How’s Your Compensation Plan Holding Up?

Introduction:

This week, Shawn Busse, Liz Picarazzi, and William Vanderbloemen discuss what it’s been like trying to make sense of employee compensation in a time of COVID, the Great Resignation, inflation, and a looming recession. Shawn’s business model is evolving, and he’s trying to adjust his mix of employees to fit the new model with as little disruption as possible. Liz is expecting a year of big growth and is assessing how that will affect her staffing needs—especially as she introduces new benefits, including health care. And William is trying to create a more sustainable compensation structure while also breaking his employees’ expectation that they will always get a year-end bonus. Plus a listener asks: What tasks are the owners still doing, even though they know it’s not worthy of their time? (Aside from participating in this podcast, of course.)

— Loren Feldman

Guests:

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

Shawn Busse is CEO of Kinesis.

Liz Picarazzi is CEO of Citibin.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Full Episode Transcript:

Loren Feldman:
Welcome Shawn, Liz, and William. It’s great to have you here for the first podcast episode we’re recording here in 2023. I hope you’re all having a great year so far. I wanted to start with a conversation about employee compensation. The latest figures show that companies are paying the biggest raises they’ve paid in decades—I gather, trying to keep employees. I suspect that those numbers reflect larger businesses, by and large, but I’m wondering if it’s affecting you guys as well. William, this is your field, what are you seeing?

William Vanderbloemen:
Well, I can tell you what we’re doing in our office, and it’s based on what we’re seeing. You know, in the pandemic, we had to reorg and reshuffle, and we—for the first time—had to do staff cuts back in March of 2020. And we lost some really good people. It wasn’t like we had fluff. But the people who stayed with us through that, we are very interested in keeping around. And retention is such a big deal right now that I authorized a percentage bonus pool. And then our managers go and figure out how they want to divvy that out. And I authorized the biggest pool, percentage-wise, that I’ve ever authorized.

Loren Feldman:
Was that based on your company’s financial performance in 2022? Or was that based on the goal of retaining employees?

William Vanderbloemen:
It was our best year ever, way better than we thought. So it was a little easier to take that step. But cost of living, I guess, is starting to come down some. But we kind of figured, just to make people whole, we’d better do 8 or 9 percent. And then we did a little better than that.

Loren Feldman:
Was it just bonuses? Or did you offer significant raises as well?

William Vanderbloemen:
No, that’s all raises. Bonus is a separate issue.

Loren Feldman:
I see.

William Vanderbloemen:
Not everybody got that number. I mean, we offered that number to our managers and said, “You might have some who deserve 11 and some only eight, or whatever. You figure that out, that’s fine.” But what we’re authorizing as a company is a significant pool of money to raise annual salaries, which is, as you know, an evergreen cost. But we think that the inflation issue is real, and the people we have with us now are some of the best people we’ve ever had. So we’re kind of paying it forward in retention.

And that’s based on what we’re seeing in other areas, that a lot of people really cut down to the bone during the pandemic. The people that are left are really pretty critical to the business. And painful as it is to raise evergreen costs, we’re just going to do it to try and show people we understand that it costs more to live than it used to, and we want you around for a long time.

Loren Feldman:
Had you had much turnover?

William Vanderbloemen:
We did about 7 or 8 percent the year before. The losses we had were not because of finance. We made some pretty significant shifts in the last 12 months, and some people didn’t feel like that was their best place to flourish, and they moved on. And that’s fine, we wish them well. I don’t think we had any really nasty departures. It was just, chemistry is seasonal, right? And as we move from one posture to another, there are some who enjoy it, and some who say, “That’s not my deal.” And we wish them well and move on. But I don’t think we lost people because we were not keeping up with the cost of living.

Loren Feldman:
Shawn, from what you’ve told us, I gather last year was not your best year ever. Tell us how you’ve been approaching employee compensation.

Shawn Busse:
Yeah, so before the pandemic, I went really hard at the idea of compensation and making it better, because I started thinking about the thing that employees and owners both dread, which are those negotiations. And it struck me as very odd that you go through all the effort to hire a really great candidate. You get this high of, “Oh my gosh, this new person, they’re so good.” And then right before they join your team, typically, you engage in this almost adversarial issue of figuring out what they get paid. And there are so many problems with that idea from a cultural perspective, but also from an equity perspective and creating gender and race wage gaps.

And so what we did is we committed to every two years doing a market-based survey of what the positions in our company pay. And then we committed to paying 75 percent of market, which is not the very top, but also pretty significant. And then on top of that, we built a bit of a formula to factor based on experience, tenure in the organization, and what the rate of pay would be for an employee. So that system was really great. We do open-book management at the company, so there’s a real kind of clear understanding of financials, and that there isn’t this giant bucket of money to raise wages.

