Fintech South 2023: Lara Hodgson with NOW

Intro: Broadcasting live from the beautiful Georgia World Congress Center for FinTech South. 2023. It’s time for Atlanta Business Radio. Now, here’s your host.

Lee Kantor: Lee Kantor here live from Fintech South 2023 celebrating fintech leaders from around the world. Right now we have Lara Hodgson with NOW. She’s the author of a new book, Level Up Rise Above the Hidden Forces Holding Your Business Back. Welcome, Lara.

Lara Hodgson: Thank you.

Lee Kantor: So tell me about the book. How did this come about?

Lara Hodgson: Well, you know, it’s interesting. A friend of mine that I went to business school with saw me post something about congratulating Stacey Abrams on an award she had won. And she said, oh, my gosh, how did I not know that you were business partners? And I thought, Well, I don’t know how you would know that I don’t walk around with a sign on my forehead or anything like that. And she said, that is so fascinating to me because people obviously know the policy side of Stacey’s life. And Stacey obviously is a very successful author in both fiction and nonfiction fiction books. But nobody knew about her business background. And I think what intrigued people the most and it’s it’s a big theme in the book is Stacey and I are not the same. We are very different on almost every axis, quite frankly. I mean, we have very different backgrounds. We have different ideologies. And many people will say, how do you overcome the challenge of your differences? But we would tell you, as we do in the first chapter, that our differences are, in fact, our superpower.

Lee Kantor: So talk a little bit about her role in now and your role and now and how you’re able to kind of have that synergy and combine the superpowers to create a super business. Like, Yeah.

Lara Hodgson: So Stacey and I met in 2004 in Leadership Atlanta. At the time, she was the deputy attorney for the city of Atlanta. I was running a real estate development company called Dewberry Capital. We spent a year looking at challenges around the city of Atlanta. And at the end of that program, she was actually leaving her job to run for state office for the first time. I was leaving my job because I was pregnant with my son and I was about to become a mother. And I said, you know, you’re the smartest person I’ve ever met. We should do something together. And she said, Well, you’re the smartest person I’ve ever met. We should do something together. And then we said, What should we do? And I think there’s an interesting lesson in that in that. Most people focus so much on the idea and not enough time on the people. And I truly believe that you can have an average idea with amazing people and have every chance of success. But if you have an amazing idea with only average people, you have very little chance of success. So from there, Stacy and I started the first of three companies together. We started a consulting company called Insomnia because we don’t sleep. We started a company called Nourished, which was our patented bottled water for children. And it was that business growing to death that caused us to start now account start the company now.

Lee Kantor: So then when you started working together and you had the first iteration, I guess consulting, which the consulting kind of is probably low hanging fruit, right? Like that’s like we’re both smart. That’s right. Yeah, we were.

Lara Hodgson: Like, Mikey on the life commercial. If you have an impossible problem, give it to us. We’ll solve.

Lee Kantor: It. So now when you’re doing that, and I would assume that since there’s three iterations that that wasn’t going the way that you wanted to go or maybe to the amount you wanted.

Lara Hodgson: No, actually it was incredibly successful.

Lee Kantor: So it was super successful.

Lara Hodgson: It was super successful. We had great clients. We were growing. One of the things we recognized with a consulting company is you don’t make money while you sleep because your unit of value is time, right? And Stacy and I are incredibly efficient compared to most humans, but we’re still limited to 24 hours in a day. The reason we started nourish is I had my son. I birthed a child after the nine months, and as I was going to meetings and I had him in the carrier and in the car, he was constantly spilling things everywhere. And I showed up one day for a meeting with Stacy, and my son had spilled something all over me. I was complaining would be the politically correct way to say it, but there’s a much better way to say it. As I walked in, I was just complaining about the fact that he had spilled things and I was like, Somebody has got to make a spill proof bottled water for kids. And she looked at me and said, Why don’t we do it right?

Lee Kantor: Be the change you want in the world. Yeah.

