Are You Hitting Your Numbers?

Introduction:

This week, Karen Clark Cole, Jay Goltz, and Sarah Segal discuss whether their businesses are meeting expectations and how that’s affecting their plans for next year. They also talk about how to handle an employee who doesn’t deliver, whether now is a good time to hire, and—in answer to a listener question—how to make the transition from using contractors to hiring employees. And Karen explains why employee utilization—that is, what percentage of her people are actually billing clients—is the most important metric she tracks and one she tracks on an hourly basis. Plus: Notebooks or Notion? All three owners tell us how they try to stay organized.

— Loren Feldman

Guests:

Jay Goltz is CEO of The Goltz Group.

Sarah Segal is CEO of Segal Communications.

Karen Clark Cole is co-founder and CEO of Blink.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Full Episode Transcript:

Loren Feldman:
Welcome, Karen, Sarah, and Jay. Great to have you all here. I want to talk about how you guys organize your lives. How do you survive keeping track of all the things that you need to keep track of, getting done all the things you need to get done? Sarah, let me start with you. What keeps you on track?

Sarah Segal:
That’s a really good question. And I have to say, I haven’t found that magic method to keep me on track. My default is a notebook. My old partner used to do that, and she had this regular notebook that you would use in college. And she’d write everything down, and she put a big strike through every time she accomplished something—and then would keep adding to it. And so I kind of picked up that habit. But then I also put my call notes in that. And then I have this idea that I’m gonna get really organized, and I researched new apps to do it. I have tried every app on the planet to get organized. But again, I have not found a magic cure to my disease.

Loren Feldman:
Why don’t they help you? What doesn’t work for you?

Sarah Segal:
I don’t know. I just think I have this optimism that, someday, I’m going to have a lot of time to sit down and collect all those Post-It Notes and put them in one place, be organized, and then be diligent about it. But my existence doesn’t seem to provide me that opportunity. But also, I don’t know that my brain works in that linear fashion well enough to leverage those tools.

Loren Feldman:
But you’re keeping the to-do list on paper? Why can’t you keep it in an app or a Google Doc?

Sarah Segal:
So ask the follow-up question, Loren. How many notebooks do I have? [Laughter]

Loren Feldman:
How many notebooks do you have, Sarah?

Sarah Segal:
Oh, I have one, two, three, four on my desk right now in front of me.

Loren Feldman:
Do you feel organized?

Sarah Segal:
No! I have this need and this desire. Literally, my porn is Instagram posts of people getting organized. To me, there’s nothing better than a beautifully organized closet or a beautifully organized to-do list. I just don’t know that I am personally capable of doing that by myself. And I am open to solutions for that.

Loren Feldman:
Jay, what app do you use?

Jay Goltz:
It’s called a piece of paper. [Laughter] Yeah, it’s a piece of paper. And as I’m listening to this, I’m thinking to myself: I think what I’ve done is, I’ve made sure I hired competent people, kept them around, and I’ve given away most of the day-to-day stuff to them.

Loren Feldman:
You don’t have a to-do list?

Jay Goltz:
I have a to-do list, but it’s very short. There’s just not a lot of activity. Like if I don’t show up today, nobody’s looking for me. Nobody’s calling me. Nobody’s sending me texts.

Loren Feldman:
We would have been looking for you. How do you make sure you get to your appointments?

Jay Goltz:
I have a Day-Timer. I think there are four of us left. There was actually a year where they didn’t send them out on time. I thought, “I think that they’re gonna go broke.”

Sarah Jordan
Do you special order them?

Jay Goltz:
Yes, absolutely. I special order once a year. And they got bought by a big company, and I appreciate they’re still making them. And they’re easy, and it’s in my pocket. And I’ve got this thing called a pen that’s hooked in there. And I take it, and I write down a little note, and it works just fine. So I have absolutely no desire to go looking for an app or anything. And I frankly don’t have that many—if you open up next week’s appointment, I’ve got like two things written down. I just don’t have that much going on.

I’ve come to the conclusion that—A) this won’t be a surprise to most people—I’m not normal. I recognize that. I am probably ADD. I’m clearly ADD. I don’t think I could have gotten to where I’m at if I didn’t—there’s a great book called The Hypomanic Edge, and it talks about hypomania, where you think you can do anything, and you’re always up. I’m not really down. And I recognize that I do think differently.

