When to Pull the Plug, When to Pull the Trigger

Introduction:

This week, Mel Gravely, Jennifer Kehrin, and Liz Picarazzi start out talking about the pain of being fired by a long-time client. “It still stings,” says Jennifer, who nonetheless surprised her team by writing a note of congratulations to the CEO of the company that took the business. The conversation moves on to the tradeoff that comes with deciding between promoting managers from within or hiring them from outside the organization: What if your people aren’t ready? What if the outsiders have more experience but aren’t as good a fit? And that leads to a discussion of how to decide when to press on with a venture that’s struggling—and when to give up on it. Not surprisingly, all three owners have some experience in this area. Of course, they also have experience with deciding when to start a business, but they have very different attitudes about risk. While Mel says he’s pretty much always ready to go, Jennifer tells us she’s been noodling on an idea she really wants to pursue for about five years.

— Loren Feldman

Guests:

Mel Gravely is chairman of Triversity Construction.

Jennifer Kerhin is CEO of SB Expos and Events.

Liz Picarazzi is CEO of Citibin.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome, Mel, Jennifer, and Liz. It’s great to have you here. I want to start today with a topic that Jennifer suggested, which is what it feels like when a client fires you. Have you had that experience, Jennifer?

Jennifer Kerhin:
Yeah, it happened recently, and it was a long-term client, and it wasn’t anything we did. It was our champion. We’ve had several champions over the course of many, many years, and the champion left. And the new person that we fell under had a group of people that she had worked with for years, like her own set of vendors. And she’s really smart, very competent, and had formed a relationship over 10 to 15 years with this other group, and so decided to go in a different way.

It wasn’t a matter of our work or our experience. It was just, in what we do, relationships with vendors are so critical as a team, and that team culture, when you’re doing it with vendors—it is critical in any industry, but especially with ours, because we have such tight deadlines. And so she very politely—she wasn’t saying it was fired for performance in that way—that they were going in a new direction. They paid all of our cancellation clauses, and we left on good terms.

But it still stings. It still hurts. And when we look back, if there’s anything we could have done, I’m not sure there is. But it just goes to show you how much of the way you form a relationship with a client can be equally or sometimes more important than the actual performance of the work you do. So it’s just a good reminder for us. Again, I’m not sure there’s anything I could have done, but it stinks.

Loren Feldman:
Did your champion go somewhere else where he or she might be able to hire you?

Jennifer Kerhin:
No, they got a promotion in their current organization.

Loren Feldman:
Ah. Was this client sufficiently large that part of the issue here is the amount of business that they represented, the percentage of your total revenue? Or is that not a factor in this?

Jennifer Kerhin:
No, that wasn’t a big issue, as a matter of fact. Surprisingly, I think it was just the length of the contract. It was the contract that started the company. It was the founding client, and so because of that, I think there’s emotional significance attached to that. It wasn’t really the revenue, and again, it wasn’t performance-related. And they were wonderful about it. It was handled well. I think it’s purely the emotional side of it. When you get attached to a long-term client, how do you disengage from that moving forward?

Loren Feldman:
Did you try to talk them out of it at all, or was it clear that this was a done decision when you found out about it?

Jennifer Kerhin:
Over the past year, when we realized who was going to be our main contact, we sensed about 15 months ago that this could be an issue, and we worked hard to try to build up the relationship. So we weren’t completely surprised when it came down to it. We had come up with ideas and worked for the year to try to form that relationship.

But again, I mean, I get it. When you form a relationship with a certain group, a team that’s been really successful in the past, you want to bring that team together. It’s like bringing the group back together. And I appreciate her perspective on it. It doesn’t make it any less frustrating for us. We did our best, but I think it was a losing battle a while ago.

Loren Feldman:
What was it like for your employees who worked most closely with them? Did they handle it well?

Jennifer Kerhin:
Yeah, they actually felt really bad for me. They were like, “Jen, we’re so sorry. What did we do? What did we do?” And I was like, “There’s nothing you could have done.” They felt really guilty. And I said: Look, we all talked about this. We all talked about how this might be a possibility, how we can combat it. Let’s dissect the issue, appreciate that we kind of saw it coming and things we tried, and let’s move on and get other business. I don’t want to dwell on it forever. We took a little bit of a moment, sort of a grieving session, where they were very concerned about me, which was nice, but then let’s move on.

Mel Gravely:
You know, Jennifer, listening to you, I get it. It’s so easy for us to be—not easy. We get upset when this happens, but we celebrate when we do it to someone else, right? Because almost always, when we win new business, someone had it before we got there. And for whatever reason, whether it was relationships or performance or a better value proposition, I’m sure you’ve taken business from other folks, too. This just sounds like it was coming, and you saw it coming. You tried to mitigate it. You couldn’t. You did a post mortem on: Could we have done anything else? The answer is: Can’t think of anything. And so, as hard as it is, I think turning the page is probably all you get to do next.

