Join us as we talk with Loren Feldman who is the editor-in-chief and founder of 21 Hats, a platform for business owners where he edits a daily newsletter for entrepreneurs. In this episode, you will learn how is it different going from being an editor to joining the world of entrepreneurship and how you need to embrace your mistakes to be successful.

21hatsLoren is editor-in-chief and founder of 21 Hats, a platform for business owners, where he edits a daily newsletter for entrepreneurs and hosts the 21 Hats podcast. He has also co-hosted a call-in show for business owners, Mind Your Business, on Sirius XM.

Previously, he was a senior editor at Forbes, where he created the Forbes Small Giants franchise and was responsible for entrepreneurial coverage in print and online. Before that, he was small-business editor of The New York Times, where he started the You’re the Boss small-business blog. He has also been editor of the Web sites at both Inc. and FastCompany.

Before going digital, he was a top editor and writer for print magazines such as Inc., Philadelphia, Manhattan,inc., the American Lawyer, Money, and George. He has also written for GQ, The New York Times magazine and The New York Times Sunday Business section. And he has spoken and moderated discussions at numerous conferences and seminars on entrepreneurship.

Transcript

Narrator:        Welcome to Cracking the Cash Flow Code where you'll learn what it takes to create enough cash to fill the four buckets of profit. You'll learn what it takes to have enough cash for a great lifestyle, have enough cash for when emergency strikes, fully fund a growth program, and fund your retirement program. When you do this, you will have a sale‑ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want, in the way you want.

In Cracking the Cash Flow Code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he's learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.

Josh Patrick:   Hey, how are you today? This is Josh Patrick. And you're at Cracking the Cash Flow Code.

And my guest today is a very special guest. And I'm really serious this time. He really is a very special guest. He's an important person in my life because he was my editor at the New York Times. And when he got me, I was probably this side of terrible as a writer. And when that section of Times finally closed down, I made it all the way up to mediocre as a writer. And I credit this guy, his name is Loren Feldman, as being one of my best writing coaches of all time.

So, we're not going to talk about my ability as a writer or lack of ability as a writer. We're going to talk about what he's learned from working at the New York Times, and as an editor of Forbes, and an editor at Inc. And he has now started his own thing. And we're going to hear about what's difference between writing about entrepreneurship to actually living it.

So, instead of me yammering on, which I have a bad habit of doing, let's bring Loren on.

Hey, Loren, how are you today?

Loren:             I'm great, Josh. Great to be here. Thanks so much for having me.

Josh:                Oh, it's my pleasure. And you really have been a huge help in my journey as becoming a reasonable writer.

Loren:             Well, you're being too hard on yourself but you're making my day. If I helped you at all, I feel great about that.

Josh:                Well, you helped me a tremendous amount.

So, I have a question. I mean, here's my first question, Loren. What are some of the biggest lessons you learned while you were an editor for those three, you know, business publications?

Loren:             Well, you know, I know where you're going with this. And let me give you an example of-- let me just say this. And maybe you've learned this yourself at various points. It's a lot easier to tell other people how to run their businesses than it is to run your own business.

So, one of the things I learned as an editor, to answer your question, is that a tremendous percentage of business owners are nervous about charging as much as they should charge for whatever their product is, or whatever their service is. I've talked to so many people in so many situations and I learned, a long time ago, that if you're looking at why a business is struggling, that's a good place to start, to check and see. Are they charging enough? Because people tend to get gun shy. They get nervous about it.

And I've parroted that advice, not because, you know, I'd lived it or because I had any particular expertise but because I talked to a lot of smart people who had shown me that to be true. Then, I got to the point where I had to price my own stuff. And we can talk about that whenever you're ready. And it's a very different ballgame.

Josh:                Yeah. Well, I tell people all the time that there's likely way more pricing elasticity in their business than they think.

Now, when I was in the food service and vending business, we had a lot of pricing elasticity around our catering. We had none in the vending business because it was so ridiculously brutal and competitive. But, for the most part, you're absolutely correct.

