090: Lara Hodgson - Creating Innovation Without Big Pockets

Are you thinking about how to grow your business with near and offshore staffing, but you're also wanting to make sure that it's reliable, cost effective and really well done. I think docsa talent is the way to go. Here's why. They don't just fill your jobs. They bring integrity, top talent, and a people first approach that's hard to find. I've known the people at Doxa talent for over 20 years now and I say that you can count on them. I have. Talk to Docs of Talent and you won't be disappointed. Go to docsatant.com Bill G Again, that's doxatallent.com Bill G One more time. Doxatalent.com Bill G Check it out today. Innovation, Innovative companies. We'd all like to be an innovative company. I'm sure there are companies that immediately spring to mind for you as great innovators and it's probably not you and your business in the mirror, right? So we think about companies like Apple, we think about companies like Tesla, you might think of lots of companies. We think about SpaceX, we think about a whole range of companies and what it takes to and one of the things that immediately comes to mind is big budgets and R and D and deep pockets and lots of resources and time and scale and innovation centers and groovy workplaces and special design labs. But that's not the core of innovation. Innovation comes from a million and one small companies. For sure, you do interesting things at that scale and in those kinds of companies. But that started a whole long time ago and there's something available to each and every one of us. You probably know what this is, but today's show is all about innovation at a small scale and how to take it up big, fast. So listen in. Hello and welcome again into the Scaling Up Business podcast. I'm your host and Gazelle's business growth coach, Bill Gallagher. So on the show with me today is Laura Hodgson. Laura is connected by another friend in turn from the Entrepreneurs organization, Kent Gregoire. And he thought we should talk and we should get her on the phone because she's a dynamic speaker. And even in getting ready for the show, I could tell you that you guys won't be disappointed. This woman's ready to talk on any subject at any time. Laura is in the Atlanta, Georgia area. She's an accomplished entrepreneur. I'll let her actually tell some of her story. But she's got a 12 year old son. She manages a big impressive life. She does stuff with Harvard, she does stuff local University, and she's the founder and CEO of an innovative company, NowAccount.com we're going to talk about innovation more than funding your business, although I'm sure we'll touch a little bit on both because we'll get into the problem that leads to innovation. So welcome to show Laura.

Thanks. Thanks for having me.

Nice. All right, so as we get into this, why don't we just go back and introduce yourself by way of telling us your story. How do you get to be this place? How do you get into business? So take us through that journey that brings us to today.