Jennifer Kerhin:
Yeah, thanks, Mel. That’s a good perspective. I wrote to the company that got the book of business. I’ve known that person, just at industry events, and so I wrote that CEO and just said, “Congratulations, it’s a great client. I wish you all the best.” And my staff was sort of surprised that I would do that.

And I thought: You know what? This industry is too small. This world is too small. There was nothing that other company did. They didn’t do dirty-handed tricks. They didn’t badmouth me. They just won this business. And so, I wanted to wish them well and wish the client well, because it’s never good to burn bridges. And I am shocked when I see people getting angry and burning bridges. You never know what happens in the future. So I tell them, “Look, if it never comes back, great, but you never know what could happen.”

Mel Gravely:
You never know. You know the band played pretty well in the previous venue, but this is a different venue, and maybe that band coming back together—maybe you really can’t go home again. [Laughter] I never thought of, though, reaching out to the person coming in and wishing them well. That’s a nice touch. That’s even icing on the cake. So I’d say, hats off to you.

Jennifer Kerhin:
Thank you.

Loren Feldman:
Did they respond?

Jennifer Kerhin:
They did. That CEO wrote me back, sort of surprised, and said, “Thank you.” And again, any industry can be too small as you start to get bigger, and I never want to be perceived as sour grapes or burning bridges. We played a fair game. We did our best. And we wish them the best.

Liz Picarazzi:
Right. Well, and other partners that you worked with at that company, like, if they go on to other jobs where they’re in a decision-making role to hire you, they’ll have had that experience to draw upon in considering you. When I worked in corporate, I saw that a lot, where maybe an agency would lose the business, but then it would kind of, 10 years later, they bring the agency back.

Jennifer Kerhin:
Liz, that’s what I’m trying—I’m hoping for reputational, right? The reputation of me as a CEO and of our company is that we do our best. We try to work with you long-term, and if it’s not a fit, then we want you to do the best you can for your meeting, for your convention. And who knows what will happen?

Loren Feldman:
Mel or Liz, have you guys had that kind of experience?

Liz Picarazzi:
Yep. So I would say my response to this is definitely a lot different than Jennifer’s. The one that’s most vivid that came to me was when I had my handyman business, Checklist Home Services. We had two products: the handyman for a half day and the handyman for a day. And so our clients would basically put together their list of all this sort of painting and caulking and IKEA assembly. We’d figure out which product worked for them in terms of time and staff, and that would be it. That model worked really well, but I sometimes went outside of that model.

And on a couple of occasions, there were people who wanted more than the handyman for a day. They actually needed a full contractor. So they would try to stuff the work into a regular handyman day. And so on probably three or four occasions, that happened. And I think it was partially my fault, but I think you’ve just got to watch out for people who are trying to stuff more work into the service that you offer, versus needing to kind of be a step up, in terms of scope.

So I remember it really hurt. And I remember feeling very righteous about: We’re trying to help her out with all of these things. But seeing: You know what? Let me stay in my lane. The way that I market my business, the way I hire my guys, it all lends itself to strictly a handyman business, not a GC. But it took being fired a few times for me to realize that boundary needed to be set.

Loren Feldman:
How about you, Mel?

Mel Gravely:
Yeah, of course. I mean, I don’t know anyone who has long-term relationships with customers who hasn’t had one decide to go another direction. I remember one who I would have to say was partially because they worried about our capacity to do all of the upcoming work that they had to do. So we hadn’t failed to deliver on that capacity, but they worried that we might. And because of that, they didn’t take all the business, but they took a portion of it, and it wasn’t a small piece. It was like 40 percent, and gave it to someone else. And it didn’t go well.

I mean, you know, same as Jennifer, this is our founding customer, and they’re very important. We gave a lot to them and invested a lot in that relationship, but we took the high road. I didn’t write the other CEOs notes, though. I wish I’d have done that. That’s a great one. But we just kept our heads down, and we focused, and we continued to execute. And it turned out to be a positive, only because the customer had not had a chance to compare. And having others work with them that they didn’t know showed them, “Oh, it is better when we’re doing it with Triversity. We thought it was more expensive,” or whatever they thought.

It is actually different. And so in a weird kind of way, it turned out to be a positive. Those suppliers are no longer in this account, we now do all of the work again. But we had to work our way through probably two and a half years of sharing the account. But I think it turned out to be a positive. So I say just put your head down and keep doing the work. Take the high road, and you never know.

Jennifer Kerhin:
Mel, that’s my hope. You just never know for the future, right? Some people already reached out to us for some historical knowledge, and we said, “We don’t have access to the technology to give that.” We can give them old reports that we’d emailed them, but we’re no longer in the account. We don’t have access into the event technology to give them. And they were like, “Oh.” And so, the same thing as you—look, I’m taking the high road. I really wish you the best, but I’m really hoping to feel that maybe they do come back. You know, if they do or don’t, but I do hope that they see the comparison that they couldn’t see before.

Mel Gravely:
Yeah. The other thing is, it frees up some of your capacity to maybe find something that’s even better. Because I think sometimes, just like customers get kind of addicted to us, we get addicted to them. And a little perspective doesn’t hurt from time to time.

