to have all of you here. Kate, you founded Boston Human Capital Partners. Tell us what you guys do. I did in fact. Um yeah so in 2011 um during the recession and it was a downed economy but I still was overs subscribed with work and finding uh talent so I've started the company based on a process and methodology for recruiting as a consultant. Um so we work on an hourly basis and um we've also uh started working on in HR with three different levels there and the uh I'm guessing from the name the company is in Boston. It is although we actually work on a national and even international level. Do you have a physical office? No. Um, so out of the 14 years or 13 years we've been operating, um, three of the years we had an office because I had a lot of millennials telling me they wanted an office. Three years in, nobody came to it. So, I figured I could save the money soon, just send everybody back home. You mentioned you you work on an hourly basis. Not every talent or recruiting firm works that way, correct? Yeah. Although I I I'm seeing more and more switch to ours. Um it's it's funny. I I always just felt like recruiters, head hunters, even with retained search, it's very coin operated. And we wanted to be able to provide uh an embedded situation. So we can actually help with the employer brand and bring the candidate um through the full experience. It's tacky to say, but it's kind of true. I tell my team this, you know, we're essentially paid to judge people. We want to make sure that our clients are making the right choice. So even though we source those people, we tend to build really strong rapports with our our candidates. And so we want to weigh in. We want to help them make the right choice. So that's why if we were commissioned, there's no way we would be uncovering any sort of situations where we might have uh concerns. this model we can really have what's the most important thing for our clients and even the candidates because it doesn't it do anybody good if somebody s joins the company and six months later they're miserable by being paid by the hour though that means your clients have less certainty about what it's going to cost them right as opposed to a a flat commission fee is that an issue you know that's the question that everybody comes up with well why wouldn't you just sandbag it and it's like, okay, well, because this entire time we we don't operate through sales. All of the work we we do is really referral-based. So, we can't do anything. We we wouldn't be this successful if we weren't working hard to move quickly. And so, the faster we get through and find uh have success, uh it just helps move us through um the market. Let me help you with that answer because I've been through this and I just hired a controller. I did it myself. I put right in the ad. No recruiters, but of course they still came out of the woodwork. And the answer is this. It's real simple math. The fee that that that 30 25 30 fee is so much money. There is no way that that they charge. What fee are you referring to, Jay? They char if you the contingency people charge 25%. So, if you're paying someone a h 100red grand a year, they're going to get $25,000. There is no way I can see somebody doing it on an hourly thing that they could spend that kind of money. I mean, it just doesn't make sense. Now, in my case, I used my accounting firm the last round. They rang up a pretty big bill and couldn't find anybody. Then, they sent me to a recruiter. He sent me a horrendous resume that had like six jobs in five years. And I said to my the recruiter, I go, "What are you?" She goes, "Oh, they should send it to me first." I go, "Oh, so I should pay $300 an hour for you to screen bad applicants." So, I got rid of both of them. So, I think what you're doing makes perfect sense, is honest, and I think you're right. It's not tacky to say you're pay to judge people. Yeah, that's what it is. It is what it is. So, good for you. Thank you. Thank you. I appreciate that. Kate, how big is the business? So, right now we have nine people and your revenues. So before the pandemic we were uh tracking to three million and then that crashed it. So right now we're about 1.4. And do you have a specific target market? Do you specialize in helping any particular type of business? We operate with uh a proven process methodology that transcends into other markets. So when I started I was 100% focused on software but through the the years we just get pulled into these other things. We we had a uh half a billion dollar shipping and dredging company that called us and said, "Hey, can you help us with this this particular role?" And we're now doing a bunch of work in life science med device, but even the no tech, low tech, you know, it could be accountants like you had mentioned there as well as um even landscapers. A lot of the the skilled trades too are really having a difficult time finding talent. So, we're happy to help. you've made a couple of references to your methodology. Can you tell us about it? Yeah. Um, so I've been in the talent acquisition space for a very long time. I'm on the wrong side of 50, so I never like to bring the actual number in. Uh, but join the club. Yeah. Yeah. So there was there was a a moment in time where actually I broke away um for almost four years and I did um enterprise uh class sales. And when I went to sales, I ended up learning a lot about how to run a highly effective sales uh pipeline and how to really manage it. And what I found with the enterprise sale is it's very long. it takes 18 months, you know, in some instances to close a quarter of a million dollar deal. Well, if you take that same uh blueprint and