How Small Business Competes for Employees with Well Funded Startups – SBS 51

Greetings folks and welcome to the small business show at businessshow.co episode number 51 for today, Wednesday, January 27, 2016 here in Durham, New Hampshire I'm Dave Hamilton.

And in Concord, California, I'm Shannon Jean. How are you sir?

I am doing quite well, how are you?

I'm good. Did you guys, we have this thing about not talking about the weather, but I have to ask you, did you guys get blasted out there in the snow or was it.

Oh no, no, it was the, the edge of the storm end 10 miles south of where I am right now. So.

Nice.

So I mean even they didn't get, you know, that much but Boston got, I think Boston got like a foot. Friends in Connecticut got about a foot. Manhattan got like, you know, two feet. DC got like three feet. So. Yeah, yeah, that's cool. The snow seems to alternate now. I mean winter, winter is not over for us.

Yeah.

And I, and I'll, I'll point out for everyone but of course it's, it's sobering for those of us here in northern New England where we had like six blizzards last winter alone, that this, as of this date one year ago, our first blizzard had only just started. So. Yeah, so the fact that we don't, you know, that we missed this one and we haven't had any others yet really doesn't mean anything when you, when you look at it that way. But it seems to me like it, it shifts every year. It alternates. We either get hammered or like the Mid Atlantic DC gets hammered and then there's a year off. I think it's a three year cycle. So it's them, then nothing, then us, then them, then nothing, then us. And that seems to be how it's been going. So, so my prediction is that this winter will be relatively speaking mild. Now we, we've already had snow, we already had, I don't know, maybe a foot total if you add it all up.

But that's not bad. No, not bad at all. No, that's cool you get.

But you get snow at when you go out to Tahoe, right?

Yeah, well we get, we have a local peak here, Mount Diablo that gets dusted, you know, once in a while. I think it's like 3, 500ft or something like that. But okay, we got a ton. Yeah. This year in Tahoe's been know the best snow year and I mean maybe in seven or eight years. So they've, we've gotten like 150% of normal and it's, you know, we're right now, which is we're still getting snow. There's another storm hitting this weekend. So it's all the area up there is, is loving it. So.

Yeah, that's good for ski weather, right?

Yeah, it's great for ski weather, good for the economy and it's good. Really, really good because California in its infinite wisdom, you know, we don't have enough storage for all the water that we need. So we rely on the Sierra snowmelt to really trickle in to our reservoirs. And all the rain that we get, a good amount of it, I'm certainly no expert, but a lot of it just flows right into the ocean. So we really need that snowpack to make it, to make it work.

Sure. Yeah, we do too. It just seems to be pretty standard that we get it. So.

Yes, that makes sense. Yeah. Yeah. So hey, today we. I wanted to talk about the, I guess the on demand economy. The I guess I don't believe the sharing economy. Although some of it maybe is. But I was reading an article up on LinkedIn Pulse written by Brad Smith as the CEO of Intuit.

Okay.

Of course the guys that make QuickBooks and Around Forever and stuff and they talk. This is a really good article. We'll link it on the site. And he makes some really good points about opportunities for individuals based on, you know, businesses like Uber, TaskRabbit, Hourly Nerd, which is a new one I hadn't heard of. Okay. Instacart and those places where you know, you sign up as you're basically an independent contractor and you are getting paid an hourly or in some place like TaskRabbit on a job type basis and you know, kind of you're self employed and you're doing your work and everything. And as I read this article, you know, really got to it got me thinking about. I love it too and I use these services but I do see some challenges from small business owners perspective that we are now competing with those on demand services for our employees and you know, for an entry level employee that looks at what you're able to pay them versus what a, you know, money losing startup that's heavily funded can pay you. Not, not that I'm bitter.

No, but it's true. Yeah.

So. So the folks that don't have to, you know, show a profit on their bottom line that are paying, you know, like Instacart, you know, they advertise right on their front page. You know, they make up to $20 an hour and you know, if your business is hiring entry level or just you Know, non. You know, I hate the word non skilled, because even people that make, you know, maybe a lower salary are very skilled.

Sure.

Depending upon what your. Your salary range is, that could be very impactful to your business. And, and, you know, having one of my companies, we just lost a, you know, a relatively recent employee that went to work for Uber because he just ran the numbers and he figured, well, I can make more driving and I'll have more flexible time. And, you know, and I totally get it. So I wanted to chat a little bit today with you, Dave, and get your feedback on, as small business owners, how do we address this and how do we compete for employees? Because especially right now, at least out in California, it's tough to find very good qualified applicants to come work for you. It's a challenge in the Bay Area right now.