And I just gave up on trying to be the most organized. Yeah, I’m just not. But it works. And I’m not torturing myself over it, which is a key part to this. My new phrase is, “Let me not sleep on that.” Because that’s the only thing I can’t control. Like, I do get up in the middle of the night occasionally thinking about something. But other than that I’m pretty at peace.

Loren Feldman:
Do you schedule that in your Day-Timer?

Jay Goltz:
No. And it’s frustrating sometimes, because stuff does wake me up that I’m thinking about. But I will tell you, at six in the morning when I’m half asleep, I actually come up with some great solutions occasionally.

Sarah Segal:
I have that problem too. Like I wake up, you’re just sitting, thinking, and stewing in your own thoughts.

Jay Goltz:
Yeah, it’s helpful sometimes. I wouldn’t mind just just getting a whole night’s sleep without …

Sarah Segal:
Do you write down the things that you think about? Or do you know that you can remember them? Because I worry that I won’t remember them.

Jay Goltz:
Once in a while, I think of something—”Oh, I don’t need to write that down”—and then of course, three hours later, I can’t remember what it was. So I do write it down occasionally. But I’m organized enough. On my desk every day, there’s a pad of paper, and I have a list of stuff to do. And I’m working on the list. I have zero desire to go get an app. I can tell you that.

Loren Feldman:
We sense that. Karen, how about you? Do you feel organized?

Karen Clark Cole:
It kind of depends. Sometimes I do. Sometimes I don’t. I’m different than Jay. I don’t have ADD, I have OCD. My closet is incredible. I mean, the whole company is built on organization, though. So like my sock drawer is organized. My forks are organized. Everything’s really organized, and if it’s not, then it’s problematic for me. It makes me crazy. But that’s the physical space. But I’ll tell you, over the years, it’s like the flavor of the week of what I do to organize my work.

I love paper. Because it’s fast, it’s easy, and I also have an art background. So I like to use different colored felt pens, and the pen I use is very important for the notes I’m taking. And if it’s this kind of note, I use this color. If it’s that kind of note, I can introduce that color. I have very specific paper that I’ve tried over the years, a million different kinds of paper. And it has to be beautiful, because of the sort of art side of me, and it’s five by seven. It’s got dots on it. And the pages pull out. And so they’re not meant to stay in there, which is really important. Because once I’m done with that note, it goes bye-bye, and I don’t want to wreck the book. So the book stays beautiful. Pages get ripped out. And as it goes down to the bottom, I have 10 others in different colors that I choose, and I use next.

Now what I do—and this is a new system that I’m using, which is working so far—is I have a big iPad, and I use OneNote with a pen, and I can draw digitally on my iPad and take notes that way. Then I can carry it around with me, because what I found is I’m walking around with these stacks of papers of all my little notes. And each little note is some sort of action item. So there’s always something, some new initiative that I’m working on. And I’ve got notes that came out of this last meeting that now I’ve got to turn that into action. And so there’s all kinds of stuff, and I’ve gotta get this person going, that person going, and make it all happen.

And so I’m walking around with these little bits of paper, and I’ve got them all over my desk, which is great—until I have to move and go somewhere else and work. And it was becoming really problematic, because sometimes I’m at home. Sometimes I’m in the office. Sometimes in my car, all over the place. And so this iPad, with the notes on it, was super helpful.

Jay Goltz:
I’m exhausted just listening to this. I think I need to take a break now.

Karen Clark Cole:
I know. My life is exhausting, Jay. There’s never a dull moment, I can tell you that. And the whole thing translates to my personal life. Like, I have a separate piece of paper with a different colored pen for like, “Call the vet,” “Call the furnace guy,” all that kind of stuff.

Sarah Segal:
This is a serious question, Jay and Karen: Are you good at taking notes? Because I learned early on that I’m an auditory learner. And so if I take notes, I’m not hearing what the people are saying.

Karen Clark Cole:
Oh, I’m the opposite. Actually, I have to have a pen in my hand, or I kind of can’t hear you. It’s interesting that you say that, because I think everyone is very different. If I were to look at those notes typed out, I don’t remember the conversation hardly at all. I have to really think about it. And so that’s why putting it into this app where I can draw—because with a pen, that lets me do that same kind of thing where I can sort of doodle around to sort of remind me what I was thinking about.