you kind of tweak it a little bit to fit for an individual, it's the same process. So, we're still going through figuring out exactly uh what their pain points are, how to um get them really engaged, and that starts even with the prospecting, how we how we effectively prospect because it's all of this narrative that people don't take jobs, they take companies. So, in order to get them to talk to us, we really have to put that concept in front of us. So that's how we we um have been so successful in all of our searches including uh this year. Obviously there's been a lot going on uh a lot of uncertainty. Um a lot of people have uh talked even on this podcast about uh holding back on investments and not being looking to hire, if anything, looking to unhire. How has that affected you? Well, I mean, my exhilarating panic attack actually happened uh January 2023. Um because I do actually believe that if you're in the hiring space, we tend to be like the barometers. And so big tech actually got hit October 2022, by January I was like, "Oh my god, things were just coming off the rails." And so um that year we dropped 37%. Last year we ended up growing 22%. And it's all because we said we need to step back. We need to reook at how we're approaching um the industry. So we did that again. We started looking at deviating if you will from our uh ICP. Starting to look at other ind ICP. Yes. our ideal customer profile. Thank you. And so yeah, from from there what we we've done and I think we'll probably grow another, you know, I'm going to be a little bit more u conservative, but I think we'll probably get another 12 to 17% this year because now we're taking the time to address HR and move away from just pure hiring because there's so much that needs to happen. We we had a a real shift. We had particularly during COVID all of these companies that were um just jumping in and hiring heads of HR, they were actually using CFOs less. So now there was a a real uh imbalance in in our in our clients we were seeing. So I think what we're going to see now is more need for fractional HR rather than bringing in HR that we're just told for about five years to simply uh attract and retain uh employees. It's there's a lot more to it now. So how much do you charge per hour? So it well without it sounding like uh a science project there's there's a couple of different levels. So when we look at individual contributors depending on the the search it can be 125 to 105 and then we say um for each position it's about 15 hours a week. Uh when we kick off a role uh it actually could take us a little bit more than that but we're just going to charge that 15 hours. So what's the hourly charge? Yeah. Yeah. So, it's 105 to 125 depending on that summarizes the issue I had with my accounting firm. They were I I I think I misspoke a minute ago. It wasn't I think they were charging like 2 and a quarter an hour which at the moment didn't seem like a lot until I did the math and I go that's a lot of money to be paying for someone who is not it just it just didn't work. And I would tell you what's changed today compared to 10 years ago, which is why I think what you're doing makes sense is a you really need to be good at LinkedIn to be able to recruit, which is a skill set which none of my people have. Two, you can't ignore the baby boomer thing. There's less people out there looking for jobs. I went to a seminar on it. The guy went through the math and showed it. Our workforce has shrunk. Yes. I can't tell you I had a great success with my my thing. I got one perfect guy, I think, and I got another 150. Like, why did you apply for this job? Nowadays, they just hit a button and boom, they they applied. They don't even put a stamp on the envelope anymore. So, I can understand where what you do makes perfect sense for a company my size. Well, I really appreciate that. And that we do actually a lot of executive search as well with the same model. So, um, there's one competitor we have more in the Boston area, but we bump into them in New York as well and in Austin. And I found out that they're for their retained search, it's $130,000 for the executive search. I charge $225 an hour when it's an executive search, but we're still coming remarkably lower than that. and people are actually feeling like they have a true partner uh as opposed to somebody that's just trying to slam bodies into seats. A little bit more information on the executive search front is industry averages show that for an executive search it takes about four to five months to find that person. We're typically half that time. I got a question for you. So, um you said I thought I heard 1.4 million in revenues. Yes. And nine people nine this year. Yes. Is that nine full-time? No. The HR folks um right now are more on a fractional basis to us. How many full-time equivalents? Then it's the six beyond that. Okay. Because the ratio of of uh revenues per person is on the low side, particularly if it's 9 into 1.4 million. But on the other hand, you don't have an office, you don't have to buy materials or anything. So maybe it works, but I'm just wondering whether you're underpricing because, you know, like $102 an hour is in the trades is barely gets you a plumber's apprentice. I charge that for pretty much hanging pictures. I mean, you're right. No, that's just not a lot of money these days. Yeah. I mean, when you when you come in with such a price and performance difference between your competitors, do you ever think maybe I'm leaving money on the table here? every single day. But if you would have told me 150, I would have thought, "Oh, that's a really good price." Because I'm telling you, I