Well, yeah. I mean, it's a challenge everywhere. You know, my. My companies are all virtual, which opens things up quite a bit, but it also opens us up to people being poached all over the country. So, you know, it kind of works the same way. We. I have not lost anyone to Uber or any of these new sharing economy, you know, kind of businesses yet. But years ago, one of our first, I guess he worked for us part time. Trying to think he might have worked for us full time. A guy named Kyle Daddario was one of our editors at the Mac observer, and he really was fantastic, knew his stuff, totally reliable, just one of those people that you just love to have work for you. And he was approached by Apple when they were starting the Apple stores. So again, a similar thing, right? A project that can lose money for a while, you know, and so they offered him a, you know, a salary and an opportunity and all this stuff. And. And he actually said to us, I'd prefer to work for you guys, but, you know, I can't say no to this money. Yes. And he said, can you match that? And I said, no, no, you know, no way. And he said, all right, I got to go. And I'm like, you got to go? Of course you got to go. I said, if you need, I know you've already got the gig, but if you need a recommendation, you know, I'm right here. And. But, you know, the funny thing is now we've actually had some people come and start working for us from the Apple stores because they don't pay very much now. But. But, you know, Kyle's in a different position. He's still there. He still works at the stores, but he's not doing he's not just, you know, a genius or a floor rep. He's doing other things there. So, so he's fine.

But yeah, and I think that, you know, it's interesting that you said, because we lost one of our editors for deals on the web to the Apple Store.

That's right.

Yeah. Shauna left. And it was the same kind of thing. You know, you're, you're really happy for, you hate to lose them, but you're like, oh, this is a great opportunity and you know, of course you have to take it. And you know, she since moved on and now she works in the technical publishing department. She's moved out to California and she drives the Infinite Loop every day, you know, so it's a, it's a great story and. But you have to, like you say, how you keep the talent, so to speak, is really important. And I think that probably in those two examples is looking at the career path is what they were looking at. It's like, wow, I can have not only the money, right. But going in someplace that maybe they couldn't go with us at the time.

Yeah, yeah. No, it's a real thing. And it's tough competing with a business that can lose money.

It is very tough, you know, and I think that you have to focus on what you can offer them maybe versus what they don't get out there. You know, working for as an independent contractor and explaining, you know, the, the benefits, the traditional and non traditional benefits that you may, may offer them when they, when they come to work for you. You know, I have this, and I think I've mentioned here before, it's, you got a lot of young people and maybe because their age doesn't matter, but because I'm older now, I'm more aware of these things like actually, you know, building up things like Social Security credits. Right. Because if you're, if you're self employed, I guess you pay into that yourself and you pay both sides of the Social Security, right? If you pay self employment tax.

Yes, that's right.

That's the way it works. Yeah. Yeah. So that, so you're, you have to think about those kind of things, but you, it's not a conversation you can have to somebody, I think when they come to you telling you they're, they're leaving, I don't know that you can, you know, use that as a, as a, to entice them to, you know, to stay. But you know, what we've tried to do is focus on our culture, you know, trying to make it A great place to work and, you know, make really push that out there, you know, and the training that you offer them, the team of people that you have here and really making sure you do have some sort of career path for them to follow here, to move up. I think, I think it's critically important that it's true.

Yeah. If you can offer people that and show them. Like you said, though, there's a. There's a lot of. There's a lot of benefits that you can. That you can show your employees, but you have to show them to them, you know, and. Yes, and career path is one. Like you said, flexibility. I mean, for us, we're a virtual company, which means that folks get to work out of their homes. So here's another benefit. Right. You know, you don't have to put on pants if you don't want to. Well, you know, some people, you know, you don't have to commute. You're saving money there. Right. You know, and also, you know, I always point out, you, you know, here's a company that you've been working for, you know, us, so there's the devil you know versus the devil you don't know scenario. And hopefully the devil you know here is a good thing. If not, you should leave anyway. And. And yeah, but please tell me why, because I, you know, we try to make it really friendly and helpful, but the other thing to consider is they're paying you money that they don't have in their cash flow, whereas, I guarantee you, we're paying you money that we can afford. Right. So they can't actually afford you based on their current revenue model. They're banking on your ability to help change their revenue model in the future. Or their revenue picture. Maybe their model stays the same, but their revenue picture. So, you know, do you want to be a part of that? And for some people, the answer is absolutely yes. I, you know, I want to take that risk. But for some other people, it's like, oh, yeah, wait a minute, you know, how can they afford to pay me? Well, they just got a big pile of funding.