Loren Feldman:
Are you transparent about salaries as well, Shawn?

Shawn Busse:
We are, but in a very specific way, meaning that every position that you want to go after, we’ll share that range and how that formula works. We don’t post everybody’s compensation on the wall. I think that that’s problematic in lots of ways. But if somebody says, “Hey, I’m a designer, and I want to go into the strategy department. What would that look like?” we’ll talk about the compensation range and how that formula works. And then we also post it with every job description, which is now required legally, in our state anyway. So that program has helped us from a compliance perspective a lot, and also, I think, protects us a lot from a lawsuit and that kind of issue.

So, I love, love, love, love, love, love it. It’s been great. The problem that I’m finding now is, it’s time for our annual survey. We did the survey, and holy cow, the wages have gone up so much. Like I said, pre-pandemic, we were at 75 percent. Every position has gone up by anywhere from 1 percent on the small side to probably 14 percent. And then my position—which is crazy—the CEO role has gone up by 20 percent, which is just astronomical. So now I’m looking at that going, “I don’t need a 20-percent raise, but these other people really do need raises.”

And so it’s really creating some challenges to our model, partly because we weren’t hurt instantly by the pandemic. But we were really hurt from a marketing perspective over the long-term of the pandemic, and we’re just now starting to kind of recover from that. But everybody who knows marketing knows that the thing you do today will probably have an impact six months or 12 months from today. So that’s our hurdle right now, is that our financial situation is kind of eh, okay. And how do I stick to my commitments in terms of compensation with a much smaller pie than I’ve historically had? So that’s my challenge right now.

Loren Feldman:
Have you started having these conversations with employees?

Shawn Busse:
We’ve had it at a leadership level. And these are the hard decisions that, as leaders, you have to make, and I think William alluded to this a bit. The added complexity of our business has changed dramatically, especially the last five years, but definitely over the pandemic. We’ve shifted from being the shop you go to if you really need branding—if you need great brand work, we’ve got lots of design support. We can help you in that—to a lot more consulting and a lot more of a strategic play. And so we’re mis-balanced as an organization. We have too many design resources, too many people who are in that realm, and then not enough who are in the strategy realm.

Interestingly, the strategy realm is the place where the greatest compensation changes have happened. And the design realm is where it’s flattened. I have known that trend has been going on for a long time as design and content creation and lots of those services have been commoditized. So it’s a tough situation for our leadership group, because we love our team. Everybody here is a great employee. We don’t have any deadweight, and yet our ratio of employees is kind of wrong. And I would love to grow my way out of that problem, and that’s what we’re trying to do. But I don’t know if we can grow fast enough to resolve that. That’s the tension.

Loren Feldman:
Where do you get the data you use when you assess the market salary levels?

Shawn Busse:
Great question. So we partnered with an agency here in Portland. There are many of them that have access to pretty significant databases. I’m guessing William’s firm has that kind of information. Most staffing and recruiting firms have access to that. They’re an outsourced human resources company, and so we partner with them.

And basically, what we did is we crafted job descriptions for every role in the company. And then some of those positions weren’t easily off-the-shelf. So you might have a job like a strategist, which is kind of a vague term. And so what we had to do is we had to combine off-the-shelf job descriptions—like a marketing director and a business consultant—and kind of create a hybrid role so that the analysts who, when they’re analyzing the market, could say, “Well, if you’re 60 percent marketing director, and you’re 40 percent business consultant, then we’re going to take 40 percent of that wage rate and 60 percent of that wage rate, and combine them and get to what the Kinesis number is.”

The more specialized the job, the more you have to create kind of a bespoke answer to that question. I feel really good about that, in that it feels fair. The challenge when you have job titles and roles that are not readily identifiable, I’ve also learned, is that it makes recruiting hard. And William can probably speak to that too. Because you have these terms that people aren’t searching for. So there’s a lot of challenges there. I think we’ve solved it from the compensation perspective, but yeah, that’s kind of a Pandora’s box as you start to open that up.

Loren Feldman:
Liz, what’s going on with you?

Liz Picarazzi:
We’re still a very small company. We’re just eight employees, and so we have an evolving compensation strategy. We’re kind of adding additional components each year. So last year, we added profit sharing, which then will continue into this year, and we do have a lot more profit. So they’re kind of getting a bonus. It’s going to feel like a bigger benefit than it would have been in the previous year.

