What Do You Owe Your Employees?

Introduction:

Most business owners hope to reach the day when someone offers to buy their business. If that day comes, the payoff isn’t just financial. It’s validation for years of risk-taking, sleepless nights, personal guarantees, and sacrifices that most employees never see. But that success can raise an uncomfortable question: What exactly do owners owe the people who helped them get there? Should employees share in the proceeds when a business is sold? Does an owner have an obligation to find a buyer who will protect the culture and the jobs that have been built over the years? Or is the owner’s responsibility fulfilled by paying people well, treating them fairly, and creating a great place to work so long as the business is theirs to run?

This week, Jay Goltz, Liz Picarazzi, and Ted Wolf wrestle with those questions—and not always from the same perspective. They agree that employees deserve respect and appreciation. But they also point out that employees weren’t the ones who pledged their homes as collateral, absorbed the losses, or spent years wondering whether the business would survive. In other words, where should owners draw the line between gratitude and obligation?

Plus: As Liz expands Citibin beyond New York City, should her marketing reflect that shift? Or should she lean into her hometown roots and emphasize that if her trash bins can make it there, they can make it anywhere? Liz also explains her plan to capture some recurring revenue.

— Loren Feldman

Guests:

Jay Goltz is CEO of The Goltz Group.

Liz Picarazzi is CEO of Citibin.

Ted Wolf is CEO of Guidewise.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome Jay, Liz, and Ted. It’s great to have all of you here. As you know, I’ve been working on putting together a peer group workshop to help business owners decide how they want to exit their business, and there’s an issue that kind of keeps coming up, one that I don’t hear discussed all that often, which is, what exactly do business owners owe their employees, especially when they’re leaving their business?

So, here’s how I’d like to ask it of you: Let’s say you’ve built a company over, say, 30 years. A private equity firm offers you exactly what you want for the business. You strongly suspect that they’ll cut staff, change the culture, and pressure people who have been with you for years, because that’s kind of generally what PE firms do. The question is, do you take that offer? Liz, how about you?

Liz Picarazzi:
I think it depends on, quite frankly, how big the offer is. If it’s a number that I’m really excited about, and I’ve gotten my number, I think I would have to look at, well, what would be the impact on employees? And maybe I should even back up a little bit. I really hope I’m in the position where I have potentially several offers, and I can compare them and be able to choose the one that is going to be a good fit for my employees.

I mean, there’s a very high likelihood when PE buys a company that they’re going to destroy the culture. I don’t think that’s an exaggeration to say that. And it’s definitely important, for me, as I potentially in the future want to sell. I don’t want to be in a position where I take the offer just because it’s the highest dollar amount. I wanted to have been able to consider several options and have the sale price and what they’re going to do with the company to be part of my decision.

Jay Goltz:
I think the problem with that theory is, you can’t believe anything they tell you. They could change their mind. So they could say, “Oh, Liz, don’t worry. We’re not going to change anything. We’re going to keep it exactly like it is.” And I’ve heard that story 100 times, and that’s usually not the case. So, at some point I’ve concluded: You can’t control the future once you’re out of it. You can give it your best shot, but—

Ted Wolf:
You have to take both viewpoints into consideration. Liz, what you talked about, you have your money. You have considerations for your employees that you want to build into that offer. That’s legitimate. But as Jay said, they can do whatever they want after they have control of the business, unless it’s really documented well within the agreement. What I did when we sold our business, when we were acquired, my brother and I, we basically made sure everybody got stock options—everybody, including the receptionist. And we had receptionists in those days. They got stock that was worth more than what their annual salary was. So people stuck around. Eventually, they did seed out. They replaced some people, etc.. But I can’t control that.

I think what they really owe the employees is, number one, honesty, and number two, prepare for the exit well in advance. Make sure you’re going to keep the valuations you want. Make sure people are built so they have a future in the company, because they have the skills to work in that private equity or the PE environment. And then number three, just be open and honest with everybody: Here’s what we’re looking to do. Here’s what the implications are for yourself. Here’s the benefits. Here’s what we’re setting aside for you. And we want to move forward.

Because let’s face it, after you put 20, 30 years into a business, you have the right to say, “I want to exit right now.” You have put your money, your capital, your reputation, your assets on the line over and over and over again. I think it’s just being able to say: Here’s an honest business approach I’m going to use. It’s going to take us years to get there, hopefully, and we’ll be able to get the valuations we want. And when we do, everybody knows what’s going to happen.

Liz Picarazzi:
You don’t want to blindside them.

Ted Wolf:
No, right, exactly. I don’t want to be blindsided. So you build it accordingly, and you know what’s the best for all concerned to do, but you do have 20, 30 years of investment. You have the right to take the chips off the table if you want to. Just do it in an appropriate manner.

Jay Goltz:
The reality is, correct me if I’m wrong, 80 percent of businesses don’t sell to anybody. They just go away. Isn’t that true?

