Episode 30: The Case for Not Pivoting

In this week’s conversation with Paul Downs, William Vanderbloemen, and Laura Zander, Paul explains why he’s not planning to pivot his business—even as his sales collapse. Normally, Paul says, his most reliable customers are other business owners. When they call to ask about a custom boardroom table, he and his sales staff know they are likely to buy. Right now, though, in the midst of a pandemic that has changed the way people look at commercial space, they aren’t even calling. A lot of people have suggested that Paul pivot to manufacturing desks for home offices. So far, he’s resisted the idea. “To walk away from what we know,” he says, “and do something that we don't know and that others know very well, I just feel like it would be a huge mistake.” Paul, William, and Laura also talk about how the crisis has affected their own compensation.

Episode 30: The Case for Not Pivoting

Guests:

Laura Zander is co-founder and CEO of Jimmy Beans Wool.

Paul Downs is founder of Paul Downs Cabinetmakers.

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Paul Downs: “To walk away from what we know and do something that we don’t know and that others know very well, I just feel like it would be a huge mistake.”

Paul Downs: “A lot of people have suggested that I should look into making desks for people who are now working at home. The fact is, most people who are working at home don’t care about their desk. You don’t see it on Zoom, so it’s not a prestige item.”

Paul Downs: “I think that I’m leaning toward just hunkering down because my suspicion is that this thing is gonna kill a lot of my competitors, and particularly, the ones that are a lot bigger.”

Full Episode Transcript:

Loren Feldman:
Laura, we haven’t spoken with you in a few weeks. What’s going on?

Laura Zander:
Well, right now we are in the midst of trying to purchase a building in Fort Worth for the Madelinetosh business.

Loren Feldman:
That’s the supplier you bought last year and the reason you’ve been spending a lot of time in Texas.

Laura Zander:
Yep, I’m there now every other week. I’ve been home in Reno this week, and then I go back to Texas on Monday, go back to Fort Worth. We’re almost through the due diligence period. We’ve been doing a bunch of inspections and all that kind of stuff, doing one of these SBA loans that Jay had told me about. It’s a 504 loan, and we just found out last night that our bank that we’ve been with forever, US Bank, has denied our loan for this. Now we’re going to go find a smaller community bank that focuses on small business.

Loren Feldman:
Why do you think they denied it?

Laura Zander:
They denied it because of COVID, in a nutshell, and that’s because we’re in the retail and online retail industry. They have flagged all retail as super risky.

Loren Feldman:
Your business is up, though, at least Jimmy Beans Wool. Your online sales are up, right?

Laura Zander:
Yeah.

Loren Feldman:
Were they just looking at the supplier, which I assume their sales are probably lower than expected because of COVID—is that right?

Laura Zander:
Well, no. Actually, they’re going up. It’s complicated. Over the last three years, we’ve acquired, and that’s a really fancy term, but we’ve brought on three other companies. From a cash flow standpoint, we’ve invested a lot of money in the future. When they’re looking at our books for the last three years, they don’t look super. They look good, they look fine. But given the new COVID restrictions or the new COVID rules and calculations that they’re using, we’re just on the cusp of what they consider to be a safe investment. That’s because they applied new rules based on if you’re in one of these industries that they’re deeming as risky. So yeah, Jimmy Beans is up. The Madelinetosh business, we’ve grown the customer base 35 percent since January.

Loren Feldman:
Wow.

Laura Zander:
And our sales—hey took a dip, for sure, because it was a wholesale business, but they’re really starting to pick up. We’re now booked out through the end of October. We have enough work to last us through the end of October, which is actually more than I want. We want to just have eight weeks worth of work.

Loren Feldman:
Is that the reason you’re buying a building, to increase your capacity?

Laura Zander:
No, we’re buying a building for a couple of reasons. One, the interest rates are really low. The monthly payment on a building would be about half of what we’re paying in rent. That’s a big one. There’s a huge cost savings there. Then secondly, the nature of the work with the kitchens: dyeing yarn, it gets really hot. We’re in Texas where it gets really hot. We want to be able to put air conditioning in. We want to be able to put a new venting system in, and we want to do a bunch of things to make the conditions significantly better for the people that work there. The investment for that—you’re looking at six figures at least. If we’re going to do that, it’s too risky for us to do that to somebody else’s building.

