I Just Cut My Pay

Introduction:

This week, Paul Downs tells Shawn Busse and Jay Goltz that his year has not gotten off to a great start. This was supposed to be the year that Paul unleashed a bold, new marketing campaign that would put his business on an entirely new trajectory—and perhaps it still will be. But for the moment, his revenue has fallen considerably short of his expectations, which has presented him with an unwelcome choice: Should he hold-off on the marketing campaign? Or should he cut his own salary? Along with discussing Paul’s decision, we also talk about the process of rethinking a website, how best to make use of LinkedIn—it’s a gold mine for both business development and recruiting, says Shawn—and why Paul and Shawn continue to perform their own HR chores.

— Loren Feldman

This content was produced by 21 Hats.

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Podcast Transcript

Loren Feldman:
Welcome Shawn, Paul, Jay. It’s great to have you here. First of all, Paul, you were out for a while, I believe with COVID. How are you?

Paul Downs:
COVID was just part of the fun. I started by screwing up my knee playing soccer, then I got wicked COVID that lasted for a couple of weeks. And in the middle of that, I completely threw my back out. So 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.

Jay Goltz:
You could have done that at work. You didn’t have to be home for that.

Paul Downs:
Yeah. But I’m all better now. So thank you for asking.

Loren Feldman:
Glad to hear that. How did the business run while you were home being miserable?

Paul Downs:
It ran very well. I mean, 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, because we’re running through our backlog. But I think that we’re going to pull it out right at the last moment.

We’ve been able to run the factory at full speed, and it’s just a question of the backlog shrinking, but we 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 give 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 I think that we are going to get out of it okay.

Loren Feldman:
I seem to recall that you’ve had struggles in the early parts of the year in previous years. Is this any different than that?

Paul Downs:
Yes, in 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 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 am 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 until the very end. So people often don’t call us until the end of that project. And I’m thinking that it’s possible we may finally be seeing a COVID 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 year ever.

Jay Goltz:
You know what, I could ask the reverse question. I could say, “How could that not be affecting you?” Because I got clobbered last year in my corporate art business because the offices were closed. Who’s hanging artwork in offices that are closed? And I took the hit on it. 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 who are good, solid people who I’ve got years invested into. At least as far as I’m concerned, sometimes you’ve just got to take the hit.

Paul Downs:
Well, I agree. I mean, 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 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 a tight-run thing, but compared to other moments I’ve had, this is nothing. This is just a little bit, you know, the backlog’s 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—it was actually 2012, and I ended up writing a book about it. But when I was weeping in my beer to my Vistage group, “Oh, our sales are down, and I think it’s the economy,” their advice was, “It doesn’t matter what’s happening in the economy. You’ve got to look and see what you’re doing, because that’s the only thing you can control.

And so yes, I’m looking very carefully at all the things we’re doing, and I’m planning on a counter punch. And the way I’m gonna pay for it, since we don’t have as much cash—normally 50 percent of our cash comes from deposits when people place orders. So if people are not placing orders, I don’t have as much cash. I just cut my pay, which I haven’t had to do for many, many years. But I just did it, because that’s what we need to do right now. So we’re not out of cash. We’re able to run the factory profitably. We haven’t run out of work. I don’t think we’re gonna run out of work, although the backlog may get very low. And we’re just going to ride through it.

Shawn Busse:
When you had the lull in 2012, Paul, do you feel like that was a lag from the recession?

Paul Downs:
No, it was two things. One, there was a seasonality to my sales patterns that I did not understand at that time, because I hadn’t kept the data. And the second thing was, I had done a configuration change deep into my AdWords program that basically destroyed the whole thing, without any real indication that it was failing.

What happened was—and I’m gonna spend very little time on this, because it’s complicated—but we introduced a new product. We supported it with AdWords. It was aimed at a particular target market. Google started showing that product to everybody on Earth and getting clicks. And that’s Google’s idea of success.

What was happening: It was using up my daily budget early in the day on people who weren’t going to buy. Previously, our AdWords had been aimed at a lot of people, but the ones who tended to click were very late in the day, and those were the bosses who actually buy stuff, who were looking at tables after their days’ chores were complete. So the ad was running and the budget was being used up at the wrong time of day by the wrong people.

Shawn Busse:
Wow.

Paul Downs:
It took a long time to figure that out. And there was nothing about how Google presents information that made it even possible to understand this. And then there was nothing about how AdWords worked back then that made it possible to easily fix it, either. It took a long time to dig through it and figure that out.

Jay Goltz:
Well, as always, one of the problems is, this isn’t your only hat that you’re wearing—the marketing hat. So if you, or I, or Shawn, or anyone else had nothing else to do but work on this, maybe we would figure that out. But when you’re trying to run a business, and you don’t have a chief marketing officer, it’s just one of the many things you’re juggling. So it’s not a surprise that it took a while to figure out.