Ted Wolf:
Yeah, and that’s the other alternative: I just shut the doors. I have a fire sale. I can’t give it away, in effect, and that’s not where you want to be. Because you put 20 years into a business. You’ve got a huge amount of money tied up in it. It’s locked in that business. You’ve got to unlock it so you can put it in your own personal account, and it takes planning to do. And that takes a business that’s transferable, not people-dependent, and a number of other things. But you’re right, Jay. 20 or 30 percent is the success rate for being acquired today, on average.

Loren Feldman:
Ted, when you sold your business, did you sell it to a PE firm?

Ted Wolf:
Yes.

Loren Feldman:
And what happened to the business after you sold? How did they treat it?

Ted Wolf:
They held on to it. Some people stayed, some people didn’t. They didn’t like new management. They didn’t like the way it was being done. But for the most part, the majority of people definitely stayed. They had good careers. They worked through, and you know, it was a good acquisition, because the cultures changed, but we helped prepare all that because we had a plan three years before we actually exited: What do we need to do? And we had an excellent investment banker who guided us through that entire process, so we could build value in the people in the business before we went to market. And that was key.

Loren Feldman:
Did you make a deliberate effort to find a PE firm that would, in fact, preserve the culture and treat people well?

Ted Wolf:
Here’s what happened. We found an investment banker who could coach us on doing that. They went out, and they found the company. And it was interesting when we had a meeting with a PE firm. We went to New York. They were right overlooking the park, pretty impressive, and they said, “We want to see if you’re made out of the same cloth as we are.” I’m quoting their exact words. And we went through the conversations: Here’s what our philosophy is. Here’s what we’ve done the last two years. Here’s why we’re working with this investment banker. And they ended up coming back to us and saying, “Okay, you’re built out of the same cloth. We’re going to move ahead with this.”

So they knew the culture. We knew the culture. They did not, in any way, shape, or form, dictate to us what to do, or how to do it. In fact, I led that whole acquisition and the merger and the eventual sale, governing and overseeing the sale, when we were acquired. So it worked out very positively that we were open and honest. We stuck to our principles. We told them what our core values were. We demonstrated how we used them to make the business better, and it all worked out, because we were open and honest and had a plan.

Jay Goltz:
I would like to speak to the 97-98 percent of people who are absolutely not going to be in that situation, because their businesses just are not positioned to be able to do that. And one thing I would say is, I have been fully committed for 48 years to each and every one of my employees, and done everything I can to support them. And they’ve done everything they can to support me.

But I recognize that I can’t take this to my grave, and I am not going to put the pressure on myself that, “Oh my god, I’ve got to make sure that every single person…” I’m going to do the best I can with this. I’m working on a plan. But I recognize that for most business owners, you can only do what you can do. And you can try to do something that will leave your employees as best off as you can, but it’s not something you can necessarily do. And I’m going to give it my best.

Loren Feldman:
So, Jay, if you got that hypothetical offer from a PE firm that met or surpassed whatever number you have in mind, you’d take the offer?

Jay Goltz:
Okay. Well, let’s start with: I don’t think that’s going to happen. But there’s clearly a number that if someone said, “Oh, we want to get into picture framing,” which is laughable, but let’s say they do. “And you’re the biggest place in the country. We want to start with you and use you as”—okay, is there a number where I’d have to go, “Oh my god, I’ve got to take this.” Sure. Absolutely. I would give really nice bonuses to people. And yeah, I don’t think—it’s not going to happen. And if it did happen, am I sure that that would all work out? No, I don’t, but—

I have a friend who sold his business for a good amount of money, and he walked me through how, one of his key people, he said to her, “All right, if I take this deal, how much money would you like to get out of it?” And she told him, “I’d like half a million dollars.” And he goes, “Okay.” And he gave her half a million dollars, which was great. They both agreed that was a good number, and he could afford to do it. I think everybody should do whatever they think they should do with their business.

I fully believe—back to what Ted said—all the risk, all the money, all the endless hours, I think business owners have a perfect right to do whatever they want with their business. It isn’t necessarily what I would agree with, but I’ve seen people sell their businesses for maybe a couple hundred million dollars, and really give very little, if anything, back to their employees, and I wouldn’t do that.

Loren Feldman:
How do you think about that, Jay? I mean, the half million dollars sounds impressive, but you can’t really evaluate it without knowing what the business was sold for.

Jay Goltz:
I know it was about—let’s say, it was $20 million.

Loren Feldman:
So, certainly significant.

Jay Goltz:
Yeah.

Loren Feldman:
You said that if somebody met your number, you would try to bonus employees. Can you give us any idea how you would approach that decision? Is there a percentage you have in mind that would go to employees? How would you think that through?

Jay Goltz:
It depends what the number is, but I certainly—you know, I read a great book. It’s called Enough, and it’s about the guy that started Vanguard, and he tells a famous story about two writers who went to this hedge fund manager’s house. And they’re talking about, “Oh my god, look at the pool and the helicopter pad.” And the one guy says to the other, he goes, “But I’ve got something that he’ll never have.” “And what’s that?” “Enough.”