Jennifer Kerhin:
That is a very good point. And I think what Liz said, too, is that you get perspective on the scope of the work you want to do and what you don’t want to do. And when you have a legacy client like that for a long time, you just assume so much extra work, I think because it’s built up slightly over the years.

It’s kind of like when, if you’ve ever painted a room and there’s like 10 layers of paint and wallpaper or something, you start peeling back the layers, you’re like, “Wow, wait a minute. Why are we doing this? We don’t do this for other clients.” So hopefully, we’ll see. But I feel good. I think by taking the high road, you can never feel bad about it. It stings, but it doesn’t leave a lasting mark.

Liz Picarazzi:
Think about it, too. Let’s say that company has \ 30-40 people. If you’re connected to those 30 people on LinkedIn, when they leave that job, you’re already connected to them. I mean, again, LinkedIn sometimes is helpful, sometimes not, but I would totally connect with them there if you aren’t already. Because then a decade from now, they’re still going to be connected to you.

Jennifer Kerhin:
Agreed, agreed.

Loren Feldman:
Jennifer, are you doing anything differently than you normally do to try to replace that business?

Jennifer Kerhin:
Well, the whole year we’ve been putting a lot more emphasis on marketing than we’ve ever done. So I don’t think specifically that losing that client, but this is the first year I’ve really leaned into more marketing. We’ve done a lot of trade shows. Imagine that: A trade-show-management company doing trade shows. And we hired our first business development part-time person, dedicated. So, not specifically because of that client, but overall, knowing I needed to lean in.

Loren Feldman:
And how is that going?

Jennifer Kerhin:
Slow. [Laughter] We have a long cycle. We have multi-year contracts, and so it’s a long sales cycle for us. Getting a new business development person up to speed took a little bit. She’s from the industry, so she’s been fantastic, just getting her up to speed of us, the training. And then, she has brought two clients, and our life cycle from initial contact to when we got the signed contract, it was about five months. So it’s a long life cycle anyway. Six to nine months is pretty typical.

So continuing on to it, what I realized, though, is next year, I’m budgeting for a director of sales and marketing. I have four different people involved in this, and there’s too many pieces and not a leader. So I was trying out different things: a part-time hunter, in the business development language, going out to find new clients; someone that’s doing account management internally to try to get current clients, get more business; a marketing agency; and then internal, some marketing support. And I need to pull it all together next year.

It doesn’t matter that it’s a lot of different vendors or different part-time employees. I just need one person to report to me, because there’s too many. And then I have a project manager helping. There’s too many cooks in the kitchen. I need one leader to talk to me, and then that leader to execute. I can do the vision, and I can set the agenda and the messaging. I need someone to execute. I can’t have these four people—it’s too much.

Loren Feldman:
That’s something you’ve been focusing on of late as well, isn’t it, Jennifer: developing your managers and offloading some of what you’ve been handling yourself?

Jennifer Kerhin:
Yeah, that’s our messaging for the entire year—our mission for this year, let’s say. My goal was management training. As we’ve grown, I have tried to promote from within and give them resources, and I’ve invested heavily into them to be at a certain level, a director level. And what has come out is: This is a longer process. We want to grow faster than it’s going to take someone to do some of this. So last year, last December, we brought in a director from outside the company, and her skill-set was so fantastic and so strong in staff management, it made me rethink that it is not possible to get a really good worker to that staff management level fast—or some of them don’t even want it.

So I recently had a really strong, strong, competent person who was leading a department. When the department was two people and her, she did fantastic. It’s now six. She asked to step down. She said it was too much, and I tell you, that was the best decision. I’m so proud of her for taking a step back so that she could move forward in her career, because it’s going to be better for the company and better for her career to get someone in who actually has better experience. Because the managing of staff—that track of being a technical or subject matter expert is one thing, but the whole track of managing staff I have learned so much about.

It’s a different skill-set. You don’t want to take your best expert and put them in staff management, because sometimes they hate it, and then sometimes staff managers can manage two people, but you start to manage more and more. It takes a while. It’s an entirely different skill-set. So I’ve learned, as a CEO, what it takes to manage staff; at that department level, what it’s taking for them to do it. And I’m not sure I can always promote from within—not that they’ll never get there. They’ll get there. It’s just going to be a longer time period, and I need people immediately.

Loren Feldman:
Mel, how have you come to think about that issue of whether you can promote from within or hire somebody with more experience from outside?

Mel Gravely:
Yeah, I mean, I’m with Jennifer on that. It’s a mix, because of the age of our company and our aspirations for the rate of growth, the individuals we bring in out of college—which is our highest retention—and promote up through, we’re moving too fast for them. We’re planning for their growth. We’re planning for their future leadership. But it’s 8, 10, 12 years out, and we’ve got to pace ourselves on that. And so we’re sprinkling in culturally aligned professionals from outside.