If you're in the advice business, for example, I could almost promise you that you're underpricing by 20% to 50%. If you're in the construction business, you're underpricing. If you're not hearing “no”, at least 20% of the time, I really think you're too cheap. Does that make sense?

Loren:             It does. It does.

And, you know, it comes up in all sorts of situations. I mean, it tends to come up whenever there's a conversation about the minimum wage being increased. And, you know, owners tend to be nervous about even the slightest increase in their prices even if it's, you know, to pay people to meet the new minimum wage law.

When it's your business though it's hard because everybody has that fear in their gut. There is a line somewhere. Am I close to it? I don't know for sure. But I do know I don't want to go over that line and have, you know, people-- you know, have my phone stop ringing or people stop coming into my place.

Josh:                Well, as I tell people, it's easier to lower prices than raise prices. So, if you start with your prices high, you can always give people a discount. If you start with your prices low and you go back and say, “I want to give you a price increase,” then you have a challenge. So, my advice is start with your prices high. If you're not hearing “Yes,” keep ‘em high but offer a discount.

Loren:             But, you know, there's a psychological aspect to this as well. And I think, you know, you started by asking me, you know, what I've learned covering entrepreneurship. Another thing I've learned is that people go into business, generally, because they really know something about something. They have some area of expertise, and they're really good at it, or they wouldn't, you know, have the nerve to try to turn it into a business. But nobody knows all the things you need to know to run a business. And, you know, it's just hard to develop the professional skills to do all the things that you need to do to run a business beyond those that you bring to the table, initially. And I think pricing is a part of that.

Josh:                Yeah, my experience is business owners really don't become any good at what they do till they’re about 50.

Loren:             Well, it depends on when they start.

Josh:                Well, that's even if they start after 50. They--

Loren:             That’s not helpful.

Josh:                Well, it’s a different ballgame but you've learned a lot along the way. And I can tell from my own personal experience. In my 20’s and 30’s, I was a disaster as a business owner. I was a disaster because I was a terrible human being, being a business owner. And I was a disaster because I didn't know anything I thought I did. And you--

Loren:             You wrote about that for me at the New York Times. You wrote some terrific pieces about it.

Josh:                Yeah. Yeah.

Loren:             And I think that probably helped a lot of people because you're not alone in feeling that way.

Josh:                Well, I know for a fact that's what the world is. And the reason people at 50 start becoming successful in making some money is they've stopped making the mistakes they made that hurt them along the way. And they've learned from their mistakes. In fact, I wrote that in my newsletter today that's going out tomorrow. I was writing about the concept of mistakes and the fact we need to learn how to embrace mistakes to be successful - in anything we do.

Loren:             The thing is it's so interesting. In a lot of walks of life, there is tremendous opportunity to learn before you do. You know, you don't just get sent out there to figure it out yourself but that happens a lot with business ownership. I mean, you know, I think entrepreneurial MBA programs have gotten better. But I think you probably would agree with me, there's nothing that really prepares you to run a business except running a business. And that's why you're in that position of having to learn from your mistakes.

Josh:                Yeah. One of my-- one of my sort of anti‑mantra mantras is the most dangerous degree granted, in the United States, is the MBA, especially for small businesses. I've yet to see an MBA program, including the entrepreneurial programs, that really get at the issues that a smaller, privately held business owner has. And by that, I mean businesses with less than 50 employees.

MBA programs are okay to mediocre for over that. And they're probably pretty good for over a thousand employees. I've never worked in a big organization so I can't say that for a fact. But I can say the MBAs we hired, we had to deprogram before they became useful for my company.

Loren:             I'm not surprised to hear that.

I mean, the other thing is they tend to focus on building venture‑backed businesses. And that's a tiny percentage of the businesses that get started and not my particular-- not my favorite model, anyway, even if you're able to attract venture capital. But that's an issue as well because, I think, that's the focus of most MBA programs, if they deal with entrepreneurship at all.

Josh:                Well, that's my-- you know, I-- [inaudible 00:09:12] for years, the VC model is a really dangerous business model. You either become a unicorn or you're sold off to one of the big ones because they want your talent. And the VCs do not care.

Loren:             In the best case-- best case scenario.