With salaries, we do reviews over the summer, and I do remember a couple of raises that I gave that were pegged to kind of the market rate. But they were looking at the inflation rate. And it seemed that there was an expectation that the raise was going to correspond directly with the inflation rate, which of course I couldn’t do. And I did prepare for that conversation, knowing that it could come up. It was maybe a Forbes article in your Morning Report. And it was exactly on that: Do not make raises directly based on the inflation rate, because that’s a temporary figure that’s always going to change.

But in terms of next year—not this year—we’re going to be adding health insurance. We don’t have that right now. And I guess one thing also looking into this year, as we grow, I am going to be promoting a couple of people who have been with us for a while, which then will be managing new people who we’re going to hire. But I’m also going to be hiring some people above my existing employees, and I’m a little bit worried about that. And that’s where looking into the compensation needs to be done really thoroughly, because existing employees are going to look very closely at what the new employees are making. I know it’s a common issue in compensation, but it’s not one that I’ve ever had to face before.

Loren Feldman:
Are you transparent about what you pay people, or are you just assuming that people will find out what others are making?

Liz Picarazzi:
It’s kind of like I assume it. We’re very open, but I don’t have a chart or anything on the wall. I would say it’s evolving, and so far, so good. But it needs to be formalized. If not this year, then next year.

Shawn Busse:
Do you basically assume your employees talk about compensation?

Liz Picarazzi:
Yes, I do. And the other thing is that a lot of the employees are friends and relatives, even. So it’s just like a natural thing. They’re not strangers. There’s that familiarity. And then also, the person who does payroll, I’m sure that she’s discreet, but she’s also going to know that if I hire someone who’s paid more than she thinks they should be paid, tThat’s the sort of scenario I’m a little bit worried about. Which means I need to look very carefully at what I’m paying people now and make sure, before I bring in someone at a higher rate, that they’re where they need to be.

Loren Feldman:
Liz, how does your profit-sharing program work?

Liz Picarazzi:
We have it on two thresholds. And I actually don’t remember exactly what the percentages were. But if you hit one threshold, it’s a certain percentage of the profit. If you have a higher threshold, the bonus is higher, based on that.

Loren Feldman:
Do you mean if the company hits a threshold, or an individual’s performance?

Liz Picarazzi:
A company, company-wide. This year that we’ve been doing the profit sharing—actually, this is the second one—I definitely feel like people act more like owners. And maybe it’s partly a function of it being small and also having employees that have been with us for a while and probably feel like owners. I can see that there’s probably more chasing of deals and sales as well as wanting to cost-cut. I don’t feel like I have to be so diligent about cost-cutting initiatives, because I know they’re now incented to do that.

Loren Feldman:
Does everybody get the same percentage based on their salary? Or how does that work?

Liz Picarazzi:1
It’s actually not based on their salary. It’s based on what the company profit is.

Loren Feldman:
So everybody gets the same percentage, whether they’re a high-level employee or a lower-level employee?

Liz Picarazzi:
Yes.

Loren Feldman:
How do you work your bonuses, William?

William Vanderbloemen:
Oh, man, that’s changed over the years. It’s just changed every year, it feels like. We’re a little bit different. We don’t have investors. We grow with the speed of cash. We don’t have debt, never have, aside from every couple years maybe having to do a line of credit when there’s a cash crunch from cash flow. So we don’t have reservoirs for bonuses, unless the company grows.

Now, when we started, I didn’t want to take out big loans. I didn’t want to give away equity to investors. So when I hired people, I basically paid them a really low base salary and said, “Just trust me. If we grow, I will make it right at the end of the year.” And depending on how we grew, and depending on the performance of people, we had bonuses where the bonus was probably 50 percent of their overall compensation. That was kind of back in what I call the “duct tape/paperclip era” for us. And maybe you never grow out of that. But it was kind of just, “How are we going to make this work for right now?”

What I’m trying to work on now is sustainability. And so I’d rather get those base salaries up to a really competitive level. And what I found over the years was—I guess I need to be a better leader—those big bonuses, while if you took the base salary from the old days and the bonus, and added it together, it’s far less than what people are getting in a base salary now. But people don’t remember that. They just remember, “I got a big check in December.” And I don’t know how to prevent—really nice people, good people, but it felt like they were a little entitled. And that sounds like I’m slamming my team. I’m not.

Shawn Busse:
It’s just human nature.

William Vanderbloemen:
So I’ve been fighting that quite a bit for the last few years to the point of just saying, “We’re going to keep moving forward with making this a place where it’s like, ‘Wow, you get to work there! You’re well taken care of. You’ve got a great workplace. You’ve got great benefits.’” And adding benefits? Oh my goodness, Liz, God bless you, as you start that journey. That is amazing.