Yeah, well, you know, it's funny. If you were to try to draw a chart of how do I get to where I am, you would end up with something that looks very much like a bowl of spaghetti. And most people sort of look at me and shake their head because I've never had a job someone had before me, but I started out and a very analytical world. So, you know, grew up here in Atlanta, Georgia, where I was active in, you know, sports and academics in the community and ended up going to Georgia Tech for my undergrad. And I wasn't really sure what I wanted to study because people used to say, you should do what you're passionate about. And that used to drive me nuts because I was passionate about a lot of things. But someone told me that the hardest major at Georgia Tech was aerospace engineering. And I don't know if it's a character flaw or. Or a strength, but if you tell me something's the hardest, that's for darn sure what I'm going to focus on. So I majored in aerospace engineering, which is great for all the rocket science jokes. And when I was probably halfway through Georgia Tech, I had a professor tell me that I had an engineering mind and a liberal arts personality. Now, for future reference, if you ever say that to an 18 year old, they think that might need medication. It sounds somewhat schizophrenic, but. But what I realized is that I loved problem solving. I love impossible problems. But at the same time, my personality was very much extroverted, working with people. And so when I was in my research lab at Lockheed, I would often sort of die every couple hours until I could go out and find another human being to talk to. So one of my advisors said the Defense Department is running a program in Japan and they're going to pick 20 engineers from the United States, from MIT and Georgia Tech and Caltech, etc. To go over there. You should apply. My first reaction was have you not heard the Laura Hodson plan? It does not involve going to Japan. But she said, when will you ever get a chance to do something you would never do? And it is rare that I don't have an answer to a question. But I did not have an answer to that. So I applied and found myself studying Japanese in Japan, signing an agreement that I would speak no English. So my charades got really good. And that was the first time I was so outside my comfort zone and looking back on myself that I realized I really didn't want to be sort of a research engineer, that I wanted to do something much more creative. And that my whole life, people had always said, well, there's creative people that can sing, dance and draw, which I am not. Then there's analytical people. But what I realized is that creativity is not about singing, dancing and drawing. It's about problem solving. And it's about looking at the same thing as everyone else and seeing something different. And I am awesome at that. So I had a problem. When I came back from Japan, I had not interviewed for jobs. I had a full fellowship to do a PhD in engineering with the National Science foundation. And I did not want to do engineering. So lucky for me, I was named one of the top 20 students in the United States by USA Today. And I had a bunch of people calling and asking if I would like to do anything from consulting to, you name it, most of which were jobs I'd never heard of. And so off I went and took on a job in consulting and started learning about different industries, different businesses. I worked with the Olympics in Atlanta. I was the ambassador to Lebanon. So I lived in the Olympic Village and marched opening ceremonies, which was great for me because I had also been a scholarship athlete on the Georgia Tech track and field team. So as soon as I finished the Olympics, I went off to Harvard Business School and did get my MBA again, sort of broadening my awareness of different businesses. And when I came out of hbs, my husband and I had gotten married and we knew we were coming back to Atlanta because he was with Coca Cola and still is. And so when I came back to Atlanta, I went and took a job with a company called ixl, which at the time was just a startup sort of web development company that over the course of that next year and a half, we acquired 46 odd companies. And my job was to help integrate all of that together. So a lot of M and A and exponential growth as we went to over 3,000 employees. And I took on one of the business Units, which was consumer products, and ran that division across the company. And then one of my clients was Shaquille o' Neal and his agent had teamed up with a handful of Nike's first employees and they had an idea to build a footwear company based on Dell's model of manufacturing. So just in Time manufacturing. And I had helped them write the business plan, helped them raise the money, and found myself commuting to Los Angeles to run that company. So we built a facility in Macau and started doing Just in Time footwear. Our timing was awful because shortly after that sort of, you know, we had the big crash. But any of you have ever done custom shoes with Footjoy or Nike id, et cetera, you've used our facility. And so from there my mother in law started to sort of picket for grandchildren. She's like, you can't have grandchildren if you're gallivanting around the world. And so came back to Atlanta and I started running a real estate development company for a while. Was blessed to have my son, which is the greatest venture and adventure of my life. And at that point realized that I really wanted to go off and do something on my own instead of helping everybody else build their companies. Mostly not because I was dying to be the boss, but more because I wanted the flexibility to be a great mom and a great wife and a great CEO. And I wasn't sure if I could do that for somebody else. So one of my leadership, Atlanta classmates and I were talking one day and she was leaving her job to run for state representative. And so we decided to start a company together. We didn't know what we were going to do. We knew we loved to solve impossible problems. So we initially took on some large infrastructure projects like working with an Alaska native corporation on their zinc mine, working with an aggregate company in Florida on water reservoir reservoirs, you know, like fun and sexy stuff like that. And in the meantime, I am toting around a baby in a carrier and I realized that there was nothing that you could use with an infant or a toddler that didn't spill all over your car. And I also realized that whoever had invented the juice box should be badly hurt because those things do nothing but squirt in your face and put sugar in your child. So I had an idea to come up with a spill proof bottled water for kids. And my business partner and I said, well, okay, let's do it. So we launched a company called Nourish that was a patented spill proof bottle for babies that when you were traveling you could just add the Formula shake, serve and recycle. And for toddlers, it's a spill proof bottled water designed after the Camelbacks that I used to use when I was doing TR running. And so we had this new product that was, we bootstrapped it. We had offers to take in private equity, but we didn't want to give away half our company. So we started selling the product into newsstands, at the airports, parody shops, et cetera. We started selling into small retailers, small distributors, and the cadence worked fine. The business was growing great. And then we got our first big order from Whole Foods, which was an awesome day. I mean, my business partner and I are high fiving. We've bagged the big deal. Now we're shipping truck lids across the country until our brain caught up with our excited hands doing the high five. And we realized, wait a minute, these orders are huge. There's lots of zeros on the end of them. We're going to have to ship this product and send an invoice. And we don't know when we're going to get paid. And sadly, we found out that it doesn't matter if your invoice says net 30 or net never. You're going to get paid whenever the customer feels like paying you. So we had this awful realization that we were going to grow to death, that everything we had done supposedly right would be the very thing that put us out of business. And I think your greatest challenges come from some of your greatest strengths. Our greatest strength is we had this great product that was selling like crazy and it became our greatest weakness. That's where most innovation comes from, is your problems.