just paid two and a quarter and got terrible results. Yeah. Yeah. No. Um the point is that we want to be able to This is Yeah. This is the problem. Like um I will tell you and my team will tell you probably, you know, I don't I don't pay great, you know, like I'm not off the charts. I'm I'm kind of mid ground if you will and that actually you know we we are struggling with profitability looking at our profit margins right now but in the same vein I mean we're we're growing in an industry that we're seeing shrinking right now and so it's one of these things like do I want to scare the squirrels and jump up our prices that's where I've been struggling and if you ask me Jay what's the biggest mistake you've made in business. I would tell you and I always say this, I was always afraid to charge more and it cost me millions of dollars over the years and I I'm totally with Paul. I think you could easily get 130, 140 and get over the emotional part which certainly I know what it means. It's just you are under market. Yeah, that's why you're growing at the moment. I mean, it may be also other things, but clearly you're cheaper than all the alternatives. So, it's not what does it cost me or what do I feel about it? It's what's plan B if they decide not to go with me and if they're the next choice for them is 40 50 60% higher, you've got some room to raise your prices, honestly. Yeah. Yeah. Well, that's and that's where we're kind of at, you know, this strange point where if they don't go with us, they go with nothing on the software side. That makes sense. They'll they'll post and pray and hope because nobody has the pockets that they used to have to move forward. Yeah. So, I put right in the ad no recruiters. Well, I had all the big guys calling me. I guess Robert Haft, I had a couple of others. They were polished salespeople and they kept pounding away on me. That's what everyone else is paying for. They're making their money by getting their foot in the door somewhere and that's what the other clients are paying for. They're not paying for them to do recruiting. They're paying these people to go out and find new business, which is why that business model is so screwed up. Exactly. It's still chuming water for them, you know. Yeah. But here's here's where it comes back is, you know, you're you just told me that I should raise my prices. Yes. As as a better business, they could, you know, feasibly you could look at them and say they're actually better business people. But from my perspective, I'm looking at it from I have people fully employed. Um I I do I have I have profits now. Am I wildly profitable? No. Um but that's how my my model has always worked is I take people from outside of the industry. I don't want people with previous recruiter experience because I usually spend so much more time trying to retrain them. And um so basically I can start billings for somebody that's really junior who's actually going to be far higher caliber than any other uh recruiter out there. You said if I was a they were better business people. It depends what your definition of a better business person is. If it's just making money, I'm sure you're right. They make more money. If it's about feeling good about what you do for a living and providing value and being honest and being a good citizen, that's not being a good business. So, it depends what your definition of a better business person is. I want to feel good about what I do and know that I'm giving a good value to people and and it's not just about money. Money's part of it, but it's not just about money. Exactly. On the other hand, it's about money. If you can get more money, you can do all the things that you're doing now except better. You can pay your people a little better. You can absolutely reward them when they do a good job. That was not an argument not to raise prices, right? Not at all. No, we're on the same page. I think you can do both. Okay. But I've heard the rationale of and I've lived the rationale of I'm doing the best thing for my people and myself, you know, and I'm honest blah blah blah blah blah. And that is selfd delusion that you it's an excuse to not take a hard look at what you're trying to accomplish and to just get your head around the idea that if you can get more money in the door for the same amount of stuff, everybody's going to be better off. I 100% agree with you. It's finding that balance and it seems to me and Paul at the moment that your balance is too much on being afraid of char you're still getting a tremendous value if you charged another 10 20%. Yeah. I mean what were you 102 you said no 100 okay? Yeah. So you go from 105 to 109 you just raised your pricing by 4%. Nobody's going to notice that. So you could probably go to 120 to at your low end and then whatever you said 120 go to 140 and everybody will be uh happier and your clients will not will they'll they're either going to go with you or they're not going to go with you but the difference in money between those two price points is not as big a deal to them as it is to you. And and I would add it's price elasticity. I would never say you won't lose some. You will lose some business, but the point is you won't lose enough business to negate the price increase. It's simple math. If you raise your prices 20% and you lose 10% of the business, you're still way ahead of the game. So yeah, one of the challenges that we we just recently had, we were, you know, talking to uh somebody, they were they were actually a head of HR and um uh somebody on my team was saying that they were like, "Yeah, no, we're just going to go with a contract independent contract recruiter um because we can