Oh, yeah, that's right.

Okay. Do you want to be part of that? And again, I mean, I don't ask that question as a loaded question. Some people quite naturally will say yes to that, but you need to make that decision. Eyes wide open. Don't just look at the salary and say, oh, my gosh, this is. This is panacea here. Well, it might be. And then in a year, if it doesn't work the way you and they hope it's not even that they'll let you go because you're not doing a good job. They just fold things up and move on.

Yeah. If they can't raise, I mean, and you know, out here now we, we see a lot of, or I read a lot about fundraising in a. They're in what they call a down round.

Yes.

The valuations are dropping significantly with a lot of these companies. They're still raising some money, but they're giving up much more of the company to raise that money and everything's getting diluted.

Well, yeah. And a down round means it's not your first round of funding. Right. It's your second round and your valuation is less than the first one. And that's, that's a dangerous place for the company's founders and management to be.

Yeah, yeah. So, you know, and we'd love to hear someone's, you know, feedback and experience on working with some of these, you know, on demand economy type businesses. I mean, let us know@feedbackusinessshow co. And again, I look at both sides. I think it's great. I love some of the dynamic, you know, ideas that flow out of these things, but I think many of them will be not around very long. Like, you know, we Munchery, I think is one that we get, you know, dinners delivered to our house.

That's cool.

And yeah, it's. And it's very high quality food. It's prepped locally, this kind of thing. And I look at and do, you know, the only time we order it is when they send us a coupon, a significant coupon. And you know, and I mentioned to my wife, I said, well, this is great, but there's no way they're making, you know, money at selling it. This, you know, meal for four people for 30 bucks.

Yeah, right. Especially delivered. Yeah, delivered.

Yeah, delivered. And you know, so. But I love the convenience of it. So, you know, well, that's like Jet, right?

Jet.com. i mean during the Christmas season, you know, they were offering all these discounts and I bought Xbox One game for my nephew and this was the NHL 16. So I mean this game is retail 60 bucks. Amazon had it maybe for like 53. And oh also it was a week before Christmas and I couldn't even get it shipped prime with Amazon. Right.

Okay.

And I went to Jet and with, without any discounts, it was 38. And then I had an $8 coupon and so I got it for like, I think less than 30 bucks with the, you know, the Mobile discount and this one, you know, they all pile together. And so I got it for like $28 or something and it arrived in two days. And you know, it's like, I know they lost money on that deal.

They must have.

And then I just got a coupon in the mail from them. 10% on your next three orders. Wow.

Yeah, I mean, they're buying customers, right? They're trying to, you know, to get you in the door. I've read about them as well. I know their model in the beginning was to sell a membership and they would only make money on the membership and everything else would be a cost. Yeah, but I'm not sure that worked.

Well, they say, I mean I did, I had to sign up for a membership, but my membership was free, I think for six months. And you know, that's one of those things. It's like I look at that kind of like when Yahoo or Flickr, but also Yahoo said, oh, you get a terabyte of free storage for your, your photos. Do they actually cap anybody at a terabyte? I don't think so. I think that's just a marketing thing. Right. You know, it's better than unlimited because unlimited, everybody gets all. Well, is it truly unlimited? Yes, it's a terabyte. Oh, that's more than I need. Right. You know, everybody's in. So I wonder if in six months they're going to say, hey, you got to ante up, you know, for. Yeah, maybe, but maybe not.

Yeah, but you know, you mentioned something when we were talking about people, folks leaving and finding out, you know, if, if they were happy or working or, you know, with you, that kind of thing. And so I, I have a question is, do you do exit interviews when people leave your company?

I do. I mean, I always, I always, I always do that. I always try to do a kind of check ins though. And we talked about this while they're still here too. I mean, long, you know, before they've told me they're going to leave because if there's something we can fix for you and, and that's even better than fixing it after you left because it sucked, you know, but yeah, I try to. Not everybody is the right person. I mean, if it's somebody that's leaving, like, you know, like the example I described, then, yeah, sure, you know, what was it like working here if I'm letting somebody go, or even worse, you know, truly firing someone for, you know, lack of performance or anything, which I've thankfully only had to do a handful of Times then an exit interview is again, it depends on the person. Some people can take it really well and some people don't take it well at all. And then, you know, do I want to sit there and have them, you know, just vent to me? And maybe, you know, but that, but there's rarely a whole lot of value. I don't know. There's always value. You know, if you, if you're willing to check your emotions at the door and just let somebody, you know, spew venom at you, if you can pick through it. Sometimes there's like a little nugget and you're like, you know what? Oh yeah, that little thing there that they mentioned. I know they were pissed, but they're right, you know.