I buy that. I think there’s such a thing as enough money. So whatever that number is to someone, I think that once you get your number, I think you can afford to be generous with your employees. In my personal opinion, like I said, if somebody wants to give nothing, okay, that’s their business, but it depends what the number is.

Loren Feldman:
Presumably, that person who did that, Jay, would argue your employees have already been compensated. They had a job, they had a salary and benefits, and—

Jay Goltz:
They could argue that, for sure.

Loren Feldman:
Is that a legitimate argument?

Jay Goltz:
Yeah, to them I think there’s the key word: I don’t think they owe them anything. Do I think it’s the right thing to do? Do I think it’s a good thing? Absolutely. Do I think they owe it to the employees? No, I don’t. But that doesn’t mean I wouldn’t do it, because I want to do it, and I think it’s the right thing to do. But there’s a difference between owing it and doing what you think is the right thing. It’s not the same thing.

Loren Feldman:
Does that make sense to you, Liz?

Liz Picarazzi:
It does, but the point that I’m not hearing in this is, how do you sort of formalize what your commitment is to your employees, should there be a sale of the business? So, what I’m hearing you say, Jay, is that you could sort of bonus them to acknowledge them for their hard work. But I know there is more of a formal way to do this with, like a SARs program—stock appreciation rights.

I looked into this before I came on here, because I remember that Carey Smith, the founder of Big Ass Fans, who sold his business for $500 million seven or eight years ago, he had a SARs plan in place. And he ended up having a $50 million pool of money to distribute to employees. 100 employees got payouts. 15 of them became millionaires overnight. And you know, he really wanted them to get the upside, and he had the plan in place for a long time before he sold. So those employees who were helping to grow the business knew that if it were to be sold that they would get something out of it. I don’t think they knew that they would become millionaires, but I would say that probably also helps build culture and commitment. Because you do know that all the crazy hours you’re working, if there’s a sale, you’re going to get something from it.

The part, legally, you’re not going to necessarily know is what is going to be the amount. You probably would know how many shares you have in that fund, but in looking into this, it was something I thought was interesting. Because, right now I have a couple employees who I think if I were to sell, I would definitely want to bonus them. But then I think, “Well, if that’s my intention, why wouldn’t I just formalize it ahead of time, so that then they’re incented to grow the company even more?”

Jay Goltz:
No, that’s a good point, if one can do that. The fact of the matter is, he got, what, you say $500 million? Yeah, he can afford to throw around 50. He could afford to throw around 200. I mean, that’s a one out of 1 million—1 out of $5 million story. I mean, most people don’t get $500 million for their company.

Ted Wolf:
So let’s also look at it another way. I own a business, we’ll say, and I get $500 million. Well, after I’m done paying taxes, you know, it’s a haircut. Then all of a sudden, I have debt that I’m carrying in the business. I mean, if I’m an industrial business, I’ve got an awful lot of CapEx and I’ve got an awful lot of debt that I’m carrying. So I reduce that. It’s not like someone says, “Hey, I got $500 million, and I’m walking away with $500 million.” So you’ve got to take all that into consideration. But I do think you need to pre-plan. You need to think it through, because you have to be able to develop in a specific way an organization to get purchased today, to beat that 20-30 percent number.

I mean, I made some people an awful lot of money in stock options that we gave them, stock that would appreciate significantly over time. And I still had employees who came back years later and said, “You know, you didn’t pay me enough. You kind of worked tight on what you did.” And I just look at them, and I think to myself, “I gave you more stock than you made in a year. I gave you two, three years worth of stock that would appreciate,” but there’s always going to be those individuals who say, “It’s not enough,”—Jay, going back to what you said—”it’s not enough. You didn’t give me enough for the effort and the contribution that I put in place.” But I’m the one who had the house as collateral. I’m the one who had my assets on the line. I’m the one who stayed awake trying to make sure everything worked. I think I have the right to make the determination.

Jay Goltz:
I have a phrase, “There’s no team in losing money.” Everybody wants to be part of the team when you’re making money, but when you lose money, have you ever had an employee go: “Oh, Ted, I know you’re not sleeping at night and things are really bad. We lost a lot of money. Can I put $20,000 in? I’d like to help out.”

Loren Feldman:
Jay, you’ve said that many times on this podcast many ties, and I take your point, but is that realistic? I mean, is there any reason to think that that’s something an employee should do?

Jay Goltz:
No, I’m being sarcastic, except my point is, this idea that, “Oh, you didn’t build a company. We built a company.” I’m getting a little tired of people [saying], “No one builds it themselves.” No question. But the problem I have—one of the events that is out there said, “It’s a myth that anyone is self-made.” Oh, stop. Just stop. I mean, that doesn’t mean you did it yourself. Certainly, your employees played critical—

Loren Feldman:
I think that’s the point they’re trying to make, don’t you?