Well, there's two ways, right, of dealing with One is an internal innovation where you solve your problem in a novel way. It becomes your secret sauce. And then the other is where you turn that problem into a business into itself. Right?

That's right. That's right.

And right off the bat, it sounds like you go looking for problems and don't have any hesitation about turning them into businesses.

That's true. And I don't know if I look for problems. Although my mother might argue with me saying that she would probably say I absolutely look for problems. I think it's more when I hear of someone else's problem, I have this dire need to help. And so when someone says they have a problem, I immediately think, well, how can we solve that? And you're right. It's an interesting way to think about it because to me, when I created Now Account, which is the business I have today, I was really only trying to solve Nourish's problem. It was that internal reaction. It was actually quite selfish. I was just trying to make my life better. It wasn't until I started working on it that I realized everyone else had the same problem as me. And I didn't realize that because being an entrepreneur can be very lonely. When you're sitting in your car thinking, what an idiot am I? Why did I not know this was going to happen? And then you finally share that with someone and they say, oh, Laura, everyone has that problem. You just have a working capital issue. And I'm an engineer, not a banker. So when people said that to me, I thought, well, I don't want one of those. How do we get rid of it? And then that internal innovation became, wait a minute. This is something that other people could benefit from too.

Who else shares this problem? You know, I suppose I'm like most human beings in that I wake up many days and I start to address my day and I have these fantasy moments like, oh, I wish I didn't have this problem, or what would life be like if I didn't have this problem? And, like, resisting and avoiding problems, wishing I didn't have certain problems. And I am reminded it comes back to me instantly, all the time. There's a guy who lived nearby me, an ice cream billionaire, and I was sitting at lunch with him one day at business lunch, actually. It was also, I think, for the EO organization. And I was sitting with him at the table. He was going to talk to us over lunch, and he said, you know, we were talking about this and that. And he said, one of the things I've learned is to be grateful for my problems. And at each point I've had different problems. And one of the things that I've noticed, and I think he said that he was having this insight, like driving a sports car down the road one day, and he looked over at somebody else with a different set of problems, and he thought, thank God I have my problems because I could have that guy's problems, right?

That's right.

So I remind myself and I coach other people to thank God and appreciate the problems that you have because you could have somebody else's. And there's something there about just embracing the problem, like plunging head into it. And then you can take that further and say, God, do a lot of other people have a problem like this? How big is this problem? And the bigger the problem, the more interesting the opportunity from a business standpoint, right? Whether it's a way to change Your business as we do when we do, like, X factor work, something that gives you a tenfold advantage, or if you're actually looking as an entrepreneur does, like, oh, show me a problem, I can turn that into a business. Is that entrepreneurial mindset? I'll tackle that. I'll take that on. I'm sure there's another way, a better way to do something. And then you start to think about actually turning it not just into a particular method or approach within a business, but a business unto it itself.

