What It Means to Break $1 Million in Revenue

Introduction:

This week, Liz Picarazzi and Sarah Segal talk about their attitudes toward growth, including how they set goals, the tension between revenue and profit, deciding when growth requires additional bodies, choosing between contractors and employees, and how they would use the money if someone were to give them a million dollars to invest in their business. Plus: What will it take for them to consider themselves successful?

— Loren Feldman

Guests:

Liz Picarazzi is CEO of Citibin.

Sarah Segal is CEO of Segal Communications.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Full Episode Transcript:

Loren Feldman:
Welcome, Liz and Sarah. It’s great to have you here. Today, I want to talk a little about your attitude toward growth and how it may have evolved over time. But first, I just want to note that you’ve both already beaten the odds. We’ve all seen the numbers that indicate how hard it is to break a million dollars in revenue. I think fewer than 5 percent of businesses—one in 20—actually do that. It’s a huge milestone. Both of you have done it. I’m curious, were you conscious of that? Was it a goal? Was it a big deal? How about you, Liz?

Liz Picarazzi:
Yeah, it definitely was a goal for me. And I remember on the day that it happened, I was really excited. But I was kind of by myself. I was working from home that day, and I felt like, “Well, who do I talk to you about this?” You know, besides Frank. And so for me, it was like a weirdly non-eventful day for a milestone that was so important to me.

Another reason why the million-dollar mark was significant for me is that when I worked at American Express in the small business division, we had a program to help women entrepreneurs achieve a million in revenue. And they did seminars all over the country, and I remember I took note of that: “Wow, this is a very hard thing to achieve.” Like, less than 40 percent of businesses are owned by women, and something like only 2 percent of women-owned businesses achieve a million. I mean, that was a stat from like five or six years ago, but I think it’s still pretty significant.

Loren Feldman:
Sarah, how about you? Were you conscious of it? Was it a goal? A big deal?

Sarah Segal:
No, it was never a goal. Actually, when I was acquired, the person that facilitated the acquisition basically handed me the goal. He said, “This is your revenue. You should have this goal for the end of the year.” Honestly, it gave me anxiety. It gave me stress. I had always just focused on profitability and not that million-dollar goal. But the problem since then has been meeting that goal that was handed upon me, but now working at moving beyond that goal. And so that’s kind of where I’m in a holding pattern.

Loren Feldman:
And we’ll talk some more about that. We should point out that you were acquired, but recently took your business back, and are running independently again. Liz, once you hit that goal, how did you reset after that? Did you come up with a new goal? Did you feel like you could relax a little bit? Or did it kind of rev things up for you?

Liz Picarazzi:
I think it revved things up for me, actually. I really wanted to get more millions, like most people do. So when I hit that million, I set the goal the next year to get to 2 million. And I do think it’s significant. I don’t think I reset. I mean, for me, it was less about the money, and it was more about the brand and establishing the business as the go-to in a category that, quite frankly, I’m kind of creating.

Luxury trash enclosures were really not a thing until Citibin came along. So for me, success is also to be that go-to, like Canva was for easy graphic design, or Spanx was for shapewear, or Chobani Yogurt was for Greek yogurt. Those are all gigantic companies, but part of the reason they became successful is that they were category creators. So for me, it was like, “Wow, we’ve achieved this revenue mark. We’ve got great momentum. We’re headed towards being this category-creating company. Let’s just keep going in that direction.”

Loren Feldman:
How did you pick the goal of doubling your revenue after you hit a million? Was that based on anything in particular, or did it kind of just seem like the next logical step?

Liz Picarazzi:
I mean, it looked like that’s where it was trending, and it did. Also, I saw the types of clients that we were getting, and they were bigger, and the order sizes were bigger. And we are really moving from residential to more commercial. So I really saw it as an attainable goal.

Loren Feldman:
How about you, Sarah? I think you told us at one point that your goal going into last year was to double your revenue. How did you come to think about it that way?