Jay Goltz:
Except they have to diminish—they pretend like it’s even, and that everyone did it together. And the fact is, the owner is the one who signed the leases, who borrowed the money, who borrowed against their house. They deserve to be compensated for that, and it gets a little old when it turns into socialism, and all of a sudden, “Oh no, we’re all in this together. We built it with you. We should get the same thing.”

Loren Feldman:
Wait, wait. Does anybody actually say, “We should get the same thing”? I haven’t seen that.

Jay Goltz:
Well, I think the guy—that goes back to Ted—who says, “I didn’t get enough,” I question whether that’s—really? I question whether that’s a legitimate argument that he’s making.

Loren Feldman:
Okay, that’s one person.

Liz Picarazzi:
I mean, maybe there’s some way along the line that it can be communicated or conveyed to employees how much risk you take on as a business person. And I’ve had a little bit of a conversation with a couple of employees about that, but definitely would like to see some upside. I’m trying to work into how I can do that.

But I’ve had to really explain to them: I left a corporate job. I put my house down as collateral. I took on debt. I risked future compensation if I were to keep the corporate job. And the number of hours and the heartbreak and the risk, really? Can you quantify that for me? I’m not that direct with these people, but I sort of skirt around it to be like, “If you were to put a dollar amount on the risk that I have taken on to run this company, I think you’d get my perspective.”

Loren Feldman:
Obviously, everybody on this call finds that a compelling argument, Liz. I’m curious, how do you think it went over? Did it make a difference? Do you think they heard you?

Liz Picarazzi:
I think they did, for the most part. I think most people understand that it is pretty complicated to do stock options within a small company. And I’m just not motivated to do that. I don’t want to go through all the legal stuff. Everyone has told me, if I ever sold my business, it is so advantageous to remain 100-percent owner, which I am right now. So, I don’t want to dilute that for any reason.

What I can say is that I know that if I sold the company, that I would compensate them. I would give them some sort of a huge bonus. The question is, how would I formalize it? And it’s probably not a good enough explanation to them: “Oh, I’ll take care of you when the time comes,” which is basically what I’ve said. But you know, we’ll see.

Jay Goltz:
I’ve never had one of those conversations with people.

Loren Feldman:
Why is that Jay? Did you feel like they didn’t need to hear it, or did you think it would not go well?

Jay Goltz:
I have no reason to. No, I’ve never had an issue. I don’t have people coming to me complaining, “I’m not making enough money.” I think I give them wages that they’re happy with. As a result, my turnover is very low. I’ve got lots of people here for 20-30 years. I just don’t have that problem, and it depends what kind of business you’re in. I’m in a retail, mostly, business, and there are other people who maybe one of their key employees is responsible for bringing in—I mean, businesses are very different. So what’s right for me, I’m not at all suggesting is going to work for everyone.

Ted Wolf:
I think it all comes down to how business owners are going to take care of employees, and how employees are going to actually say: I have an obligation to the owner of the business to come to work every day and be engaged—not watch my cell phone and listen to music and then get into the betting and all that kind of stuff that everybody does. But I actually owe something to the owner, just like the owner owes me something. So there’s going to be accountability on both sides. We’ve got to make really good businesses, and we’ve got to figure out how to help people become mentally and emotionally healthy and mature in what they’re doing, which means they have obligations on their side that they have to fulfill too.

This isn’t a one-sided thing, and it’s not one-sided in favor of business owners. It’s not one-sided in favor of the employee. But we’ve got to come to terms to say: If I’m putting all my assets at risk, I want a return on that. But I do have to make sure I’m bringing along people also who are doing it, but in a reasonable fashion. We cannot kill the entrepreneurial class in America, or we’ll have huge political and economic problems. We have to nurture the entrepreneurial environment.

Jay Goltz:
I couldn’t agree more.

Loren Feldman:
Ted, I have to ask, have you actually had issues with employees gambling on their phones during work hours? Because I haven’t heard that one before.

Ted Wolf:
Oh my god. Yes. Oh my god, all you gotta do is walk out in some construction sites, or you walk into a shop floor, or anything, where, you know, people are on the front lines, they’ve got their cell phones with them all the time. I have situations where clients actually tracked cell phone usage, because it was a company cell phone, and guess what? They went to yoga sessions at 10 o’clock in the morning. You’re at a yoga session. You’re supposed to be working. You know, people are people, but everybody’s got to grow up. Everybody has to improve their skill-set when it comes to working with people and business. And that means everybody’s got to contribute to making a business successful, or we all go down. It’s as simple as that, I think.

Loren Feldman:
Jay, do you have problems with people spending their days on the phone, on their personal phone?

Jay Goltz:
I would be extremely naive to say, “Oh no, everyone’s working.” I see them on there. I don’t know what they’re doing. I mean, I’ve got a showroom. They’re waiting for customers to come in. Sometimes there’s no customer. They’re on their phone. I don’t know what they’re doing on their phone. Is it a quote-unquote problem? No, because when the customer comes in, they take care of the customer.