Right. Well, you know, and it's interesting when you talk about problems. When I was first starting Nourish, I was sitting down with a friend of mine, Sarah Blakely, who most people know because she founded Spanx.

She's also a success story in the entrepreneur's organization.

She is, she is. And so Sarah and I were having lunch with her father. And this was. I mean, Spanx was pretty new at the time. And we were sitting there with her dad having lunch, and her dad was telling me this story, which Sarah often tells, which is that every Friday at the dinner table, he would ask Sarah and her brother what they failed at that week. And if they didn't have an answer, they got punished. And I remember laughing and thinking, really, you punished your kids because they didn't fail at something that week? And he said, well, certainly, because if you went an entire week without failing, shame on you. You stayed so comfortably in the middle of your bubble, you couldn't possibly have tried something new. And that story has always stuck with me because when we first launched Nourishment, you know, we had designed this gorgeous bottle. The labels were perfect, everything was perfect. And then we started doing larger runs and we had to run it on the high speed line. And what we found is we were getting air bubbles underneath our labels, which to most people would have not been a big deal, but when you're the founder of something, it's like your child. And I thought, no, that can't go out looking like that. And so I pulled all of our suppliers together and we realized that it was a problem with the material. Right. There was too much memory or elastic to the material we were using. And so we needed to change it, which is great, except that I needed to ship product within the next couple of days. And so our whole team sat around the table and by hand, you know, we're applying these dang labels. And it was so cumbersome, we started cutting them to be smaller so that we were just using the part that was printed. And all of a Sudden I thought, wait a minute, why are our labels so big to begin with? And the reality hit me that had the line worked perfectly, we would have kept printing the big labels. They were more expensive. But it was because of the failure or the problem. And because most people, because of human nature, if you have a problem, you know, we're all sort of inherently lazy, we'll find the easiest way around it. It was finding that easiest way that ultimately became an innovation, even in our existing product, and cut a ton of cost out of it. So I'm glad we had the failure, even though during those 24 hours, you wouldn't have thought that, by the way, I was running around like a chicken with my head cut off.

So sometimes in dealing with one problem, you actually, you improve a whole bunch of other related things. There's spinoff benefits to it.

I tell my employees that they should. Look, you should try and fail at something every week. And I learned that from Sarah, because if you do, that means you've tried something new and you've learned from it and you've improved something.

You know, it's funny, for some years, I used to criticize a former employer, like, oh, they fired me because I made a mistake, and they should have learned that, like, I was. I was good to make mistakes and I was trying things. And, well, there's an aspect of truth to that. The real reason I got fired back then, because I was a jerk. And the reason they didn't invest in that tuition is because I was. I was nasty to a lot of the people that I worked around, and one of them eventually became my boss. But I did learn things in that. And then ultimately I learned from that failure in turn to be a nicer person and to be kinder and less arrogant. Right?

The key is to fail fast and fail forward.

Right? Learn the lessons fast. And yet, look, failing is uncomfortable in the moment. If you can sort of embrace the discomfort, look at face in, take that thing on, and then say, okay, well, where should we adapt? Where should we modulate?

Right, Right.

Where can we innovate from here? I took over a company in 2002 and almost immediately faced a failure as the bank called my bluff, called my loan, and wanted to put me out of business. And in dealing with that crisis, right, different events will throw you a crisis. A competitor, technology, society, the economy, lots of things can throw you. Operational problems can throw a crisis your way. And the way that you tackle them and challenge them can determine everything. I dealt with another one lately, later with another business owner, and we looked at a problem and we walked away from the problem because we had different minds of how to approach it and what to do, and we couldn't come to agreement. So we divided and we walked away from that particular challenge. But in the one that I did back in 2003, there was an enormous. There was a shift. Like the way forward was untenable as it was. And we looked at what was working, what wasn't working, where the trends were, what the core problem was, and we ditched stuff that wasn't working, and we doubled down on the things that were. And along the way, little things opened up and we produced huge breakthroughs as a result of that.