I will say that it’s harder to retain them, at least we find it harder to retain them. We’re also finding it harder to make sure they’re aligned culturally, because we have such a deeply different culture here. So sometimes people say they get it—until they get here and they say, “Oh, I didn’t think you meant that.” So that’s a little bit more of a challenge, but it’s worth it, because we’re sprinkling in these professionals. And when they work out, they help us grow. And when they don’t, we help them find what they should be doing next.

Loren Feldman:
What are you referring to about your culture, Mel? What’s so deeply different?

Mel Gravely:
Well, if you start with our purpose statement to model the diverse and inclusive world we want to live in, that’s a strange purpose statement for a construction company. And I keep telling them, “No one needs another construction company, but they need another model in the world.” So the way we hire, the way we promote, the way we engage, the way we talk to one another, the expectations around empathy, the expectations around acceptance of others create these non-negotiables for our culture, where I don’t think a lot of companies find those things to be imperative. They find them to be important. Here, we just can’t be who we are without them. So they’re all bound up in everything—all the processes and procedures—and some people just don’t like that.

Loren Feldman:
Do you think you’ve lost good people as a result?

Mel Gravely:
I would say we’ve lost people who should work someplace else. They weren’t good for us. I can’t think of a person that we lost where I thought, “Man, that’s it. Darn it, darn it, darn it.” Usually it’s pretty obvious that they’re not going to thrive here because of who we are. But if we aren’t who we are, then we’re really just a construction company, and I’ve got to tell you, that would suck.

Loren Feldman:
Jennifer, it sounds like you kind of won the lottery. You went outside, maybe for the first time, to hire an experienced manager, and you got exactly what you were hoping for. What did you do right?

Jennifer Kerhin:
It wasn’t the first time. I think it was the second time. The first time didn’t work out. And I will echo Mel’s statement. Everything he said is what I’ve seen on a smaller scale. But you just can’t move fast enough sometimes for the internal people. You need to sprinkle in and then find people to fit the culture. The first one that I brought in from the outside—actually it was two people, I’m sorry. One only lasted eight days. [Laughter] Yeah, that was a really, really bad hiring decision on my part.

Mel Gravely:
But wait, now. Let me let you off the hook. Who hasn’t had one of those?

Jennifer Kerhin:
It’s like, “Wow, that was a bad choice.”

Loren Feldman:
Did you end it? Or did they end it?

Jennifer Kerhin:
Oh, I ended it. It was at the eight-day mark. And she wasn’t surprised at all when I called her—at all. I probably could have done it at day four or five, but I thought, “Oh, maybe this is just the first week.” So this was actually the third person I brought from the outside, and what I have learned—and anyone who’s been in recruitment or hiring, who’s good at it, will probably be like, “Well, duh, Jen, of course,”—is really understanding not just the day-to-day culture, but the type of person who will succeed in your company and in this industry is really important.

So for us, if you know trade shows, fantastic. But you have to also understand being what we call the third-party: We’re in an agency environment with clients. If you have not been on that side, and you’ve only worked on trade shows internally, you don’t understand the client management side of it. And I did not realize that until this person was hired. And I thought, “Oh, well, now on my interview checklist, I have to add in, ‘Okay, trade show experience is great. Cultural aspects of our company is great. But you have to understand what it’s like to be on the agency side.’” I did not realize that before that person was hired, and it’s changed my mindset of hiring quite a bit.

Loren Feldman:
Can you explain what it is that they’re missing if they haven’t had that agency experience?

Jennifer Kerhin:
Two things. One is decision-making ability. You have some, but not unlimited decision-making ability when it’s not your event. So you have to work autonomously, but understand when to ask for approval. People who work internally for a trade show make the decisions. So here, you don’t have final decision making.

And then, second, is switching between one client and another. One client’s best practice may be different than another client’s, and you can give them your best practices and the industry standards. But ultimately, the nuance of client work is different. And there’s a lot of similarities with marketing agencies that that creative type work can be nuances for clients. That’s difficult sometimes for people to transfer over and understand that.

Loren Feldman:
So, I want to talk about another uplifting topic, which is: How do you know it’s time to pull the plug on something that’s not working? Mel, I gather you’ve had some experience in this area. Can you tell us about it?

Mel Gravely:
Yeah, I’ve been thinking about this, Loren, and I think that I’ve got a disproportionate amount of these examples because I try crazy things at times. Some might call them entrepreneurial. Some might call them opportunistic. But I apparently have a low threshold for trying, right? And so, you have these things that you go try and you realize that they don’t always work out.

So, yes, I’ve had a number—including a business that I think I’ve mentioned on this podcast before—that deserved to be gone. It had died long before we let it have its peace. And so now, I’m just much more aware of the signs.

Loren Feldman:
What have you learned? What are those signs?

Mel Gravely:
Well, I promise you, I’m going to learn some new ones, because I’m going to keep doing things that are opportunistic and entrepreneurial, I’m guessing. But you know, let’s just take a company that we were running, call it a C. We might gussy it up to B-minus performance levels. It was an engineering firm. We had great people. We just didn’t have a very well-developed business plan or business model. We weren’t clear about who we were. So we had a kind of take-what-we-could-get mentality, and it was just a very uninspiring business. And I learned a lot about what a business has to be from that experience.

