I Caught My Employee Stealing. What Should I Do? | Ep 980

I recently caught one of our main employees dealing. What would you do in that scenario? I would not want a snake in my business. But there's $100, $1,000 they stole.

That's wild. Question is, number one, why can't you do more? This is why we do this. This is why we do this.

The good shit, right? Hey, so $8.7 million, trailing 12 months, $1.2 million profit.

My brothers and I own a designer handbag resale company. Ooh, interesting. Okay. And a pawn shop specializing in gold, silver, jewelry, and luxury.

It's a tricky one to grow right now because an added caveat to this is we're in the process of selling, and we're in the later process. So we've otherwise signed... Yes, sir. AKA signed, LOI are both signed, waiting for the lenders to get SBA approval.

Okay. And then I have a hyper-specific question. Okay. I recently caught one of our main employees kind of skimming off the top, stealing.

What would you do in that scenario? Is it the guy or is it like what guy is - I mean, it's not really going to change my answer, but I'm just curious. It's - It's someone who is replaceable, but it would be a huge hit. What is it?

What is a hit? Like we would have to. Well, the financials are worse because they're stealing, correct? Not significant.

So it's like it's small. It's not. Let me give you the TLDR. Let me give you the TLDR on this.

When you're 85 looking back, you're going to want to have been honest, period. Also, you expose yourself to liability because as soon as you know or it's demonstrated in any way that you knew about something, all of the reps and warranties that you're doing in the sale are going to be flipped. And so if you basically are knowingly giving somebody an organization that has some liability that you have not came forth with, you take on that liability and they could basically take off, basically take back, not take back the money, but sue you and it'd suck.

Right? The good news is this is I think that all of this is going to be how you frame it when you're going like when you're telling the buyer. Right. I just say, hey, like, you know, the business you're getting into.

Like we deal with some nefarious characters. That being said, it's a very profitable business and it's a good business. Yeah. I've got good news and bad news.

The good news is we're slightly more profitable than we've let you know, and we're willing to honor the existing price. The bad news is I have to replace one of the people because I found out he was skimming. But fundamentally, you have to be upfront, state the facts and tell the truth. I don't think it's going to blow the sale up.

Yeah, I agree. I agree. And truth be told, I already did talk to this person. I'm more interested in what you would do because I spoke to them, met a middle ground, didn't ask for any money back.

We changed the... Oh, I mean, I would kick them out. Moving forward. Dude, they stole.

Before the sale? Yeah, they stole, man. Oh, that's interesting. They stole?

Okay. Would you say that if it was like $100 versus $10,000? Have you seen Ozarks? The show?

No. Okay. I'll give you the scene. Millionaire, but no.

I'll give you the scene. So, Drug Lord finds out the main character and his partner are skimming in some way, right? So, Drug Lord shows up. The main character is an accountant.

His partner is also an accountant. They have a legit accounting firm. They also do this drug cartel stuff on the side. The main character doesn't know what's going on because he's not the one skimming.

The drug lord tells a story about when he was growing up, they were in a grocery store. And he says his father called Lupita. Everybody loved Lupita. Lupita was amazing, right?

Yeah. And he caught her pocketing like a $5 bill on her way out the door. And so the drug lord then goes to, you know, the secretary of the, of the account who's the main character and says, what would you do? And, you know, the secretary says, you know, it was just $5, not a huge deal.

And so then he kills her. And then he goes to the next one and says, what would you do? And he's like, well, I mean, Hey, you know, there's, we've got to understand the situation, blah, blah, blah, blah, blah. And so finally he goes to Marty, who's the main character.

And he says, what would you do, Marty? And he says, well, I'd get rid of her. And he says, why? He said, because it's not the first time she stole.

It's the first time you caught her. Gotcha. I would not want a snake in my business. Whether it's $100, $1,000 they stole.

To be fair, that's how I do business. Yeah. It's just like, what kind of signal does that, I mean, it's like, what signal do I send to my team? What signal do I send to myself?

It's just like, there's no reason. Well, I can tell you what happened is I got tremendous pushback on a different person on the gold side. Because this was an inherited business, which is one of the reasons we're selling. And that was kind of the way things were.

Yeah. That was the status quo. That people skimmed? And I can't...

Yeah, it was like, I do this, I make your company this much money, this is the way we do. That's wild. I know. I'm looking at you, I did the same thing.

I did the same, I almost, I couldn't believe it. But we're selling the company, and I don't know how much to push back to how much to be lenient on it. And so that's the scenario that I'm in. I mean, I stand by 100% what I said originally, which is like, I think the game is long and reputation is something, the only thing that you defend with your life.

And like when you do a deal in the future, because hopefully you will, they will call your last acquirer and say, how was it? So I think state the facts, tell the truth, be upfront about it. I don't think it's going to blow the deal up. I think that you get it basically putting things on the right foot the right way.

Like you will feel better about it. There is a short, like this is, I mean, these are real. These are real. You know what I mean?

There's many people who wouldn't do this. This is a judgment call. This is an ethics call, not a business call. But I will tell you 100% that is what we would do.

And it would pain me, to be clear. I'm not saying I would be happy about it. I'd be pissed. I'd be like, why did you have to do this?

Right? Sometimes I'd be like, why did I have to catch you? Why couldn't you have been better at stealing? Right?

But like when you know, you know. Right? The best day to catch someone stealing was 20 years ago. The second best day is today.

I do think that the people who you do business with will respect you for bringing it to them. And again, when I have these hard conversations, I'm going to go longer on this because I think it's going to affect more than one person here, is when I say state the facts and tell the truth, it's stating the whole facts and the whole truth. And that's what actually gets you through these things. It's the half truths and the half facts that get you fucked.

So basically, it's like saying, listen. I had a big, like I'm talking to the buyer, right? Listen, I had a big internal debate about whether that even bring this up, right? Paul, as you guys have met, he's one of the four leaders that we have here.

I caught him pocketing 200 bucks, all right? I, with integrity, I do not want to, I don't want to represent something that isn't. Now, the good news is, you know, it wasn't a huge amount of money. The bad news is I did let him go because it's not something that I stand for.

And so that being said, I don't think it's going to affect the operations. I think there's a potential the profit goes up. You know, when you remove cancer, that's usually a good thing. But I want to be upfront with you guys.

And at least at the very, like at the very least, you will know that this is, I'm the type of person that you're doing business with. And that what I said, the numbers are is what the numbers are. If somebody did that to me, I'd be like, fuck, I love this guy. I wish I could do more business with this guy.

Yeah, I figured there's always going to be skeletons. I know that. I'm a buyer. Yeah.

No, I hear you. It's tricky. No, I mean, it is. It is.

But, like, that's why they're ethical dilemmas. And it's way more a question of what type of business person, what type of reputation you want to have, than it is, like, again, this is a values question. More than a business question. Copy.

Yeah, I already, I saw the... Q&A before was all psych-based, and this was something that happened literally a week ago. And then you already answered my question earlier in the chat. Oh, good.

That's all for me. All right. Rock and roll, man. Appreciate you.

Sorry that this had to happen, but I'll say this. You will always be proud of how you acted in this moment. And the real, real is that the business seems like it's solid. You were able, obviously, to get a buyer.

If this actually does fall through, you'll be able to get another one. And you'll have time to improve the business, get a higher multiple. Hope so. Appreciate it.

Appreciate you, man. Thanks for calling in. All right. Thanks.

All right. Bye-bye. Yo, was that wild? Right?

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