Yeah. Well, I also think, you know, it's interesting. I think that all innovation comes from the demand side of a problem, not the supply side. And it's usually because I think your greatest ideas happen when you lack resources. And it's funny, because people that work for me always sort of lament the fact that if you walk into my office and say, I can't do what you asked. I don't have enough. Fill in the blank. I don't have enough time, I don't have enough budget, I don't have enough people, my reaction is always, that's awesome. Go see what you can do. Because if you have unlimited time and you have unlimited budget and you have unlimited people, that's easy. You don't have to even get creative about that. It's when you lack a resource that your brain starts to develop, you know, more curiosity, more creative ideas. And it's typically the demand side of a problem that lacks something. Right.

I mean, so let me underscore a couple things that you're saying here and for our listeners, and translate it. So I hear a variety of things like this directly and indirectly, all the time. Oh, we're not like Apple. We're not like Company X. We're just a little shop and we can't innovate. And people go right to. It takes resources and effort and resources mostly, and size in order to do real innovation. And they think of R D labs and innovation centers and places with cutesy environments and lots of fidget toys all around where people just dream fanciful things. But the phrase that you're underscoring and speaking to is necessity is the mother of invention. If you want people to create something extraordinary, right, you want the man to invent a lever, then throw them in a cave with a bunch of rocks and a stick.

And a snake.

And a snake, and he'll invent the lever before dinner. That's the key. It's when your back is against the wall. I think about the most interesting innovations of my career and I think about my clients innovations. It's when we're dealing with a real challenge and somebody says, wait a minute, I've got an idea. And maybe you do that 10 times, right, and you fail a bunch. I mean, Thomas Edison, one of our most famous American inventors, is famous for 10,000 attempts at a light bulb, a filament light bulb. And most of us, we do 10 attempts at something and we completely give up. If we make it to 100 without success, we take ourselves to the nearest bridge and contemplate ending our existence. Our wife leaves us somewhere. Our husband leaves us somewhere around 200. The notion of being willing to fail again and again, being willing to try things, fail fast is a motto in my neighborhood, Silicon Valley area. And we hear around business. But necessities of mother invention embrace failure. Celebrate failure because it represents attempts. Now, don't bet everything you have unless you have no option. Play small bets as you experiment with things. But then when you find something that's starting to work well, double down on that. Right?

Well. And I think there's a difference between being comfortable with failure or ambiguity and being, you know, negligent. I mean, I always tell people, people have this sort of romantic view of entrepreneurship as you know, I'm going to your point, throw caution to the wind. I'm going to throw everything I have into one thing. I'm going to eat Mac and cheese for a year. Most entrepreneurs don't love risk, but they're not stymied by it either. I mean, I don't wake up in the morning and say, where can I possibly find some risk today? I'm not looking to jump off a cliff, but if it shows up, I think, you know, one of the greatest skills I developed probably from Georgia Tech, studying aerospace engineering, is you really can't freak me out. And I mean, my team laughs about that because everything can be going wrong. And I'm just as calm as can be because my brain is already starting to think, what would I have to change to make it work? What would I do different? And you know, I still remember where that comes from. I took an advanced rotor theory class when I was in undergrad, which I had no business taking. And I walked into the finals and there was one question and I sat down and I didn't have a clue what to do with that problem. And so my brain literally went through the options. Option One, go ahead and walk out and fail the class, because that's a pretty rational option right now. Number two, sit down. I got an hour and 50 minutes. Take a deep breath. What do I know? And hope that somewhere along the way I can figure something out. And if you know, you can't fluster me anymore. So that to me is. I don't love risk, but it doesn't create havoc in my life either.

My favorite term in rocket science lately is rapid disassembly.

That's right. That's right.

