As a small business owner, you may one day find yourself in a tough spot with your business. In episode 72, hosts Elizabeth Larkin and Gene Marks talk about the toughest spot Gene’s ever been in with his business:
“Gene, what was the toughest spot you’ve ever been in as a business owner? I’m talking, ‘The world is ending. This thing is going to crumble. Joffrey just beheaded Ned Stark.’ How did you persevere?
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Elizabeth: Welcome back to the Small Biz Ahead Podcast. Gene, you travel a lot for your business really.
Gene: Yes, yeah. Well, I have client projects around the country and then, I speak.
Elizabeth: I always like to get your travel tips, so before, you told us always bring an extra shirt.
Gene: I do, I always do pack an extra shirt with me and when we talk about different travel tips, obviously, I never pack or check-in bags. I always carry-on. When you went to Europe, did you check bags?
Elizabeth: I did check a bag because I went for two and a half weeks and I’m a woman.
Gene: Is that right?
Gene: Okay, so fair enough, won’t go there. I actually never check-in bags.
Elizabeth: Even if you go on vacation?
Gene: No, even if I go on vacation, never check a bag.
Elizabeth: Does your wife check a bag?
Gene: No, she does not check a bag. She is extremely low-maintenance.
Elizabeth: Yeah, so I typically don’t check a bag; but when we were going to Europe, I was going to Greece where it was 106 degrees. I was gonna be in Germany and France where the weather was cold and rainy.
Elizabeth: I just needed to bring too many different shoe selections. So, my question to day is I know you just got delayed and you were in Austin coming back.
Gene: Nine hours.
Elizabeth: What do you do as a business traveler when you’re delayed?
Gene: I’m gonna tell you. Well, first of all, when I’m delayed, and this dovetails into a good travel tip. You had mentioned when you were traveling, you had lounge access?
Elizabeth: Yeah, I have a credit card that gives me access to lounges.
Gene: I cannot. Now, I travel on American Airlines. I pay 400 bucks a year, 500 bucks a year for their lounge access.
Elizabeth: Is that worth it?
Gene: I cannot tell you how worth it it is.
Gene: I would probably pay twice that amount if they raise the price up.
Gene: I’ll tell you the reason why, Elizabeth. Particularly, if you’re a business traveler, you are going to face delays, layovers. I use that lounge as an office all the time, I go into the cubicles, I work away. They’re always a professional environment.
Gene: They’re always in a good location. This morning, I get to do the podcast today. I come to Hartford for a day. We do these things and I get to the airport insanely early, just because I’m a nut when it comes to doing that.
Elizabeth: Yeah, you’re crazy.
Gene: I’ll go to the lounge and I’ll sit there in the cubicle and I’ll do work. I’d rather do that than sitting at my desk in the office worrying if I’m gonna get to the airport on time, but in the lounges, they’ve got free things to nosh on. They have free wine and beer if you want to do that as well, but I just would say as a business traveler, if you’re traveling more than half a dozen times a year for business, I would cough up the 400, 500 bucks and join, be at a lounge membership with your favorite airline.
Elizabeth: What I like about it is if you’re in the airport, let’s say, you have a three-hour layover or something like that, you’re probably gonna get a meal. You know how expensive food in the airport is?
Elizabeth: It’s crazy. You want to charge your phone. It’s really hard to find a place to find a charger and then, your laptop.
Gene: Internet access is spotty, depending where you are in an airport. Whereas when you’re in the lounges, the internet access has always been really, really good.
Now, I’ve never used in the lounge. They have separate rooms there for conference room facilities and whatever. I’ve never explored that or had the need to use that, but I was thinking of asking about it. Sometimes if I’m traveling around, I need to do a webinar, or a conference call, or something like that. I’m thinking, “I think I can use that.” I just don’t know if they charge you extra for it, that I gotta find out.
My biggest pet peeve in the lounges, though, let’s see if you have the same thing, is I sit there in the cubicles and then, you got the guys that talk on the phone. I don’t know if I’m right or wrong about this because if you’re in the work cubicles, that’s the spot for the people doing work and people have to make phone calls, so they’re talking on the phone and it drives me insane and then, I always think to myself, “I think I’m the one that’s being a jerk here.” I think it’s okay for them to be on their phones.
Elizabeth: Have you ever thought about earplugs or something?
Gene: Well, I put in my earbuds immediately.
Elizabeth: Yeah, yeah.
Gene: Just tune them out, then that’s what solves it, the answer; but then, even if I have to be on the phone, I’m walking around the whole lounge. I’m not in one place, I’ve got my earbuds on and I’m talking on the phone and I will walk the whole length of the lounge.