Loren Feldman:
Sure.

Laura Zander:
And we just had looked at buildings in the Reno area, but buildings in the Fort Worth area are about a third the price of what they are in Reno.

Loren Feldman:
Seriously, a third?

Laura Zander:
Yeah, seriously a third.

Paul Downs:
Why is that?

Laura Zander:
‘Cause it’s Texas.

Loren Feldman:
William, have you got any comment on that?

William Vanderbloemen:
Yeah, I mean it’s cause we’re the best country on Earth.

Laura Zander:
Texas?

William Vanderbloemen:
Yes.

Laura Zander:
Yeah, [in] Reno, the cost of living has increased so much. We’re only six miles from the California border, and we’re right down the road from San Francisco. We’re right down the road from Sacramento, and so this mass exodus that’s happening—and I’m sure William knows about this too. I’m overgeneralizing—but it’s like everybody in California is leaving and either going to Nevada or Texas. A lot of companies are coming to Nevada. They’re coming to Reno because the weather is freakin’ amazing. I’ve lived in, what, twenty different places? And it’s the best weather ever. It’s still really close to the Bay Area.

So the cost of living and the building prices—we were looking at buildings, and let’s say a 30,000-square-foot building or a 25,000-square-foot building—and we found multiple instances of this—five years ago, they sold for about 1.2 million, and now people are asking 4 million. The growth here has had some good consequences and some kind of tough consequences to swallow, and that’s with the cost of real estate.

Loren Feldman:
How confident are you that you’re going to be able to get the loan?

Laura Zander:
I’m pretty confident. Worst-case scenario, US Bank will give us a loan, just not for as much as we want. We would like to be able to put 10 percent down. Worst-case scenario, we’ll have to put 20 percent or 30 percent down, and then they’ll do the loan. But we would prefer to just put 10 percent down and save that money for inventory and other investment purposes.

Loren Feldman:
Are they asking for the larger down payment even for an SBA loan? Or was it not an SBA real estate loan?

Laura Zander:
Yes, they are. The SBA is not asking for a larger down payment. They’re good with the 10 percent. But US Bank now has a cap, so if you’re gonna borrow over X dollars, then you have to… it’s kind of like a jumbo loan with a house. If you do a jumbo loan, then there are all these other kinds of rules.

Loren Feldman:
But if it’s an SBA loan, doesn’t the SBA guarantee it for the bank?

Laura Zander:
They guarantee 40 percent.

Loren Feldman:
I see, so there’s still some risk for the bank.

Laura Zander:
My understanding, and I’m not the expert—obviously, we need Jay, who’s the expert of everything… [Laughter]

Loren Feldman:
You know what? We’re gonna find out if Jay listens to this podcast when he’s not on it?

Laura Zander:
Yes, we are. But my understanding is, the way that it works is, the day that we close, the bank funds the entire purchase. They’re on the hook for the whole thing, and then if you have to do improvements—and in our case we do, we need to do a few things—while we do those, let’s say that takes 30 days, the bank itself is on the hook for the entire loan. And then once the improvements are done, the SBA portion comes in and they kick in 40 percent.

Loren Feldman:
I see. William, what’s going on with you?

William Vanderbloemen:
Our work is primarily with churches and with schools, and churches are not meeting, and schools, who knows if they’re going to reopen? Everybody’s got very strong opinions about all of those things. I think we’ve settled into a new place, Loren, of—what’s the way you’re supposed to say this—coexisting with the virus and figuring out what that means for our company.

If people have listened to this show during this pandemic, very early on, the second week of March, we cut 40 percent of our operating expenses anticipating that we would have a significant drop-off for the year, maybe 25 percent down for the year financially. It looks like we’re going to be down this year, but not by that much. We should end up a little better than that. The data that we’re receiving is showing us that our clients are in better financial shape than anyone ever thought they would be for a number of reasons.