Josh:                Yeah.

Loren:             Yeah.

Josh:                Yeah. Well, worst case scenario, you're going to-- you know, if you've got talent and you've been VC‑backed, you're going to find yourself a good home when your business crashes and burns and you have no more money.

Loren:             And, you know what I think people don't think about enough, Josh. A lot of those businesses that crash and burn didn't have to crash and burn. And that they crash and burn because of the VC model which destroys more businesses than it creates because their whole goal is, you know, you have to become a unicorn, as you just said. Their whole goal is to build these businesses as big as possible, so they throw more money at you than you really need and they tell you to go for broke. And a lot of them end up broke because they have to meet the needs of the VCs. Whereas, if they didn't take all that money and they just tried to build a sustainable business, they might have succeeded and built a really good business. And that's the shame of it. Those businesses never get built.

Josh:                Yeah. Well, that's-- I’ve been preaching that for years, as you know. And the thing that people don't realize is that, when you take VC money, you're focusing on the wrong end of the P&L, meaning that you're focusing on that top line.

And I think I wrote a post about this. My father and I used to have this ongoing argument. And we went for years, and years, and years. And he would say, “You're an idiot. You don't focus on profits.” And I said, “No. We need to grow the business. We need to focus on top line.” Well, I focused on top line, flat ran out of cash, and then learned that yeah, maybe I should pay attention to the bottom line.

Loren:             Maybe your father did know something.

Josh:                He knew. That thing he knew about, he was right on the money about. And I was completely wrong about it, so.

Loren:             Well, you're not alone.

Josh:                No, I'm not. I'm not. And that's the unfortunate thing about VCs.

So, Loren, when you were an editor, you got to hear lots, and lots, and lots of stories. What was one some of the more interesting ones you've heard?

Loren:             Oh, gosh. It's hard to pick one or two.

You know, when I was at Forbes, I started a program we did there called Forbes Small Giants. We partnered with the Small Giants organization which actually grew out of a book written by a colleague of mine when I was at Inc., a guy named Bo Burlingham. And he wrote about businesses that are the antithesis of the VC‑backed firms we're talking about - firms that decide they want to be great, not necessarily big. It doesn't mean they're against growth. They're not against growth at all. They just want to grow on their own terms. And that means, you know, maybe they're bootstrapped. Or, if they take some friends and family, or investment money, it's under control. They control the business.

So, he wrote that book, I guess, around 2005. And about, I don't know, five or six years ago, we started this program where we picked a new cohort of Forbes Small Giants every year. And we just found some amazing companies that were doing really cool things.

There was one-- there was a marketing-- I'm sorry, an advertising business in Toronto called Zulu Alpha Kilo. It was started by a guy who was a refugee. His name was-- his name was Zak, Z‑A-K. So, the initials of Zulu Alpha kilo matched his name. He worked at a very big successful advertising business but thought there was a better way to do it, started his own firm. And one of the things he quickly decided to do was he was going to stop doing those pitches that advertising agencies are generally forced to do, where they donate their time to try to win an account. They participate in a contest with other agencies, give away their best thoughts, and sometimes to get the business but often don't.

And he said, “You know what? I'm not doing that anymore. I am-- you know, if you want to hire us, hire us. If not, don't.” And his business didn't grow as fast as some others, but it grew and he got great accounts. And people respected what he was doing. And that was kind of the type of business we were looking for - somebody who was willing to buck the trends in their industry and do things the way they thought should be done.

Josh:                That's great to hear.

So, Loren, you have your own venture you're doing now. How's it-- you know, how's the difference for you going from being a great editor to join the world of entrepreneurship?

Loren:             Well, that's nice of you to put it that way. It's a pretty big difference, especially when it comes to the paycheck. I'm just getting started. As you know, I've kind of been on my own for about three years now. But I've really been on my own for the last one year.

