I Used to Sell to Consumers

Introduction:

This week, Paul Downs, Jaci Russo, and Sarah Segal talk about how they wound up pitching their products and services not to consumers, but to other businesses. They all agree that selling to business is more profitable, and they all agree that it has other advantages, as well. “In general,” says Paul, “it’s easier to sell to businesses because the person you’re talking to, it’s rarely their money.” But some aspects of selling B2B can be harder. For example, how do you break through and reach the right person at a business, especially if you’re trying to reach the owner directly? And of course, there’s always a learning curve: Selling to a big business requires a level of professionalism that can be challenging, especially early on. Plus: Sarah explains why—even though she had to lay off people last year—she’s doubling her office space this year. Jaci is exploring what policies make hybrid offices most effective. And Paul, who says he’s having his best year ever, spells out the way he calculates when it’s time to add employees, as he had to do earlier this year.

— Loren Feldman

Guests:

Paul Downs is CEO of Paul Downs Cabinetmakers.

Jaci Russo is CEO of BrandRusso.

Sarah Segal is CEO of Segal Communications.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome Paul, Jaci, and Sarah. It’s great to have you here. I want to start today by asking about something all three of you do, which is, you all sell B2B, to other businesses. And we’ve certainly noted that here previously, but we’ve never had a conversation in which we specifically addressed the challenges, the opportunities, the pros and cons of selling to businesses as opposed to consumers.

This was triggered for me by a question I saw on the small business subreddit. The question was headlined, “B2B is difficult.” Let me read it to you:

“Everyone wants to be able to sell to someone, but doesn’t want to be sold to, myself included. We see it here often with the sheer disdain toward marketer’s cold calls, emails, really anything that wasn’t asked for. I realize that selling to us types is harder. So why are we the way that we are? Is it not hypocritical?”

So I want to get your answers to that. But first, before we talk specifically about those questions, and about selling B2B in general, I want to talk about the numbers. Until I saw this question, it had never really occurred to me to check and see what percentage of the regulars on this podcast sell B2B. And somewhat to my surprise, it turns out all of them do, including me. Of course, three have significant consumer businesses as well: Liz, Laura, and Jay. But I was kind of surprised by that. So I asked ChatGPT what percentage of businesses sell B2B. Any of you have a guess? Do you know?

Paul Downs:
Small. I would say 15.

Jaci Russo:
The opposite. I would say the majority.

Loren Feldman:
And you would be right, Jaci. Paul, I was kind of thinking along your lines.

Paul Downs:
Well, what’s the definition of a business?

Sarah Segal:
Wait, I have a question. I’m confused. So you said, “What’s the percentage of businesses—”

Loren Feldman:
The percentage of businesses that sell specifically to other businesses, as opposed to consumers. And according to ChatGPT, the percentage is 75 percent.

Paul Downs:
Yeah, but ChatGPT makes stuff up all the time. So the first thing I would want to know is: What is their definition of a business? Because my understanding is the vast majority of businesses—if you just number them by things that are called business—are quite small, usually single-person. And so that’s a huge number of businesses that probably aren’t selling B2B and would be the denominator in the percentage.

I asked ChatGPT a couple of days ago: When did carrots start to be a popular food item? And ChatGPT told me, to my surprise, that it didn’t happen until the 14th century. And it took about 10 seconds of looking to realize that carrots have been around in European cuisine for at least 10,000 years before that. So just because ChatGPT gave you an answer doesn’t mean anything to me anymore.

Sarah Segal:
Here’s the real question, Paul. Why on Earth were you asking that on ChatGPT? [Laughter]

Paul Downs:
My wife and I were just talking about cooking. And what I was curious about was whether carrots were one of those things, like tomatoes or potatoes, that had been introduced to European cuisine after America was discovered. And so the answer, “the 13th century,” doesn’t make any sense in any context, because it will be prior to Columbus finding the New World, but it will be so much farther after people started cooking in Europe and other places, that it’s just like, “Where did that even come from?”

Now, to be fair, this was Google’s AI. There’s a little summary at the top of the search results, saying, “Here’s what we think it is,” and then all the search results immediately below that directly contradicted this AI-generated answer.

Loren Feldman:
And that’s the same place that said a popular topping for pizza is glue. So yes, you’re correct, AI can be wrong. But Jaci knew. Jaci, how did you know?

Jaci Russo:
Because that’s what we do. We ourselves are B2B, but we primarily work with B2B clients, and so our clients sell to other businesses. And even though I know, I am still regularly amazed by how many businesses are out there that I’ve never heard of in industries that I’ve never heard of making things that I’ve never heard of that are sold in the millions, and sometimes billions. The layers of nuance in industry are fascinating to me every day. And there are far more businesses in this country that sell goods and services to other businesses for commercial use than there are businesses that are retail or open for everyone to come in and buy.