They didn’t teach me this in seminary, so I’ve had to learn as I go. And I’m doing things now that are different. I’m trying to be like, actually, okay, true confessions. Y’all, don’t forward this to my team from a year ago, but I actually Googled: “How often do slot machines payout?” Because there’s some math that’s been done there that works really well. And it’s like, if you pay every X percent of time, then people really think they have a chance of winning, but they don’t mind if they’re losing. And maybe that’s how often I ought to bonus.

So in 2020, we had a really awful second quarter, and our people pulled through it. And then in July, things turned, and it got better. And just as a thank you, I think we sent everybody $1,000 the week before Fourth of July, and said, “Go do something fun, or put it in the bank, or whatever. But this is just kind of battlefield promotion pay, just a one-time thank you.” And I’m kind of moving toward that. Like random, “Wow, you went above and beyond the call,” rather than an annual bonus.

Now, you ask me in two or three years, once I’ve got the salaries where I think they’re really, really hard to beat, and the benefits are amazing, it may be that I go back to what I was doing in the duct tape/paperclip era, but for now, our focus is sustainability. And that means going ahead and taking the very expensive gamble of raising our annual budget every year by getting benefits and base salaries in a better and better spot.

Shawn Busse:
Man, my experience so mirrors what you just said there, William. You know, in the early days, you don’t pay people very much. If you do well, you throw a bunch of money at them at the end of the year. And I’ve learned over time that that idea of an expected annual bonus is terrible for an organization, because there are going to be years where you can’t make that. That year you can’t make it, the level of disappointment is just so high. It’s crazy.

And like you said, we pay people so much more now in annual salary than we did when we had the low salary plus a bonus kind of idea. And what’s interesting about it is, I think it’s shaped us as a more calm company: A lot less drama, a lot less turnover, a lot more mature employees. And I’ll take that any day. It’s just so hard to go from one to the other. But I feel like you have to, because otherwise, you’re just like chaos, right?

William Vanderbloemen:
One hundred percent agree with you, Shawn. We finished our nine core cultural values years ago, and it was in the middle of this transition. And I had all nine ready, and we were headed to the office. Long process, involved the whole team, and everything. And we were sitting there, and our youngest, who was probably two or three at the time—and she’s not a morning person, and she’s the baby of the seven kids—and she’s sitting there eating her cereal, and she just looks up from her cereal, and she says, “Today, I will not drama.”

Shawn Busse:
Wow.

William Vanderbloemen:
And I thought, “Oh man, let’s make it 10 values. That can be the 10th value: ‘We will not drama.’” And I wish I had, but we didn’t, and I thought, “Well, like 10 commandments. Not 9.” I’ve got all these things in my head, but getting the drama out is so helpful. And I’ll tell you, as an owner, we had that year where we couldn’t pay the bonuses. We grew, but we also added staff, and for a lot of reasons, we couldn’t do it. And it affected me. Like, very selfishly, it made me grumpy. It led to bad decisions on my part. It led to me taking on all this sense of responsibility for people that I shouldn’t have. I was not in a healthy spot that year. So I 100 percent agree with you. It’s hard to get there, but we’re making the shift little by little.

Shawn Busse:
And you know, your slot machine insight is really good, because humans, as social media has taught us, really respond to asymmetric rewards. So meaning like, “Oh, somebody liked my post. Oh, nobody likes my post. Nobody liked my post. Somebody liked my post.” That is just addictive behavior. And so the problem with the annual bonus is, it’s the opposite of asymmetric rewards. It’s expected, right? So then you get this thing called hedonic adaptation, which is where people expect to be treated in a certain way. And that’s the enemy of an entrepreneur: Expectations and entitlements.

So the slot machine idea, which is like, “Hey, we did really great. You guys pushed through something really hard. Here’s a little bit of upside from that.” And then time goes by, they don’t see anything, they don’t see anything, and then out of the blue, there’s something different. I think that’s a way more powerful way to engage. I think it moves away from the expectation of always getting something.

Loren Feldman:
Liz, William referred to the challenges of getting up to speed, in terms of introducing new benefits, like health care, as you referred to. Do you have any questions about that?

Liz Picarazzi:
Yeah, I mean, I would love for there to be some sort of a service or platform that’s like a one-stop shop where I can get health insurance, life insurance, anything with 401(k), all handled together, so I don’t need to have different providers for all of that. As you guys know from me talking on here, I hate red tape. I can’t stand administrative work. So the idea of having like four or five new providers to the business that need to be managed, and looking at the pricing every year as we do with other types of insurances, it’d be great to have the one-stop shop.