We ended up—I think I’ve mentioned this before—being kind of a hub of resources for PPP: how to apply to get your PPP loan, etc. Of the 90,000 faith-based organizations that receive PPP funds, we have had direct, real interaction with over 20 percent of them. And we’ve sent a survey out to say, “Okay, tell us how you’re doing.” And it’s better than I thought. Most of them have not reduced their headcount. Most of them are doing fairly well financially. I think we’ve realized this pandemic, for our particular business with churches and schools, is going to impact us probably at least until this time next summer. We better be buckled down and ready to live in this reality for a while. But on the other hand, that reality is not as bleak as it looked in March and in April. Does that make sense?

Loren Feldman:
That makes sense.

Loren Feldman:
And we’re launching a new company a week from Monday, so that’s kind of fun.

Loren Feldman:
What’s the new company?

William Vanderbloemen:
Same sector, but in our world, this is kind of inside language, but there are executive search firms, like the Korn Ferrys of the world, that do C-suite work and maybe executive vice president searches. That’s sort of what we do in the church world—if the church has a C-suite, just the senior leadership. What we’ve not ever been able to do is function like a staffing company for people who need a person that makes $40,000 to $60,000 a year, who usually has a shorter tenure. We’ve spent a long time researching how to do that a we’re opening that up.

Loren Feldman:
Why are you doing this as a separate company?

William Vanderbloemen:
There are a lot of different reasons. I always like to seal things off from a liability standpoint. The bigger reason though, Loren, is it’s kind of like right now, I’ve got a really good Lexus dealership and getting ready to open a Toyota dealership. They’re both great products, but they’re very different. They have different service departments. It’s just a whole different experience. It’s called Christian Teams, and oddly enough, Christianteams.com was wide open, like it was $10 or something. It’ll be Christian Teams powered by Vanderbloemen, and if people look at the website, they’ll see kind of the logo for one looks like an inverse of the logo of the other. It’ll look the same, but we want people to be real clear: you’re paying a lot less. You’re also receiving a very different service experience.

Loren Feldman:
Got it. Paul, last time we spoke, you were concerned that, at a certain point, because of the pandemic, your sales were going to really fall off. You weren’t sure when that was gonna happen. How’s it looking?

Paul Downs:
It’s here. This is the day.

Loren Feldman:
I’m sorry to hear that. What do you mean by this is the day?

Paul Downs:
Well, we track first, just the number of people who call us, and then look at those calls and divide them into a bunch of different buckets, because we know who of those calls are likely to be buyers. We’ve seen a drop of 20 to 30 percent in overall search or inquiries—we call them “overall inquiry volume”—since about the middle of March. And usually, we have some drop in the spring, but not that bad.

But the critical thing to me is that we’ve really seen a particular type of buyer who we’ve done a lot of business with just disappear. That would be people just like me and Laura and William—owners of companies who are doing well, they’re moving into a new facility, and they want a flagship boardroom. Those people have just gone. They’ve gone underground.

Even though there are a lot of people who are doing fine in the middle of all this, I think everybody’s kind of worried about whether it gets better or worse. We’re not seeing that level of, “Yeah, I’m gonna splurge on this thing that I don’t need to be fancy, but I’d rather have it fancy.” To get back to Lexuses and Toyotas, they’re thinking about Toyotas or thinking about nothing, as opposed to Lexus, and so that’s having a big effect on us.

We are also sort of getting to the point where, with the pipeline so dry, the parts of my company that deal with the incoming inquiries and the level of sales have been built to handle somewhere between $4 million and $5 million a year in business. We are most likely to be looking at $2 million next year, so the pipeline is drying up from the front, and I have more capacity than I need, in those parts of the operation. Now, we’re still running the shop at full speed, but eventually, that’s going to have to slow down too. I’ve been thinking all along, “End of the summer is when this is going to hit us,” and here we are. Nothing’s changed. So now I have to deal with it. That’s how I’m doing.

Laura Zander:
So what do you do?

Loren Feldman:
Have you decided what you’re going to do?