we know that person's work and we can get them for $50 or $60." So we do have particularly in the software space a little bit of a challenge here because that's that's what we're contending with. We don't have a lot of competitors that are doing what I have done and successfully still executing on that. So that that's a little bit of the rub where I'm kind of like every day I'm like do we do this? Do we raise the prices? What do we do? Because we want the length of contract as well. I think that's a sales function that you need to explain to them that paying someone $50 an hour, which is not even close to a lot of money. Like, how qualified is that person? You got to question compared to what you're offering. It seems like a great value proposition to suggest yes, you're paying me more, but it's going to pay for itself. I I think that makes sense cuz anybody who's smart in the world is not working for $50 an hour. Kay, let me ask you this. You you said you expect to grow this year. is do you expect that growth to come from the recruiting side or from the fractional HR side? I think it's going to be a mix. Um, you know, I I'll always just naturally gravitate towards um talent acquisition because that's my blood, but we will see a lot more HR. Um, HR is in a lot of ways a lot like marketing where people just lump it together, but there's really varying levels. You know, you have your people ops that are really focused on more of the infrastructure and the day-to-day. You have business partners that can really coach the managers. And then you have the more executive advisory services. So, we're active in all three. And how do you charge for that? So, for the executive level, it can be anywhere from 185 to 225. Um the business partner tends to be about more and again it really depends on the type of client. No tech low tech is going to be lower but um so that's usually 95 to 105 and then people ops is about the same as well. A huge problem in business is that most businesses by far when I say most meaning 90% don't have an HR person. They're not big enough to justify having an HR person and the boss is doing it and the boss probably has no background whatsoever in it. It really the law the whole thing it's it's a real problem and it it's it's those companies that have 20 30 most businesses don't have 100 employees. So if you got 30 employees who's playing HR person, the boss or the boss's assistant? There's a lot to it and uh it's got tremendous exposure. Oh my gosh. Yeah. I I always say, you know, the business businessing is easy. It's the people that make it hard. And I think I would agree. You don't need a full-time HR person below a hundred people. Um unless you have, you know, significant like professional services where you're hiring junior people and you have to start to figure out a career track for them. It depends on the the environment, but most companies, if you're under a hundred, you don't need a full-time person. A matter of fact, you won't necessarily have the revenue in a lot of I was just going to say it's not need, it can't afford. I mean, there's no money to pay the person. Exactly. Or or if they're going to bring in any like big programs that are going to cost a lot of money. Yeah. It's you're going to pay too much for little return. Do you have a lot of competition in that space? Are there other people offering the same service? You know, we we see it, but again, we're we're seeing in Boston more individuals that are coming to the table and they get kind of passed around. Um, but not not like what we're what we're offering. Paul, have you ever considered hiring a fractional HR person? No. And why not? I mean, well, I've only got 20 people and the nature of my workforce is that the personality types who go into this field just aren't all that troublesome. And I have had, you know, everybody has some problem employees. But most of the HR stuff is just understanding how to log into the health insurance website and make a change or something like that. I don't have a huge amount of work to do. I mean, I do it. It It amounts If it amounts to even an hour a week, I'd be amazed. Well, the problem is, you're right, at a small size, you can do it yourself. I've lived through the whole grow thing. I got 130 people now, maybe 125. It's when you get to 50, 60, 70, 80. You can't afford to do it yourself, but that's a big salary to bring in. and to go get someone who's cheap could cause so many problems that like you know my my old joke and it's not a joke used to be the most expensive thing in the world is a cheap lawyer. I might say the second most expensive thing is a bad HR person. I mean think of the damage they could do to your company if they're not good at hiring and firing and coaching. So the problem is there's lots of companies in that 30 to 60 70 people that it's hard to justify a salary, but it's it's almost a job which gets to your fractional thing. Yeah. Yeah. And I I will say I've worked with some amazing CFOs and controllers that really have their wits about them when it comes to human capital, but I again now we're seeing so many people that have reduced their uh financial um support partners to fractional as well. If I know a client, we're going into a startup uh that has some funding. if they have a CFO, I'm always like, "This is going to be a breeze because I think um you know with with human capital, it actually sits so close to finance and over the last five years or so, uh it's kind of pulled away from finance, which makes no sense because that's your most expensive asset is that's, you know, your your human capital. when they want to li, you know, chop down uh 10% of your