William Vanderbloemen:
So, Liz, I can share, I went through the same heartache, bellyache, headache, the whole thing. And you’ve got eight employees, and it was probably when we had three or four. The reason I got that heartache was we had three or four, and we were doing a policy through just the guy who handles our insurance personally. And then Adrienne had an allergic reaction to something. We were at a Halloween party for kids.

Loren Feldman:
Adrienne’s your wife and co-founder.

William Vanderbloemen:
Yeah, sorry. So she was fine. It was no real health scare. But man, she blew up like a balloon. She looked like a character in a Dick Tracy cartoon. It was awful. And it was terrible. She’s like, “Do I look bad?” And I’m like, “Those jeans do not make you look fat. Really. I promise you.” It was awful. And so the net-net was, there was no cause for it. She spent two nights in the hospital getting it calmed down. She was fine, never in danger. But the next year, our health insurance rates went up 67 percent. They maxed out.

Shawn Busse:
Oh my God. Wow.

William Vanderbloemen:
And you know, it’s all gambling. We only had four people, so if you have one big claim, I’m like, “Ugh!” You probably know this, Liz, but we went to a PEO. So like, Insperity is the biggest one. And it started as Administaff. Ironically, it was Adrienne’s across-the-street neighbor in Houston who started Administaff, and the PEO basically charges you a little more than you would get charged. And Loren, maybe you or Shawn can explain it better, but you essentially lease your employees to Insperity, and now they’re part of a 2 or 3 million-person employee force that negotiates with the insurance carrier so you don’t have those max loads happen. I mean, we had life insurance, we had pet insurance. There’s a little bit of a tacked-on fee. It is more expensive, but if the headache is the driver for you, you might consider a PEO.

Shawn Busse:
Yeah, you’re thinking so right, Liz. Same experience here, William, except that I’ve held on probably too long to the, “Oh, here’s my 401(k) provider, and here’s my insurance provider, and here’s my payroll and benefits person.” And throughout the pandemic, a lot of those vendors have become really lame. And the administrative burden I have right now is out of control. And I’m looking really hard at, “How do I consolidate?” A PEO is a potential option. There’s another one that’s relatively new. William, have you heard of it? It’s called an ASO.

William Vanderbloemen:
Oh, sure. Good. Our next step was to go from—

Loren Feldman:
What’s an ASO?

Shawn Busse:
Administrative services organization. I just found out about this the other day.

William Vanderbloemen:
Yeah, you’re not leasing your employees. So when I was with Insperity, technically, Insperity was employing all my people. They sent the W-2s. It was their employees, and they had 3 million employees spread across a bajillion companies. The ASO is like, “No, they’re my employees, but the ASO does negotiation.” It worked for us when we were a little bit bigger.

Our third step—and where we’ve been for quite a while—is to just go with an insurance provider that focuses on family-owned small businesses. And we’ve been very pleased. It’s Benefit Concepts, I think is what it’s called. It’s based here in Houston, and it’s one of the best ones in the world. So we’ve evolved as we’ve gotten bigger, but back when we were where you were, Liz, we went with Insperity. It cost us a little bit more money, but the headaches were gone. And the concern about huge spikes in rate increases went away too.

Loren Feldman:
Liz, there is an HR software platform called Rippling. I don’t know if Shawn or William has any experience with them, but I know Sarah uses them and loves them. And I’ve heard other owners say that.

William Vanderbloemen:
Yeah, I left out a step. We tried Zenefits for a while, which was one of the first of these online HR platforms. And it was a total nightmare. So if you’re gonna go that route… Yeah, it was awful. You can Google them. It was bad. It was just, what I would call, a typical Bay Area startup thing. And they had a fun culture, and it was growing real fast, but they had no infrastructure. And it was so fun that people were having parties instead of dealing with my benefits, and you know, cart-before-the-horse kind of thing. And I’m sure it’s gotten better now. I’m sure the one Loren mentioned is the next iteration of that, and in a better spot, but we were early adopters and shouldn’t have been quite so early.

Shawn Busse:
Well, I think there’s a new risk now. So that space is becoming really crowded, and there’s uh, uh…

Loren Feldman:
A lot?

Shawn Busse:
A lot, thank you. An S-ton. There’s an S-ton of money—or there was an S-ton of money—coming into there. And I think the new risk is that capital is fleeing tech right now. And they’re saying, “You’ve got to be profitable.” And so the problem William described was the early-stage problem: Immature companies run by manchildren.

And now the problem is, because money is not free anymore, these organizations are being told, “You have to be profitable.” And so what they’re doing is they’re hacking and slashing. I’m curious if they will suffer from a quality and service perspective. And so that’s the thing to watch for with all those online, tech-funded organizations. But yeah, some of them have been good for some of our clients. Yeah, I would just buyer-beware on all this stuff. I’m interested in that firm you’re using, William. Are they privately held? Are they a public company?