Sarah Segal:
I don’t know, it was just a number. It just seemed like a natural step. I mean, it was a reach number for me. And I always kind of placed that as it, because I wanted to grow in a way that I can maintain, that is not going to get me in trouble. Because as we saw during the pandemic, clients go away. And there are a lot of different factors that can cause a client to leave.

It can be VC-funding drying up, or change in the marketplace in general. So I just don’t want my growth to be dependent too much on one category. So it’s kind of, I’m trying to be a little more methodical about our growth. Of course, it’d be nice to have extra funds, but I also am not just going to take a client because it’s going to add to our bottom line.

Loren Feldman:
Are you still thinking about profit the way you did originally, Sarah?

Sarah Segal:
Yeah, 100 percent. Profitability is important to me, because of the way that I’ve set up my company. So most PR agencies are around the 20 percent profitability range. That is, they end up with a checking account with 20 percent of their revenue at the end of the year. And we give out pretty sizable bonuses when we can, when we have that nice pocket of funds. And that also helps us maintain our employees and makes people happy. And it’s a nice way to end the year.

I’ve been able to maintain that as a minimum. But it’s always nice to reach toward a 30- or 40-percent profitability, which gives us that nice bucket of cash to play with at the end of the year, either by giving it away to staffers or reinvesting in the company.

Loren Feldman:
How do you try to manage profitability? What’s the key point there?

Sarah Segal:
Ooh, that’s the million-dollar question. I have a P&L that I literally look at every single day. I’m looking at expenses. I’m looking at how much it really costs to hire a person. I only have one person on staff who’s not billable. Everybody else is billable. And literally, it’s like you’re balancing your checkbook every day. And that’s how I make sure that, at the end of the month, we’re not at zero balance in our checking account. I want to make sure that there’s a buffer.

And going into this year, January 1st, I started with zero dollars in our account because we left, which was really, really hard. Because I had payroll two weeks in and had zero dollars in my account. Thankfully, I actually had one client pay their monthly retainer early, so that helped. But I also invested some of my own money temporarily, just to kind of get going. My hope is to eventually have a nice little buffer that I can rely on throughout the year. But I knew going into this year that the first quarter was going to be a lot of robbing Peter to pay Paul.

Loren Feldman:
What do you think of as being the key moment when you have the most control over your profitability? Is it when you sign up a new client and set the terms of a deal, the price, and what’s expected of you?

Sarah Segal:
It’s a really weird dance, because you sign on a new client—you can’t have more employees than you have work.

Loren Feldman:
You can.

Sarah Segal:
Yeah, but you don’t want to. So you don’t want to under-use your staff, but you also don’t want to overwhelm them with work, which will burn them out. So it’s this weird dance of, “Okay, this new client is going to be a retainer, and they’re signing on for six months to a year. Can I take that risk in hiring another person to support the account?” But I need to look at all of my other clients and see: How they are doing? Are they in a good place? Are we delivering on what we’re supposed to be delivering on? And do they have money to continue working with us? So it’s a tap dance pretty consistently.

Loren Feldman:
Liz, you have the added complication of buying raw materials and outsourcing manufacturing, all that beyond labor that you have limited control over. Do you see, in part because of that, that there’s a tension between revenue growth and maintaining profit margins?

Liz Picarazzi:
There is, but luckily, it’s worked in my favor in the last year. So our shipping costs and bringing containers over from overseas was so expensive before. It was between $25,000 and $30,000 per container, a 40-foot container, during the height of the pandemic. And now it’s $3,000. So it went from like $30,000 at times to $3,000 in a year. And so that’s helped us, obviously, with profitability. I mean, with us, with profitability and expenses, I think we’ve done pretty well at putting the right amount of work on staff.

But people do wear multiple hats. And as we grow, that’s going to have to change. We’re going to have to have more specialized roles. So that’s something that when I do take those steps—and I haven’t taken them yet—to hire some additional beefy roles, that’s going to definitely impact profitability. But like Sarah, I’m gonna have to look at, “This additional client that I brought on, does that merit an additional employee to support that?” So those will be some pretty important decisions I think I’m going to have to make sooner rather than later. But in terms of how I’m feeling about profitability, I felt pretty good about it last year. And it was because a lot of our huge pandemic-related costs, primarily shipping, went down.