In my factory, where we do the framing, they can’t have their phones at the counter. They’re in their locker. So I don’t think I have a problem with that, but I most certainly can see, in businesses, it’s a huge problem now that didn’t used to exist. Even Nordstrom, who I have the utmost respect for, you used to walk into Nordstrom and immediately someone walks up, “Can I help you?” Now, they’re looking at their phone. I mean, even in Nordstrom. It’s a problem.

Loren Feldman:
Okay, back to selling your business and what you owe your employees—

Jay Goltz:
Or not selling your business.

Loren Feldman:
Or not selling your business.

Jay Goltz:
Right, just at the end of the road. Do you owe your employees?

Loren Feldman:
What do you think of selling to key employees? For a lot of owners, that seems like an optimal solution. Would you take less money to be able to sell to key employees? Is that something that makes sense to you? Anybody?

Jay Goltz:
It makes sense to me. I think that’d be a great solution, if you can pull that off.

Ted Wolf:
I think there are qualifications you’ve got to put on that, Jay. I think in listening to 21 Hats for years, myself, and listening to you, you went through a thing where you evaluated ESOPs and things like that. I think that there are ramifications that everybody has to think about in selling to employees. And I mean, I know one person who owns a business, a $30-$35 million manufacturing company, and they can’t be acquired. I understand why they can’t, but then they’re saying, “Well, maybe we’ll sell it to our employees.” But they’re looking around and saying, “We didn’t develop a manager’s class or skill-set here that we feel comfortable they’ll manage the business when we’re not here, and we don’t know if we’ll get our money out of it.”

Jay Goltz:
No question. Loren said, though: key employees. That was the key piece. The ESOP thing, I want nothing to do with it. I’m not talking about an ESOP. I’m talking about, do you have some key employees who have been groomed to be managers, who are already managers, who can take it over? And I helped a guy in the frame business do that, and it worked out great.

Loren Feldman:
Liz, could you imagine taking less money to sell to key employees?

Liz Picarazzi:
Definitely. And I would love it if it was an EESOP. What I’ve noticed, though, and also from listening to 21 Hats and going to a lot of events, Inc. 5000 and so forth, you’re going to hear a lot of people who are very against it, a lot of people who are very for it, and a lot of the people talking about it have actually never done it themselves.

If I were to really consider that, I would want to talk to like 10 or 20 people who had done it and hear from them. Right now, most of the time I hear about it, it’ll be like an EO event, or an Inc. 5000, here on 21 Hats, and I hear how an ESOP works. And it’s by someone who works in the industry, not someone who’s an actual business owner. So, if and when I get to that point, those are the people I’m going to be talking about—the people who have actually done it—rather than the people who have executed on it, as, like, you know, they’re running ESOPs. They’re creating ESOPs for people.

Loren Feldman:
Well, Liz, you need to sign up for my 21 Hats Succession Solutions Workshop, where we’ll be talking to business owners who’ve actually done it.

Liz Picarazzi:
Okay, sold!

Ted Wolf:
I think there’s a real interesting insight we can gain from this in the conversation, and that is: if you’re running a business and you’re looking and saying, “Well, I want to exit, and one option might be I sell it to my employees.” If you say, “No, I don’t want to do it,” that’s a reflection on what you’ve built in your business. It’s not transferable. If you don’t want to do it, why would somebody else want to buy it then at a premium?

Jay Goltz:
Well, unless they were going to be the ones to run it, taking over your role.

Ted Wolf:
I agree, and I can see that, but I would personally never buy a business wanting to take a role. I would say: I want to make sure there’s systems in place, so I can work myself out of a job. I’m surrounding myself with the people who can run it. That’s different. That’s a different business to run. I’m not chained to it. I’m directing the business now. It’s not directing me.

Jay Goltz:
You said one word. You said, “if you want to exit,” and my reality is, everybody’s gonna have to exit. That’s what I finally figured out. I can plan all I want. I’m exiting. That’s for sure. And that’s the reality for all business owners, and I would say we should all be working to not leaving our spouse with a business that they don’t know what the hell to do with. That wouldn’t be a great finish for anybody, and I don’t want to be that one.

Ted Wolf:
I agree with you totally, Jay, and that comes back to planning. You’ve got to plan the exit for the best of all concerned. That means spouse, generational wealth, if you want to think about that. But I mean, you’ve got to plan this entire thing, because you’ve only got a 20- to 30-percent chance of being successful.

Loren Feldman:
I’d like to ask each of you to finish this sentence for me. “When I leave my business, I want to be able to look my employees in the eye and say—”

Liz Picarazzi:
Thank you. Thank you.

Ted Wolf:
Liz, you hit it, “Thank you.” And in the positive way, not thank you in the negative way. [Laughter]

Liz Picarazzi:
Yeah, not thank you, see you. But truly, thank you. A heartfelt thank you.