Oh, that's outstanding. So not going hungry for it. Well, operators, right, who are in slight contrast to the innovative visionary side of entrepreneurship, the tinkerers are often a little more risk averse. I'm, if you follow strengthsfinder stuff, ideation and activation are in my top five. So that means I come up with ideas and I want to get started on them well before anyone else is comfortable. And a guy like me is best complemented with and empowers an operational partner who, once we find, find something through experimentation and discovery, will scale it. And that's a different thing than the innovation itself.

And it's quite honestly the hardest part. I think it's pretty easy to start a business. I think scaling a business has never been harder. It's interesting because when you think about some people's innovation comes out through, as you said, the generation of the idea, those are the people you run into every day and they've always got 50 new ideas. But honestly, some people's creativity comes out in connecting that idea to resources. Other people's creativity comes out in connecting that idea to a Gantt chart with an actual plan. And the reality is you need on your team all of those folks, because if you have a bunch of ideators running around, you'll never get anything done. But you have to have people who are equally as creative and innovative, but their innovation manifests itself through creative ways to operationalize something. So it sounds like you've got some good partners with you that have been able to do just that. And I'm lucky enough to have the same thing.

Right. One, it's good to recognize which role you play and to understand that there's a process and a flow to the innovation process. We're recognizing, identifying, structuring a challenge, trying different solutions to a particular challenge, and then we're maybe analyzing it in different ways and from different psychology, but we're all looking at it and grappling with it. Then we come up with something that works and we start to see can we scale this solution, can we turn it into a unique approach for our business or a business into itself? And that interplay is the interplay between the innovative, visionary idea Monkey kind of person, and we've had folks talking about idea monkey and so on, and the operational partner who sees it through, who scales it, who takes it and works through the consistency of it. As on the idea side myself. So I come up with ideas from the moment in my dreams, as I wake, as I shower, as I go about, as I drive to work. I now have learned to try to frame them into something. So does this idea address one of my top priority problems right now? Does it fit in that or is it some lark in some other place to just be noted and appreciated and. But not done anything with? Or is it close to something that's important to me or does it re rank something? And so then I just, I either give it to someone or do something with it, depending on how I see it fit things. But I don't chase them all equally anymore. Sometimes I think, oh, that's a nice someday, but I'm not doing that now and I have no commitment to when that'll be. Right.

You'd look like a kid chasing butterflies if you did chase them all.

Well, I look like that frequently. Maybe I learned a little bit as I approach my mid-50s. I think we've touched on a couple great things for folks. I think our listeners will find themselves either the scale up operator side or the entrepreneur balancing with another to scale up the visionary person. The idea of embracing the problem, looking for the opportunity problem, seeing where it fits, creating a culture that celebrates or at least accepts some failure and recognize that you're not playing safe when you've got some failure as a regular habit, right?

Yeah, absolutely. And sometimes that failure, like our failure with Nourish, caused us to completely pivot. You know, we started to create a solution for ourselves and then realized that that solution was probably actually a bigger business than Nourish was to begin with. Which was a hard realization. Right. I mean, for the longest time I didn't want to sort of give up on Nourish because that was my baby I had birthed was growing well, the customers loved it. But at the same time recognizing that perhaps Nourish's role in my life was to get me, to now account, to get me to experience that moment of beating up against a wall and having to solve it. So that was probably something my husband realized before I did, because when he said it at first I thought, you don't know what you're talking about. And then it was even more frustrating to realize he had more clarity than I did.

You know, it's not husbands or wives or friends, but it's anybody else that often helps us to recognize the thing that we can't see in front of our face. My favorite quote as a coach is that it's not that I'm smarter, more experienced, I am smart. I have experience. I do have tools and stuff as a coach, it's that I don't swim in your water. So you can say that we can be. We'll never know who discovered water, but you can be pretty sure it wasn't a fish.

Right? I like that.

Right. So people around us can often see the things that we can't. And there's a process of revealing blind spots. Right. We all stood behind someone in the line at, I don't know, the post office or the passport office or the Department of Motor Vehicles or somewhere, and you see that person with something like on the back of their shirt or the back of their hair that's not tucked, and it's oblivious to them but obvious to everyone else around us. We all have blind spots. And when you see them, your view of the world is enlarged. Something more is available, and that outside view can often be really, really helpful. So you, you had this problem, right, funding the other business. So give us the 10 second version of what now account does.