William Vanderbloemen:
Yeah, privately held, but one of the largest in the world. But they think like small business. Now, our open enrollment is in the summer, because during COVID, there was a grace period. So it moved from the end of year to summer. And he’s told us to expect a 6- to 7-percent increase, but he shops around, and is very competitive, and has made this iteration of our benefits a lot easier.

I do think, Liz, you’re just in for increased overhead every single year, once you do it. And for us, we have a lot of people who used to work in churches and then come to work for us, and they’ve never worked in a small business. Or they work for a giant oil company and then come work for us. And the benefits that are offered in those kind of companies—like, I can’t compete with that. Like, yeah, I just can’t.

Loren Feldman:
It sounds like you have some interesting organizational issues you’re thinking through there.

Liz Picarazzi:
Yeah, I have the goal to double revenue again this year.

Loren Feldman:
“Again” being the key word there.

Liz Picarazzi:
Yes, yes. Last year, I didn’t do much planning around growth, as we grew. So I want to be more diligent about it this year. And also, it gives me a chance to look at all of the existing roles and see, “Does it make sense, the distribution? Where do the next roles need to be?” So I am using this as a chance that, maybe once every two or three years, I really look at the organization and see what needs to move, what needs to be added, what needs to be removed. So I’m not being very concrete about it now, but that’s because I just started the exercise last week.

And I actually had a couple of my team members present an org chart to us a couple of days ago on, “If we doubled the company, where would the new roles be? And what would they be?” So we were off in Japan in December, and I had to give them some sort of big-thinking activity. So that was it, and they had some really good ideas. There were a couple of surprising shifts. You know, I’m not hands on. I’m not in the business and not dealing with the warehouse, or with the tariffs, or any of these things. So I’m seeing what is the nitty gritty of what various people are doing and how some things don’t make sense the way they’re done. I’m seeing this as an opportunity to make roles a lot more clear, as well as to create a growth path for employees to be promoted into other roles.

Loren Feldman:
Are you clear in your mind what the most important pieces you need to add are, if you’re going to double revenue this year?

Liz Picarazzi:
Yeah, so it’s mainly to add sales and marketing in the municipal area. So for cities, sanitation departments, business improvement districts, as well as higher ed. We’re just using our existing team to get all those sales, and they’re growing. It’s been a very kind of rapid growth, but I see that if we bring someone in who already has a good Rolodex, or good experience in those areas, that that’s going to help us grow a lot.

So that would be an important part. And then I do see, in terms of operations with the warehouse, and with supply chain, and with shipping, right now, there’s a kind of a mismatch of people doing it, including Frank—my husband—who spends almost every Sunday at the warehouse counting boxes. That should not happen. [Laughter]

We laugh about it. He does have this sort of routine now. He goes there on Sundays. And it really is just like, as an owner, the feeling of having your product and your inventory around you, that sort of ownership over what you’ve created. I think for both Frank and myself, that’s like a great feeling having come from corporate backgrounds, where there’s not much tangible value that you can see and touch. So you know, he’s kind of explained it that way. But it’s—

Loren Feldman:
What exactly is he counting, Liz? Is he making sure you have the boxes ready to go out the door in the coming week?

Liz Picarazzi:
It’s a combination of things. So because we’re doing so much with the city, and it’s so high-profile, we do have a lot of inventory going out to those. And we just want to make sure everything is right. And then the other thing is, we have three containers that just came in yesterday, and so we need to make sure that we have room in our warehouse for it. And—because we haven’t kind of operationalized the calculation yet of the warehouse space—it’s been sort of manual. So I should probably ask him to kind of, “Let’s make this more clear so we automatically know how many containers will fit into this warehouse,” for example. Right now, that’s kind of vague. But he enjoys it. He worked in supply chain stuff in his previous career, so a lot of the stuff dealing with customs and with shippers. And he likes that stuff.

Shawn Busse:
I’m kind of curious to step back just a minute about your hires in the coming year. You said sales and marketing. I hear a lot of people shove those two words together. Do you see that as one role? Two roles? Separate roles? What are you going to hire first? Tell us a little bit more about the strategy there: junior, senior? Yeah, spell it out for us. Because this is, I would say, one of the top five struggles for business owners, especially in that kind of $1 million to $5 million range, even up to $10 million.

Liz Picarazzi:
Well, so the sales is in this area of government and education, and we don’t have expertise, other than doing it for the last couple of years in that area. And we just know there are people that sell to institutions, and they know how to do it. They have deep connections, existing connections. So the idea is to bring in someone who can really set up that whole kind of sales network. Maybe it will be regional, who knows? Maybe it will be virtual. But can really set up a diligent sales process with higher ed and with cities.