Jay Goltz:
I would like to think that one way or the other I can give them something. I just had a guy move to Florida, I’ve talked about it. He has been with me since he was 17 years old. Now he’s 61, and it was emotionally extremely difficult for both of us. And I never used to think about that. And it’s weird when you run a business and you surround yourself with people who are with you the whole time, and it’s not just a business transaction. And that doesn’t mean that all of my 115 employees fall into that category, but there are certainly a bandwidth of some I don’t know their name, frankly, and some I’ve been working with for 20-30 years. I would like to think my last thing would be, “Thank you, and here’s something.” You know, something.

Ted Wolf:
Yeah, I framed it a little differently. I just said, “What do I want to say to myself when I look in the mirror?” And that was: I took care of my employees. I mentored them, and I did everything that I could to help them have a better life. And I know that’s pretty subjective, but I think I established enough of a reason to say it was more than money that I gave them. I gave them a good lifestyle. I gave them good grounding for them to develop their own career. And like my children, “Hey, this is your life. You’ve got to determine what it is, but I at least gave you a start on opportunities that you wouldn’t have had.” And if I could do that with my people—and we had hundreds of people—I felt real good about that. And I think that proved out over time.

Jay Goltz:
You said it better than I did. Absolutely. I feel very good that, while I was here for the 48 years, whatever it turns out to be, I have provided a nice, safe environment, a supportive environment for them. And I feel very good about that. The line I have to draw to myself is, I can’t guarantee it to the day they retire. Because that’s where I have to say, “Okay, yeah, I did the best I could.” But no, I 100 percent agree with you. I feel very good about that.

Ted Wolf:
Jay, we can only expect the best that we can do, and nobody’s perfect. But I think everybody who is really a good business owner or director has that same thing in mind. It’s always the minority that gets the headlines in the business. It’s not necessarily the people who really do take care of their people. And I’ve found entrepreneurs—good, sincere business people, entrepreneurs—they do want to take care. They’ll share things with other people, and I think I find more of that than I do those who get the headlines.

Jay Goltz:
It’s certainly not 90 percent, from my experience. If we want to say, “Okay, more than half the other way,” okay, I’m with you on that. But I don’t think that 95 percent of entrepreneurs are caring, nurturing, supportive bosses. From what I’ve seen, I’ve seen a lot of jerk bosses out there. There’s plenty of them.

Loren Feldman:
Next topic: Liz, I gather you are shifting the focus of your marketing somewhat. Can you tell us about that?

Liz Picarazzi:
Sure. So, as you know, I’ve been very focused on the New York City market since first building a Citibin back in 2012 in my backyard. I started with working in just my immediate neighborhood, then within the borough of Brooklyn, then in all of New York City. Then we moved from not only residential, but also doing municipal with cities and parks. And so all of our marketing and communications and efforts really have been primarily focused on New York City, and that is reflected in our marketing, really across the board, from our website, to the trade shows we go to, to any of our social media.

We’ve redone the site recently, and if I’m looking at some of the stories that we have to tell, customer success stories, those are also somewhat New York focused. So it hit me, I think I knew I needed to do it, but it really hit me recently when I looked at the new site and realized: If I’m someone who’’s coming in from Ohio, I’m going to read all the stuff about New York City and New York City parks and Times Square and New York City universities. I’m going to want to see that Citibin is nationwide, which is what we are. I have the stories to tell, but we’re so focused on New York that we sometimes neglect them, because the orders aren’t as big. And so that’s a shift, and it means that not only am I modifying our language, but I also need my whole team to convey it that way.

So, if I have someone writing copy, I need that person to know that you should not be repeating New York, New York, New York all the time. Someone comes to our Instagram and they see New York, Brooklyn, everywhere, they’re going to think we’re a New York City company when we’re actually not. So this was something that, you know, our realization also in developing the new site, our site used to be very residential and very New York focused. Now we’re showing we have a line of Citibins for municipal, for residential, and also for bear. And then we have some subcategories. We have parks, we have housing authorities. But the sort of nomenclature of where we sell, what we do, and our products themselves needs to be adjusted.

Loren Feldman:
You know, Liz, we’ve spent a lot of time here talking about some of your outreach efforts to business districts around the country, and you mentioned the bear stuff. We’ve obviously talked about that quite a bit. So, I guess I had the impression that you were already reaching beyond New York more than perhaps you actually have been. Can you tell us what percentage of your business is New York-based at this point?

Liz Picarazzi:
I mean, it’s probably at least 90 percent.

Loren Feldman:
Ah, I didn’t realize that.

Liz Picarazzi:
But we are in 60 other cities. So we are proliferated, and we’ve got some cities that have a lot. Chicago, Baltimore, Boston all have a lot of Citibins. So we definitely are nationwide, but our marketing and our communications have not caught up with that.