It was my first business that got to any scale. So I learned a lot about the people, part of it in the positioning and strategic planning and all that—none of which we did very well. But it got to a point where we kept having to try different things to survive, different billing models, different pay terms, different ways we pay our employees to stretch out cash flow. When you start doing things like that to survive, it’s a sign that something’s wrong. And you at least should evaluate. And probably, whenever you find a deep, deep problem in your business model—in Mel’s opinion—I’d say over 75 percent of the time, it is a business model flaw that it may be too late to fix. There’s something wrong with the value you’re creating and the way you’re getting paid for it that is probably too late to go back and fix.

And so the only way out is out, and people don’t like to do that. But before you cash in your 401(k), before you borrow money from friends that you probably aren’t going to be able to pay back, and ruin long-term capabilities and opportunities, it is almost always better to cut your losses and move on. I’ll just say one last thing: I only learned one thing in business school, and that is the theory of sunk costs. And if people are making a decision to keep going because of everything they’ve already put into it, you will always make a bad decision.

So you should only be calculating: What are my opportunities in front of me? Because the other things are already in the past. And I did a whole bunch of that. Well, we’ve been at it so long, and we’ve put so much into it, and of course, there’s ego and all of that stuff in it. So, yeah, I’ve got project examples, business idea examples. It’s been a fun ride.

Loren Feldman:
Liz, I know you mentioned your handyman business, which you had before you started Citibin. In fact, Citibin grew out of it because your handymen were making trash enclosures, if I recall what you’ve told us previously correctly. And I know you sold that business, but I’m curious. I’m not sure how well it did. Did you ever think about whether it was time to move on or pull the plug before you discovered the opportunity with Citibin?

Liz Picarazzi:
Let me think… I would say I thought that I could do both. And after two years of really grinding myself with both, I realized I couldn’t do both, and I chose Citibin. So there were a couple of years where I was running both of them, because I saw tremendous synergies between them. So we had a shared bookkeeper, a shared workspace. We had a shared installer, shared vehicles.

Like, it all seemed to work together well, but one business was profitable—Citibin—and the other one was not. And so I had the opportunity to sell Checklist, and I took it. And I’m so glad that I had the opportunity to do that, because quite frankly, if I had stayed in that handyman business any longer, I don’t know what would have happened. I was really done with it by the end of it.

Loren Feldman:
So looking back on that experience, is there a lesson you take from that? It sounds like you didn’t go looking for the opportunity to sell it. Maybe that opportunity just—

Liz Picarazzi:
It did. It was someone from EO, actually. So I’m part of EO, and someone really loved the business and wanted to franchise it. I thought that would be a great idea too, if he could have done it. And, you know, it turned out not to be scalable. It turned out that without me doing the marketing and strategy and business development, all the stuff I did, that it was less valuable. And so, it died a couple of years after that, less than two years after I sold it. And I mean, it does sound like a death. I grieved for quite a while, but I also really love what I’m doing now.

Loren Feldman:
That’s really interesting. You had another business that was doing well and was profitable. Why were you grieving?

Liz Picarazzi:
I really loved what the service was. I really loved the idea. I think there’s a customer need there that is so, so obvious. Like, someone should do that business. It’s just not going to be me anymore. I think it’s such a good, worthwhile service for someone to be able to take care of their honey-do list in a day. I’m a consumer of those services now, too, and I really value it. It’s so clear.

But it’s also hard to run profitably if you want to have W-2, on-the-books employees—which I did—who were licensed, and we had insurance that cost a lot. So if people are accustomed to paying for a handyman that they found on Craigslist, my service is going to sound really astronomical. But I had to focus on that client, that that was important for them.

Loren Feldman:
It sounds like maybe you should partner with somebody who has a construction business.

Liz Picarazzi:
Oh my God. I’m going to stay on product for the rest of my life.

Mel Gravely:
You know, I was just thinking, iIt sounds like a great business. But when you try to scale something, the challenge is, does the customer recognize the differentiation? And if they don’t, then they won’t pay for it, right?

Liz Picarazzi:
Yep.

Mel Gravely:
So if it is handyman services, they put that into a category. And if you’re 35 percent over—I made that number up—at scale, they won’t pay for it. Of course, some people will, because they’ll get it, but that’s what I mean by business model challenge. Sometimes you don’t know until you’re out in the market, whether it’s a B2B business or B2C, whether the model really works. And if you don’t check in on that business model early, you could do this for a few years and really get yourself screwed up before you figure it out.

Liz Picarazzi:
Right, or you can think that it’s going to succeed based on your early results, which are probably largely due to it being small and you being highly involved. So you may not have the view at that point, or the experience, to know that it’s not scalable due to all the reasons why businesses tend not to scale well.

For me, the liability issue of realizing every time I send someone who I may have just hired a week before into someone’s home, I’m at risk, both professionally and personally. That’s not a risk that I’m willing to take without having good enough insurance to do that, which brings the price up on something like that. So it seemed great when it was small, but then hiring handymen was not very easy. I’ll just put it that way.