Paul Downs:
Well, there are two ways to think about it. It really depends on what you think the problem is and what the solution is. The problem clearly is COVID. There’s nothing else. We were doing fine before this. But there’s always something different you could do, right? Whatever marketing and sales operation I had on February 1st could have been tuned up in various ways. It happened to have been working fine and producing the quantities we wanted. But let’s just say it was improvable.

One of the things I could do would be to say, “You know what? It’s just COVID. That’s it. And when the world feels better, the buyers will come back.” That strategy would be to just hunker down and make the cuts to cost as the demand disappears for the different parts of the company and then just shrink. I don’t think we’re going to go to zero, but I think we’re going to be a lot smaller next year, and so I would just scale back. I’d cut people. I would cut hours. I would cut costs, and go back to whatever we were when we were a $2 million a year company.

Then the other thought would be, “Okay, that’s gonna happen, but if you counterpunch, if you go on offense in places where you could have gone on offense, then maybe you can turn that $2 million into $2.5 million.” There are a number of different things that I would do if I believed that was the right strategy, and I’m really bouncing back and forth over which one is better, because the argument against going on the offensive right now is that you can do whatever you want, it’s just the wrong moment. If I go do some more marketing, do some more AdWords buys, keep all my sales staff on in the hope that we get a revival sooner rather than later, then I’m burning my reserves faster than I would ordinarily. It may be that all of those efforts, it doesn’t really matter what I would do, that it just brings closer the day when we run out of resources. We just don’t have the same set of resources to survive. Maybe we’d only last six months from now, as opposed to nine months from now. Those are the things that I’m trying to figure out.

Laura Zander:
You know, Paul, we’re kind of going through the same thing with this business that we bought in November. They were doing four times more than what we’re doing right now a few years ago. Now granted, I’m in a different situation because I have another business that is doing fine, so I can subsidize that. I’ve kind of got my own PPP, if you will. But I just decided we’re just going to scale down, and we’re around the same thing. We’ll just do $2 million, and that’s it, and let’s see if we can make it healthy at this smaller volume. Then if the growth comes, the growth comes.

What I was going to ask you was, one: how does this relate to cycling? There’s a reason I’m gonna ask that. But two: what do you want your life to look like? How much energy do you have? Because where I’m struggling, and where I ended up was, I don’t know if I’m ready to fight to try to grow and to try to do this marketing and blah, blah, blah when I don’t know what I’m fighting against. It’s changing every single day, so for us to try and actively go get new business when I’m not sure I fully comprehend what our customers are going through, it just feels like a moving target.

The lazy part of me is like, “If we can just get by and just hunker down and just make it…” And the reason I brought up the cycling—because you said that you ride—is, here we go. You’re in a really long race. Is it worth burning some energy to make it up a hill on the off chance that you might pass one guy and you’ll never see him again? Or are you better off just kind of plodding along and finishing the race, as opposed to burning out?

Paul Downs:
That’s a great analogy, because I think about that a lot, just in terms of my overall approach to my business. For those who are listening who aren’t cyclists, this may not mean much, but I think everybody can picture what riding 100 miles in a day would look like. It’s hard, and the way I’ve done it and got through it is, you never exert yourself at any point. If you’re breathing hard, you’re going too fast. Then you get to the finish line. I’ve always had that basic attitude towards my business because it’s right on the edge of being a lifestyle business. It’s sort of been a crappy lifestyle for a long time, but it’s pretty good right now. You know, broke and scared, that’s a lifestyle.

Loren Feldman:
You’re being too modest, Paul. I know what you’re referring to, but we should point out you have more than 20 employees and a manufacturing company that has been in business for how many years?

Laura Zander:
Okay, but, Loren—

Paul Downs:
The last few years have been okay.

Laura Zander:
Having more than 20 employees is not always something to brag about.

Loren Feldman:
Okay, I hear you.