Yeah, well, I think there's some positives to gleaning, you know, things you can get out of it. And you know, we just, we have a form, say hey, you know, before you come in on your last thing, you know, fill the stuff out, whatever you want. Skip questions that you're not comfortable with. And sometimes you get some. Yeah. Then you don't have to, they don't have to fizz, you know, talk to you face to face. They may feel not comfortable even if they're leaving or if they're angry or something like that. Yeah, I mean if somebody, if you're letting somebody go that's not going to be happy about it, asking them their opinion, probably not going to be that valuable.

There might be some bits and pieces here, but.

Yeah, yeah, but if they're just leaving for, you know, whatever reason, it's, I think it's, it's a good thing to do. And there's all kinds of X interview forms that you can find online. I'm sure that's where we found our.

It's a good idea. Yeah, I like that.

Yeah, you have to do that. So, but anyway, so jump back to this, this article, you know, from Brad, the CEO into, into it there. He, he has some really, you know, some pretty good tips and one of what he's really pushing is the, you know, their QuickBooks self employed version, their online thing. And, and there's a couple of, I think very valuable things and folks here that we've interviewed have mentioned, you know, that they wish they had started accounting for things sooner. And you know, one of the things I often see with people just getting started or even employed in general over time is not keeping track of all your expenses and thinking you're making money when or you're maybe making more money than you think. You are right. And so expense tracking is one of the big things that this quickbook self employed that they hang their hat on. They've got a mobile app, you kind of keep track of everything and then sets up categories and things so you don't need to worry about, you know, finding it every time you just kind of throw it in. Okay. It's this is this time type of expense. And, and then it keeps track of your, also your quarterly self employment taxes which is another thing that people miss all the time. And you wind up paying fees, you know, penalty fees and interest if you don't pay your quarter lease. As a self employed person, of course you got to do it and you, and it helps you keep track and to budget to paying those quarterlies. Because I have definitely been in this position more than once. I hate to say it, but all of a sudd orderlies are due and you say wait, where's the money for that? You know.

Yeah.

Especially if you have an inventory business where you're buying lots of inventory. So anyway, they sell this app, it's a bundle or it cost, you know, 5 bucks a month for the first year and then 10 after that. Or you can get a bundle with TurboTax, 12 bucks a month for the first year, and 17 without it or after that. But if anybody's used it, we'd love to hear from you. Feedbackusinessshow.co Definitely, you know, again, I have, I really support it and promote it and I always push people go do this, go do that. But it, it's, as small business owners, I think we're going to be facing a challenge. It's, it's similar to the, the minimum wage kind of debate where you know, fast food folks want 15 bucks an hour. Well, if that happens everywhere, that will really change the face of small business.

I think that's the thing, right? Is. Yeah, yeah, yeah, yeah. There's, there's some, well, I mean, I get it, I do too.

But it, you know, as a, as a business owner, I think, well, those are supposed to be, you know, entry level jobs that you work and then you move on. Right. But they've kind of turned into for a lot of people, jobs that they rely on for long, long time.

A long time. Yeah.

And so, you know, as a society, I think we need to deal with those things. But it is going to be, I think a lot of it at the expense of small businesses that get compared. If like well hell, I can go work at McDonald's and make 15, why should I do this? Thing for, you know, hopefully you're hiring people that don't think like that, so.

Yeah, yeah, but you might be, I mean, right.

You never know. I always come at, you know, entry level positions where, you know, you just getting somebody out of school or just getting somebody started where you've got to train them and all these kinds of things and, and they don't typically have an expectation that they're going to make a ton of money right now, but as they learn and you know, move forward, they have opportunities there, so.

That's right.

It's interesting. We'll have to see how it goes. And I know that, you know, out here some cities have been passing these laws, you know, these higher minimum wage laws and I know Oakland, California, they had one, they bumped it to 1250 with the plan to go to 15 within three years and you know, Walmart just came out and yeah, they were closing 269 stores and there was no surprise that Oakland was a store that was closed literally with a week's notice or maybe two weeks.

Wow.

And you know, I read an article, you know, it wasn't, it was kind of speculating. Hey, are all these areas, you know, that have these higher minimum wages, are they the ones that are getting shut down? And it wasn't all of them, but there was a significant amount that, you know, had that had that issue. So it's, it's have to see how that works out for everybody. So.

Yeah, yeah, yeah. I mean it, it, it, at some point it, I mean minimum wage needs to keep up with inflation, of course, but it also helps to define it.