Lara Hodgson: I mean, you know, the all innovation comes from the demand side of a problem. And I was on the demand side of the problem.

Lee Kantor: And you did enough market research.

Lara Hodgson: We know. You know, I mean, that’s that’s nice. That’s what they teach you in business school. But honestly, we had the idea. We we did some focus groups with some friends of mine that also had young children and said, Hey, would this be interesting to you? They said, yes. We cobbled together our own money to get the molds made and get the first couple of bottles made. And we had our first sale with the parody shops and so off we went. But we kept the consulting company until Nourish had taken off because, you know, while people like to think that entrepreneurs love risk and they just live in their garage and eat Cheetos until like they make it and they’re a unicorn, that’s not how most people do it. I could not not have an income. I had a child in the house. She could not not have an income. So the consulting company gave us great current income. It gave us flexibility because as nourished grew, we could actually not take another project and dial that down so that we could launch nourish.

Lee Kantor: And then from nourish that birth.

Lara Hodgson: Now nourish, absolutely birth now. I mean, you know, again, just like Insomnia was wildly successful, Nourish was wildly successful, and within a few months we had gone from shipping ten and 20 cases here and there to airport shops around the country to large orders from Whole Foods that were truckloads instead of cases. And when you get an order for a truckload, there’s a lot of zeros on the end of that. Right. And what we realized is that they wouldn’t give us a credit card when they when we shipped the product. And I thought, that’s how commerce works, right? I give you product, you give me money. That’s the way it’s supposed to work. I guess. Even on Popeyes, though, you know what? I’ll gladly pay you Tuesday for a hamburger today. Yeah. The wimpy, wimpy formula. That’s what we all use. And so, you know, we got this first big order from Whole Foods. We started to cheer the fact that we had bagged the big deal and we were going to be on the cover of Fortune and somewhere in there you start to do the math and realize, Wait a minute, that’s a lot of zeros that I have to pay my vendors and my employees and wait and wait, right. And I quickly realized net 30 is just a suggestion. It doesn’t actually mean you’re going to get paid in 30 days. You know, you might as well write net pay me when you feel like it on an invoice. Especially the bigger firms like Whole Foods, right?

Lee Kantor: The larger firms seem to take more than a lot of.

Lara Hodgson: Small they can, right? Because what am I going to do? What am I going to say? I’m not selling to you anymore, right? They’d say, Fine. There’s a line of people waiting for your shelf space. So as we had this issue, we took the order. It took the first order. I took almost four months to get paid and meanwhile more orders are coming in. I need to make more product. I’m going to my suppliers saying, guess what? More orders. And they’re like, Guess what? You haven’t paid us yet. And I said, Well, of course not. Nobody here has been paid. And that’s when everybody said, Well, you just have a working capital. Bless you. You should get a line of credit or try factoring.

Lee Kantor: And you know how easy that is.

Lara Hodgson: Well, and not only that, but I’ll be honest. I’m not a banker. I was an aerospace engineer. It’s very good for rocket science jokes, but not so much for finance. And so when people said, you just have a working capital issue, I said, well, how do I get rid of it? And they said, Well, you can go borrow money. You can get a line of credit. And I thought, Why am I borrowing money? I’m the free bank to Whole Foods. They should borrow money and pay me faster. But we all know how that works, right?

Lee Kantor: Did you make that suggestion to them?

Lara Hodgson: You know, I did at one point go to them and say, why don’t you just pay me with a credit card? Wouldn’t that be easier? Because then I would get paid immediately. And you can pay your visa bill whenever you feel like it. And they smiled, but they said no because they said, if we pay you with a card, we now owe the bank. And if we don’t pay it on the deadline, interest and penalties. But if we don’t pay your net 30 invoice on the 30th day, nothing happens.

Lee Kantor: Nothing bad happens to us. So no.

Lara Hodgson: It’s kind of like a Seinfeld episode, right? Like you can take the order, but you can’t actually fulfill the order. And so that’s when I was like, There has got to be a better way. Like small businesses, the largest lender in the United States is not a bank, it’s not SBA. It’s small businesses because last year, small businesses originated over $11 trillion of of of loans to their customers. They look like invoices, right? That’s a free loan that you just.