Jay Goltz:
But have you figured out how to go to another city with setting them up and having the economies of scale to make money on it? Because you can’t just send your guy out in the morning to go install them in New York. Now they’re driving eight hours, or whatever, 20 hours. Have you figured out how to do it so that you can make money on it when you’ve got to send people out of state?

Liz Picarazzi:
Yeah, well some people have builders who are helping them out do the assembly. But I actually have two nationwide assembly companies that I’ve been working with that are doing installations in other cities. And they can scale up really quickly, and I’m so confident in the work that they’re doing that one thing in our marketing we only just turned on this week is that we can legitimately say that Citibin has a nationwide network of installers. They don’t need to be employees, but anyone who’s going to be doing Citibin installations for us, they can easily get trained.

We can either go there in person sometimes. Like for instance, in Baltimore, we hired local people to help us with the installation, so that when we rolled off, they took over. So there was a fire recently in a bin in Baltimore. We didn’t need to send someone from Brooklyn down to Baltimore. We have a local guy who handles it. So, yeah, to answer your question, that service part of it, we have not only taken care of, but it’s part of our value proposition.

Ted Wolf:
I just want to congratulate you, because what I’ve heard and listened to you for years, as I said, on 21 Hats. And I’ve listened to the evolution of your business, and I think what you’re demonstrating right now is just further growth of the brand. You’ve got your roots in New York, but you can go way beyond New York. You’ve got all the distribution, and you’ve got the facilities in place, the systems in place, to be able to service an entire, I’ll say, 48 continental United States. I think it’s excellent. I think you’re in the right direction, because your brand now is going beyond that, and that’s that next level of maturity. And I love to see that, because that’s just success for you and everybody in the organization.

Loren Feldman:
Liz, was the change in your marketing approach, primarily just making it less New York centric, or are you adopting a different tactic or strategy for your marketing?

Liz Picarazzi:
Yes, so the main driver of this is the recognition that business improvement districts in New York City—and there’s 78 of them now—they’ve all been required to containerize their trash. So we’re coming upon that deadline, and we have gotten most of the business containerizing those BIDs. I think we have over 50 now, the 50 of the 76 BIDs. The city council money for that was for 2026. It’s drying out, which means that we need to have other major cities that have that purchasing power and have that need, because that business has really been our catapult. It’s New York City Business Improvement Districts, and we started at Times Square four-plus years ago.

We’ve grown this business to be incredibly successful. We have dominated the market share, but that is drying out, similarly with parks in New York City. So, there’s another competitor that won a contract that is sort of making it more difficult for us to sell into parks, so there’s another act there. We’ve been incredibly successful in New York City parks. We can be successful in other cities. So we are working in parks in several other cities now, and sometimes they’ll do a pilot with a couple of bins, it’ll go well, and they’ll expand it.

And then the other factor I would say is that when you look at the residential product and the residential need, the need is primarily in New York City, where people don’t have garages, driveways, and alleys. So this question of where you put your trash cans, like I never thought about that growing up in Wisconsin. I never thought about it in any of the cities I lived in before I came to New York, where it’s a real problem. Even the nicest homes usually don’t have a garage or driveway, so you’re putting your trash right out front. That residential need is not as high in the rest of the country.

Another thing I’m looking at are HOAs, so communities, when they’re spec’ing, what does the garage door look like? What does their front door look like? I want to be spec’ed, that trash enclosures and package lockers are spec’ed into those plans, and that’s going to take a while to do. I don’t even really know how to work with the HOA market. We’ve done a little bit of it, but I know that is a huge opportunity for us. But the selling needs to be different, because it’s no longer about keeping rats out of your trash or keeping trash from being in front of your home. It’s about having something nice that complements your house, and it’s a different message.

Jay Goltz:
Do you think you’re doing all the right trade shows? As you’re talking, it seems to me there must be some trade shows that the buyers you’re talking about are going to.

Liz Picarazzi:
We haven’t, but we’re going to. And with HOAs or multifamily, we have not done any of those shows. So we need to plan to do it. The other reason I want to do it is that I’m actually looking to hire some external salespeople and people who could go to those new shows in those industries and already have a foothold. So Jay, you and I traded some messages about talking about the external sales hiring. But I think that there is huge opportunity also with landscape architects, anything where an architect or designer is involved in spec’ing larger properties. They’re not really single-family homes, although we do some of those sales. I’m going for the big purchases in larger communities.

Jay Goltz:
I don’t know the answer to this, but in Chicago, they’ve got bus shelters. They’re glass. They’re very nice. I wonder, what’s that company’s story? Are they around the country? Do they have independent reps? I mean, there are probably people out there selling stuff to municipalities who represent several different lines of stuff, I would think.