Sarah Segal:
Liz, can I ask you a question? Before I owned my own business, I always heard business owners lament about how expensive it is to hire people. I’m just curious about your perspective on that. Do you see it as a really expensive process?

Liz Picarazzi:
No, I don’t, but I also don’t have many benefits for employees.

Loren Feldman:
You’re moving in that direction, you’ve told us, right?

Liz Picarazzi:
I am moving in that direction, but like the process of HR going through lots of different things and bringing in 20 candidates for a role, like I haven’t really had to go through it yet. I mean, the cost of hiring an employee with all of those benefits and needing to have administration of those benefits, I think it will be a lot more expensive. And I kind of dread it.

Loren Feldman:
Why do you ask, Sarah?

Sarah Segal:
Well, I always read about how that was the biggest complaint, and that was the biggest burden for companies, and this and that. And yeah, we have a really nice benefits package that we offer. And that was something that, when I was acquired, they had a really nice benefit package, and we kind of adopted it, because we really liked it, and so we continued with it. And I don’t see it as a burden. I see it as: That’s how you treat human beings.

I read an article that I think, Loren, you probably shared as well in your newsletter, about a Gen Zer and their perspective on work. And there was a statement in that article that said she’s not interested in giving her life to a company when companies can literally just drop you on a dime. And so I see the benefits package as my part to prove that I’m not going to drop them on a dime. Because I’ve put a lot of time and effort into making sure that their work-life balance and their benefits are reasonable and match their value to me.

Liz Picarazzi:
One other thought I just had on this, too, is that if I need to hire, let’s say, a marketing manager, which I do right now, some of the great candidates are also going to be looking for jobs at Amazon. So if we’re competing for those same candidates, I’m always gonna lose.

Sarah Segal:
I don’t know that you’re gonna have that. It’s interesting, I worried about that. We just hired a person, and we did have some candidates who were like, “Oh, well, I work for a tech company currently, and they pay me an exorbitant amount of money.” And we’re just like, “We can’t match that. That’s not us.” But then we also had people who were like, “I don’t want to work for a big Goliath like that, because I’m not going to have the opportunity to do as much.”

So you hire a marketing director for you, and they’re going to rule the roost. They’re gonna get to do a lot of stuff. They’re gonna get to make a lot of decisions. If they’re a marketing director for somewhere like Amazon, they’re gonna have a—

Loren Feldman:
They’re not going to be a marketing director at Amazon.

Sarah Segal:
No, they’re gonna have a lane, and they’re gonna have one job that they do. And they’re going to have a very defined role. And some people don’t want that, because that’s boring.

Liz Picarazzi:
I agree. I used to do that.

Loren Feldman:
Do you really think you’ll be competing with Amazon for a marketing person, Liz?

Liz Picarazzi:
Or just the equivalent. I’m in New York City. There are a lot of major companies here. And if I’ve got my job up there on Indeed, and so does, like I said, Amazon—or Google has a big office here. I don’t think that if you put them next to each other, that my offer would look very good.

But I do think, Sarah, there are people who want it to be something that’s really enjoyable, where they have agency. So trying to find those candidates who want to feel that agency is important, because then they’re not going to be looking so specifically at all the numbers.

Sarah Segal:
Well, and also, those two companies that you mentioned, they just had layoffs in December. And so their track record from keeping employees—

Loren Feldman:
With more to come, almost certainly.

Sarah Segal:
Yeah, so you’re probably slower, more methodical and thoughtful about the people who you hire, and you’re not just putting bodies in seats like a lot of those companies are. And so you’re going to make sure that it’s the right fit for the right role for the right team. Somebody can be great on paper and interview with us, and there’s no connection. And half of it is just personality, and we’re back in-person. And I want to like the person I’m breathing next to every day. So you have a draw that way, and I think a lot of people will specifically look for that, because they don’t want to deal with the machine that is Amazon or Google.

Loren Feldman:
I almost think you wouldn’t want to hire someone who would rather work at Amazon than help you create a brand new category. I mean, it’s just a different kind of person.