Elizabeth: You’re a pacer?
Gene: Yeah, I’m pacing; but I do it because that way, I feel like I’m not annoying the people around me in the cubicles. But I think I’m wrong about the political incorrectness of using your phone in the work area.
Elizabeth: It just annoys you.
Gene: Just annoys me. That’s one of many things that annoy me where I’m completely, right?
Elizabeth: Alone in it?
Gene: Yeah, where I’m completely alone. Right.
Elizabeth: Okay, we’ll be right back with our first question. This is another question for Gene directly about the toughest spot he’s ever been in with his business.
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QUESTION: What’s the Toughest Spot You’ve Ever Been in with Your Small Business?
Elizabeth: We’re back and this question is from Marcia in California. Before we ask this, though, I just want to remind everyone that Gene owns his own business.
Elizabeth: It’s a small tech company.
Elizabeth: He has 10 employees.
Elizabeth: Okay, so this is Marcia’s question.
“Gene, what was the toughest spot you’ve ever been in as a business owner? I’m talking, ‘The world is ending. This thing is going to crumble. Joffrey just beheaded Ned Stark.’ How did you persevere?”
Gene: Marcia, I actually did have a spot. I really did, I started my business in 1994. We were doing fine, we were doing okay, whatever. In 2009, for a year or so before that, I wasn’t really paying that much attention to my financial statements.
Gene: Yeah, believe it or not, I was running around, and doing this, and doing that. You get into a routine and you think everything is okay.
I started looking at my numbers in 2009 and remember, this is the recession time, things were slow. I got the sense that things seemed to be slowing down or whatever and I was at a level of cash that was like I was losing sleep level of cash.
Elizabeth: Oh, no.
Gene: Oh, my god. I didn’t realize that my cash had fallen as low as it was, I’ll never forget that. Still, to this day, I will always remember that. First of all, it was a little bit of luck that I actually just started paying attention at that time; but then, it was also a little bit of perception of what was going on.
Elizabeth: Didn’t you have a bookkeeper at this point?
Gene: I did. Oh, yeah. I had a bookkeeper and everything, I was getting the reports. It’s just admittedly I wasn’t looking at them for a while. I don’t know why, but you get that sense. I was like, “Oh, my god.” I had a meeting that day with somebody and I remember Lily being in that meeting and not even concentrating on that meeting because an hour before, I was looking over and I was like, “How do you even get there?”
I was a little annoyed that nobody had told me. My bookkeeper’s like, “Why didn’t you let me know that my cash was going? When was she gonna tell me, when we had no more cash left?” You know what I mean? Yeah, but in the end, it’s not her fault. In the end, it’s my business and it’s my fault and I should’ve been more recognizing.
Elizabeth: Yeah, she’s sending you the reports.
Gene: Yeah, she’s figuring I know what I’m doing.
Elizabeth: She’s like, “He must be reading them.”
Gene: Yeah, apparently she assumed a little too much that I actually knew what I was doing, so that was a really “holy you-know-what” moment in my business life. I caught it just in time and I made immediate moves. The next week, I actually terminated two people from my company, two people.
Elizabeth: Oh, wow.
Gene: Which was 20% of my company. We were a dozen people at the time.
Elizabeth: That must’ve been really difficult.
Gene: It was.
Elizabeth: Yeah, and hard for them.
Gene: But then, I knew they were not very busy and here I am still carrying them along and then, I went through my general ledger. I identified just a bunch of other silly expenses and eliminated them.
Elizabeth: Did you still have an office at that point?
Gene: We did not even have an office at that point and then, what I did is, and it took a couple of months; but I turned around. I really dug down and reached out to our entire client base and really reengaged in marketing to them and reaching out to them. No job was too small, “Sure, Gene. We can use an hour of work here, we can use whatever.” Fine, great. I’ll take that hour, that hundred bucks means something to me. Right? You know what I mean?
Whatever it was and then, things slowly but surely turned around and then, turned around a lot. But it was a moment, it was a real low point and to this day, when I get the reports, my reports I get, I have a flash report that I get from my bookkeeper once a week of key metrics including cash. They go all the way back to 2008. It’s just a spreadsheet workbook. She puts it in there, but I can go back and sometimes, I do. Sometimes, I will go back to 2009. It was April of 2009 and I will look at my cash levels back then, just to remind me.
Holy mackerel, I remember that. Jeez, and never want to be back there again. Marcia, that was my lowest point and that’s what I did.