Sarah Segal:
But my question also is, where’s the money at? Like, you know, the percentage—does it make sense? Is the money really in one, B2B or B2C?

Jaci Russo:
Yeah, there are more dollars moved in the B2B space than there are in the B2C space in the 23 years that I’ve been doing this.

Paul Downs:
Are you typical of all businesses? I’m still very suspicious of this question. Because A) we don’t know what the definition of a business is. We don’t know how many of them there are. Are there any boundaries, in terms of size? Is the size dollars? Is it employees? And then, the amount sold: Is that in dollars? Is that as a percentage of revenues? Like, all this is so vague, I just have a hard time with it.

Jaci Russo:
I would define B2B—we’ll just start there—with a business that sells a good or service to other businesses. And by contrast, B2C, business to consumer—the typical way to kind of differentiate those, in just layman terms, is, in the B2C space, you typically have either a website or a brick-and-mortar store that is open to anyone. Just about anyone could buy and use the things you sell. And so, if you look at a company that manufactures lug nuts that are to be installed in the U.S. on 18-wheelers, that’s not a regular thing that everyday people need. But shampoo and soap are. So there’s your kind of two differences.

Paul Downs:
Okay, that’s a definition. I mean, if the answer that Loren kicked out actually reflects that definition, sure. But sorry, Loren, what did you say was the percentage of businesses by this—

Loren Feldman:
Seventy-five percent.

Paul Downs:
Seventy-five percent of all businesses are primarily B2B?

Jaci Russo:
Yes.

Paul Downs:
I find that difficult to believe. Because, again, I don’t know what the definition of a business is.

Loren Feldman:
I think you’re asking some good questions, Paul. I think there are answers to them. But I don’t have those answers. I do think there’s still an interesting conversation to be had here, though, about what it takes to sell B2B and why you guys chose to do it and how you wound up where you are—and the questions that the person asked on the subreddit.

Paul Downs:
Well, I will say that I’ve done both, and that for the first couple of decades of my business, I was primarily business-to-consumer. And then we switched focus in our business to other entities besides consumers: could be business, could be government, could be military. But it’s not consumers. It is way easier to make the sales to anybody but consumers, at least what we sold, because it was a high-cost, high-commitment item.

Sarah Segal:
I was gonna say, it depends on the price.

Paul Downs:
Yeah. In general, yeah, it’s easier to sell to businesses because the person you’re talking to, it’s rarely their money. That makes it a hell of a lot easier.

Loren Feldman:
Jaci, did you make a deliberate decision to specialize in B2B?

Jaci Russo:
We started in B2C. My first couple of years of clients were all clients in a B2C space: auto dealers and restaurants and furniture and casinos and hospitals—all kinds of general retail, B2C. I realized about 2008 that the shift that was happening in the advertising industry was going to dramatically change media buying and traditional advertising and my future. And we had a real skill-set in the strategy. And we had started to do some B2B work, and we had started to be more involved in the creation of strategic planning. And we liked that better, and quite honestly, it was more profitable. And so we transitioned.

Loren Feldman:
Did you have the same sense that Paul had, that it’s easier to sell to businesses than to consumers?

Jaci Russo:
I think so—not for the same reasons that Paul just mentioned. Because a lot of the businesses that we work with, we’re working with the people who own the business. And so it is their money. But I find that it’s easier, because it’s specific. And I think anytime you can be specific, it’s going to be a lot easier to have a plan for what you’re going to do, to be more successful with that plan, to know what is and is not working, to implement that plan.

Retail can be so much wider, and therefore vaguer, because it’s like: Who are you selling to? You’re trying to sell to almost everybody. That’s going to be a very hard success. I’ll go back to the lug nuts for 18-wheelers. There’s a finite number of companies that are buying lug nuts for 18-wheelers. So, it’s a lot easier, I think, to be successful when you have a finite, specific number of people to go sell to. You just have to get to know them really well, develop a relationship with them, and sell.

Loren Feldman:
Sarah, you sell your service to other businesses. But some of them are buying your services to try to reach consumers. Do you think about this much? Does it make a difference to you: B2B, B2C?

Sarah Segal:
We have both. So we have a lot of lifestyle clients, but we always have a handful of B2B clients. I have to say that I agree with Jaci that B2B pays better. I mean, it just does.