Liz Picarazzi:
It is. It’s definitely a totally different flavor of person.

Loren Feldman:
And this is something that a lot of people struggle with, because you do have to decide between hiring someone—what’s the best person you can get to bring in to work for you as an employee—versus spending that money with an agency? Have you given a lot of thought to the trade-offs involved in that decision?

Sarah Segal:
Oh, please do tell, Liz. I’m very curious. How do you decide? Because I see openings all the time for like, head of communications. I’m like, “We could do that. They don’t need to hire somebody in-house, and we have all the resources and tools that they would need,” at least for PR, not for traditional marketing.

Liz Picarazzi:
Yeah. Well, I so far have mostly had agency or myself do all the comms. And in a couple of situations, when I did hire that out, sometimes it worked, sometimes it didn’t. Overall, I think I got a good return on investment in marketing and PR work that I paid for. But I have often had good success from me doing it on my own. And that’s the issue with needing to grow the company is that, if I don’t get someone else to do those functions, I’m not going to grow as I want to.

And that’s some work I need to do, is finding that right person and letting go. Lately, I think I’ve been a little bit more hands-on because of this new category of municipal where I have to—I shouldn’t say “I have to”—I plan on rewriting everything in the marketing, in the newsletters, in all the sales materials. And it has barely crossed my mind to hire someone to help me with that. And that’s probably something I need to get over. Because I am feeling really overwhelmed.

Loren Feldman:
You’re re-working all of that because you’re going after a different kind client?

Liz Picarazzi:
Yes, exactly.

Sarah Segal:
But Liz, sometimes it’s easier to… Like, you’re not going to find somebody who knows your business as well as you. That’s never gonna happen. But you can find somebody who’s eager to learn the nuances of your business. And for some people—I don’t know about you—it’s easier to edit than to sit down and focus on writing that book. At least you have something to work with.

So short of using ChatGPT, it’s like, you hire somebody, even just a writer. They interview you. They ask you a billion questions. They get your baseline answers to that and then they formulate that narrative for you. And then you can go back in and edit it and tweak it. And it’s a time saver. And sadly enough, writers are not super expensive to work with, because we pay writers terribly in this industry.

Loren Feldman:
I often recommend a book called No Man’s Land by Doug Tatum. I don’t know if either of you are familiar with it. I recommend it because it’s not as well known as it should be. The basic thesis is that every company that grows—and you can choose not to grow, but if you choose to grow as both of you have—inevitably, you hit a point where what’s worked in the past stops working. It could happen because you get a big order, and you just don’t have the infrastructure to fill it, or you don’t have the capital to fill it. You may not have the talent to fill it.

At some point, you’re going to realize that someone who has worked really hard, who’s been loyal, who’s been there from the beginning, is not really capable of doing the job he or she is now doing. It worked for a while, but it’s not working anymore. It could be a friend. It could be a brother-in-law. It could be a spouse. It could be you. Given the amount of growth you’ve both had, I’m wondering, have either of you run into this at all?

Liz Picarazzi:
So, for me, in the past, I have made some decisions with employees who kind of hit a level where I guess they call it the Peter Principle, where they hit a ceiling where their talents are never going to really exceed that. And they’ve worked so hard to get to that point that I assume that they want to be promoted and get a title and get another salary, to be able to have that responsibility and feel like having that promotion.

And in a couple of situations, that really didn’t work for me. So in my first company, I had like the best handyman ever—who still is probably the best handyman ever—who did such a great job, I eventually promoted him to be a director over all of the handymen. And I gave him a title. It was called “field success director.” And Frank always laughs at me with that title, because these are kind of blue-collar, handyman workers, and I’m giving them these very corporate titles. Well, he didn’t really want that role. He wanted that salary, and I gave it to him. And I gave him that title. But ultimately, he was really just a good handyman.

Loren Feldman:
That’s kind of a classic situation. I mean, it happens in sales all the time. Somebody who’s really good at sales may not be good at managing salespeople.