So before I do that, I just want to comment on your point about the blind spots. It's funny because people come up to me all the time and say, how did you come up with now account? You're not a banker. I think the reason I have actually some really good advice when it comes to being open to other people seeing your blind spots. I think so many of us have our passion and our ego in what we do. And if that's the case, you don't listen. Well, because if I designed a widget, if I designed a widget and someone comes up to me and says, laura, that's a great widget, you know, you could do the following to improve it. My first reaction is, I'm sorry, did you see my great widget? I'm not listening to your advice because my ego is in the what that I did. But long ago I realized that you didn't have to be passionate about what you do. You have to be passionate about the so what that you do. So if my ego is in the so what or the impact, and you walk up and tell me how to improve something I'm all in. I would love to hear that. And so I always tell people, make sure your passion and your ego is not in what you do, but in the so what that you do, the impact that it has, the people that it helps, the world, that it changes. Because if that's the case, then you are open to blind spots because all you care about is solving the problem. And you know, when I, when I was trying to grow nourish and frustratingly realizing that I was going to grow to death, I had people around me that loved me dearly, that had great advice, and they were like, oh, Laura, you just have a working capital issue. You should go get a line of credit or go try factoring. And again, you know, engineer, my reaction was, okay, well, I get that. I mean, borrowing money or factoring are perfectly good solutions. If the proceeds of the financing are going to stay in my own company, no problem with that. So borrowing money to go buy a piece of equipment or build some inventory or get some, you know, a facility, that makes sense to me. But what I didn't understand is you're telling me to go borrow money. And what I'm going to do with that dollar that I just borrowed at some cost greater than zero, is I'm going to actually lend it to my customer for free. Because that's what an invoice is. It's a free loan. And I had this amazing realization that I'm not the borrower here, I'm the lender. Why should I be borrowing more money? And it was that sort of aha moment when I thought, wait a minute, there's got to be a better way. Our economy is hamstrung when small businesses are the bulk of the economy. And yet with our high cost of capital, we are the largest lender in the country. We fund more credit than any bank does. And I know for certain that my capital costs more than theirs does. So why in the world am I borrowing money to turn around and give it to Whole Foods for free when their cost of capital is lower than mine? That was my aha. And it wasn't to your point. It wasn't that I was smart. I really, it was. I really didn't know the answer to that question, but I was willing to ask the question because it didn't seem to make sense to me. So I went out and I looked at everything that was out there. Factoring receivables, finance, lending, lines of credit, asset based lending, you know, you name it. And at the end of the day, my big aha moment came when I was sitting at lunch, and I looked around, and I thought, you know what? This restaurant doesn't have to ever wait to get paid. Some people give them cash, but most people just hand them a credit card. And when they close their store tonight, they're gonna have been paid for every single thing they sold. They didn't borrow any money. They didn't factor anything. They just simply got paid. Now, they took a credit card to do that. So I went home, and I was talking to my mom, and I said, you know, when I. When I was growing up, we used to go to the riches store every month to pay the riches bill. It occurred to me that my mother's credit came from retailers, not from banks. And yet when the credit card system came out, all of that changed. And all those retailers that used to have to wait for my mother to pay before they could go buy another piece of inventory no longer had to do that anymore. They could grow fearlessly. They could open five new stores. And my mother's buying power exploded. So I literally went back to whole foods to my customer and said, out of curiosity, why don't you just pay me with a credit card? Wouldn't that solve all of our problems? I would get paid today. You can pay your credit card bill whenever you want to. It's not my problem. And they said politely, but no. And I realized the reason is in a consumer transaction, both sides benefit because I'm buying myself float. But in a B2B transaction, my customer will never pay me with a credit card. They have utopia, which is, send me an invoice. I'll pay it when I want, and there's no cost to that. It's free. So we created a payment system that, for the seller of the good or service, feels like taking a credit card. No loan, no factory, no liability on your balance sheet. But to your customer, nothing changes. They still get an invoice, pay whenever they feel like it, make the check out to their supplier. And so we just figured out an engineering way for both sides to get what they want. But I can tell you with great certainty that if my finance professor from Harvard was listening to me today, he would fall over in shock at the fact that I'm even in finance. I don't even like finance.