Mel Gravely:
I’m shocked. I’ve never experienced that problem before. [Laughter]

Loren Feldman:
Jennifer, you clearly have learned that there are times when you need to pull the plug on an employee quickly. Have you also had the experience of pulling the plug on some sort of venture or service that you’ve offered?

Jennifer Kerhin:
Umm I won’t say venture or service—I think clients. Early on, I was really good. Some people were kind of shocked. I’d pull the plug on a client really quickly. I quickly learned in the first couple years that I wanted to be in a very, very niche industry and not to do extras. And if you think of a wild apple tree or something, I was going crazy with pruning the first three or four years, which has been successful. I have learned: Do not try to be everything to everyone. That’s a way to death. The best way to start off as a small business is to do one thing really, really, really well, in one client group. And then you can eventually expand.

And some people question—a lot of people question me on this—that we are only right now doing convention and trade show management for associations. We get calls all the time from corporations, or we get ones where it’s like a quasi-government one. We get it from foundations. I won’t do it. And everybody’s like, “Well, why? Why?” I’m like, “Nope,”—because that is a marketing leverage and that is what my staff understands. They understand the timelines. They understand the governance structure. They understand the budgets. And then from a marketing perspective, I know their language. There’s a lot of other dumb mistakes I’ve made. Not that one.

Mel Gravely:
What’s shocking to me is that when you try to tell people, they just don’t get it. We don’t do any government contracting, just as an example, and we are now one of the top 10 in size construction companies in our region. And people are like, “Why wouldn’t you go do this for the city or this for the county or that for the state?”

One day that might change, but all the things you said that your team understands, we understand none of that with the government. We don’t know their motivations. We don’t like the procurement process. We don’t like paperwork on the front-end. We don’t understand how to do budgeting. We can do the construction. It’s all the other stuff that’s the problem for us. People just don’t get that.

Liz Picarazzi:
Yep, and a lot of time could be spent looking at how things are done at every level. Now that we’re doing more stuff in other states and nationally, the bureaucracy of it is sort of daunting. And not every company is going to want to spend time doing that. They’re going to want to focus on the clients that don’t have that red tape involved.

Jennifer Kerhin:
Right. But I’d actually say I’m more risk-averse than Mel. I think I want some of Mel’s entrepreneurialism or ambition, to be honest. I have a new idea that I’m not ready to talk about. But I have a new idea that’s new in the fact that it’s new for the past five years I’ve been talking about it. [Laughter]

Loren Feldman:
Maybe it’s time to tell us about it, Jennifer.

Liz Picarazzi:
Now’s the time!

Jennifer Kerhin:
It is going to be my 2025 goal. It’s a new service, and I am tired of talking about it and tired of not making the leap. So I have told myself: I’m putting it in the budget for next year. But Mel, I’m like the exact opposite. I’m too risk-averse to try this. And what’s the worst that can happen? It fails, and I think I’ll probably lose $50,000. I’m trying to figure out how much money I’d lose, which is significant, right? But I’m not going to lose everything. And it’s been five years and I’m still scared of it.

Mel Gravely:
Well, I get it, by the way, and the reason I think I am the way I am is I sometimes don’t know any better. So keep in mind, I used to run a construction company, and I’m not a construction person. So these ideas made sense to me, and my team would freak out, and then I’d go do it anyway, because I was CEO and I could. And then they’d have to rally to save me from myself later on.

And we just talked about this last week, that the concern that I have, and the board has now, is there are no entrepreneurs left in our company. And so the fear is, we’re going to become a construction company, and if we are, we’re going to have a real tough time competing. So they’re working through that.

Here’s what I would say: I think, “How much would you lose?” is a great question. There are two other questions I just invite you to ask, Jennifer. And one is: What is the true upside? And is this a sustainable business that drives an upside that you’ll say, “Glad we did it,” if it wins? And the second part is: How distracted will it make you and your team? Because what I have found is, if it doesn’t have a big enough upside and it distracts the team too much, it probably wasn’t worth it—if that makes any sense.

Jennifer Kerhin:
It totally does. I’m writing this down right now, and I’ll tell you by the end of the year.

Mel Gravely:
Yeah, you’re going to do it with the existing team, probably, and so someone’s going to be a bit distracted. And what’s that going to look like? Because I’m assuming people are busy in your organization, like they are in all of our companies. But if you can work your way through that, then, man, I say, go for it. And if it doesn’t work, stop doing it, and try something else.

Jennifer Kerhin:
I’ll let you guys know how it goes.

Loren Feldman:
Jennifer, just to confirm, it sounds like this is an idea that you would do within the structure of your existing business, not an entirely new business, correct?

Jennifer Kerhin:
It’s a joint venture. It is in the same industry. It would be with my staff doing the work. And I have thought considerably, Mel, about my distraction level. That’s one of the big reasons I didn’t do it before, because we have been in rapid growth mode. And I could not devote one more minute in my brain or my body to do something new. But I’m, as we’ve talked before, almost at the end of the valley of death. And so, the new idea would be with my staff, but as a joint venture.