Paul Downs:
In the circles I’ve been in lately, too, 20 is pretty tiny. We’re $4 million a year, and that’s just opening the door to real prosperity, I would say, in the small business world. Maybe that’s just because of the people I run with now, and I’m well aware that the vast majority of businesses that just do headcount are much smaller than that. But it’s surprising how getting to that $4 million and that 20—we have 23 employees—is not quite nirvana, because I’m still doing a lot of stuff myself. If I decided to take six months off, the place would close. It’s not really at that point of being self-sustaining, although I could see it, and I was planning on being there in a year or two, but COVID really screwed us over.

Laura Zander:
I didn’t mean that you shouldn’t be proud of the fact that you’ve built it. I just mean that sometimes having more employees is more work and it’s more stressful. Having 20 doesn’t necessarily mean it’s a great lifestyle. You know, there are times where I wish it was still just me and Doug.

Paul Downs:
Right. I hear you on that. I think that, actually, if you’ve got the right 20 people, it’s not a bad place to be, because I’m able to come into work and spend a pretty good amount of my time doing stuff like this, not necessarily gluing pieces of wood together. I have enough time and headspace to do other things besides work, but it’s at the expense of real security. As I said, if I got sick, or I were gone for six months, this place wouldn’t survive.

I think it would need to be somewhere in the six to 10 million range where you can afford that whole layer of management and you’ve built HR and you’ve done all that stuff. Forty-some employees seems to be kind of where that starts to happen, and I’m just not there. But we’re digressing from, “What am I going to do next?” I think that I’m leaning towards just hunkering down, because my suspicion is that this thing is gonna kill a lot of my competitors, and particularly, the ones that are a lot bigger. Some of our main competitors are $100 million-plus companies, and I don’t know where they’re going to find the business to support that kind of overhead. Whereas if I just hang tight, I think it’s going to be two years for me, honestly.

Loren Feldman:
Are those competitors you’re referring to, do they do custom tables like yours? Is that what accounts for all that revenue?

Paul Downs:
They do, yeah. There are people who are just bigger and more established than me.

Loren Feldman:
So there has been a big market out there, that certainly indicates.

Paul Downs:
Yeah, there is, and I think that everybody who’s concerned about what the future of the office looks like, I mean, those people have got to be really sweating it. We at least have flexibility. I’m able to do business with a pretty wide range of people. And as I was saying, we do business with churches, and you wouldn’t think of churches as buying custom tables. We do business with small town municipal governments and school boards and police departments, because we know how to make something that’s a good fit for our clients’ resources.

Those bigger companies are all really focused on the Fortune 1000 market and those big headquarters projects and really making beautiful interiors. I think that stuff is going to be hard to find for a couple of years, and so I hope they all die. I hope they all die really quickly, frankly.

Laura Zander:
Oh my god!

Paul Downs:
Well, wouldn’t you be delighted if every other wool supplier in the world were gone tomorrow? I mean, it would make your life a lot easier, wouldn’t it?

Laura Zander:
For me? No, actually, but we have a different industry. Because if we do that, then maybe the craft goes away. There are a couple of them that are jerks that I would love for them to find employment elsewhere. But no, actually, ours is kind of the reverse. I want more and more and more competition of small businesses, because that creates more interest in what we’re doing.

Paul Downs:
Okay. That’s a point of view. Makes sense.

Laura Zander:
Yeah, but this is a different industry. We’re supplying things for people to make things, so that’s like saying gardening. If all the garden shops go out of business and you only have Lowe’s, what does that really do to the gardening industry?

Paul Downs:
All of my competitors are Lowe’s, so if they die tomorrow, and the world is left to people like me…

Laura Zander:
Yeah. And we only have a couple of Lowe’s, if you will, in our industry, and actually one of them just died. You’re right. We celebrated, and then we were able to just hire one of their top employees, and she’s gonna move to Reno and come work for us. They were even worse—I shouldn’t say worse, they’re nice people—but they operated under the business model where they don’t need to make a profit, so they were able to price everything super low. They had gotten $50 or $100 million in money, so they were out spending stuff, and they really took a chunk out of our business. There’s another one like that that still exists out of Europe. So you’re right, I wouldn’t mind if they passed away gently.