your expenses, they go right for your human capital. So, that's why I I just I I love working with really topnotch CFOs. I would agree with you 50% that that's absolutely connected, but there's another 50% of just having the skill set, the instincts of interviewing and and figuring out who the right people are. cuz I've suffered tremendously over the years with having the wrong person in that job. I had an HR person for a short period. I asked her how she interviewed someone and she said, "Well, I gave him the benefit of the doubt." And my head almost exploded. I said, "No, your job is to give no one the benefit of the doubt. That's your job. Your job is to assume everyone's lying to you and then go find out whether that's true or not. That's your job." She was gone a month later. Thank God. because anybody with that mentality, you talk about a dangerous what could be more dangerous than an HR person who gives people the benefit of the doubt. Yeah. Well, thank you. And actually, um I had a conversation with an HR professional um a few months back and basically she said, "Well, I'm here to protect the employee." And I said, "No, you're not. You're you're you're if you want to protect the employee, go go be a lawyer. If you protect the and I use this term a lot, the fidelity of the company, the fidelity of the company means you're going to be operating correctly, you're going to do the right things for the company and the employees are going to also feel that because all of the laws are really geared towards uh the employee and the employee benefits. So all you have to do is really police that and coach coach internally. Then everybody's happy. I'd be okay if they said half my job is protecting the company and the other half is protecting the employee. I got no problem with that because there's certainly some truth to that. But to suggest their own that's that's frightening. I mean that you're right. They should be a employment lawyer or something. That that's frightening. And this person think about it. She said that out loud. You didn't read her mind. She actually said that out loud to you and thinks that's a good thing to tell somebody. We joke internally in my team. We call them candy dish HR because they they really don't know what their true place is in in their company. I love uh and I can spot them a mile away when when I have a candy dish HR person versus a true business partner. So what do you think? I have my own number in my head. You want to hire a competent HR person that takes care of all the details, doesn't make mistakes, is got a good instinct for interviewing. What does that job pay in Boston dollars? In Boston, yeah, you're you're probably talking about in and if we're in the software high-tech, you're probably talking about 250. Oh my god. Okay. Well, that's forget software for the moment. I was going to say 100 and a quarter for a normal business that's not high-tech. Jay's in Chicago, Kate. But Chicago should be similar to Boston, I would think. Yeah. Well, when we get when we get away from the high tech, I have a woman on my team, Manuela. She's she's really an ace. She just joined us, but I brought her on specifically to work with a client out in Western Mass. In Western Mass, the compensation's about 20% less. It's a non- tech, so we were trying to find somebody for about a hundred uh thousand there. I'm sorry, but every single person I spoke to, uh, I mean, no judgment, but it sounded like they drank and smoked all their lives and they had no there was no level of sophistication to them. And that's a problem to me because you have to have that level of sophistication. Yeah. And I'm telling you, I believe this to be true. The reality of the situation is those companies that have 50, 60, 70 employees that are going to bring someone in, they think that they're going to get someone to do this job for 75 grand and quote unquote that's a lot of money. They really don't under and I know this because I've done it. They don't realize all the stuff this person doesn't know and the exposure they're putting their company at both legally and the exposure of just not hiring the best people in the marketplace. So, I don't think that the typical small business owner understands the true role of an HR person and the incredible benefit and protection to the company that they provide. Yes. Well, and that was the legitimizing them work continuing to work with us because I'm like I I just can't find the caliber person you need not in their for their environment. So they're they're with you us working as a fractional uh client and they brought in actually a COO which they're going to get more bang for their buck doing it that way. I mean in my case I probably just got lucky. I found what I believed to be the perfect guy but it was it didn't have three other candidates that were even close. So, I wished I would have known you a year ago or 6 months ago before I hired my accounting firm to do it because that was just a complete waste of money. Yeah. Well, I'm happy to work with you. It's going to be $175 an hour and less less my special 21 hats discount. Thanks, Paul. No problem. Kate, what's been your most effective uh form of marketing? Uh myself, actually. So, honestly, it's just being out in the community, which everybody else is. You know, they're they're doing the phone jockey thing and I'm just out there pressing the flesh. Um, so I I really do love the startup community. Um, high growth. So, we've been very fortunate that we're currently on six preferred VC vendor lists. Um, so we get a lot of traction from them. Um, but you know, I I'm out there. I I go to the events. Um, you know, and again, it's