Sarah Segal:
I can’t do that. If I’m writing, I’m not hearing and listening to what they’re saying. So when we have client calls, or potential client calls, one of my members of my team takes notes, or I’ll use something like Otter, which will just record and transcribe the conversation, so I can look at it later. But I can’t write and listen at the same time.

Jay Goltz:
I can’t think of a time… I don’t take a whole lot of notes, because I’m listening. And I’m trying to find the insight into what they’re saying. That’s what I live to do: figure stuff out. And so I’m processing it. I can’t think of a time where I’m taking a whole lot of notes.

Karen Clark Cole:
Unlike you, Jay, if I don’t write down that idea first thing in the morning, it’s gone instantly. Like, I have a notepad in my bathroom for when I get out of the shower to write stuff down. And it would be better if I had it in the shower.

Sarah Segal:
That’s awesome. [Laughter]

Karen Clark Cole:
Yeah, and that’s when big ideas happen. I’m not writing notes verbatim at all. I’m writing down action items, like, “This is the thing. This is the next step. This is who has to do what, who I’ve got to call to make sure that this other thing happens.” It’s just a series of to-do’s, essentially, that are coming out of a meeting, which is what you’re doing, Jay, but I can’t remember anything. So I literally have to—if I don’t write down, “Go downstairs and get my other shoes,” I’ll be like, “What am I supposed to be doing?” Really, I have no idea. [Laughter]

Jay Goltz:
So let me ask you this, Karen. Do you think, if I said, “What percentage of you is entrepreneur, and what percentage of you is manager?” do you have a feel for that? Do you think you’re fifty-fifty?

Karen Clark Cole:
Well, I don’t—the word manager to me means, it’s totally, that’s like—

Jay Goltz:
Running stuff.

Karen Clark Cole:
Telling people what to do. For me, managing is more the operations side. I’m an ops person for sure. My sort of initial role in the company was ops, making sure that everything’s organized. We have the right system for everything. We have process. We have systems. I’m super into processing systems,

Sarah Segal:
I’m super into that. I just can’t do it. One of my first hires is now our operations manager. And I think that I drive her nuts on many levels, because she’s always trying to find process and systems. I’m a big fan of not having to reinvent the wheel. If you do it once, and you have to do it again, you shouldn’t be starting from scratch. But I think I’m more optimistic in my ability to make that happen than my bandwidth allows.

Jay Goltz:
Okay, this just illustrates that people are very different and manage to get the job done, but they come at it from very different mindsets. My answer: I’m 80 percent entrepreneur and 20 percent manager. Maybe call it operations, that’s fine, because I just get bored with it.

Karen Clark Cole:
Why do you have to be one or the other? In order to be a good entrepreneur, you have to have some operations.

Jay Goltz:
There’s no question. I’m just saying that some people are, quote-unquote, running their business all day long. They’re on the phone, they’re dealing with customers, and there are other people who have set up the thing and have very little to do with day-to-day operations. So there is a difference in entrepreneurs, as to the mentality.

Sarah Segal:
Or you have somebody on your team who’s really good at that day-to-day. And it sounds like, Jay, that you’ve outsourced a lot of that day-to-day in a very effective manner.

Jay Goltz:
And it took me many, many years. Trust me. Many, many years. Like, 25 years. I mean, it wasn’t like I did it overnight.

Sarah Segal:
Well, yeah, and you have to trust those people are going to accomplish the things that you want. Yeah, I can imagine it taking a while to do that.

Karen Clark Cole:
So I have an entire company that I’ve outsourced what I used to do—same as you, Jay. If I didn’t show up to work, everything would go just fine. And people would probably be pretty happy because I wouldn’t be driving them nuts.

Loren Feldman:
You tried that a couple years ago.

Karen Clark Cole:
Yeah, it was great. They were really excited. Because we’re growing and we’re evolving and we’re changing constantly. I’m constantly looking for: What’s next? How can we be better? How do we need to grow and shape? And then getting it going… Like, I am the entrepreneur, in that sense of, I’m sort of making stuff up all day long. If it sticks, then I go and create the team around who’s going to execute and implement that thing. And then I’m out of there.