Jaci Russo:
Don’t tell the others! [Laughter]

Sarah Segal:
Yeah, they have bigger budgets. You know, it’s there. They’re bigger industry. They are harder, in terms of what we do, in terms of press and media and social media and content. They’re harder to service those, because you’re always challenged and trying to—some of them just want trade recognition, but most of them come to us because they have the trade already, but they want to break through into general business coverage. And so we do a lot of content and news creation on their behalf, which is a lot of work. So, while they pay better, we’re also having to do a lot more strategic thinking for them.

And then in terms of the lifestyle, they’re easy, they’re fun, they make the day go by quickly. You get satisfied when your client is featured in Vogue, or in some lifestyle publication, like a Pop Sugar or what have you. That’s fun. So I like having both, because I think it gives us a balance. And we’re able to take learnings from each kind of client. We’re learning different strategies and tactics.

Loren Feldman:
So the person who wrote this question on the subreddit has a slightly different perspective than you guys, I think. His question suggested—the headline was “B2B is difficult.” And it was making the point that other businesspeople who this person is trying to reach don’t want to be reached a lot of the time. They’re not asking for the kind of outreach this person is trying to do.

Sarah Segal:
So, bad outreach, I’m gonna say. Because—sorry to interrupt you, Loren—on any given day, my inbox has at least 10, if not 15, cold emails or follow-up to previous emails of somebody. I don’t know why. I’m like on some sort of list where people are trying to guarantee me calls to grow my business. I get those all day, every day. I actually posted on LinkedIn a complaint the other day about people putting “Thoughts?” in the subject line to try to make me not realize what it was. And they all use the same tactics over and over again.

It’s very rare that I get one that is valuable. I got one the other day, and I kept it because it was smart. It was a great way to reach out to me. I didn’t need the particular service, but the woman provided me with insights about my company and free stuff, something valuable for me as a business owner. So that was good. It wasn’t just a, “Hey, I can guarantee you 25 calls so you can grow your business.” I don’t love the deluge of cold emails, but I’m open to thoughtful strategic targeted emails.

Jaci Russo:
Those people are selling, and they’re selling—and I’m using air quotes—with false promises. There’s no social proof. They don’t know you. They don’t know what they can deliver for you. They are lying. And they make all of our industry look bad. And I’m going to revisit my need for some licensing and rules and regulations around it. But that’s a topic for another podcast [episode].

But the ones that you saved are the same ones that I save every once in a while, the ones that cut through the clutter, because they’re not selling. They’re sharing information of value. They’re serving. They’re delivering something that can help us with our jobs. So the person who started this on Reddit: Sure, nobody likes being sold to. I went to dinner with my in-laws last night, and my father-in-law was on a rant about TV ads, and how horrible all the TV ads are. And I was like, “Well, if you don’t want to be sold reverse mortgages and hearing aids and Medicaid supplements, stop watching old-people TV. I don’t know what to tell you. But that’s what they’re doing, is they’re selling the things that they think the audience of that TV station wants to watch.”

Sarah Segal:
I just want to add to that: For example, we pitch media, right? And a reporter can know that if we’re just throwing spaghetti at the wall and blasting them. Or if we’re reaching out to them individually and looking at what they’re reading and really getting to know them before we reach out. You can tell.

Jaci Russo:
Oh, you mean doing your job? Yeah.

Sarah Segal:
Yeah.

Jaci Russo:
Yeah, it comes through loud and clear. When professionals do their job and have research and expertise and put thoughts together, then it’s not spam. It’s sharing and serving. And that will get you in the door most of the time.

Paul Downs:
I think that the fundamental insight for the person who asked the question on Reddit is that, if what you’re doing isn’t working, think about what you can do to make it better. Are you pitching a good or service that’s a commodity, and you’re just spamming people and hoping for a point-one-percent return or something? I’ve run into some tough moments in my business and always got the advice from people who knew me well. It’s like, you’re trying to blame the economy. You’re trying to blame this. You’re trying to blame that. Don’t. Do a better job, and you’re gonna have a better outcome.

So, we don’t really know this person on Reddit, what they’re trying to sell, what their approach is, and then complaining, “It isn’t working.” So rather than put the onus on the people who are getting whatever crappy message this person is sending out, I would suggest that that person figure out why their message is generic, poorly timed, not relevant, to the people that are receiving it, and try to figure out a way to do this differently. Because business owners have problems just like everybody else.

I have, in the past, actually responded to pretty much a cold call that was extremely helpful and has ended up saving me, oh, probably $100,000 in credit card fees. And that was someone who contacted me cold but had a very compelling pitch that, “Hey, I’m pretty sure that you’re not getting a good deal from credit card companies. And I’m absolutely willing to explain to you exactly what’s wrong. If you just send me your current statement, I’ll analyze it for you.” And I was like, “Yeah, I’m sure I’m getting ripped off by this terrible bank. So why not?”