Yeah. And I don't think, and you know, I don't even know what the, the federal minimum wage is right now, but is it $859, $10, something like that?

Well, we have seven and a quarter here in New Hampshire, so pretty sure federal minimum wage is lower than that. Yeah, yeah, yeah.

California is 850, I believe.

Yeah. Federal minimum wage is the same as New Hampshire. Seven and a quarter.

Okay. Yeah. And you know, that's a tough thing. You know, you're not gonna, you know, it's not much money.

No. But I mean, my daughter is working at Dunkin Donuts and. That's right. You know, she started when she was 15 and they paid her. Actually, I think they pay her more than that. They think, think they pay her 750. But you know, it's somewhere. It's right there. Yeah.

Yep, yep.

And that makes sense to me.

It totally makes sense for young people. Entry level people. And I think that they will feel the pinch as well if those, you know, numbers go way up. Basically doubling with this whole, you know, $15 thing, I think that that will make it much more challenging for teenagers to get work.

Well, yeah, because now you're, you're attracting people down from the pool of, you know, slightly more skilled labor. Right?

Yeah, yeah, yeah, yeah, exactly.

I mean, you know, my son, who's two years younger than my daughter, he. He's been playing hockey since he was, whatever, I don't know, six or something. So he can skate, he understands the rules of the game. This year he got certified as a referee. And so at 14, and he could have done this a year ago and he would be paid the same. He's paid somewhere between 25 and 35 bucks per game, which is pretty good considering, you know, I mean, the game is an hour, so maybe total, he's there at the rink for an hour and a half. Right. You know, getting there before the game and you know, taking off his skates after the game or whatever, that's pretty good money. But, you know, you start putting minimum wage up, minimum wage gets to 20 bucks, it's actually he's better off going to work at Dunkin Donuts than he is. And they're having enough trouble getting referees, so now they increase the rate of pay for a referee. Right now you've got 13 year old kids making, you know, 50 bucks per game.

Per game.

And then what, what did we as parents pay? Because, you know, that money doesn't come out of thin air.

Yep.

It comes straight out of the fees that we pay for what's, you know, lumped in as quote, unquote, ice time. Right?

Yeah.

And so it's like, okay, now we're paying instead of two grand a year for hockey, now we're paying three grand a year. Okay, well, now I need to go and earn more money to make that, you know, I mean, this cycle, it's how it works and it's okay.

Oh yeah. You want to move everybody up. I mean, the, the goal is to, you know, raise all the ships, so to speak. Right. And you want to try to, to, you know, take care of everybody. But I, you know, and I hate this sounds terrible, but as a business owner, you know, you're, you need to pay, you know, what the prevailing wage is. Right?

Yes.

Within your industry. And so, you know, I have, you know, we have a few different businesses, some of which are very high margins. All kinds of funds come in. You can pay people A lot of money, and it's awesome and everybody loves it. But. But it's a certain very unique skill set that can run that business, then have other companies that, you know, a lot of your folks are, you know, more entry level. And when you look at the numbers, you're just like, well, this is good, because that's all this business supports.

Yeah.

And. And I think that a lot of businesses, especially smaller ones, that will face that challenge of, wow, you know, how do we pay these. These things? And similar to, you know, businesses, I remember when Best Buy was people like, oh, they're going to go out of business, they're not going to be around. And I can remember telling everyone, you don't want Best Buy to go out of business. I mean, you know, they're one of the last few places at least out here that you can go buy something that day and get it and walk out the door with that cable or whatever. It's like losing Radio Shack. I hadn't been there forever, but when you need some special little funky thing, it's awesome when they're there, but now they're gone.

No, I needed some little funky thing. And it was like, I gotta wait, you know, four days in order to get it from, you know, online, because I don't know where else to go.

Yeah, that's right. Yeah. Yeah. So anyway, so it's an interesting topic. We'll have to come back and revisit it. And again, we'd love to get some feedback on how if at all, you know, maybe I'm totally wrong. And I would love to have a discussion with someone that, you know, could have that with us and, you know, reach out to us. You can find us or email feedbackusshow.co. you can go ahead and go to Facebook. Just search for small business show and same on Twitter.

That's right.

Good.

Yeah. Awesome. Yeah. Fun stuff. This is great. Yeah. I'm sure we've got some people listening that have strong opinions that disagree with us. And actually, I'd love to hear from you because that's what keeps. Keeps the conversation going and it keeps us all smart.

Yeah, you got it.

Yeah.

Awesome.

All right, folks, we will see you next week and hopefully it's a good week for you. Thanks.

Take care, everybody.