Jay Goltz:
Well, there’s a difference between our mentalities. I just want to grow it. I’m not pushing it that hard anymore. You’re still in the go stage of growing it, which, more power to you. And you’re also younger than I am, so that makes sense. I’m at the stage of just, “Hey, if I can grow it,”—I don’t know—“6, 7 percent a year, I’m good.” I don’t really have any desire to push it to grow any faster than that, because I know that it’s gonna take a lot more energy and money, and I don’t really care.

Sarah Segal:
I’m totally opposite from both of you. I think I’m in the baby phase, compared to both of you, where I’m still—well, our company and our parent company live by the rule that we all do windows, we all do floors. Overall, my job is kind of high-level, but I have no problem rolling up my sleeves and doing what needs to be done.

We have a client we love, and they did a wine-and-donut tasting menu with a local winery. And nobody on my team can do these deliveries. The client is a beloved legacy client of ours that doesn’t have the budget to pay messenger services. So I’m literally driving a case of wine and a box of donuts to two locations in San Francisco today and dropping them off. And I don’t mind doing it, because I have calls during that time that I could just do in the car. But yeah, I’m 20 percent in the weeds still, for sure.

Jay Goltz:
From your partners there, what is your directive? Are you supposed to grow that company as fast as you can, or not? Or do they want you to grow it some? I mean, is there a clearcut mission as to: Do they want you to double the company in the next three years?

Sarah Segal:
No, there’s no pressure like that. But I put pressure on myself.

Karen Clark Cole:
But you don’t have a mandate of a certain amount of growth that you have to perform? That’s crazy.

Jay Goltz:
Or if not “have,” how about “want”? If you grew it 10 percent next year, would they be happy with that?

Sarah Segal:
Yeah, I mean, they would be happy with that. I keep them in the loop of everything. And they know what they bought when they bought it. And we’re growing in a slow and thoughtful way. But I put enough pressure on myself. I had somebody ask me, “Well, what’s your five-year plan? Where do you see yourself?” And that question, I have a lot of trouble with that question. I can’t do that question. Because I don’t know.

Jay Goltz:
I’ve got no problem with a three-year plan, because it’s tangible. Five years, it’s like, who knows what’s going to happen?

Karen Clark Cole:
Wait, three years is crazy. How about six months? Maybe a year?

Loren Feldman:
Let’s take a quick break to hear from our sponsor, which happens to be a sponsor that can help people who need help getting organized.

[Message from our sponsor, Work Better Now]

And we’re back. Sarah, did you have numbers that you had wanted to hit this year? And are you hitting them?

Sarah Segal:
Yes, I had numbers I wanted to hit, and no, I’m not hitting them. I’ve told this to a number of people. This was a learning year for me, as a business owner. I invested in hiring some senior people who didn’t deliver. I also realized that I need to have lengthier contracts, just for that consistency.

Loren Feldman:
Sarah, were those senior people that you were expecting to bring in new business?

Sarah Segal:
No, not so much that, but let me take my hands off the wheel, so I could focus on that. I think I was impacted by what’s referred to now as a “slow quitting” situation. We paid out severance and let the person go in an amiable way, but it set me back. I’m literally, this year, because I made a mistake or two, my growth is level this year.

Jay Goltz:
The person who you hired—because I’ve been through this—when you say “senior person,” give us a handle on that. Are they 20 years older than you? How senior are they? Are they in their 50s? They’ve been doing this for 30 years?

Sarah Segal:
No. PR is a young person’s game. So this is somebody who’s in their early 30s.

Jay Goltz:
Wow.

Sarah Segal:
They had a lot of great credentials, but it just wasn’t a match, and they didn’t deliver. And I gave probably too many opportunities to, “Okay, well, let’s see if we can fix this.” Because I believe in people, and I’m always glass-half-full about things. And I should have just went with my gut early on and said, “No, this is not gonna work.”

Jay Goltz:
And if it makes you feel better, you and everyone else I’ve ever talked to in business would say the exact—I’ve never met anybody who wouldn’t say the exact same thing you just said.

Sarah Segal:
I learned my lesson that you’ve got to listen to your gut. And I listened to somebody else—not somebody else, but I kind of listened to the cohesive feedback.

Loren Feldman:
What was your gut telling you that you didn’t listen to?