William Vanderbloemen:
You would think I’m in the church or faith-based or Christian space, so I want everyone to live and be happy and wouldn’t want anything to die. I do want healthy competitors to do well through this. Unfortunately, I’ve got two different issues when I think about competitors. One is, we frankly started this industry, and we’re trying to legitimize a new idea among a group of clients that are not known for accepting new ideas very quickly. The more people who are doing a good job of it, the better for us just legitimizing an industry, because we’re far and away the largest in our industry, but we haven’t even scratched the surface. It’s not a foregone conclusion that a church uses a search firm or a school uses a search firm yet, so I want the people who do quality work to do well.

The other side of that is, to enter the search world, here’s what you have to do: hang a shingle that says, “I’m in the search world.” That’s all. There’s no barrier for entry, which means there’s no quality control, which means there are people who undercut on price and then really do a bad job, and it gives everybody else a bad name. If the pandemic causes them to go pursue other interests, that won’t bother me a bit.

Paul Downs:
Well, you’d be surprised. In woodworking, it’s pretty much the same thing. The vast majority of businesses are started by some guy in his garage, and we have to deal with that. Wishing for your competitors to die is churlish in a way, because in every business failure, there’s an enormous amount of human suffering. And no, I don’t want it. I don’t want that to happen to anybody in any of those companies.

Loren Feldman:
You talked about what your options include and the question of whether it makes sense to burn some of that energy and that dry powder now. Are you thinking of trying other products, making something other than conference tables?

Paul Downs:
No, and I’ve heard that suggestion a lot, and there’s a reason for that. And that is, that almost everything that we could make, that we could pivot to, there’s somebody already there. The way the furniture industry has gone in the last 15 years since we started concentrating on big tables is for much more, in terms of furniture to not be a huge deal as a purchase.

A lot of people have suggested that I should look into making desks for people who are now working at home. And the fact is, most people who are working at home don’t care about their desk. You don’t see it on Zoom, so it’s not a prestige item. And also if they feel like, “Oh quick, I gotta set up an office in my closet,” they can go on Amazon or Wayfair and get a $400 stand-up/sit-down desk that’s perfectly good, and it’ll be in their house tomorrow morning, or a day or two later. There’s no way in the world we can compete with that.

So my thought is, we have a very specialized skill set, and what leads to a $400 desk delivered in two days is not what we do. You need an entirely different operation, a different level of capital. You’re now in sort of like a global supply chain world. You’re in warehousing and inventory, blah, blah, blah. There are a million things that, if we even pretend we can do that business and start spending money to try to do it, we’re just going to get our brains beat out. What we actually know how to do is very specialized, very difficult to learn, and to try to walk away from what we know and do something that we don’t know and that others know very well, I just feel like it would be a huge mistake.

Loren Feldman:
That makes sense.

Laura Zander:
Yeah, that’s super fair.

Loren Feldman:
We don’t have a lot of time left. I’m curious about one thing. This has obviously been a difficult year with all kinds of changes for all of you. Have any of you had to adjust what you pay yourselves, what you’re taking out of the business?

Paul Downs:
Yeah, I did. I stopped paying myself a month ago, and part of that was in preparation for having to cut staff. I want everybody in my company to know that I lead from the front, that if there are going to be cuts, the first person who gets cut is me. That means I’m working for free. Now, I happen to be in a financial position with cash reserves at home. I’m very conservative about that, and I always keep a lot of money hanging around. I’ve got three years worth of basic home expenses in my checking account right now. The mortgage is paid off, and the kids are through college, and I could scale back pretty well.

Laura Zander:
Trust fund? Like, how did you do that?

Paul Downs:
No, I mean, I come from wealth, I would say, but it wasn’t wealthy wealth. It was mostly just saving money over the years. I’m a cheapskate.

Laura Zander:
How old are you?

Paul Downs:
Fifty-eight. I would never go anywhere near a Lexus dealership.