Elizabeth: That was a really good question.
Gene: It was a great question.
Elizabeth: I like that question a lot.
Gene: It really was. Oh, you can tell us when you leave your comments and your questions on iTunes or your reviews on iTunes, that’s right; but I don’t know how many other businesses really reach a super low point. I can tell you, I have recollections of some clients hitting certain low points within their companies, scary points, and have to do stuff to turn things around.
Elizabeth: Let’s say, it’s not a cash-on-hand issue. Although, with the small business, it’s probably a cash on-hand.
Gene: It really is, it’s usually a cash issue with a business or a sales issue.
Elizabeth: Going through your general ledger and really figuring out, “What can I cut out?” But your biggest expense is usually employees.
Gene: Yeah, so we cut down two and then, sales. We needed sales and I think when you’re a successful business owner, not that I’m so whatever; but honestly, you’ll sell ice to an Eskimo if they’ll buy it. You don’t care what you’re out there doing. A lot of businesses get, “Well, that’s not exactly within our model.” That’s fair enough if things are going well, but if you gotta put food on the table, you have to generate cash. It should come as no surprise that people will go to great lengths to do certain things.
Elizabeth: Yeah, and I also liked your recommitment to your current clients. You didn’t go out like, ‘We gotta get new clients.”
Elizabeth: You actually went back to your current client base.
Gene: Yeah, we did and people ask me, “What’s the number one way that you can grow the sales in your business, whether you’re in a cash crunch or not? What’s the number one way?” I’ve always just found you should go back to your existing clients first.
Gene: There’s always something to be said for new clients.
Elizabeth: We actually have an eBook coming out and I’ll link to it in the show notes about that. It’s about how your best way to drive sales is to go back to your current customers.
Elizabeth: Upsell them and reengage them and it has a lot of tips on that.
Elizabeth: Well, that was a great question, Marcia.
Gene: That was great.
Gene: Thank you, Marcia.
Elizabeth: We’ll be right back with Gene’s Word of Brilliance.
WORD OF BRILLIANCE: Floating Drink Trick
Elizabeth: We’re back with Gene’s Word of Brilliance.
Gene: Three words, Elizabeth. You’re not gonna know this, but boy, if you run a restaurant, you’re gonna want to know this. Have you ever heard of the floating drink trick?
Gene: No. Well, let me explain to you what this is, Elizabeth. If you run a restaurant, this comes from a story from a well-known restaurant actually in New York City that’s having a problem with its employees. They’re engaged in a lawsuit right now, so I’m not gonna name any names.
Gene: But the restaurant is off Broadway and it’s a popular tourist spot. They were accusing their employees, their employees, a bunch of employees, of stealing almost $400,000 from their restaurant over a few-year period of time. One employee, they were accused of stealing about $38,000 from the restaurant.
Gene: How did they do this, Elizabeth? By using the old floating drink trick.
Gene: Here’s what the floating drink trick is. You’re a waitress at the restaurant and I’m a waiter at the restaurant and Ryan is another waiter at the restaurant and Michael’s another waiter at the restaurant. Well, you go and you charge your customers whatever they have on the bill and they buy, say, a Coke, right?
Gene: Well, they pay. You go back to the point of sales system, you pull the Coke out of the check and you just put it onto my check for my customers.
Gene: Hold on for a minute and then, because the customers paid, they overpaid their bill, so what they do is you take the difference. You stick it into your pocket. Me, I’ve got that drink now, right? My customer ordered a drink as well, so I do the exact same thing and then, I take that same floating drink and move it onto somebody else’s check.
Elizabeth: But I don’t understand that.
Gene: Somebody else’s check.
Elizabeth: If you’re paying credit card, then how do they do that?
Gene: Oh, no. When people go to pay, you have the ability to go into the point of sales system and if there was an error, you can back it out. You can actually do that on the point of sales system, so if your over-payment came and then, the adjusted amount is more than what was paid for. They take the difference.
They do that and they did it so much at this restaurant, this whole group of employees. Nobody ever found the floating drink because it kept on moving. Imagine, this is a New York City restaurant where there are thousands of customers everyday were coming in. The numbers racked up.
Gene: Because it racked up, they were able to pull money basically out of the till, it was, and put it in their own pockets, get credited for that. They made a lot of money doing that, so if you’re running a restaurant, be very, very careful about the point of sales. It’s called the floating drink trick, it is a good way for your employees to take advantage of you.
Elizabeth: Nuts, alright. We’ll be back in a couple days with our next episode.