Lee Kantor: Made and that and that reframing birth now.

Lara Hodgson: Absolutely. I remember the very first event I spoke at at SBA and I thought, you know, how do I introduce this concept? And I was on a panel with a bunch of bankers and they each introduced themselves and immediately launched into things like, you know, Libor and personal guarantees and bassist points. And and I could just see the room of small business owners sitting lower and lower in their chair. They came to the event optimistic they were getting less so as they heard about all the things they could not get. And so I started and I said, you know, first of all, how many people think a BIP is something that happens on your computer and you wish it would go away? Right. So let’s lose the jargon. But more importantly, I said, how many of you sell a product? About half the room raised their hand. How many of you sell a service? The other half raised their hand. How many of you started a bank? And they all looked at me and I said, Every single one of you is a free bank to your customers. You just don’t realize it. And I have to be honest, there was a gentleman in the back that yelled out like, Hallelujah, I thought we were in a Baptist revival like we were. People were getting excited. But I think it’s this epiphany people have.

Lee Kantor: Well, it’s they’re they are not seeing it that way.

Lara Hodgson: No, because we’re all told it’s the cost of doing business right. But quite frankly, the cost of doing business shouldn’t be your business. Right. And that’s what it is. Right, is if I have to be the free bank to Whole Foods for 30, 60, 90 days, then unfortunately, I either take the order and go out of business. Actually, I go out of business or I don’t take the order, which is what most small businesses do is they turn down orders. Now, have you ever started a company to turn down orders? That’s called a hobby. It’s not a business plan. That’s a.

Lee Kantor: Hobby. And people’s business plan, they’re like, Yeah, we’re going to turn down about a third of our.

Lara Hodgson: Exactly. But I think what it also makes people realize is the word small and small business should not be a permanent status, right? But for many people it is. Now, if you want it to be like you want to have a lifestyle business, that when you’re done, it’s done. I think that is perfectly fine. But if you want to grow and you can’t because you’re an indentured lender to your customers, I just think not only is that wrong, but if you could undo that, the entire US economy grows exponentially.

Lee Kantor: And that’s the mission.

Lara Hodgson: And that is the mission. Our mission is to allow small businesses to grow fearlessly.

Lee Kantor: So for people who don’t know, talk about how that works for a small business, how would they kind of tap into the until now and then now account?

Lara Hodgson: So if you’re a small business and your customer is another business or a government or a nonprofit, it just can’t be a person. So let’s say you’re a landscaper. If you’re landscaping my house, you wouldn’t use now account because I’m an individual and I’m likely to give you a credit card. You probably have it on file. But if your invoicing, let’s say your landscaping, the local school, you are most likely going to show up, do the landscaping and send them an invoice. They’re not going to pay you that day. Right. And when you send them that invoice, if you know that they’re going to pay you in 1 or 2 days, then you should just wait. If you if they’re willing to give you a credit card, you should take it. But 98% of the time what they’re going to say is, send me an invoice. I’d like net 30 terms or net 15 or net 60. Or if you’re selling a Coca Cola, it’s net 120 these days if that is a burden. Which it is for everybody, by the way. And you would prefer to get paid immediately than when you deliver the good or service you send your invoice to the school. You upload a copy onto your now account app. It’s on your phone, it’s on your laptop, You upload a copy of it, we will verify the invoice, make sure all the information is correct. We will pay you the full amount of the invoice minus a one time 3.5% merchant fee and you typically get paid in two days.