And it turned out to be a great relationship and has been extremely valuable to me. So that person sent me something with a reasonable action I could take and that was likely to be applicable to me, because we charge half a million bucks or more in credit cards every year. And he timed it right, too. So a lot of our ability to respond to messages is also just like what’s happening that particular moment when it comes across. And that’s just luck.

Loren Feldman:
Paul, I realize it was a while ago, but when you made the shift from selling furniture to consumers to making conference tables specifically for organizations of various types, was there a learning curve for trying to reach that different customer that you had to go through?

Paul Downs:
I would say, yes, there’s always a learning curve whenever you do anything new. And it’s been a while. We, at first, tried pretty much the same playbook that we had been doing with consumers, and we found that it was just easier to close the deal. And as I said, in my case, we’re selling an expensive item. But it’s not something you could just spam a million people and sell a table. They’re looking for a table. And both in the residential and in the business context, those people were contacting me and saying, “I need what you do. Now, show me what you’re gonna do.”

And what we found was, the same playbook worked way better for the business and government clients, because the person making the decision was rarely spending their own money. And if they were a business owner and they had contacted us, then they already knew what they were in for. And these people are usually fairly prosperous, and the money just wasn’t that big of an issue for them. So it was a much easier business for us to be in. Transaction costs were lower, the sale cycle was faster, and I didn’t have to watch a husband and wife sitting across the table from me fighting about what their dining room should be. So it had a lot of pluses to it.

Loren Feldman:
Jaci, when you made the shift, did you feel like you had to go through a learning curve as well?

Jaci Russo:
Well, we had started to do a lot of transitioning already. So where we were all B2C for the first few years, then we were kind of starting to bring in some B2B and appreciating the nuances, the differences, the larger market that we could work in, the profitability, and really the fact that the industry was changing. And if we were going to stay rooted in traditional media-buying, we were going to lose that battle. And so it was a very quick learning curve, because we’d already started to make inroads into that area.

And it was probably 18 months of meetings and discussions internally around: Who are we going to grow into? Are we going to go all-in on an industry? Are we going to become a bank agency or hospital agency or lawyer agency? Are we going to stay a media buying agency? Or is it going to be this B2B branding thing? And it was pretty much unanimous that that’s where our strengths were, that’s where the profitability was, that’s where our future was. And so, then it was a quick transition, because we all bought into it.

Paul Downs:
Yeah, I want to add one other thing that we learned after doing the business for a while, which is that businesses have a vast range of different ways that they actually purchase things. And so, probably the biggest learning curve for us was making sure that we knew how to look like a credible vendor to the Department of Defense, or Lockheed Martin, or some of these big businesses that are expecting a certain level of, you know: What does the proposal look like? What is the look and feel of doing business with you?

If you come off as a small, person-in-a-garage kind of business, that’s not going to cut it for a lot of situations, because what the people who are buying for businesses fear the most is that they make a mistake and somebody calls them out on it. I mean, nobody ever wants to make a mistake with a client, but it can happen. But if you do that, and you scuttle somebody’s career who chose you over the other options, that’s a really bad thing. So we had to learn to look extremely competent to large organizations with people who were purchasing things all day, every day. And I think that that is actually a fairly heavy lift for a lot of very small businesses. How do you look credible? What do you bring to the table that convinces somebody that you can actually do the job?

Loren Feldman:
Clearly, all of you sometimes deal with people in businesses who are not necessarily the owner of the business, but sometimes I think you do deal with the owner. And I wonder how you think about approaching that. The question from the person on Reddit, I understand your responses—that that person is probably going about it the wrong way—but it did raise an interesting issue, I think. What’s the personality of a business owner like when you’re trying to sell them something? You’re all business owners yourselves. I suspect that’s probably helped you figure out how to do this. But I’m curious, when you’re dealing directly with someone like you—another owner—is there some approach that you think about? Any of you?

Jaci Russo:
No, I just give them the password and slip them the secret-grip handshake, and I’m in. [Laughter]

Paul Downs:
We have segmented the people who call us into I think 15 different types. And one of them is the boss-direct, which would be dealing with me. And yeah, those people tend to have a particular personality. But the basic way we think about them is that this is somebody who called us because they want what we offer. And let’s assume that resources aren’t the issue. Most of our boss-direct clients are running businesses that go from 20 to 200 million a year. If they want to spend an extra five grand on a feature on a conference table, they’re just gonna do it. Just like buying a car—if they want to buy a Lamborghini, they do it. If they want to buy a Toyota, they can do it.