Loren Feldman:
Intriguing.

Jennifer Kehrin
I’ll let you know.

Mel Gravely:
I’m very intrigued. By the end of the year, okay, I’m writing that down. Get back to Jennifer.

Loren Feldman:
Liz, I want to check in with you. The last few times you’ve been on here, we’ve talked about your issues with the China tariffs and your attempts to find another place to manufacture. Where do things stand?

Liz Picarazzi:
So, I’m actually in a very good place with it, because it really was a lot of worry in the early part of the year, with uncertainty starting in January when Trump said that the import would be 60 percent—my tariff would have been 60 percent. And then, sort of putting into motion, where else could we produce? And that led to Vietnam. And so then, in May, we went to Vietnam. We met with a couple of factories there. We then basically put together a spreadsheet of all the numbers for the various options we had in China and Vietnam. And then I was like, “I want to try the U.S. or Canada.”

I’m going to just try one more time. It’s been four or five times over the years that I’ve tried to make that work. And I found what I think is a really good option in Canada, and we’re going to be going to visit to meet the factory owner and to see the sample. It is about 25 to 30 percent more than what we would be paying in Asia. But there are some incredible supply chain efficiencies that are created. They would just be a nine-hour truck ride to Brooklyn, and we might be able to warehouse product up there, having sort of an inventory bank system whereby we can decrement from our own inventory instead of down here. We pay for a warehouse in Brooklyn, which is very expensive.

So you think about, as we grow, something like a warehouse expense, you don’t really think about it a whole lot until you really see that number and you see, “Oh my God, my growth is causing me to have skyrocketing warehouse costs.” Then a vendor comes along that can take that entire cost off of you. That’s something that doesn’t fit into an easy analysis, but is a huge factor in the way that I look at the costs. So there’s sort of the columns in our spreadsheet that are just numbers, and then there’s a couple of columns that are about, I would say, if you want to call them the soft considerations, but something like the warehouse, the speed, as well as the terms of payment.

So I really like the terms that I’m getting from the suppliers I chose. So there’s still basically three options. There’s with my current supplier that I work with in Shanghai, and then they’ve set me up in Vietnam. So that’s my Asia option. I’m working with my current company, which I love, and they’re doing both countries. We have production going on in both countries now. This Canada thing is what we’re exploring next. So, I’ve got three really good options, and I feel ready for whatever happens. I have a plan in case Trump is elected. Vietnam is the plan. And if Kamala Harris is elected, I have three options, all of which I like.

Loren Feldman:
I think you said you were going to give one more shot to checking out both Canada and the U.S. What happened with your efforts in the U.S.?

Liz Picarazzi:
Ah, Loren, I was afraid you’d ask that question. It didn’t go anywhere. You know, I talked to three or four factories. I had a really good meeting with one of them that I expected to get a quote from and I never got it. And I’m tired of chasing. And I went back to a couple of the places that I had bids from the last time I tried a few years ago, but the pricing was so much more that it would still cost a lot less to produce in China, even with an increase in my tariff.

So, disappointing. But Canada is closer. And you know, if the state of New York or the country of the U.S. want to help me—a small manufacturer that wants to reshore my production to the U.S.—I will take that assistance.

Loren Feldman:
Have you thought about, if you do move more work to Canada, how you will divvy that up, in terms of, will it be duplicating manufacturing that you do elsewhere? Or a separate product? What are you thinking?

Liz Picarazzi:
That’s something I’m kind of enjoying designing right now, because there are different types of clients that have different speeds, for example. So if I have a city that really, really wants bins, but they need them in six to eight weeks, China really isn’t an option for me, nor is Vietnam. So stuff that’s really fast, I would probably put up to Canada. Stuff that is very sort of high-volume and replicable, like certain products that we have are higher volume, would probably go to Vietnam. And then anything that we’ve really worked on the product together and developed together—for instance, our bear-resistant enclosures—I wouldn’t put that into Vietnam or Canada, because I still view China as my partner in developing that product, and it’s something that’s really important. So, I wouldn’t move that.

Mel Gravely:
Great options.

Loren Feldman:
You’ve made the choice that Mel said he didn’t want to make with his construction business, in terms of dealing both with private and government clients. I’m just curious, since it came up with our previous conversation, how has that worked out for you? And would you encourage Mel to rethink that?

Liz Picarazzi:
I have two sort of paths to government clients. One is directly with a city, like I did in New York, but then the second one is with business improvement districts, which are all over the country. In New York City, we have 76 of them, and those are all pseudo-government entities, but they’re much easier to work with. There’s less red tape, and so that’s sort of my way to get in. I didn’t have to go through any huge RFP, or any RFP process, for that matter, to get that work. So it’s almost government adjacent.

You know, if you have someone who can set up the stuff with these government databases—if it drives you crazy, like it does me. I just have someone else do it. And I don’t go anywhere near it, because that sort of work, it drives me nuts. I hate the red tape. So I guess what I’m saying is that I would only do more work with government if I continue to have the staff I have that has the patience to deal with it. And they do.