Paul Downs:
It did. But there’s more to it than that. The actual solution I only arrived at, and was able to zero in on this issue, was because I happened to own a wide format printer that could print out the Google statistics on one sheet of paper that was about 60 inches long. You couldn’t see that on the screen. You couldn’t look at two periods of time, and look at what’s going on, and check all your stuff. And it was just because I happen to have this capability for other reasons that I spent a whole weekend just staring at a long printout of a bunch of things, and then came to the conclusion that this might be happening.

Jay Goltz:
All right, I take it back. For me, that would be the case, but not for you. Because you seem like some kind of savant who does that stuff. I would have never had the patience or—

Paul Downs:
No no, it’s not savant. It’s when your clothes are on fire, you have to do something. That’s it. Water wasn’t available. And so I had to figure something out. I don’t even know whether that story is true. But that’s what I thought. And I changed around the campaigns. And shortly after that, things sorted themselves out. Whether it’s because of what I did or something else, I actually have no idea.

Jay Goltz:
Very impressive story, either way.

Loren Feldman:
So, back to the current situation, you do happen to be deep into a marketing campaign that you’ve already spent a good bit of money on and that you’ve told us about. Can you quickly recap for us what you’re doing, and then tell us where that stands, and what your current thinking is?

Paul Downs:
Yeah, so the idea is, at the moment, most of our buyers come to us just through Google searches. And that’s fine. But that puts me entirely at the mercy of Google. And it appears, after having been Google’s darling for almost 20 years now, that the size of that market is—let’s say it’s four and a half million bucks a year.

Now, there are a lot of people buying and selling the product we make, just in different ways. And we identified a piece of that other supply chain that we want to be involved with, which is architects and interior designers. We currently don’t have any real outreach program aimed at that group. And so the marketing campaign was designed to put us in front of those people—was designed, is designed—to put us in front of those people. Hopefully, it will work.

And we’re in the process of just building out all the content that we want to show to this group, because they have a different, let’s say, aesthetic than our average buyer. And so the website that we run for people who just know nothing about interior design, or tables, or furniture, are just looking for something, we have a website for those people. But it’s not a good fit for how architects think about the product.

So we’re in the process of designing this campaign, which included a lot of research, talking to architects and interior designers, and then a lot of content production, where we’re making videos and documenting what happens in the shop. And we’re in the process now of building out a second website that’s aimed specifically at that target audience and has a look and feel that’s more amenable to them. We just got the back end of that website completed. And we’re going to start loading content into it. And I’m hoping that we have the website pretty much completed and ready to go the first week of April, or so.

Jay Goltz:
I think what you’re saying is—because this is the world I live in—it’s a much more sophisticated market. They’re used to looking at ads that have been put together by $300-million companies, so you do need to raise the game.

Paul Downs:
That’s right. I mean, that’s as good a way to think about it as any.

Jay Goltz:
Yeah, I think you’re exactly on it. I know that most big projects, almost all of them, have a design firm behind them, and that makes sense. I think what you’re doing makes perfect sense. And it could actually end up being much bigger than the Google search thing.

Paul Downs:
I hope so. I mean, that would be the win if we can successfully put our message in front of the right people and get them to start thinking about us when these projects come up. And, yeah, that’s what we’re trying to do. And at the same time, I’m also trying to build ties to a couple of peers in the industry, who sell through the old channel but have manufacturing capability that we could be a supplement to. A lot of what we do is very, very complex. And in order to maintain the ability to do super complex work, you kind of have to be doing it all the time. And most companies that are making my product don’t do it all the time.

As a matter of fact, they’re trying to set up factories, which are doing simpler stuff in huge volume. And then when something really complex comes along, then they don’t know what to do. So we’re trying to make ties to some of the other industry players in order to offer ourselves as, “You don’t know how to accomplish what your client is doing. Or you can’t get it through your factory because you don’t have the skilled labor, or whatever you need. We’ll be those guys.” And so we’re in the middle of working on those ties with a number of companies. And I think that that’s going to be helpful, too. I anticipate that by the end of the year, we’re going to be back running at $5 million a year or, you know, hopefully more. So I’ve just got to get through this patch. And I’m pretty confident that we’re going to do it without much trouble.

Loren Feldman:
So your outreach to those new buyers that you’re hoping for is dependent on your website work, correct?

Paul Downs:
Well, the website is where they go. So what we have to do is get them to go to the website.

Loren Feldman:
And have you built the website? Or is that what you’re working on now?

Paul Downs:
We’ve mostly built the website, in that we hired the firm, showed them a bunch of stuff we liked, and they came up with a version of that. It’s just a question of loading each page with content now, and fixing the text, and doing all that stuff.