Sarah Segal:
Even when I was interviewing this person, I was like, “I don’t know. I just don’t know if this is gonna be the right person.” But the other members of the team who interviewed this person, they were like, “This person’s great. Definitely, we love this person. This person is gonna be a great fit.” And so I second-guessed myself, and I said, “You know what? Let’s do this.” And I kick myself for that. But I can’t kick myself too long.

Jay Goltz:
So was there something in the interview that you look back in hindsight—I always do an autopsy, and frequently, I find out, “Yeah, I should have known better. They did say that, and I blew it off. And I should have paid more attention,”—was there something they said in the interview that made you think to yourself, “Yeah, I should have heard that better”?

Sarah Segal:
No, it was just a lack of linear thinking. So we just did a media training for a large organization yesterday. And you sit down, and you media train these people. You teach them to think and put together sound bites that have a start, middle, and end, right? And if a person can do that, that is golden. That’s great for media. That’s great for sound bites. That’s great for press. That’s great for everybody. To me, it says: They know what they want to say. And they’re going to say it.

And so if I’m talking to somebody, and they start here, and then they deviate and go off there, and then they go here, I know, “Oh my God, they’re not going to be good for client relations.” I’m looking for people, Jay, who aren’t me, because I’m not necessarily a linear thinker with everything I do. And so I need people that are going to be like Karen or yourself and have those lists and be able to go, “I’m gonna prioritize this, this, this, and this and check these down.” And my gut was like, “I don’t know that this person can do it. But they have all this great, interesting experience and a fascinating background. Maybe I’m wrong?”

Jay Goltz:
Well, that’s part of the learning curve of figuring out how to hire, because I certainly have hired plenty of the wrong people. But I did learn from, “Okay, in the future, you need…” I call what you just said being deliberate. You figure out: What do I want to get from this? And what do I need to say to do that? Versus just wandering. Did this person come from a bigger firm?

Sarah Segal:
Yeah, not a bigger firm, but a firm, yeah. I didn’t hit my targeted goals that I had set for myself at the beginning of the year, but we got some really great new clients that I’m super excited about. And we honed our skills, in terms of making the most of what we have. I have this wonderful team of people that I’ve hired, who understand that, like, this year, we’re gonna chalk it up as kind of, “All right, we’re gonna learn things along the way.” And then 2023 is gonna be that growth year that we were thinking about.

Loren Feldman:
Karen, are you going to hit your numbers this year?

Karen Clark Cole:
Some of them. We have lots of targets. In terms of revenue growth, 20 percent is our standard target. At the beginning of the year, after the first quarter, we were up more like 35 percent growth. And so we adjusted a lot of our targets, thinking that that was going to keep up at least some sort of higher pace, but then it didn’t. Q2 was not good, and Q3 was sort of half not good. But we’re still going to meet the 20 percent, which is important for our parent company.

Jay Goltz:
That’s tremendous growth. Twenty percent is tremendous growth.

Karen Clark Cole:
Yeah, it is. But when it seemed like we were going to do 35, it’s kind of a drag. There are a lot of targets. So we’re looking at revenue, we have sales targets, and the problem is it all starts with the sales, and so the sales dropped off.

Loren Feldman:
And was that just related to the economy as a whole? Or is there something else going on?

Karen Clark Cole:
It’s possible, or the worry of the economy, yeah. And then we’re seeing right now, we’ve had some big clients just pausing on opening P.O.s, and just sort of pausing to check in at the end of Q3 what’s happening. And then they’re going to go, we think they’re gonna go gangbusters in Q4 for us, which is this one coming up.

Sarah Segal:
Are any of these VC-funded?

Karen Clark Cole:
No. No, these are big tech companies.

Sarah Segal:
Yeah, we’ve gotten a couple of reductions from VC-funded companies, because the VC money has dried up.

Karen Clark Cole:
Yeah, so for us, there are all kinds of targets we have to watch. So I have to watch the sales number, which leads into the revenue number, which leads into our EBITA. Our net profit and our gross margin are numbers that we watch very carefully. And then also, percentage of just different kinds of work that we’re doing. I have to watch that really carefully. So it’s sort of like a constant, every day, always looking at these numbers.

Jay Goltz:
This is the time of year, looking forward, that I always say, “Optimism is the gift for the entrepreneur and also the occupational hazard.” It’s both. And I’m optimistic, but then sometimes I am too optimistic. And the economy’s kind of weird…

Loren Feldman:
Are you hitting your numbers this year?