it if you're like a Robert Half, they're going after a different market. They they sit behind their phones and that's kind of how they focus where I'm just going to go and I'm going to offer free advice. I'm going to be in everybody's face just offering what I can and that's how we end up getting a lot of business. All right, Kate, I'm going to give you a break. Paul, it's your turn. The last time you were here, you told us that March was shaping up to be your worst month ever. You'd had to lay off a third of your workforce. Give us an update. How are things going? Well, uh, big surprise. April actually turned out to be a reasonably good month and May got off to a decent start. I don't understand it, but I'll take it. and I've brought back about half the people I've laid off and uh we are operating profitably although I'm not paying myself anything. Everybody took a 10% pay cut which is also helping. But my next goal is to see what May sales look like and if it continues strong then I'm going to restore everybody's pay at the end of the month and then next I'm going to try to start paying myself. But I still feel like this could go any direction at this point. You have no idea. You didn't do anything differently. No, no, there's really nothing different. I said back two months ago, you said your month, your year loot usually is reflected by how January and I did say back then, I think this is a fluky year. And I'm not surprised things are getting better because I think we're in an unusual time that we've never been in before. People are freaked out, but they're going to get over it and they're going to get back to doing business. And I do still believe that's the case. So, I won't be surprised if next month you say it's getting better and better. I think there was a whole lot of people shocked in January and what's going on and I think they're numb to it. At some point, they got to get back to doing what they were doing. If they needed a desk, they still need a desk. If they need framing, they still need framing. So, I think that luckily we're not in the restaurant business. If you lose the meal, you lose a meal. Here's there's pent-up demand. the people that didn't order their conference tables still need it and people that didn't come shopping by me still need it. So, I I won't be surprised if things start to get better. Do I think it's going to be a great year? Absolutely not. Um I just think it's not going to be a disastrous year, I think. Yeah, we're on track for about 4 million a year in sales, which is a big drop from where we were last year, but it's survivable. And so, I'm just I'm just waiting around to see what happens. Paul, how did it go when you asked people to take the 10% pay cut? Well, nobody's real happy about that. I'm sure it's it's more that at the point where I announce the layoffs, I said, you know, the problem is make sure you've got cash so that you can be around in the summer when the phone starts ringing again. And we've done a lot to preserve our cash. and we've gone from a weekly spend of about 115,000 down to 70,000 which is a pretty big cut and that's allowed us to sort of be in a position to I mean I now have money through the end of June at least and uh it's just about making sure that we're not running the engine faster than the gas is going in the tank and and uh so I'm satisfied with the moves I've made. I know that people don't complain about pay cuts like that cuz this is actually the third time I've ever done it in my career. And it's remarkable to me how how little push back there is. And uh mostly because if you make the case for why you're doing it and you make sure that they understand that I cut my pay 100% first, uh then they they they see it. is like it's serious. This is what we have to do. And listen, I haven't done it. There's no question if I did an across the board 10% pay cut. Uh that would make a huge difference. That be and I just I'm hesitating to do that. But well, it's it's a thing you do when the when the house is on fire, right? I'm not down like do it for chuckles. I mean, I wouldn't anyway. No, the difference is you were down 50%. I'm down 12%. So, I'm not there and I'm hoping it comes back, but see. Well, down 50%, backlog disappearing, money going out the door, what's going to happen next? Nobody's calling, nobody's buying. The house was burning pretty pretty good. And so I did sort of the most drastic plan and with the thought that I'd rather just do it once and recover than chip away at it week by week. You know, one person disappears every week. I don't think that that's good for morale. No. Whereas, if you can present it as like, hey, we're getting screwed by forces beyond our control, but this is what we have to do to survive. At least everybody understands they're in it together. Paul, when you uh went back to some of the people you'd laid off and invited them to come back, did everybody say yes? So far, they were very happy to get get called back. So, I mean, some of them took a pay cut to come back and I was like, "Hey, I gave everybody a pay cut. same with you. But um I think that we have a pretty good place to work and that people recognize nobody wanted to get laid off and so um I'm very pleased that they wanted to come back and that they seem to be happy to be back and they and they took it the way you wanted hope they would take it. It sounds like Yeah. I think part of it is they wanted to come back cuz there's not a whole lot of jobs out there doing what you're doing cuz everybody's in the same situation you are. So I mean it's not like it's a booming market and they've got job offers coming out all I assume. Well that yes and