Loren Feldman:
Were you happy with the process? I mean, that’s a complicated aspect of it. People struggle from the beginning of hiring the right person to getting it done. Did it go smoothly?

Paul Downs:
It did, because it’s not my first rodeo, and I rely heavily on recommendations and people I know. I wanted to hire someone local, and so I interviewed four or five firms. I actually already have one website firm that’s running my existing site, but I didn’t think they were a good fit for this new site, because they’re just not.

Jay Goltz:
So are we talking about a $100,000 website?

Paul Downs:
No. The website is going to be about 30 grand.

Jay Goltz:
All right. Well, that’s not a lot.

Paul Downs:
No, I mean, one of the things is I chose a firm, which is just two guys, and got references, people I know know them. But I’m not paying for fancy offices or anything. I don’t need to. These guys are just down the street from me. We could communicate, that’s fine. They’ve been good.

Loren Feldman:
And were they recommended by a business owner you know?

Paul Downs:
Well, they were recommended by several people, including our current web guys. One of the guys used to work for them, so they know each other. It’s a community.

Jay Goltz:
Correct me if I’m wrong: You said you have the web guy. So these guys are more of the graphic designers, and they’re working with the guys who are actually doing the website? Is that how it works?

Paul Downs:
No, this web firm has two guys. One is the look-and-feel guy, the other guy’s the back-end support guy. So that’s all you need. You want someone to help you figure out what your website should look like: The fonts, how many pages…

Jay Goltz:
So he’s a graphic designer?

Paul Downs:
He’s a web designer. That includes graphic design. And then the back-end guy is tricking out WordPress to sort of do the things we want to do, and to give me an administrative portal that allows me to do the amount of content uploading and changing that I want to do, which is a lot.

Jay Goltz:
There has to be a photographer involved, right?

Paul Downs:
Well, the marketing company that we hired to sort of design the marketing part of this—the content that we’re going to try to put out, the messaging, the positioning, where do you put it on social media—they also have, let’s call it a photography and movie unit, that is providing a lot of the imagery. But we have a ton of imagery ourselves. A lot of what’s on the site, it’s just gonna be pictures of stuff that we made. And some of that was taken by us. Some of it comes from the clients. So yes, there’s a second firm involved, but they’re the marketers.

And early on in the process, when we started getting feedback from the marketing company that was doing market research, I was listening to what they have to say, and I’m like, “It’s pretty clear that if we go to the trouble of contacting our target audience, and we send them to the current site, it would be like inviting people to the Met Gala, and then actually sending them to Burger King or something.” It’s just like, our current website works great for the people who see it, but it will not work for the people we want to drive to it.

Loren Feldman:
Why wouldn’t it work for an architect?

Jay Goltz:
They’ve got a trained eye. They’re used to looking at ads and communications that are made by billion-dollar companies.

Paul Downs:
It’s just a different aesthetic. The mindset that makes you an architect is different from the mindset that most people have. I’ll just say that. It’s just a different aesthetic. And if you show them the wrong thing, they react hard in a negative way.

Jay Goltz:
Listen, I’m in that world. I’ve been framing pictures for architects, and you’re right. They’ve got a different aesthetic. They’ve got a different sophistication level, and I totally buy what you’re saying. You’ve got to bring your big game to it. They’re used to dealing with, you know, Kohler.

Paul Downs:
Right. And the point of this campaign is to introduce ourselves as a brand to that group of people. Because as Jay correctly pointed out, all my competitors are billion-dollar corporations. They have marketing resources you wouldn’t believe. And they’ve been around for a long time. And yeah, that’s who people think of. And I’m nobody, but there’s one secret weapon I have, which is, over the years, we’ve amassed a client list that is just stunning. When you see who we’ve worked for successfully, you’re like, “Oh my God. Who are these guys?”

Jay Goltz:
And you’ve got the photographs to show them.

Paul Downs:
And we’ve got the photographs to prove it. And we’ve got the testimonials, and we got all that. So I think it’s credible for me to go in front of your average architect in Boston or something and say, “Hey, you’ve never heard of me. That doesn’t mean it’s because I stink. It’s because we’re in this Google world, and you’re not. But I just want to show you what you’re missing and how we could help you.”

Jay Goltz:
You need to be the trusted brand versus just a brand. And when you show them all that, it gives them trust.

Paul Downs:
Right. Trust is actually the critical component. And the world we live in now, if someone calls us out of the blue, they don’t know who we are. So we have to establish instant trust. And we’re pretty good at it. But it’s easy at this point, because we can always say, “Oh, we work for this, we work for them. Yesterday, my people were in the Pentagon installing the new boardroom for the Joint Chiefs of Staff. Yesterday, we got a call from the White House.” People who have choices end up choosing us. So I don’t think it’s a hard conversation. It’s just that we’ve got to get their attention and start the conversation. That’s the trick of this campaign.