Liz Picarazzi:
Well, and then the second instance was with Citibin, where our first designer, who really created most of the product we have today, was really into that one trash enclosure. And when I wanted us to shift into package lockers, he didn’t want to innovate that way. He wanted to just keep perfecting that first product. And I saw on the market, there was a huge opportunity for package lockers.

So one year, for his bonus and his performance review, I thought, “Well, the way I’m going to stimulate innovation in him is, I’m going to give him a new title. And he’s going to be called to innovate.” It was the “director of innovation.” And he was not innovative. And that was okay. I mean, he was so good at what he did. But the problem was that when he did not behave in an innovative way, I thought, “Well, damn, he’s the director of innovation.” Well, I’m the one that gave him that title, because I wanted him to be that. He ended up leaving, and a lot of it was that clash over my desire for more product development and growth, and his desire to really perfect what we already had. And so no title change is going to change that. I learned my lesson on that.

So yeah, I would say those were a couple of the mistakes that I made. And with current employees, I’m a lot more careful. If it’s obvious that they’re not good at something, instead of continuing to push on it, I’ll either get them trained, or I’ll just take it off their plate and give it to someone else.

Sarah Segal:
I agree. I agree with you on that. In my industry, there are people who are independent contributors. And they like their focus, and they don’t really want to do anything else besides that focus. And I’m a person who, I want to do everything. I want to be a generalist. I want to learn how to do everything. I want to continually push myself and educate myself and try new things. And I have to remind myself that not everybody really wants that. And not everybody is looking for a career. And some people are just looking for a job. And so there’s that.

And then on the other side, I really try to listen to my staff and figure out what they’re interested in doing. Because I feel like, if there’s an opportunity where they say, “Oh, I really want to do more content and more video.” And we have clients, and we can offer that service, and we can build that, then I want to leverage that natural interest, because they’re going to put a lot of energy into that. So really trying to build our offerings based on individual interests.

Yes, there are things that are necessary evils that we all have to deal with. And right now I have a staffer who I love, she’s ready to transition out of some of the day-to-day stuff that she does. But we don’t have anybody to take over those duties yet. And I basically was like, “I want to relieve you of some of these chores so you can do cooler things. But I have to kind of backfill and find more business so I can relieve you of those duties.”

So it’s a matter of listening to what people want, but also seeing their roadmap for what work means to them. If somebody just wants a job, then that’s a different path forward than somebody who wants a career. Not everybody is going to become a VP and go out and do client sales and pitches and this and that. Some people can do that, and for some people, that will never be something they’re interested in doing.

Loren Feldman:
Which is fine, if you have an appropriate position for them. But if they’re in a position where you need somebody to take on more responsibility, then it can become an issue. It’s still fairly early for you, but do you see the possibility of that evolving where you have somebody who’s worked out thus far, but the company has grown enough that you need to get somebody who does want to handle more and take on more?

Sarah Segal:
You know what it is? PR is a very young person’s industry. So most people who come in are eager to learn, and you can tell when you’re interviewing that they want to expand their horizons and do that. So we’ve been lucky, I guess, in hiring. We haven’t run into that issue yet.

Loren Feldman:
I suspect you will, at some point.

Sarah Segal:
I’m sure I will. I hope I will. Not this week. I have other issues this week.

Loren Feldman:
Liz, I thought about this, in part because you were talking about the marketing position. And that seems like the kind of position where this could be an issue. Are you hiring someone who can handle what you’re looking for right now? Or are you looking for someone who can grow and who you hope to be with the business for some time?

Liz Picarazzi:
I mean, I’d really like to hire someone who can be with us for the long-term. People who come in to kind of fill roles and come in and out, it can be a little… I just want to have continuity. I think it’s so important for someone in communications or marketing to really understand the brand and the customer. It takes a little while for people to get that. So I wouldn’t want to hire someone and have them finally learn that and then leave. So having someone where you really see that they have aptitude…

Loren Feldman:
That’s looking for a special person.

Liz Picarazzi:
It is.