So it’s not about trying to trickle information. It’s just: Show them what they asked for, put a price tag on it, say, “Here it is, pal. When do you want to get started?” And so it’s a different psychology than other kinds of buyers, because a lot of other buyers are very, very different and require a different playbook. And that is something that you can only learn by having to deal with a pretty wide range of different types of clients.

Jaci Russo:
I want to acknowledge what Paul just said, because I think that is the takeaway for this whole hour. So if you learn nothing else, he clearly said he uses 15 different segments. So the takeaway here is: When you know your data, when you know your target-audience segments, you know them well enough to have 15 different variations on that, and then he can adapt, because he knows that they’re coming from a different place. They have a different power and authority. They have a different want and need. They have different pain points. They have different rationales.

So he is not using what I think our Reddit new best friend might be doing, which is kind of a one-size-fits all approach, or what Sarah and I get inundated with all the time, which is, “I can guarantee you 25 new clients a month,” which is bullshit. So what Paul’s doing is doing it the right way. He knows his target audience so well. He knows how to segment them so well that he’s serving up the right piece of information with the right motivators to the right person to get the right answer.

Loren Feldman:
And on that note, I think we should move on to a different topic. Well said.

Jaci Russo:
Thanks.

Loren Feldman:
I want to hit each of you with a specific question, but Sarah, let me start with you. Last summer, you had to, unfortunately, lay off some senior people. I understand you recently just expanded your space in your building in San Francisco. I assume that’s a good sign.

Sarah Segal:
Yeah, it is a good sign. Thank you for bringing up bad times. [Laughter[

Loren Feldman:
Well, I bring it up in a positive context. It’s a pretty quick turnaround, to be taking more space after having had to lay people off.

Sarah Segal:
Well, just for context: Last year, just to refresh, we laid people off after losing several very large clients that basically ran out of money, because of the economy and VCs and all that kind of good stuff. And so I learned a lot from that experience and rebuilt based on smaller-sized clients. So our monthly retainer minimum was decreased. But also, it’s made it so we’re not so dependent. We don’t have an anchor. If a client leaves, my P&L doesn’t flinch. And it’s a little more complicated running the business, because we have so many clients. So we do have a lot more younger, cheaper people coming on board. And it’s been a great way for me to build the business.

Now, as far as expanding, the upstairs of our building has been empty for a year or so. And we have a great relationship with our landlord, and so we’ve kind of been just hemming and hawing over it. We had asked for the first right of refusal, and didn’t take action on it, but we pay next to nothing for our space. Like, you guys would laugh at how little we pay.

Loren Feldman:
Try us.

Sarah Segal:
For our current space, we pay $2,500 a month, and we’re basically doubling our space. So I can negotiate at a similar term for the second floor. So now we have twice the amount of space. And we’re going to be moving our desks to the upstairs floor, and then the downstairs floor is going to be more client-facing. But it’s also going to be offered out—I know a lot of agencies and businesses and media groups that don’t have offices anymore, and they’re always looking for spaces where they can get together and meet with their teams.

For example, I know that there’s one publication here in San Francisco that’s a very well-known publication, and they’re all remote. And I was talking to the senior editor, and she was like, “Yeah, we try to get together once a month, but we’re always looking for spaces.” And I’m like, “Well, why don’t you use our space?” So we’re gonna let it out as well. But it’s not just our full-time staff, which we have grown slowly back up. We also have reignited our internship program. So we actually have three interns starting on Tuesday. So, a long answer to your short question.

Loren Feldman:
Well, that does sound quite positive.

Sarah Segal:
It is positive. I am nervous. I’m nervous as F, like, 100 percent.

Loren Feldman:
Why?

Sarah Segal:
There’s a lot of anxiety with this, because I’m waiting for the shoe to drop. Because it was a shitty experience last year, like 100 percent. And I am fearful about that. But I can’t run a business based on fear. I have to run a business based on: Okay, things are gonna keep improving and getting better. And our clients are all feeling well-serviced. And so, I’m not worried about our current folks. I have a great team on board. Things are good. And so I can’t run a business based on the what-ifs.

Jaci Russo:
It’s a self-fulfilling prophecy. If you believe it’s going to be positive, then it’s going to be.

Sarah Segal:
Right? I was watching Oprah on TikTok. I wasn’t watching her, but she was quoted. And she was saying that a successful leader or a successful business owner decides what they want, and what they want to become, and what they want their business to be. And then they make sure that everything that they do, every decision that they make, is in service to that end goal.

And if you do that, you’re not distracted by the little things, or the concerns, or whatever. You’re just going towards that goal. It’s like being in a cross-country race: You have a start and a finish. You’ve got to establish the finish. Because if you say, “Hey, people, you’re gonna be in a race,” but there’s no finish, then that’s just gonna be a messy race.