Jay Goltz:
No, part of it is all relative to the year before. The year before, everybody was out there spending money fixing up their house, so it’s all relative. But no, I’m not hitting the numbers. I’m adjusting next year’s numbers. And I’ve been through this 20 times. It’s just like, I don’t want to be overly optimistic, that’s for sure. So I’m bringing the numbers down, looking at the expenses to match, and you think about the hiring thing. And in my case, my biggest expense, by far, is labor, so I just have to make sure I try to match the right amount of people.

But I will tell you as a customer: Oh my God, the companies I’m dealing with are so messed up. I’m seeing lots of companies that are understaffed, and they think it’s okay. And I don’t think it’s okay. They’re losing business. And I don’t want to be one of those companies. So I’m still trying to—not trying—I’m still maintaining our customer-service levels, because in the long run, you can do a lot of damage to yourself by cutting back too much.

Loren Feldman:
Jay, how do you think about it when you see your numbers off? How much do you attribute that to the economy, and how much do you think you need to adjust your marketing?

Jay Goltz:
My marketing is next to nothing, in that I’ve got a website, and I’ve got my locations, but I spend very little in advertising. So I definitely am not blaming any of it on marketing.

Loren Feldman:
You have spent a good bit of money on advertising in the past.

Jay Goltz:
Over the years. But I’m not anymore, because the stuff I used to do just simply doesn’t work anymore. It used to be, you could go on the radio and expect a decent return. That’s over.

Loren Feldman:
You’re not doing direct mail or ads or print or anything?

Jay Goltz:
I am gonna do another direct mail, but it’s not substantial.

Loren Feldman:
But you haven’t been?

Jay Goltz:
No, but that never was a major driver of the business to begin with. The major driver to my business always was, and will continue to be, repeat business. I’m selling a lot of discretionary income stuff. Nobody needs to frame a picture today. They can wait till next month or the month after. And, frankly, when you talk to people, frequently, they say, “Oh, I’ve got something I’ve been meaning to frame,” and they’ve been meaning to frame it for five years.

Karen Clark Cole:
I have a big stack. I think you should start doing pickup service where you can come to my house and do it and take it away. [Laughter]

Jay Goltz:
I’m going to get in the car as soon as we’re done and drive over there and get your stuff, because we need to get it on the wall.

Karen Clark Cole:
Seriously, like that would really help me out. That’s my barrier: I’ve gotta get it in the car. I’ve gotta take it down there. If you came here, it would be amazing.

Jay Goltz:
The problem is, the stock market’s way off, and people are probably concerned about, “Oh, I should stop.” They’re probably concerned about spending some money. It doesn’t take a lot to throw things off.

Loren Feldman:
Well, the housing market is collapsing.

Jay Goltz:
It certainly doesn’t help.

Sarah Segal:
I have a stack of things that need to be framed, because it’s in one of my notebooks on my to-do list.

Jay Goltz:
All right, I’m going to dispatch someone to go to both of your houses. So the question is: Is there some blocking and tackling that you could be doing, Sarah, to go get some more business? Like, here’s my question for you: How come I’ve been in business for 43 years, and I can’t ever remember reading a story about a PR firm, a small PR firm, that was looking to do—I’ve never seen an article that I can remember.

Sarah Segal:
Well, actually, new business is hitting us hard, fast, and furious right now. It’s like all of a sudden, people open up their wallets. I literally signed three contracts in the last week. So I don’t want to hire anybody full-time until next year. My goal is to go into next year with a beautifully healthy P&L. For PR agencies, if your monthly profitability is a minimum 20 percent, ideally 40 percent, you’re in the gold standard.

So I don’t necessarily want to add additional headcount before the new year, because I want to go into the new year with: We have this wonderful profitability. We have clients that have signed on for six to nine months. We’re in a really good place. Because last year, we had a number of contracts that expired at the end of the year. So I went into January with: I’m in the red right now, because those contracts ended. And January is the death for new business, because people haven’t figured out their marketing budgets for the year. January is just like a wasteland.

Karen Clark Cole:
Sarah, if you’re hiring, why do you need to hire at all, if everything’s going well?