Sarah Segal:
Well, hopefully you have time. If there’s an urgency to hire this person, it’s gonna be a challenge just finding people. We definitely had people apply for the position. We were not overwhelmed with people applying for these positions, specifically the higher levels. Because we get a freight train of junior level people applying to us, which is great. But it’s those higher-level folks, which are, I think, much harder to find, specifically because a lot of those folks have paid their dues working for an agency or in-house or somewhere and decided to go independent.

So there’s this whole percentage of the workforce in marketing and communications who are doing their own thing. They’re freelance, they have a couple clients, and that’s all they do. So it’s like they’ve gotten so burnt out in their junior years that they don’t want to work for the man anymore.

Liz Picarazzi:
I think I need to find some people like that.

Loren Feldman:
Having had the success that you both have, has it affected the way you think longer-term? Have you thought at all about what your definition of success really is?

Sarah Segal:
I like the fact that you say, “You’re successful.” I don’t feel like I’m successful yet. I mean, I’m just gonna be perfectly honest.

Loren Feldman:
Well, going back to where we started at the beginning, you’ve done something that lots and lots of people try to do and don’t get there.

Liz Picarazzi:
Particularly women.

Loren Feldman:
Not that that means they’re failures. It’s just really hard to do. You’ve managed to at least get past that hurdle. And I don’t mean to suggest that you’ve got it all figured out. Nobody does. But you have had a measure of success, and you should be proud of that.

Sarah Segal:
I am, I am. And I love it. And I think it’s just me, the way I am. I’m never satisfied with what I’m doing. It’s an issue I have where I’m like, “Okay, I can do better. I can do better. I can achieve more. I can accomplish more.” And that’s my own mental—

Loren Feldman:
We’ve talked about this in terms of whether you’ve made it or not. This is a related question, but a little bit different. Can you sketch for us a little bit: What would success look like?

Sarah Segal:
I want Liz to go first on this one. [Laughter]

Liz Picarazzi:
I have thought about this a little bit. It’s such a great question. I mean, it’s often asked in terms of, “What is your exit strategy?” So my answer is kind of along those lines. But I mean, I’m 50 now. I would love to at least have the option of retiring at age 60. Whether or not I exercise that option, I would like to have that as an option. And to get there, it would be—well, actually, I should say, part of the reason I would like to retire early, and I would love for Frank to be able to retire early, is that we both have our own hobbies, outside of the business. I love to travel, and I love home improvement. And he’s a composer and a performer. And so he’s a musician who, since joining the business, is practicing and performing a lot less.

So, he was not put on this Earth to be COO of a trash-enclosure company. He’s doing it really, really well, but he was not put on this Earth to do that. So I would like for both of us to at least have that option. And really, the way to do it is to make ourselves as attractive for acquisition as possible. I’ve had a lot of potential funding come my way and outside investors. And I was really interested in it for a little while. But then I realized: I want to be wooed in a way where there are four or five options for me, and I figure out which one is best when I’m ready, and I pick it.

So I don’t know if that’s being grandiose, but I want to be in a position to choose who acquires me and feel really good about it—like, feel really good about my employees being set up, that the amount I’m paid is fair. But I don’t want to, when I’m 60, be looking for someone to acquire me. I want to actually have them waiting in line. So that would be ideal. That would be success, to allow me to move into the next stage of my life, which might be at 60. Maybe it’s 75. You know, who knows?

Loren Feldman:
Do you also think of the option of just trying to manage the business in such a way that you remove yourself gradually from more of the day-to-day, and the business can operate without you full-time, and give you the room to pursue some of the other things you’d like to pursue?

Liz Picarazzi:
Right now I’m actually able to pursue a lot of my hobbies. We did home improvement, and I can shop for hours for door knobs, just install them, and take pictures of my new bathroom doorknob and feel really good about it. That’s something that really gives me joy. And I don’t know where that would lead me into my future, but I used to be a home contractor. So maybe there’s an opportunity to return to that while I’m still running my own business. Or potentially getting involved with real estate.

I’ve noticed that a lot of entrepreneurs in my EO group who have had exits and have sold their businesses, they’re now in real estate. That’s their primary business. They’re using the funds from the sale to kind of move into a new direction. So that’s another thing I could see myself doing. But I know that I don’t want to feel as stretched thin as I do right now in 10 years. I just want to have a lot of options available.