Shawn Busse:
Quick question about that. So this is another pain point. Do you hire the person who manages the other people? Or do you hire the person who’s in the trenches selling and closing deals?

Liz Picarazzi:
I would hire the person who is managing the people and setting up the whole strategy.

Shawn Busse:
Okay, so that’s an expensive hire. That’s like a six-figure hire pretty easily, is my sort of market assessment. Would you agree with that?

Liz Picarazzi:
I would, yes.

Shawn Bussie
Uh huh. And then you’ve got to hire the people to do the work. So really, you’re talking a sales investment of probably $160,000 to $250,000, yeah?

Liz Picarazzi:
Yeah, it would be.

William Vanderbloemen:
Years ago—10 years ago, golly, maybe even longer—I was at this same juncture. And I love selling things. I mean, from being a newspaper boy, which doesn’t exist anymore. I love buying and selling. I was the salesperson when we started, and it was just me, and the dog, and Adrienne. And I was looking for that next salesperson. And I remember going to Dreamforce, which is the Salesforce big conference out in San Francisco, and going to Inbound, which is the HubSpot, and we were customers of both. And just by dumb luck ended up having conversations with the heads of their sales departments. And both of them told me the same thing in separate arenas. They said, “Our clients, probably the number one mistake of founders who like selling is they wait too long to hire the EVP of sales”—that person that I hear you saying, Liz, you want to go after—“Smart ones will do it soon.” So I think you’re really onto something, going that direction first.

Liz Picarazzi:
Yeah, I definitely see that. And if, you know, it is $160k to $200k, I think that it would easily pay for itself.

Shawn Busse:
Yeah, I mean, these are big ticket sales, right? Long sales cycle, high dollar.

Liz Picarazzi:
They are. My only concern is that, as it is with any new employee, are they going to be worth it? I have had some failures in hiring people. So bringing someone on in maybe a project or consulting basis to see how they think and what they can do, I would do before going out there and hiring someone like that. Because I just have experienced that sometimes they say they have the connections, and they understand the way that they’re gonna do it, and then they’re a bad writer.

So for me, as a writer, I find that so offensive that it makes me question, “Does this person know what they’re doing? This is really important. Do I need to write the sales copy?” Yes, I’m controlling, but most of the time when I write the sales copy, it’s good. It’s not often when I have someone else do it. And that’s such an important communication. So their ability to communicate is really important.

Shawn Busse:
I tend to find that somebody who’s good at the strategic level of selling should be good at communications. But then often when you get down into the real hunting and trying to get the deals, those folks struggle, because they’re always in such a hurry.

Loren Feldman:
William, in the beginning, you told us that you’re coming off your best year ever. I’m just wondering, did you figure out something about sales in the past year that led to that?

William Vanderbloemen:
Oh, Loren, every great success we’ve had is just right place, right time. It’s not me figuring it out. The pandemic ended up being—I mean, there’s so much bad, I don’t want to minimize the horrible situation people went through—but I, frankly, in as early as late ‘17, I’d just gotten kind of complacent. You know, sustainability, low growth, and I just kind of was riding our normal growth. And then we had to redo everything in 2020. It’s almost like we went back into startup mode, which was really healthy for me. I didn’t like it. You know, there’s a lot of things healthy for me I don’t like.

But coming out of that, one of the things we realized is—as Loren knows—we’re content-based marketing. Nearly all of our leads are inbound. We didn’t do any outbound calling. And some of that—most of that—is because we were doing a new thing for churches when we started, and churches and new ideas are not best friends. So you can’t just cold-call people with a new idea for a church. It won’t work. You’ll get the door slammed in your face and kill your brand. So we spent years providing content that would draw people to us. And then they would finally write to us when they get to the bottom of our funnel, and say, “Okay, I’m ready. Can somebody call me?” And it was great. It was awesome.

I remember the first salesperson I hired. It’s like, you don’t go and hunt and kill and drag it back in a cave. You wake up in the morning, you open the door, and there’s a severely wounded animal on your doorstep. And you just have to drag them across. It was very nice. But after the pandemic, we realized the pandemic accelerated so many trends. And one of the trends it accelerated was that the idea of search, among the faith-based communities we serve, has now become normal. It’s not a new idea anymore. It’s probably a new idea for pockets of the church in places that are later adopters. But we’re no longer on a sales call selling the idea of using a search firm. It’s now, “Why are we better than any other option that’s out there?”