Sarah Segal:
We have too much work. As I said, my time dealing with new business is, I will easily be up until 10 o’clock, 11 o’clock at night, every day, just catching up on things, because I’m trying to juggle new business. But also, we need to hire an additional person for our consumer team.

Loren Feldman:
So isn’t it more important to hire that person and get the work done than to make sure your P&L looks the way you want it to look?

Karen Clark Cole:
Exactly. And turn it into revenue.

Sarah Segal:
Yes, I hear what you’re saying. But hiring somebody and then having them not work for half a month in December is like: Why?

Karen Clark Cole:
Because then you hit the ground running in January.

Sarah Segal:
That’s true.

Jay Goltz:
And you can service clients in November. If they just signed on, are they going to wait until January? You’re going to hire someone, bring them on, and then what? In February, they start to get the work done?

Karen Clark Cole:
And if you’re paying every two weeks, then that’s not that much money in a salary.

Sarah Segal:
We have found a couple of contractors, one of which has been a contract with us forever. And she won’t let me hire her because she’s an independent contractor. So we’re able to fully service all of our current clients. I just don’t want to make that commitment until I know in the new year that we’re in a really good place. I have one client, a big client, whose contract ends February 9th. And so if they go, then that is gonna cause me stress in the new year. And so I’m kind of just trying to prepare myself in the best way for the end. And using contractors is fine, because it’s really hard to find people to hire.

Loren Feldman:
It just so happens we’re almost out of time, and I have a listener question that addresses exactly that point. Let me read this to you. This question comes from Nile Livingston, who owns a design business in Philadelphia called Creative Repute. Her question is this:

“Many of the people I work with are contractors because the work we take on is so inconsistent. Plus, contractors allow us to maintain a deep bench of specialists to call on. However, I will be taking steps to convert long-time contractors that consistently work with us each week into employees soon. I’ve learned that offering flat rates for each project is fair, unless it’s a minimal task. Otherwise, I risk having contractors milk the clock. Plus, flat rates help us budget better. Salary will be a new endeavor for me. I’m excited to learn some lessons about managing that. I don’t want to pay for people to sit around for long periods, but I need to retain talent. That’s my question.”

Thoughts, anybody?

Karen Clark Cole:
That’s like a four-part question.

Loren Feldman:
Yes, it is. Which part would you like to address, Karen?

Karen Clark Cole:
Well, I mean, I think the first two points are true, which is you get specialists, and you just pay for them when you need them. There are laws now that make it so you can’t just use contractors over and over and over and have your whole business using contractors and avoid any kind of taxes. It’s to get out of paying employment taxes.

So in California and Washington, you can only use contractors on a temporary and very specialized basis. And you have to prove that they’re not there instead of having them as a full-time employee. So you have to be really careful about that. So that’s the difference between a 1099 and a W-2. But yeah, managing bench time and utilization—utilization is the number one thing that I look at every day. It’s the most important thing. It is the single most important thing that impacts our profitability.

Loren Feldman:
What is utilization? Is there an equation that you’re referring to?

Karen Clark Cole:
Yeah, people working on projects, so people billing. We’re consultants, so we bill our employees’ time to the clients, essentially. And we mostly do flat fee projects as well, because they’re nice to manage.

Loren Feldman:
So you keep track of what percentage of your people are billing on a daily basis?

Karen Clark Cole:
Oh, yeah. I know every hour.

Sarah Segal:
What do you use to track their hours? I’m curious.

Karen Clark Cole:
A time-tracking system. We’ve used a bunch of different ones over the years. They’re just basic time tracking. But everyone has to enter their time.

Loren Feldman:
The way a law firm has lawyers keep track of their time.

Karen Clark Cole:
It’s exactly the same, yeah. So they have to show what project they’re billing to, and they have to record their time. And it may just be 40 hours billing to this one project, and it’s super simple. It doesn’t have to be complicated. But we don’t get to track revenue until those hours have been entered into our time-tracking system. So until their hours are entered, it’s considered a sale. So let’s say we have a $100,000 project. That’s $100,000 in a sales number, and it doesn’t convert to revenue until those people have entered those hours into the time-tracking system. Because the revenue is work done.