And I mean, I’ve got some ideas on paths to get there, but that’s even something now that I’m exploring. If someone were to acquire me, who would it be? Who would be motivated to acquire Citibin? And I’ve got a list of like four or five companies that I think, if I were them, I would be really interested in it. And so I’m kind of trying to be below the radar with them, because I also don’t want them to compete with me. I want to gain more market share so then I’m very attractive for acquisition, regardless of whether I agree to be acquired.

Loren Feldman:
All right, Sarah. Thoughts?

Sarah Segal:
As for hobbies, I don’t really have any hobbies anymore. My job is my hobby. And I’m not saying that to sound dismissive of hobbies. But I’m still in that kind of honeymoon phase of really liking the process of navigating all of this. I turned 50 this year, as well, and by 70, I would like to be able to pass the reins off—or have already done that in a way. I don’t know if I would be interested in an acquisition again. I’d rather pass along a healthy company to the folks who are running the show in some way. I don’t know if that’s employee ownership, or what that looks like, because I haven’t even thought twice about it yet. I’m literally just trying to keep the lights on right now.

Loren Feldman:
Neither of you mentioned numbers, in terms of your thoughts about what defines success. Liz, you referred to the possibility of being acquired at a point, which would allow you to do other things. Is that more a matter of time? Or are you thinking that you need to hit a certain number that would make it possible for you to do what you would like to do?

Liz Picarazzi:
I don’t have that number. I mean, part of it is, I really like what I do right now. So it’s not like I’m fantasizing necessarily about retiring so young, and I don’t have the number. But I guess that’s my answer. I don’t have an exact number, and it might be something I need to think more about.

I know that I am thinking about valuation, and what can I do to make my company more valuable? I think about that a lot. So everything that we spend money on with R&D that doesn’t have any revenue attached to it, sometimes I don’t like that. But I realized I’m investing. And if I do get acquired, like this new feature on a lock, or whatever, is going to add value. Or if I get these patents, it’s going to add value. So a lot of decisions I make are based on growing our value, which means a higher acquisition price.

Loren Feldman:
Sarah, do you think in terms of a number when you’re thinking about how you define your eventual success?

Sarah Segal:
I’d like to retire and not have to worry about it.

Loren Feldman:
It might be an age number.

Sarah Segal:
Yeah, well, my in-laws have an interesting story. She was a hygienist, he was a juvenile probation officer, and they retired from those careers. He got a pension, and then they started a real estate business. He got his broker license and would sell things, but then they ended up slowly, over time, buying buildings. And now they own a handful of buildings outright, and they have paid them off.

And so, yeah, they have the perfect retirement. They have ongoing sources of income that they don’t really have to do much to maintain, which is kind of the ideal.

Loren Feldman:
How are you going to do that?

Sarah Segal:
It’s on my list of things to do, Loren. [Laughter]

Loren Feldman:
All right, the million-dollar question: Ami Kassar, a small business finance expert who has appeared on this podcast and writes a column for 21 Hats likes to ask owners, “What would you do if I gave you a million dollars to invest in your business? How would you invest it?” Liz, have you thought about that at all?

Liz Picarazzi:
I have. So, with 1 million, I would invest in research and development and patents.

Loren Feldman:
And how would you go about that? Do you know what type of research you would want to do?

Liz Picarazzi:
Yeah, so on the research, to further our municipal line, there are a lot of features that are being asked for that we don’t currently have. And I know that if I had a million dollars in the bank, and I could hire an amazing industrial engineer and a great metal engineer and experts in locks and various things, that I could really evolve the product to a place where it has all the features that my customers have asked for.

And so that really is what it is, and also wanting to do that before any of my competition, who doesn’t have the benefit of working with sanitation workers in four different cities. I know what they need, because we work with them. I also am not an expert in most of the things that I sell, which means I rely on other people to come up with a different latching mechanism, or a different hydraulic arm for the door, or a different way to level the feet, or drainage being slightly different, or having an electronic lock instead of a manual lock. Like, those are all things that I could easily spend a million dollars on. And that probably doesn’t even include the legal that would go with it to patent those features.