Lara Hodgson: So you upload the invoice, you’re going to get paid the full amount of the invoice -3.5% fee in two days. You book your revenue as cash and you book a 3.5% expense. You’re done. You have no accounts receivable, right? Your customers still got the invoice, The school still received your invoice. It still said net 30. They’re not going to pay it in 30 days. Somewhere around 55 days they’ll get around to paying it. They’re going to make out the check or the ACH of the wire to you. But the remittance address that was on your invoice goes to my lockbox. So when every day, when we open our lockbox, nothing is made out to now account. It’s made out to all of our clients. But we paid them 60 days ago. Right? And so the beautiful thing is for our clients, they go from having a days sales outstanding of 40, 50, 60 days to two. And imagine what that does. You have all your revenue, including your margin right up front. So you can hire more people. You can take on that big account, you can add more inventory. And so one of our clients the other day said you are like, well, you’re my secret weapon for sales. And B, they said, you’re like outsourced accounts receivable because I don’t have it anymore.

Lee Kantor: Right? It goes away.

Lara Hodgson: Yeah. So they said I said, Well, here’s the unfortunate thing, although maybe it’s not. It could be a very good marketing campaign if we’re are as a service. The acronym is not SAS, it’s SAS. But it kind of.

Lee Kantor: Is.

Lara Hodgson: Right, because not yours anymore. Exactly.

Lee Kantor: So it’s your problem?

Lara Hodgson: It’s my problem.

Lee Kantor: That’s right. 120.

Lara Hodgson: I’m taking that out and I’m waiting because I have protection like insurance. I have cheaper capital. I can wait longer. Right. And so I’m doing all that borrowing so that you don’t have to.

Lee Kantor: So now in the book, what are some of the kind of key points in the book that an entrepreneur can benefit from?

Lara Hodgson: Well, you know, so I’ll be the first one to say I can’t stand business books. I don’t like them. They drive me crazy. You can usually read the first chapter and you’ve learned all of it like the rest of it is just reiterating the same thing. So when it was suggested we write this book, I sort of thought to myself, Oh my gosh, I don’t even like business books. And so it’s really the arc of the book tells the story of how Stacy and I met in 2004. We talk about how incredibly different we are and yet how we were able to use that as a positive, not a negative. And so it talks about all of those businesses, the ones that failed, the ones that succeeded, the one that turned into now account. And then we very honestly take you through now account up until today and anyone will tell you that the key to entrepreneurship is staying alive long enough to get lucky. So we have many near-death experiences which we share in there. And so what people have said about it is I had someone say that it’s a business book that reads like a thriller.

Lara Hodgson: I don’t know if that’s a good thing, that my life is a thriller. And I even had a gentleman say that it was a great beach read, which has never been said about a business book ever. But I think what we do is in each chapter we share an experience that we faced in many cases humanize. Yes. And we share what we were feeling. There are many times in this book where my head is on a steering wheel crying because I feel like I’ve messed up and and even to the point where when we did the audio book, you hear my voice crack when I’m reading it because it’s painful to relive it again. But I think it’s so important. Coming out of the pandemic, more businesses are being started than ever before, but at the same time, we’re in an entrepreneurship crisis because the vast majority of what looks like new businesses are not businesses yet. They’re jobs. People are starting a job for themselves. Right? And if we want some of those to become businesses, we have to share not just the good, not the sexy Shark Tank stories, but the ugly. Right? Right.

Lee Kantor: The good, the bad, the.

Lara Hodgson: Ugly, the good, the bad and the ugly. And quite frankly, the ugly is the one that you learn the most from. And so it is very raw. It is very real. We talk about situations where, for example, we were sitting in front of a company, a very old school, large Fortune 50 company, and Stacy felt like they wouldn’t ever address her. And she didn’t understand why I didn’t notice that. So we even talk about the times when we had conflict as partners, right? And so we talk about the pitfalls, the conflicts, the things we did wrong. And then at the end of each chapter, we offer up lessons for how we would have done it differently or how. How should you think about it? And so it’s interesting because I’ve had everyone from veterinarians to pastors say, you know what, Laura? This actually is not a business book. It’s a book about life.

Lee Kantor: Well, and I think it’s needed in today’s environment that’s so polarizing where people who don’t aren’t exactly the same are having a hard time, you know, having conversations. And in business, it seems like that’s a good area where people should be getting along and differences should be embraced and celebrated to serve people better. And not only should.