Mel Gravely:
I totally agree. To me, it all comes down to: Do you have people who can engage with their stuff? The good news about it is, it’s known and it’s repeatable. But you’ve got to have a bit of expertise in doing it.

And Loren, there’s a little bit of a difference between a product and a service. You know, we’re delivering a service to them. So there’s these constant interactions over months and months of time that are all intertwined with their different procedures and practices than in my private work, where I think I’d sell product to the government. I think. Again, I don’t sell product, so it just feels like it would be a little bit more transactional. Am I wrong?

Liz Picarazzi:
I have a thought, though, Mel: I’ve become more interested in government contracting from meeting other businesses that are doing it successfully. So, if in your area, the sort of contracts that you might bid on, you look at: What are those companies doing to be successful? Is this a space I want to be in? Someone might be able to tell you, “This is a real grind,” or, “This is totally worth it if you get XYZ correct.” I wouldn’t completely turn away from it yet, but maybe have coffee with a couple people who can tell you what it’s really like to be a government contractor. Because you can learn from them.

Mel Gravely:
Well, I think that’s good advice. Yeah, and we’ve talked to some. We’ve even looked at a few projects with the University of Cincinnati, a state agency. So it’s good advice. We are opening an office next year in Columbus, Ohio, which is the state capital. And again, remember, I’m not the CEO anymore, so I don’t make these decisions. I was thinking we should go to a different city next, but they didn’t care what I thought. So that’s cool. We’re going to Columbus. It’s a great growing market.

Loren Feldman:
I bet they cared what you thought. You are the owner, right?

Mel Gravely:
Eh, I don’t think they cared. They didn’t act like they cared. How about that? But we’re going to Columbus. So, Liz, this is our moment, because when you go to the state capital, if you’re not going to do state government work, you’ve decided that half the economy you’re just not going to pay attention to. Whereas government work in Cincinnati—it’s a good bit, but it’s not nearly as large as it is in Columbus. So I agree. I think we’ve got some learning to do, some benchmarking with some others to do, to look into that. The good news is, I don’t have to actually lead the troops up that hill.

Loren Feldman:
Liz, what’s your goal when you go to Canada, and where in Canada is it? What do you need to find out?

Liz Picarazzi:
So we’re gonna go and see the factory, meet the owners, see the sample, kind of do a tour of the factory, and really go over a potential plan. For me, this is, I like going to the factory to meet people, because they’re usually family-owned small businesses like mine, and I like to have that sort of connection. So I do think there’s a part of it that is sort of: What would the experience of working with this person or this factory be like? And then maybe discuss some specifics of terms.

So, like I said, something about the warehouse, that’s part of my negotiation, quite frankly. When I went on this whole journey, I never expected that at the end of it, I might be talking about how my warehousing costs could be reduced by working with a partner. But it took a while to get here, and now it’s like we’re fine-tuning. So that’s my goal, and I’m actually not going to share where in Canada it is, because I don’t want any competitors to figure that out.

Mel Gravely:
Good for you.

Loren Feldman:
I think you used the term “soft cost” to describe the warehousing cost. That seems like a bigger deal to me than that, like a crucial part of this. Am I wrong?

Liz Picarazzi:
It is, but it’s harder to quantify, because I’m not taking the number directly from a quote. So when I’m writing out the hard costs, I’m looking at: What are my production costs? What are my tariffs? What is my container cost? Those are the three things. So that’s the landed costs.

But that doesn’t include managing the supply chain. That’s quite a lot of work, actually. And it doesn’t include stuff like looking at the warehouse cost in Brooklyn versus this place in Canada. So it’s something that, initially, when we laid out the analysis, we didn’t really think to look at. But it does matter, and it could be an influencing factor in what we do. I know it will be, actually.

Loren Feldman:
Wherever it is in Canada, I’m guessing the warehouse space is cheaper than it is in Brooklyn.

Liz Picarazzi:
[Laughter] Yes. You know how many times I’ve talked about my warehouse on this podcast and in my 21 Hats columns. It’s a weird thing that you have to deal with when you’re an inventory business. It’s part of the supply chain. And when I got my MBA, I actually got a C in operations, and I always stayed away from operations in all of my work. Frank [My husband and COO] is really focused on it. But I like thinking about it conceptually, because this exercise was not about: Where do I get the cheapest bins? The exercise was: Where do I get bins that are reasonably cost-effective and in a way that it simplifies my supply chain?

So the simplification of my supply chain has some sort of a dollar amount. And I guess what I’m saying is that sort of the soft cost that I have a hunch about what that is, but I haven’t actually put in a multiple. Like, there’s a 30-percent cost to us because of the hassle of working with China. When you really boil it down, that’s what that number is: How much is that number? And we’re going to have conversations to figure out what that is.

Loren Feldman:
Well, we will be eager to hear more, but we’re out of time now. My thanks to Mel Gravely, Jennifer Kerhin, and Liz Picarazzi. Thanks for sharing, guys.