This happened because I'd had great experiences at Inc., at Forbes, and at the New York Times but, at each place, they had their own ideas about what they thought was useful in terms of covering entrepreneurs and business owners. For example, at Forbes-- and, you know, I happen to disagree, but they're very smart people and they weren't wrong. They were probably right for their brand. But they do tend to focus on the VC‑backed model. They were less interested in what I was trying to do. They weren't that excited about the Forbes Small Giants idea. But my point to you is, at each of these places, I learned a lot but could never quite bring it all together in one place because it didn't quite make sense to fit within the guidelines of the mission of that particular organization.

So, in 2018, I, you know, met someone who had kind of similar ideas and we decided to partner and build the content community platform for business owners that I thought was there to be built and that nobody else was doing. We ran into some, you know, ups and downs. His business has actually struggled a little bit. It was kind of my idea and his money.

His business started to struggle a little bit before the pandemic. And then, really had some issues when the pandemic hit. And, at that point, you know, he felt he needed to focus on his core business and we went our separate ways as friends. He was very generous about it. He gave me the things we had built so far. That included a daily email newsletter in which I highlight some of the content that I create but also bring together, aggregate, the most important stories of the day that I can find specifically for business owners. And I try to pull out whatever is most important for a business owner and put that in the newsletter. The notion being that, well, a lot of this stuff is available that, you know, people can find it on their own, I find it for them, put it all in one place and deliver it to their inbox. So, I do that.

And I also have a podcast that we started. And that, I think, has really worked out great. I don't think there's anything else quite like it. I started following the journeys of seven-- now, eight business owners in weekly conversations that started just before the pandemic. Obviously, we had no idea what was coming, when we started, but it really kind of made this idea because their stories-- I talk to them three, every week-- three of them every week. Their stories became pretty dramatic once the pandemic hit. A couple of them were not at all sure they were going to survive. A couple of them did okay. And a couple of them did way better than they would’ve without the pandemic. So, it was a real interesting mix.

And we would gather every week for an hour and talk about what they were experiencing. And some of that got, you know, really intense and really emotional. And I think a lot of our listeners have really gotten invested in, you know, whether these businesses are going to survive and thrive or not. So, I got that. I got a lot of work to do but that's what I'm focusing on right now.

The good news is I get a lot of great feedback. The bad news is I haven't quite figured out how to monetize it yet, but I'm working on it.

Josh:                Yeah. That sort of is the challenge with all this online stuff. There's some great content, great stuff out there, and it’s sort of a chicken and the egg. It's hard to monetize until you get traffic. You know, it's hard to get traffic until you monetize.

Loren:             It's really difficult.

I was at the New York Times when the times was thinking about putting up its paywall and they struggled and struggled with it. And, you know, they had-- you know, I think they had 30 million readers a month and it was hard for them to do. So, you can imagine how hard it would be for me by myself.

Josh:                Well, you know, the New York Times sort of has a name and people kind of gravitate towards it.

Loren:             Kind of. Yeah, and it worked out very well for them.

Josh:                Yeah. Yeah.

21 hats, I'm not sure everyone-- you know, it’s not like a household name.

Loren:             Not yet. Not yet.

But, luckily-- or happily, I think people get the idea behind it. It was kind of what we were talking about before. Nobody's completely prepared to do all the things you have to do to build a business. We're here to help, you know. You probably can wear a few of those hats comfortably and maybe there's some you can't. And we're hoping to create a community that that helps with all of that.

Josh:                You know, I've used the hat rack as a metaphor for a zillion years. And, you know, as business owners, we have to put on different hats. Sometimes, every 10 minutes. But usually about every half an hour or 45 minutes. You have to go from, you know, being a customer service person, to being a salesperson, to being the marketing manager, to being the logistics person. And until you have employees that can do that stuff, you have to learn how to do it yourself.

Loren:             Which is a great experience. I mean, it's good to dabble in all of that. No one can be good at all of it. But it's good to, at least, know how it works so that you can manage someone when you do get to the point where you can hire someone to do it.

Josh:                Yeah. Well, you have to become at least adequate. Otherwise, your business is not going to last.

Loren:             Right. Or you're never going to get to that point where you hire those employees you're talking about.