Laura Zander:
So Huck, my son, he’s 11. You asked about that, Loren. We haven’t paid ourselves in a couple years. We’ve actually been paying to go to work because we’ve been investing so much back into the business. I have an Xterra that’s got… I don’t know how old it is, five or six years old, seven years old, and it’s just a shitbox. It’s dirty. It’s nasty. My son has been going to this little camp, and he rides around in this guy’s—his PE coach has a new car—and so, we’re like, “Look, next year is going to be a better year. It’s going to be much better. We might actually get paid. We might make some money.” He’s like, “Mom, if you make money, can you please buy a new car? And maybe you could get some plastic surgery, and then maybe you could buy designer clothes, like Louis Vuitton, and look like all the other moms?” I’m just like, “Oh, okay. All right. Thanks. Great.”

Paul Downs:
Is it a terrible question to ask how you’ve done that for so many years? I mean, you must have some resources.

Laura Zander:
Because we did the same thing that you did. My husband—I blame it on the Midwest—but he’s from Wisconsin, and I came from nothing, so we’ve always been savers, and our lifestyle has always been one that we can support if only one of us has a job. We have saved everything, so we have the same thing. We’ve probably got five years’ worth of savings, or we did. Had years and years and years worth of savings.

Loren Feldman:
I’m curious, Laura, your business has been doing reasonably well, at least well enough the last few years that you’ve been buying other businesses. Do you regret not paying yourself the last couple years?

Laura Zander:
I don’t, no, because I see the big picture and the long-term. Namaste is the handbag line that we bought three years ago, and we didn’t spend a ton—well, no, we did spend a ton, for inventory and stuff. We turned that into a million-dollar business within 12 months with huge margins. And then the same is gonna happen with this Madelinetosh business that we just sunk everything into. So in two years, it’ll pay for itself over and over again. So no, it makes Doug—he’s very uncomfortable and very nervous, because that big bucket that we had has dwindled down, and it’s down to—I wouldn’t say nothing, but it’s closer to nothing than we’re comfortable with. We’re right on the cusp.

Paul Downs:
Does your husband have a different job?

Loren Feldman:
No, he works in the business.

Laura Zander:
Yeah, he works in the business. He’s a software designer and does everything for us. We just have gambled. The bottom line is, we saw the industry changing, and we decided to try to change differently from everybody else by vertical integration.

William Vanderbloemen:
Same here, Laura and Paul. Back in March when we reduced our expenses, the first expense that got reduced was my salary. It went to zero and has stayed there. Then I asked our lead team to take the biggest cut after that. Then we left people alone if they were making, I think it was less than $75,000 or something like that, because frankly, the money we would have saved by cutting their pay wasn’t enough to offset the impact it would have on their life. We kind of did a little bit of Robin Hood pay cuts, and that began with me. And then likewise with you, Laura, we have no debt. We’re cash-based, not even accrual-based accounting, which I know is primitive. We don’t sock away a ton of cash. We keep pouring it back into the business and expanding and taking calculated risks. But time will tell whether we were right.

Paul Downs:
What I’m thinking of is, I’m 58. I’ve got hopefully at least 10 years, but not too much longer than that, and the wise financial move over my whole lifetime now is just to preserve the company. Because that’s a pretty good proportion of my net worth. As I said, if I can stick it out for two years, I think it’s going to be a very different competitive landscape. I’m sure I’ll get all the money back and then some, if I can do this right.

William Vanderbloemen:
I completely agree.

Laura Zander:
Yeah, good for you.

William Vanderbloemen:
More power to you. I don’t take joy in seeing businesses disintegrate at all. But I do think many industries—and ours may be one of them—it’s now turning into a kind of a Last Man Standing game. Who can pull through this? What we thought was a blizzard turned into a long winter and now is actually a little mini Ice Age. So, yeah, I couldn’t agree with you more.

Loren Feldman:
I’ve had my salary cut fairly dramatically this year. I didn’t suspect that I was the only one on this podcast getting paid, and I’m not sure what to think of that.

Laura Zander:
But you’re a journalist. You don’t make any money anyway.

Loren Feldman:
That’s right, so the percentage cut doesn’t hurt as much. Guys, we are out of time, all too quickly. Once again, thank you for taking the time, and thanks for talking about things that often don’t get discussed.