Right.

I really don't. But it's not the what that I care about. You could change anything about now account tomorrow, and I would not care. What you cannot change is that every day I have business owners call me and say, I tripled my business because of you. I hired 10 new people because of you. That part you can't change. That's my so.

So in effect, and this is a B2B tool in, in a. In a toolkit of things that you can do to manage your cash flow. You're essentially buying that receivable from them for a flat fee like a credit card. And it works like a credit card.

Yeah, when you swipe your card at Starbucks, they sold the invoice to Amex. It's the same thing.

And interestingly enough, we've had some of our. I've had some past business success getting B2B accounts to move all of their payments to credit card and to things like that.

So you can do that. It's fantastic. I mean, at the end of the day, the point you made maybe without knowing it, is you have to have a whole suite of tools. There is no one type of capital that is going to solve every problem for your business. The key is, are you using the right type of capital at the right time for the right use. If you get those wrong, your business becomes a hobby. We all have those. They're fun, they don't make money.

Now just while we're on this topic, to link to two other things, there are a bunch of other things that rob your business of cash. We did a show on that recently called your business is a leaky bucket. You can go listen to that one about finding the places where you're losing cash. And then we've done other things, customer funded business models and changing the business model work which we use with cash conversion cycle analysis to see could we reimagine the business model. We've talked about novel businesses like how Costco's grown into the largest retailer in the world, $108 billion in sales by using fees and restructuring things. We've talked about changing supplier terms and customer payment terms the way Dell did. So there's a variety of ways of approaching. This is a totally new tool that I'm learning about today, the NOW account. I think this has been a great show on innovation and the mindset that goes into it. I want to thank our guest Laura Hodgson for being on the show today. Laura, thanks for joining us. Yeah, absolutely. Laura's company's now account. You can go read more about her nowaccount.com thanks again for being on the show.

Thank you.

All right, so there's a lot to think about there in the world of innovation and what's possible. I really enjoyed having this guest on. I think she had a lot of energy and a lot of great stories about innovating at the earliest stage of a business with not a lot of funding and opportunity but really seeing things and how to do that and then how to start to work it within your team and within the business. Either within a business or to spawn off a whole new business in itself. I want to give special thanks to our original growth guru, Verne Harnisch. Our show producer is Nayobaid. Audio production is by Podfly Productions, audio editing by Albert Burge and our show notes are compiled by Ein Kodina. Proofreading is done by Tim McGowan and if you got some value from today's show, please share it with somebody else and let us know what you love. You'll find us@scalingupbusiness.com where you'll find tools, resources, shows like this, tips, blog posts, that kind of thing for you, growth guides, ways to get your team started and scaling up. You'll find that all@scalingupbusiness.com thanks again for listening and keep scaling up. Foreign Are you ready to turn your goals into daily wins? You should check out our Scoreboard software. Powered by Align, it's the official software for scaling up. With Scoreboard, you'll get an AI driven coach for priorities and KPIs and it'll help keep your team focused on what matters most. With Align, you can track your goals in real time and you'll even see results on the go. With their mobile app you can rest easy knowing that Align has world class onboarding and support to set your team up for success. This is really more than just software, it's what I actually use to manage growth in our scaling up client teams. Unlock clarity and results with Scoreboard by Align. To try it now, go to aligntoday.com Bill G One more time. Aligntoday.com Bill G that's aligntoday.com Bill G Check it out and try it now.