Which made us say, “Okay, for 2022, the big goal is, we’re shifting our posture from reactive to proactive.” In other words, we were reactively waiting on leads to come in, reactively waiting on candidates, reactively waiting. We’re gonna move everything to a very proactive, compassionate aggression, if you will, like really get after it.

Loren Feldman:
By doing what?

William Vanderbloemen:
Well, making proactive sales calls. Like literally, if we had a lead in Atlanta, we hired a sales guy, we sent him to Atlanta, he went to see that lead, and he went to four other churches that he figured out needed pastors, and he knocked on their door. Like old school sales, which never would have worked before, ever. And it feels—I could be wrong, give me another year or two to back this up—like the pandemic accelerated us toward a tipping point where we’re now a proven concept as an industry. Now, I kind of wonder if the biggest lid to our growth for this year is just not having enough salespeople.

And I know businesses would kill to have an automated, content-based, here-come-leads-down-the-funnel, we don’t have to do anything. And we’re going to keep doing that. But on top of that, we’re gonna become much more proactive and aggressive. And I won’t bore you with all the geeky details, but the data is showing us—you can see if you look at our dashboards—”Oh, wow, it could be harvest time.”

And it means that it’s a whole new kind of person who’s doing the selling, and that goes back to some of the turnover that Loren had asked about earlier. It’s not good guys or bad guys. It’s just hunters who are truly proactive salespeople, who are different than the nurturers or farmers, to use the other kind of salesperson. It’s a fun time. We’ll see where it leads, but it’s a fun time.

Shawn Busse:
Do you have enough time passed yet, William, to where you can do a financial analysis and say, “Over the course of 24 months, we spent $280,000 on content creation and marketing. And over 24 months of hiring salespeople, we spent this much. And then on each of those models, we get this many inquiries and this much converted revenue, which is really the most important number.”

William Vanderbloemen:
That’s so good. I just wrote all of that down. We’ve been figuring it out as we go. And the whole cost to acquire the customer and the lifetime value of the customer are two equations that we don’t have forensically figured out. I think the reality is, Shawn, the proactive, go-get-em leads wouldn’t even be possible had we not poured the money into the content base.

That’s why you guys were rightfully laughing at the books behind me when we had the video on earlier. The only reason we wrote those books is so people would say, “Well, they are trusted advisors. They know what they’re doing. And we offer a resource to the church at a very low cost. And then when they need something, they remember us and come back.” And I don’t know that our outbound sales team could do anything, had we not done this first step.

Shawn Busse:
That’s a great point. And then the thing that will happen is you’ll get the salespeople in that new environment who will be like, “I’m killing it. I’m so good.” And it’s like, “Well, yeah, and 15 years…”

Loren Feldman:
We’re almost out of time. William, I’m sure we’ll come back to this throughout the year, but I’ve got a listener question. I want a real quick answer from each of you, starting with you, William. What are you still doing that you kind of know, in your heart, you shouldn’t still be doing?

William Vanderbloemen:
Right now?

Loren Feldman:
Besides podcasts. [Laughter]

William Vanderbloemen:
No, no, no, no. Dealing with any part of the business that has to do with sales or operations.

Loren Feldman:
And you are still involved?

William Vanderbloemen:
Yeah, some. But we have a massive research project that is turning into a book that will come out likely at the end of October. And I need to focus every ounce of energy on getting that completed and getting the launch done right. Because I think it could be—I don’t want to overstate—but I think it could be a game changer for us.

Loren Feldman:
Shawn, what are you still doing that you shouldn’t be doing?

Shawn Busse:
IT. Just so much IT. We didn’t need to even think about it for a while because we had such a good partner, and then they really fell apart. Because I’m the most technically savvy person on the team, I’m having to kind of vet new vendors and evaluate what’s going on, and figure out what to do, and just kind of being involved in that still is a terrible use of my time, but I don’t really have a good choice.

Loren Feldman:
That’s the danger of having a little knowledge.

Shawn Busse:
Yeah, I know.

Loren Feldman:
How about you, Liz.

Liz Picarazzi:
I’ve talked a little bit about how our trash enclosures and our parcel bins have different rates of sales. And so our parcel bin has never done nearly as well as the trash enclosure. I’ve been whittling down the time I spend on it. But I’m really committing this year to spend less and less time on it—unless I can hire someone to come in and work on it. Because I’m needed on everything with municipal, and cities are not buying package lockers—at least not yet.

Loren Feldman:
Got it. All right, my thanks to Shawn Busse, Liz Picarazzi, and William Vanderbloemen—and especially to our new sponsor, the Great Game of Business. You can learn more at greatgame.com about what they do. Have a great week, everybody.