no Jay because there are in a lot of fields having someone who is technically adept is a you know a huge plus. So, one of my guys who I laid off, he ended up working for sort of a some company that went around and did uh maintenance and what have you at grocery stores. And they were paying him 30 bucks an hour and I had been paying him $24 an hour. And uh and he said, "You know what? It was just awful. I spent half my time in the car and I I had this clunky process where I would go out to a store and be all they need is like one nut and bolt and I had to send a paper requisition back to the office and wait 2 weeks and then go back and do it again. And it was just super frustrating. But I think that that people who actually have skills with their hands and understand how to do a day's work are going to be valuable in any number of situations. just whether the company you know that you end up at is is a nice place to work or not. I laid off someone a few years ago and he had done several different jobs and we ended up needing him back and he was happy to come back. So I 100% understand what you're saying. The fact is I believe you and I run nice places to work and there's a whole lot of places out there that aren't so nice and this guy had worked at them and was thrilled to be able to come back. So yeah, it doesn't surprise me everybody came back. Kate, have you been spending more time helping people lay off employees or hire employees? Fortunately, we're more seen on the growth side than the uh helping to you know offboard people, but we get the candidates calling us afterwards. Um but you know, it really is a a testament to both of you to be able to say, "Hey, would you like to come back?" and they're eagerly coming back because yeah, if you're if you're in the skilled trades, you can find opportunities. So yeah, I think it's it speaks volumes to how you treat your people. Well, that's one of the reasons why you should change your prices so you could treat your people a little better. Well, that's the problem. The problem though is I mean I have people that have worked for me for one gentleman has worked for me for 13 years. Um so I I have longstanding employees. I run open books with my team so they know exactly where everything is is basically I'm I'm I'm showing them the numbers and I said here's the problem you guys are are really good to me and you stay here it actually is what kills our our our profitability because you know I need to pay you as well. So the whole point is that as we can move forward and hire very junior people who don't really have a a career uh compass, we can give them that. Yeah, that's the conundrum I'm in. I mean, do you think you're paying yourself what you're worth? Myself? Yeah. I I mean, yeah, I think Yeah. Well, it's it's sort of like the the basis of I think what people are paid in this industry is kind of ridiculous. You know, somebody was just telling me they paid a contract recruiter during the heyday $185 an hour. And I'm like, that's just nuts. It's just nuts. You know, um I don't want my team to be viewed as simply overhead. And that's the problem. Like if there if they have to throw the brakes on hard. Well, interestingly enough though, you say that's nuts, which certainly sounds to me too, but it obviously worked for the company. It shows you how much money they were making that this person, they must have figured out how to bring in a ton of business and get all those big fees out of people. So, it sounds nuts to us. It's not nuts to them. It works. Yeah. Apparently, they wouldn't be paying it. Well, they they they kind of had a fire sale when they went to private equity. So, yeah. Yeah. Well, it's again I I like to play armchair economics with everything and if I can take a a client and be there, you know, because we don't do like one-offs and I think what you're kind of gauging on is you have one position and then you're you're looking for that one hire. We go in and we'll be there. We have one of our clients right now where we have two people working almost full-time there. So 80 80 hours a week. As we've been talking, I'm like, well, maybe when we do have those oneoffs, that's where we jack up the price, which is exactly how we came to the two uh 225 for executive search. Um, and a minimum spend on that. So, I I really appreciate the food for thought on this. Kate, I hope we haven't scared you away. No, not at all. You just doubled her income. What are you talking about? No, it's greatly appreciated. All right. My thanks to Paul DS, Jay Goulz, and Kate Morgan who will be coming back. Uh, thanks for sharing everybody. One thing before you go, everything we do at 21 Hacks is created by entrepreneurs for entrepreneurs to help us all learn together. If you get something out of listening to these podcast episodes, consider joining the conversation. You can do that by joining the 21 Hats sounding board, a Slack channel where you can tap the wisdom of a very smart crowd or by becoming a founding member and joining our monthly Zoom forum where you can be part of conversations much like the ones we have on the podcast. You can sign up for both by subscribing to the Morning Report. If you have any questions, you can email me at lauren21hats.com. And if you get something out of this podcast or out of the morning report, please tell a friend, tell an enemy, tell every business owner you know. Your word of mouth owner to owner will always be the most effective way to build this community for all of us. Thank you. It means a lot. This episode was produced by another entrepreneur, Jess Stubberon, founder of Blank Word Productions. Thanks for listening, everyone. [Music]