Josh:                Right. And it's important to hire somebody who actually knows more about that subject than you do. But, they also have to have-- and this is really important, in my opinion, they have to share the same value system you have. Without that, you're just not going to have success because you're going to be fighting values and not working on a common interest of moving the business forward.

Loren:             It is interesting. You know, things have changed in recent years. Businesses can go a lot longer without hiring employees now and they can outsource a lot. You then get into the-- you know, it could be about marketing, for example. You could then get into the question of, you know, How would I do better? Am I better off if I bring somebody in and they really understand how the business works and they work for me full time? Or, am I better off going to somebody who does this all the time has lots of experience working a lot of different companies and tell them what I need and tap their expertise? I'm not sure there's a right or wrong answer to that. It's a tricky challenge.

Josh:                There's actually a middle ground to that which is, you know, you actually hire part‑time people who may not be world class but they're very cost effective. And you have to put some time in coaching and teaching them how to become what they are. But, you know, the thing that I've learned, by using virtual assistants, as well as people in our office, is it’s still a values‑based hire.

If I don't--

You know, when we hire virtual assistants, we have an interview where we talk about values. And I don't say, you know, how do you feel about personal responsibility? I'll ask them an open‑ended question that will allow them to expound on that a bit so I get a sense of whether they actually show personal responsibility or they don't. And, if they don't, I can't hire ‘em. I don't care if they're sitting in an office next to me or they're in the Philippines.

Loren:             That makes perfect sense to me.

Josh:                Yeah, so it's something that's really important, I think.

Loren, we are, unfortunately, out of time as I'm looking at our clock that's going there. And--

Loren:             That went quickly.

Josh:                Well, it usually does, unfortunately, especially with somebody as good a guest as you.

So, I am sure that people are going to want to find 21 Hats, and are going to want to find your podcast, and are going to find all that great daily newsletter that you send out. So, how do they do that?

Loren:             They can find it all, if they go to 21hats.com. That's 2, the number two, the number one, hats.com. They can find the podcast, the 21 Hats Podcast, wherever they find podcasts. We do publish them on the 21hats.com site with a transcript but it's also available through Apple, and Google, and wherever else you get podcasts.

Josh:                Cool.

I've got two things I would like you to do. The first, I've been asking for almost seven years now that this podcast has been going on, which is go to wherever you're listening to this podcast, it could be Apple, it could be Spotify, it could be Amazon - we're on all those places and please, please, please leave us an honest rating and review. If you love us, five stars is nice. If you hate us-- well, I hope you don't but you may. And you have to talk about that, too. So, it's important that you do one of those things. It could be some place in the middle too. Who knows?

Any rate, go and rate and review us. It's important. And while you're at it, subscribe, if you like us.

Second thing--

Loren:             How can somebody hate you, Josh? That's not possible.

Josh:                Oh, it's really possible.

Loren:             I don't see it, but I'll take your word for it.

Josh:                Okay. You've never been on the receiving end of one of my little blasts I do.

The second thing I want you to do and, again, this would help me a lot, and I think you get some value from it. I just published my second book about six weeks ago, seven weeks ago. It's called The Sale Ready Company. And it continues the story of our friendly Aardvark family as they're going through and John is getting ready to transition out of his business. And that provides all sorts of issues for he and his family.

It’s an awful fun read. Even people who don't own businesses have told me, “When's the third book coming out? I want to know what happened.” You may, too.

It's really easy to get. I'm actually selling it for half price on our website right now which is www.salereadycompany.com. That's www.salereadycompany.com. And with it, you get a bunch of bonuses, and you can even have a free 20‑minute conversation with me if you have a particular issue you'd like to talk to.

So, this is Josh Patrick. We're with Loren Feldman. You're at Cracking the Cash Flow Code. Thanks a lot for stopping by. I hope to see you back here really soon.

 

Narrator:        You've been listening to Cracking the Cash Flow Code where we ask the question, “What would it take for your business to still be around a hundred years from now?”

If you've liked what you've heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102, or visit us on our website at www.sustainablebusiness.co, or you can send Josh an email at jpatrick@stage2solution.com.

Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.

Topics: business success, entrepreneurship, Loren Feldman, 21 Hats

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