Loren Feldman:
I suspect, though, that you were taking that same approach last year when things got difficult.

Sarah Segal:
Yeah, but I’m sure that Paul and Jaci have experienced the same thing, where it’s like: You do everything with optimism that you’re going to grow and you’re going to continue to meet your goals and hit them. But you also have to be flexible enough to realize when the shit has hit the fan, and you need to resize. I didn’t want to do that, and I’ve talked to so many agency owners who are like, “Oh my God, it’s the worst.”

But it had to be done. And it was sucky, but I also worked really hard to make sure that most of my people who left ended up in a good place by either offering recommendations or connecting with people. I learned a lot from it, and I wouldn’t be afraid to do it again if I needed to. But I’m hoping that, because we kind of rejiggered the kind of client that we’d like to work with, like on the smaller side, I won’t be hit with that particular reality again.

Loren Feldman:
Jaci, from our emails that we exchanged before this show, I gather you’re still kind of figuring out the hybrid work environment. Tell us about that.

Jaci Russo:
Well, I think we have it figured out, to a point. I occasionally get sad when I see—because we stock the kitchen for the team—that bananas are going to waste. And I think, “Whoever asked for those bananas to be added to the list, and they worked from home, well, they just killed a bunch of bananas.” So I have to find the nuances, the little things to tweak it.

Really, I was introducing the topic around hybrid for some challenges that I’m seeing with my clients. And I think it’s because they seem to feel like this work-from-home-thing—that they always say with air quotes and a tone—would be over by now. And I don’t think it’s ever going to go back to the way it was before. And I think that a lot of our clients who have multiple offices in various time zones, and sometimes different countries, whether you work from a different office location, or work from home, or find yourself in a company large enough to really become siloed, it’s now about: How do you build team culture? How do you continue to connect? How do you collaborate when you’re separated by all these miles?

Loren Feldman:
And are you finding an answer to that question?

Jaci Russo:
I’m working through answers to that question. I’m starting to do organizational assessments and trainings for companies that are struggling with that. And so I’m looking for feedback. I always want to know how other companies are doing it. Who’s cracked the code? Because that’s how I think we learn. It’s by observing the ones who’ve gone before us and have figured it out.

Sarah Segal:
So are you hybrid, or are you completely remote?

Jaci Russo:
We are hybrid in the craziest way possible, and we’ve been like this since 2001. We operate under the assumption that people have work to do, and they need to get that work done. And the time of day you do the work, and the location where you do the work doesn’t really matter to me. You have a desk here in this building, and I love it when you come in, because I think that’s fun. And we can all get together and work on stuff together, and it’s nice to be in the same room. But you may also work from your house, or this location, or that location, because that works better for you.

And that whole thing started for us because I was almost nine months pregnant when I started the company, and I couldn’t imagine taking freedoms for myself that people on the team weren’t going to also be able to have. And that was with the second kid, so I went on to be pregnant with a third and fourth kid. So, I spent the first three years of this company just being on perpetual maternity leave, which really was just code for: I’m working from home because I’m in my pajamas, and I’m nursing a kid. And so it wasn’t like maternity leave like I was at home resting.

Sarah Segal:
You’re completely optional hybrid?

Jaci Russo:
Optional hybrid.

Sarah Segal:
So, we’re mandatory hybrid.

Jaci Russo:
Oh, really?

Sarah Segal:
Yeah.

Loren Feldman:
Define that, Sarah.

Sarah Segal:
People have to be here two days a week. Honestly, I think it depends on the age of your average employee.

Jaci Russo:
How so?

Sarah Segal:
And the experience. Because think about it: when you were young, and you were kind of just getting into the business, you enjoyed going into the office and learning from your peers and getting to know your bosses and having that cocktail after work and having that kind of social connection. And when you got a little bit older, you didn’t need it as much, because you have a family and you have kids and this and that.

But if you have people that are on the younger side—we try to be flexible. Obviously, if something comes up, stay home. Do what you need to do. But there’s a value that younger employees get. We have an employee—she’s a full-time contractor of ours, and she relocated to New York recently. And I think she misses coming into the office, because there’s a vibrancy and a connection that you make with your folks.

I should also say that we have a bribery program for people, where we have this point system where for every additional day that you come into the office outside of your mandatory two days, you get a point. And then you can cash in those points for gifts and prizes. I’ll send you the sheet.

Jaci Russo:
Oooh.

Paul Downs:
What are the gifts?