Loren Feldman:
You know what your customers are looking for, it sounds like. The research is in how to solve the problems they’ve identified.

Liz Picarazzi:
Yes. It’s usability things that, if you’re really a discerning customer, you’re going to notice that certain things can be improved. So yeah, that’s where I would put it.

Loren Feldman:
So what’s keeping you from doing that now? Is it just the money, or are there other aspects of it?

Liz Picarazzi:
It’s really just the money.

Loren Feldman:
One of the points that Ami makes when he goes through this exercise is to say to people, “You know, if you have a really good use for that million dollars, you can probably get the million dollars. There are ways to do that.” Have you been exploring that?

Liz Picarazzi:
Not really. I mean, I went down the having-an-investor path for a little while last year, and that was what I would have wanted them to help me out with, in addition to a few other things. And I just didn’t like that direction. I don’t think I was ready for it. And I didn’t trust that the VC who said what he was bringing to the table would bring that.

Loren Feldman:
You give up an awful lot in a situation like that.

Liz Picarazzi:
Yeah.

Loren Feldman:
Have you considered borrowing the money?

Liz Picarazzi:
Well, I haven’t, because I feel like I’m already tapped on that. I mean, I have one of those EIDL loans. And with our bank, getting a line of credit raised, even with our very great year last year, it seems to be a pain in the butt. And I know that Jay often says, “Oh, you just need to walk into the corner bank with a P.O. from the government, and they’re gonna give you a loan.” Like, no, I’ve gone to many banks, and they do not do that. That may be how things used to be. But I mean, I could probably do some sort of friends and family loan. And it could be potentially funded by a purchase that was big enough that it would be able to be kind of fortified with those features, based on the size of the order.

Loren Feldman:
Right. Especially one of those municipal orders, I would think.

Liz Picarazzi:
Yeah.

Loren Feldman:
Sarah, how about you? You have a less capital-intensive business. I assume labor is a big percentage of your annual expenses. What would you do with a million dollars?

Sarah Segal:
I actually want to know what you would suggest I do, Liz and Loren. What would you think I should do with my million dollars? I’d rather hear your opinions.

Loren Feldman:
That’s not how this podcast works, Sarah!

Sarah Segal:
I know! But you know my business. You know what I do. I’ve chatted with you a billion times about it, but like, what would you do? I’d rather have an outside perspective.

Liz Picarazzi:
I think that Loren should answer first, since you’ve spoken to Sarah dozens of times, and I’ve only spoken to her four or five.

Loren Feldman:
Are you at a point where you aren’t aggressively seeking more clients because you feel you have as much work as your staff can handle? If that’s the case, that suggests an obvious direction. You might think about that. Obviously, you don’t have to spend it all at once. Let me ask you, do you have someone you consider a number two?

Sarah Segal:
Yeah, I do. But there are different kinds of number twos. There’s the person who knows where the bodies are buried, and how things operate. And then there’s the person—I actually have two—who I know that all of the clients would be delighted with. So yeah, I have two number twos.

Loren Feldman:
At some point, I think you might want to be in a position where you have a true number two, someone who can really be in charge of the business.

Sarah Segal:
So the answer is, I don’t have a good use for a whole million dollars. I don’t. I would love to redo my website. I’d love to do a little bit more new biz, proactive outreach, creating a pipeline that is consistent. And yeah, I’d love to have another person on staff to kind of help me devise all that, but I don’t know that that costs a million dollars.

I think I’ve mentioned before that most of our business comes from referrals. But we need to move beyond that. And I say, “Okay, I’m gonna do it, I’m gonna work on it, work on it,” and then I get sidetracked. And it’s having somebody who’s not sidetracked by things, whose core focus would be that, that would be lovely.

Loren Feldman:
All right, my thanks to Liz Picarazzi and Sarah Segal, and of course to our sponsor, the Great Game of Business, which helps businesses implement open book management and employee ownership. You can learn more at greatgame.com. Thank you both.