And we are measured mostly on revenue—that’s the most important number for us. So because you can have all these big sales, and we can’t complete the work because we don’t have people or something went wrong, then it’s no good until we’ve actually done the work. So it’s the number one thing that we have had to manage and deal with and create all kinds of systems and checks and balances around utilization so that we know that we don’t have people sitting on the bench, is what we call it, which is the single most expensive thing for us. And we have a whole team that manages putting people on projects to make sure that we don’t have anybody who’s not being utilized.

Sarah Segal:
Do you have different levels of: This person has to be 80-percent billable. This person has to be…

Karen Clark Cole:
Yeah, we do. Higher up in management, more senior managers, have less billable time.

Jay Goltz:
Can you clarify: Those rules for 1099 have been around. It’s an IRS thing. Is there extra stuff in California, more than that?

Karen Clark Cole:
Yeah, California and Washington have new rules, and maybe Oregon as well. We had a bunch of people who we used on contract. And they came around after Uber and Lyft, having all these temporary gig workers and not paying any benefits. Meanwhile, they were working full-time for those companies. And so that’s when they really cracked down. And so we had to convert a big, huge portion of our 1099 people into part-time W2, so that we were paying employment taxes. They get benefits. That kind of thing.

Jay Goltz:
I think one of the critical questions is, if you are their only client, that’s a problem. I think that’s one of the red flags.

Karen Clark Cole:
Yep, for sure. And they have to be set up with their own business. They have to have a business license, all that kind of stuff.

Loren Feldman:
Karen, would you have advice for Sarah, or for the listener who raised this question, about how a smaller business can try to make sure that they’re not paying people to sit around?

Karen Clark Cole:
Yeah, I mean, you just have to watch it really carefully. You have to be careful about who you hire. We’ve always hired behind the curve. So we’ve got work coming. You have to be really watching. When’s the work going to land? What kind of work is it? Who would I need to do that work? And then we have a pool of contractors who we use to ebb and flow for this kind of stuff. And we have to keep track of when they’re available, right? Because the problem with contractors is they have their own life, and they’re off doing something else. And when you need them, they’re not available.

We have a person who manages the contractor pool. They know who’s available when, what their skill-set is, what kind of work we can use them for. But then with our employees, how we manage growth is, if we have too much work for our people, we use contractors until we know that that’s the new normal. And as soon as we can see that, “Okay, we’ve been using a percentage of contractors”—like 20 percent is a good number for us. If it’s higher than that consistently over several months, then we start looking at, “Okay, we have a new normal. We need to hire now.” So some of the contractors, we may want to convert. Others, we just have to hire new people to fill that bandwidth. And so it’s a constant, constant eye on the ball. It just never ends. It’s always been like this, for 22 years. Nothing has changed in this area.

Jay Goltz:
I only have one contractor at the moment, and it’s worked out very well. She does marketing for me. But generally speaking, that question from the listener, she doesn’t want people doing nothing. If you have a lot of employees, there are going to be times where there are just not a lot—I mean, there are ebbs and flows. And trust me, when I walk through my framing showroom, and there are three people sitting there buying shoes on Zappos, I don’t feel great. But I recognize: All right, I figured out what the costs of sales are. It fits into it. There are ebbs and flows of business. And if you have employees, which you have to have at some point, there are going to be some times where they’re not that busy. It goes with the territory.

I think, to Karen’s point, yeah, if you’re using a lot of contractors, at some point, I would think it’d be more cost-effective to have them as employees, because I would think you get more bang for the dollar.

Karen Clark Cole:
Actually, for us, Jay, it’s more profitable to use contractors. But then you have the downside, which is you can’t keep them, and then your IP goes out the door. So we do a lot of training. We want our knowledge to stay in-house, and with contractors, it comes and goes.

Jay Goltz:
Right. I have a hard time imagining a company that’s built on all contractors. I guess they probably exist.

Loren Feldman:
Sarah, is this debate between contractors and employees relevant to you? Is that something you’ve wrestled with?

Sarah Segal:
Yeah, it’s ongoing. I love contractors. I think they’re fantastic. I think that there are some people who are—a lot of people, actually, post-COVID—have found really good, stable sources of revenue being a contractor. And they don’t want to work for a company. So some of those contractors are like the best members of your team. They don’t want to be hired by you.

Loren Feldman:
That’s a great point. All right. My thanks to Karen Clark Cole, Jay Goltz, and Sarah Segal—and to our sponsor, Work Better Now. We’ll see you all next week.