Sarah Segal:
Oh, the gifts: I had some of the team help me pick out the items last year. So, they’re things like Away luggage, a round-trip ticket in the United States to any destination. If you really save up your points by the end of a year, you can get an international flight. And they’re as small as, like, a gift card to Starbucks. So you can cash them in however you want. But so far, I’ve purchased Away luggage for somebody, a Yeti mug, and some Starbucks stuff. So I know that there are some people on my team, they’re collecting them to really cash in by the end of the year.

Jaci Russo:
That’s awesome. I love it.

Sarah Segal:
But it’s not for PTO. And one is an additional summer Friday, not during the summer, that kind of stuff. And I’m happy to share it. And I’ll give it to Loren to share, as well. But gamification of getting people here. And I should note that the hybrid mandatory, if you have a manager or a partner in crime on the team, your days in the office have to align with their days. That’s the only other requirement, because it’s pointless for somebody to come in by themselves. And so most people come in every Tuesday, Thursday.

Loren Feldman:
Jaci, do you think the difference between your experience with hybrid and that of your clients, who are perhaps struggling with it a little bit more, is simply the difference in the attitude of the boss? You embraced it because you needed it at one time yourself, and they remain skeptical and speak of working from home in air quotes. Is it as simple as that?

Jaci Russo:
I think it is that. But I want to give some fairness to the fact that it’s not as simple as that. So yes, I do think that’s a lot of it. I think it’s about trusting your team. I hear a lot of—and it is predominantly older men who question whether or not work is actually being done from home, or are they just doing laundry all day? And how much laundry do you have? Like, that’s crazy. Who could possibly do eight hours of laundry every day they’re working from home?

Sarah Segal:
I can. [Laughter]

Jaci Russo:
Oh, really? I guess I could when all six of us lived at the house. But now, it’s just the two of us. You know, we wear the same thing every day. So that would be impossible. I hear bosses who say, “If you’re working from home, then you’re more home than work.” I hear employees say, “My challenge, when I’m working from home, is work doesn’t stop.”

I don’t separate the two. And so I’m thinking we have some work-life balance problems. We have some trust problems. And isn’t it just that the work gets done the right way on time? Isn’t that what matters? So do you really care if they’re doing it at two o’clock in the morning or two o’clock in the afternoon? What difference does it make?

Loren Feldman:
Paul, have you ever wished you could try a hybrid factory?

Paul Downs:
I mean, no, not at all. [Laughter] I think a hybrid factory would be incredibly difficult to manage—at least the kind of manufacturing we do, which is one-off manufacturing. There’s really a requirement for people to talk to each other about what’s going on all the time. And it’s not something that you can just plan a meeting and solve all the problems. People need to be proximate so that they can just walk over to the person they have a question for, or if they need to gather some people to solve a problem. That physical proximity is a huge plus to us.

Now, we do let certain positions work from home on occasion. And it’s an issue, because oftentimes, we need to talk to those people, and then it’s just not as convenient to do it. If you want to get two people to look at a piece of wood and make a decision about whether it can be used or not, it’s very difficult to do that if one of them is looking at it on their phone. And so I don’t think that it’s even a possibility for what we do.

Jaci Russo:
Is it also an issue for the employees who don’t have that option? Is there some jealousy and frustration there?

Paul Downs:
Possibly, but probably the biggest break point for my team is that the people on the shop floor are working in an environment that’s not air conditioned at all. And the people at the office have kind of crappy air conditioning, but it’s better than nothing. And so, when you walk from one to the other, you just notice, “Oh, now I’m in a different place.” Now, much of the year it doesn’t really matter. In the fall, and the winter, and the spring, it doesn’t matter at all. In the summer, it can be pretty bad. If it’s 92 degrees on the shop floor, and it’s 80 in the office and not nearly as humid, yeah, that’s like a class divide.

But everybody who works here understands that. And part of our rules are like, if you’re feeling overheated, just go in the office and have a cold drink. We don’t care. And so I think that whatever resentment there is, none of my people are the type of person who’s going to let that fester. We all understand: This is just what it is. And I also have a number of people who’ve worked for me who’ve had other employment situations where, instead of it just being a hot shop, they were on a hot roof. Or they were in Baghdad getting shot at or something. So everybody’s got access to some perspective about how bad it could be to be hot. And what we do is try to do everything we can to mitigate it. And it’s not as bad as a lot of other situations.

Jaci Russo:
So they have perspective.

Paul Downs:
They have perspective, yeah, and they’re good people. They just get it. You know, this is what it is.You can’t make everything perfect all the time.