Shawn Busse:
I mean, that’s real. I had a client a while back that was an IT company. And they had this homegrown website. And pretty much, they would never get any lead inquiries through the website. And without changing any kind of advertising or anything that would drive more traffic to the site, we just redeveloped the site from a trust and messaging perspective. It just looked more legitimate and trustworthy.

And they went from zero to four a month. I mean, it was crazy. So they would get like four leads a month instead of zero—like good leads—and that’s all we did. And so it just tells you that there were people actually looking at their brand. They were seeing it and going, “I don’t trust this. I don’t see a connection here.” And then they were leaving. So you probably don’t have the architects looking at you right now.

Paul Downs:
Some do. But again, if I was dragging someone in who’s busy, who’s sophisticated, who’s dealing with people, I don’t want to show them the wrong thing. One of my sales tricks all the way along has been: Okay, someone calls us. They don’t know who we are, and they don’t know anything about the product, because nobody knows how you get fancy conference tables. And so my theory has always been: You’ve got to make sure that every second you’re interacting with a new client makes them want to be there for the next.

Shawn Busse:
Yes, it’s a yes.

Paul Downs:
You cannot have a single moment anywhere in the process where it looks sketchy. And so yeah, we’re putting a lot of money into tailoring messaging and content for these people. Because I anticipate that the payoff will be very, very large. We sell a lot of tables that are a quarter million bucks. And so, okay, I had to invest $100,000 to get there. I don’t care.

Jay Goltz:
I would just challenge—you’re not putting in a lot. The amount of money you’re putting in is extremely reasonable. You could have told me you were spending 200 grand, I would have thought, “Maybe he is.” So you’re not putting that much money into it.

Paul Downs:
Yeah, actually, here’s a question for Shawn. Okay, I have to do some upfront investment: Website, 30 grand; preparing the content, doing the market research, let’s call that 70 grand; so there’s 100. The marketing people are recommending a marketing campaign that relies heavily on ad placements on social media. And, like, I don’t know what else there is to do. But I just wonder what your thought is, given the current environment, how easy is it to actually target a small group of people using the current situation, with the privacy and all this? Is this feasible?

Shawn Busse:
I mean, the good news is that you’re not trying to target them on Facebook, because that’s been just absolutely eviscerated by the Apple updates. So really, I think you’re trying to target them on LinkedIn, would be my guess.

Paul Downs:
LinkedIn and Instagram are my two thoughts.

Shawn Busse:
And then maybe Pinterest. At some point that might be worth looking at. I don’t know. I mean, I think there are two paths ahead for you. The paid media is one, and the good thing about it is you can test it and see if anything happens. I’ve not seen that work super well for high-dollar-purchase transactions, but at the same time, your folks are looking for something specific. So that’s good.

The other path would be like social selling, which I think is worth a lot of investigation. So that would be building relationships on LinkedIn, creating connections, doing outreach, and just building a network of people who are potential buyers and adding value to their experience. So I don’t know if you’ve talked about that with your marketing firm, but that’s something I would look at pretty hard.

Paul Downs:
We’ve talked about it to a certain extent, but we haven’t talked about it like you just described it. And I would say, there’s actually a third path which is—and this is old-school. Jay, you’re gonna like this one.

Jay Goltz:
Because I’m old? [Laughter]

Paul Downs:
Yeah.

Jay Goltz:
Okay, I’m listening.

Paul Downs:
Almost. So we spend a little time identifying the top 10 firms in each target market: Austin, Houston, Dallas, you name it, Nashville. And then we send them something handcrafted, customized, and say, “Hey, we know you’re doing this business. We want to talk to you. Here’s the thing. And try that.”

And that’s expensive at the front end. And, like, each time you send one of these out, it may be a couple hundred bucks, but we don’t have a million people to try to attract. So that’s another thought. And I may do that along with social media. We’ll try what the marketing firm is recommending for a while, but they’re asking for a monthly spend of $10,000 to $15,000, which I’ve done before. That doesn’t horrify me, but I want to make sure it’s producing leads.

Jay Goltz:
Wait. So are you going to send everybody a desk? What are you talking about when you say a handcrafted thing for $200?

Paul Downs:
No, actually a cutting board. We make cutting boards. I’ve been making them just for my friends and what have you. And, okay, you buy a wood cutting board from anywhere, and a year later, it’s got a bunch of cracks in it, because they always build them wrong. I’ve got cutting boards I’ve been using for 25 years that are dead flat.

So we could just send them one. It’s a nice, useful thing—and then have a little thing that says, “Hey, this is guaranteed not to crack. And here’s why. And here’s what everybody else does wrong. And if you want this level of craftsmanship”—I’m just riffing right now—”when your demanding client wants a kick-ass boardroom, we’re here for you.” That’s what I would do.

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