Liz Picarazzi:
Well, we have a little experiment going on, and I shouldn’t necessarily share this, because it’s a little bit of a business strategy, but I will anyway because I’m sort of excited about it. It’s that we got the list of a lot of trade shows that we either go to or we want to go to, and I’m having my daughter Lydia, who’s helping us with a lot of operations and marketing work, go in and see the exhibitor list from all of those trade shows—and then go in on LinkedIn and see: Who are the people working in sales and business development with those job titles for all of those companies that go to the same shows that we want to go to? And then I’m going to try to poach one or two of them.

Ted Wolf:
So, Liz, have you ever considered, or have you ever worked with state governments? There could be some really good potential wins there by getting state government behind you, and particularly with funds for environmental cleanup concerns.

Liz Picarazzi:
We have not gone as far into it as we could. The compost area is one where there’s a lot of innovation happening, and we went to a compost show from the U.S. Composting Council last year, and I was surprised to find that it was less government people and more private sector entrepreneurs who have created compost hauling companies. And they’re contracting with cities that can’t get their program started quickly enough or, for bureaucratic reasons, have not been able to do it. And so we’re selling to several of those private compost companies, and that’s been really great, because they then refer us to cities. So we have a company in Boston, we started working with them like four years ago. They’ve brought us into six or seven cities, because it’s also in their interest when they’re pitching their services to cities and other governments to say, “We actually have a whole system set up.”

Loren Feldman:
Liz, I was impressed by the numbers you gave involving the business districts in New York City. I think you said you’ve got something like 50 out of 78. That seems incredibly impressive, and something that you would want to flag when you approach business districts around the country. It seems like the kind of thing where you might want to emphasize your experience in New York, kind of a, “If you can make it there, you can make it anywhere” argument. Have you thought about that?

Liz Picarazzi:
So, I think that’s a really good point, especially that it sort of steps back from what I said about not being as New York City-centric. We do state that—it’s actually, I think, on the homepage of our new website that we are in that many BIDs. And it is true that the streets of New York City are very punishing. Like, my bins are not just on the sidewalk. They’re in literal city streets with buses driving by and ambulances and people speeding in all manners.

And yes, they’ve had a lot of collisions. There’s been some fires and other things, but we’ve survived all of it, and part of the way we’ve survived it is that we’re a modular system. So you know, if a car hits a bin, as happened in Soho last week, we can just replace the part that got hit. And so it’s not only that we’re in the 50 of the 76, but we’ve encountered most of the things that can go wrong with trash enclosures, and have a procedure to help fix it.

Loren Feldman:
There probably isn’t anybody else who can make that claim, is there?

Liz Picarazzi:
I don’t think so. And the other part of our communications that have recently switched—and I’m really, really excited about—is that we say that, particularly with cities and parks, when we sell you the bins, we don’t just run off. We don’t just get our money and run off. We also have a servicing component where we will find a local person who will be your point of contact, should anything come up.

Some of my competitors, and one in particular, are known for selling and leaving and not being available for servicing. That’s actually part of what their reputation becomes. And so for me to be able to counter that and say, “We’re actually known for not leaving. We’re known for having ongoing servicing for anything that comes up that’s really easy to get.” And that is reworking a lot of our marketing. That’s an absolute truth. We have the truth points. We have testimonials. And sometimes people ask for things, and we have them done—like they ask at five or six at night, and it’s done by the next morning.

Jay Goltz:
I think that is a great sales pitch to be able to say to them, “Listen, just so you know, things happen.” And to tell them, “There will be some service issues, and we will be there to help you with that,” is really a great sales pitch.

Liz Picarazzi:
Well, and that’s also a potential revenue stream from service plans, which we’re starting to set up right now for several New York City business improvement districts. And that’s recurring revenue. So if we go and service their bins on a quarterly basis, we go, we help with leveling, we tighten all the screws, we make sure that the hydraulic arms and everything is lubricated, the things that, like on a car, you would get tuned up. There’s an understanding that a public fixture requires maintenance, and I’ve been a little bit hesitant to put something forward, because I kind of don’t want to feel greedy, because for a lot of them to even purchase these bins, they only were able to do it because the city council funded it. But the city council did not fund any ongoing service of the bins.

But what I’m also finding is that if you say that there’s a plan available, they may say, “I can’t afford it,” but then they’ll put it in their budget for the next year. Because they’ve heard you, and if a door falls off and they don’t have a way of easily getting it repaired, then they’re going to go to their board of directors and say, “You know, we really need to have a service plan in place for this—just like we do for any other public fixture, whether it be benches or bus stops or anything else.” There’s an understanding that public fixtures need to be serviced or maintained, but I haven’t really put it forth as a true product. And I know that in the valuation of my business, if I’m able to incorporate these ongoing service plans, it’s really going to help that.

Jay Goltz:
All right, as Ted said: very impressive, Liz. Excellent job, entrepreneur of the year. Boom, done.

Loren Feldman:
My thanks to Jay Goltz, Liz Picarazzi, and Ted Wolf, and a special thanks to our sponsor. This episode was brought to you by Grasshopper Bank. Thanks for listening, everyone.