But if there’s an acknowledgment from management that, “Yeah, this isn’t optimal, but this is what it is,” and I’ve explained to them what the problem is, why we can’t air condition the shop, and looked into what it would cost and told them, “Hey, it’s going to be a quarter million bucks, and then another 4,000 bucks a month for the electricity, and there’s your bonus. What do you think?” And so they understand that we’ve looked into it, and we’re doing the best we can.

Loren Feldman:
Paul, you haven’t been on the show in a little while. I haven’t had a chance to ask you what I’ve asked just about everybody else, which is: How’s your year going so far?

Paul Downs:
Best year ever so far. I mean, we’re on track for over 6 million at the moment. Our sales are up about 35 percent from last year, which was actually kind of a down year. So I can’t necessarily explain what it is. It’s just more people calling us. And we’ve done a lot more government work this year. I think that there has been an effort on the part of the government to spend money, and whether they’re getting directions from the top to do that or not, I have no idea. But they’re spending money.

So, we’re doing okay. I hired a bunch of people early in the year, and they’re all working out great. They’re all young people. And I would say that this has actually been one of the better years, in terms of just being easy to manage. Because if people are pounding on the door to buy what you sell, and actually placing the orders, then all other problems are solvable. And if they’re not, then you’ve got a real problem. So, we’re in an easy-to-solve year.

Loren Feldman:
Were you hiring people to replace people or to expand?

Paul Downs:
Both. We had one who left, and I hired a replacement. And then, seeing the trend starting right from January, that people were placing orders at a higher rate than they normally would. And I’ve got enough experience now that I know that, with the exception of 2020, the year tends to be fairly consistent, if you project out what you sold in the first quarter all the way through the four quarters. In our case, we sold more than a million and a half. And so, okay, if we project out to four quarters, it’s 6 million. So I started planning for 6 million. And that’s been the right move so far, because it looks like we’re going to be there.

And I keep track of ratios of revenues to employees—just like, okay, if you divide the revenues by the number of employees, you get a number. Very simple to calculate. And we were at about 190,000 bucks per employee for the last two years. And then, if we’re going to do 6 million, it implies that we need 30 employees. And if you only have 24, that’s like, okay, you’d better do something. Because in our environment, it’s difficult to make people magically more productive. That’s just the nature of the work. It’s just the same. You can raise prices, which we did do. But at a certain point, you just know you need more people who do what you need to do.

Loren Feldman:
Paul, you’ve talked a lot over the last year, maybe the last two, about your spending a lot of time, energy, money on rethinking your marketing. You wanted to aim at a slightly different type of client. You created a new website. But when you listed the reasons why your revenue is up this year, you didn’t mention that. I’m curious, do you think that’s had an impact?

Paul Downs:
Well, we can’t draw a direct line from the things we did last fall to orders that came in immediately. But one of the things that we did, in order to reach the target audience, was to focus and develop marketing materials that talked about our experience at senior levels of government and military. And by coincidence, we’re getting a lot more of those kinds of inquiries, even though I can’t say, “Oh, it was the person I talked to at the show we did who called me.” It’s just somebody else. And I don’t even know what that means. We saw that there was an opportunity. We did something about it.

And so I think part of it is that our response to the inquiry that wasn’t necessarily driven by our market is now better and tighter, because we did all this work to be ready for the market when it showed up. And so I’ll take that. You know, that’s fine. But right now, I’m actually working on a project for a senior federal agency and some work they need. And we didn’t know the architect who contacted us. Did they find out about us from somebody—like, who knows? There’s a lot of moving around in our target audience. But I will have an extremely credible response to this inquiry, because we can just say to them, “Hey, we’re already working at the level you’re asking for. Here’s projects. Here’s people.” And so when you focus on developing a market and you get some success, it just makes it easier to access and succeed down the road.

And, I mean, getting back to the very first question, the person on Reddit: If you’re just starting a business, it’s tough to get that first group of experience, you know, like that first set of clients that are convincing clients for the next set of clients. That’s probably the hardest part about starting a business. And particularly in today’s day, if you send an email, and the person read it, and they looked at your website, they could just as easily be looking at all of your competitors within the next second and a half. That’s not how the world was when I started. But I can see that that’s a huge issue for people who are trying to establish credibility and competence. And there’s nothing like doing a couple of thousand at bats in order to make yourself a more convincing prospect when you go to sell people. But it’s tough to get over that initial hump. And there’s no real easy way to solve that, I don’t think.

Loren Feldman:
Well, thank you for bringing the conversation back to our starting point. That’s a great way to tie it up. My thanks to Paul Downs, Jaci Russo, and Sarah Segal—and to our sponsor, the Great Game of Business, which helps businesses use an open-book management system to build healthier companies. You can learn more at greatgame.com. Thanks, everybody.