Lara Hodgson: They, but they have to be. And I’ll be honest, the reason I was willing to write the book at a time when we were both very busy is I have a I have a son who’s a senior in high school, and I cringe when I see him growing up in a world that basically says to him, If you’re not with me, you’re against me. Right? This polarization, as you mentioned, not only is it sad, it is. It’s critical because you can’t have innovation if we only surround ourselves with people that are like us. And we have got to become comfortable being uncomfortable and we have to go back at looking at those differences as a massive opportunity, not a challenge. And so for Stacy and I, we often say the reason we’ve been able to innovate is when two people are totally opposite. We can look at the problem from a 360 degree view, Right? No one else can do that. No single human can possibly see more than 180. Right. And so I do think we have got to teach people, particularly this younger generation, that it’s not about retrenching into your tribe. It’s not about being around people that look and talk and and speak like you. It’s about surround yourself with people that are different and that is your superpower. Right?

Lee Kantor: But you have to have the you have to be civil. You have to kind of respect their opinions. You have to be curious. It can’t be a good and evil conversation at all times.

Lara Hodgson: Right. So what Stacy and I often say, because people say, how in the world do you guys do this? I mean, let’s be honest. When she was first elected to the Georgia State House of Representatives, I was appointed to the Gretta board, the Transportation board by the then Republican governor. And people were like, how does that work? We said, it works.

Lee Kantor: Amazing, right? In fact, if.

Lara Hodgson: The rest of the world worked this way, Right.

Lee Kantor: But there was a time when that wasn’t. That’s unusual. That’s right. That’s right. Where both sides can have conversations and hang out together.

Lara Hodgson: And what Stacy and I say is the key to that. The key to getting back to that is you have to be curious first and critical second, which means if I say something that is totally opposite to what you believe, the very first thing you should be doing is applying curiosity. Right? That’s interesting. Not judgment. Not judgment. Not criticalness. You have you have the rest of your life to be judgmental and critical. But for just a second, fathom that a person that doesn’t agree with you could have a nugget. That’s true. Right.

Lee Kantor: Because and that requires a lot of empathy, requires patience.

Lara Hodgson: It requires empathy. But let’s be honest, in this beautifully diverse country of ours, we can’t all fit neatly in one of two buckets. It’s not possible. Right? So we’re all somewhere in the middle. We’re all this beautiful.

Lee Kantor: Mix, right? It’s more nuanced, obviously.

Lara Hodgson: It is. And you have to have the grace and the patience to to move in the middle and consider Stacy. And I often say if she has one way of doing it and I have another way of doing it, the best way is actually an unknown third that neither one of us know yet. Right. But you have to have the courage to go there because it’s not comfortable.

Lee Kantor: And it’s funny because a lot of people, when it’s your tribe, you give them the benefit of the doubt. But when it’s not you, don’t you, you assume the worst. Well, I find it just got to get past that.

Lara Hodgson: I find it interesting that people seem to decide whether they would agree with something not based on what it is, but based on who said it. Right. And it’s like, But you haven’t listened to it yet. Because I find people that are very different from me have incredibly valid points. Right? And that doesn’t change who I am in any way.

Lee Kantor: It doesn’t lessen or weaken you at all. It only makes it stronger and better because now I’m learning from somebody else. That’s right.

Lara Hodgson: That’s right.

Lee Kantor: So if somebody wants to learn more about now, where should they go?

Lara Hodgson: You can go to w-w-w dot now account.com.

Lee Kantor: And then to get the book.

Lara Hodgson: To get the book you can well, of course you can go to Amazon and Barnes and Noble. But Stacy and I love to encourage people to go to independent bookstores because those are your small business owners. They’re part of the fabric of your community. So we always tell people to go to your local small bookstore.

Lee Kantor: All right, Laura, thank you so much for sharing your story. You’re doing such important work and we appreciate you. Thank you. All right. This is Lee Kantor back into view at FinTech South 2023.