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Introduction:
This week, Liz Picarazzi and Sarah Segal talk about their attitudes toward growth, including how they set goals, the tension between revenue and profit, deciding when growth requires additional bodies, choosing between contractors and employees, and how they would use the money if someone were to give them a million dollars to invest in their business. Plus: What will it take for them to consider themselves successful?
— Loren Feldman
This content was produced by 21 Hats.
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Key Takeaways:
While breaking $1 million in revenue is an impressive milestone for a small business, it's important to remember that revenue alone isn't a reliable indicator of business success. Profitability, cash flow, and customer satisfaction are also critical factors that need to be considered.
Loren Feldman:
Welcome, Liz and Sarah. It’s great to have you here. Today, I want to talk a little about your attitude toward growth and how it may have evolved over time. But first, I just want to note that you’ve both already beaten the odds. We’ve all seen the numbers that indicate how hard it is to break a million dollars in revenue. I think fewer than 5 percent of businesses—one in 20—actually do that. It’s a huge milestone. Both of you have done it. I’m curious, were you conscious of that? Was it a goal? Was it a big deal? How about you, Liz?
Liz Picarazzi:
Yeah, it definitely was a goal for me. And I remember on the day that it happened, I was really excited. But I was kind of by myself. I was working from home that day, and I felt like, “Well, who do I talk to you about this?” You know, besides Frank. And so for me, it was like a weirdly non-eventful day for a milestone that was so important to me.
Another reason why the million-dollar mark was significant for me is that when I worked at American Express in the small business division, we had a program to help women entrepreneurs achieve a million in revenue. And they did seminars all over the country, and I remember I took note of that: “Wow, this is a very hard thing to achieve.” Like, less than 40 percent of businesses are owned by women, and something like only 2 percent of women-owned businesses achieve a million. I mean, that was a stat from like five or six years ago, but I think it’s still pretty significant.
Loren Feldman:
Sarah, how about you? Were you conscious of it? Was it a goal? A big deal?
Sarah Segal:
No, it was never a goal. Actually, when I was acquired, the person that facilitated the acquisition basically handed me the goal. He said, “This is your revenue. You should have this goal for the end of the year.” Honestly, it gave me anxiety. It gave me stress. I had always just focused on profitability and not that million-dollar goal. But the problem since then has been meeting that goal that was handed upon me, but now working at moving beyond that goal. And so that’s kind of where I’m in a holding pattern.
Loren Feldman:
And we’ll talk some more about that. We should point out that you were acquired, but recently took your business back, and are running independently again. Liz, once you hit that goal, how did you reset after that? Did you come up with a new goal? Did you feel like you could relax a little bit? Or did it kind of rev things up for you?
Liz Picarazzi:
I think it revved things up for me, actually. I really wanted to get more millions, like most people do. So when I hit that million, I set the goal the next year to get to 2 million. And I do think it’s significant. I don’t think I reset. I mean, for me, it was less about the money, and it was more about the brand and establishing the business as the go-to in a category that, quite frankly, I’m kind of creating.
Luxury trash enclosures were really not a thing until Citibin came along. So for me, success is also to be that go-to, like Canva was for easy graphic design, or Spanx was for shapewear, or Chobani Yogurt was for Greek yogurt. Those are all gigantic companies, but part of the reason they became successful is that they were category creators. So for me, it was like, “Wow, we’ve achieved this revenue mark. We’ve got great momentum. We’re headed towards being this category-creating company. Let’s just keep going in that direction.”
Loren Feldman:
How did you pick the goal of doubling your revenue after you hit a million? Was that based on anything in particular, or did it kind of just seem like the next logical step?
Liz Picarazzi:
I mean, it looked like that’s where it was trending, and it did. Also, I saw the types of clients that we were getting, and they were bigger, and the order sizes were bigger. And we are really moving from residential to more commercial. So I really saw it as an attainable goal.
Loren Feldman:
How about you, Sarah? I think you told us at one point that your goal going into last year was to double your revenue. How did you come to think about it that way?
Sarah Segal:
I don’t know, it was just a number. It just seemed like a natural step. I mean, it was a reach number for me. And I always kind of placed that as it, because I wanted to grow in a way that I can maintain, that is not going to get me in trouble. Because as we saw during the pandemic, clients go away. And there are a lot of different factors that can cause a client to leave.
It can be VC-funding drying up, or change in the marketplace in general. So I just don’t want my growth to be dependent too much on one category. So it’s kind of, I’m trying to be a little more methodical about our growth. Of course, it’d be nice to have extra funds, but I also am not just going to take a client because it’s going to add to our bottom line.
Loren Feldman:
Are you still thinking about profit the way you did originally, Sarah?
Sarah Segal:
Yeah, 100 percent. Profitability is important to me, because of the way that I’ve set up my company. So most PR agencies are around the 20 percent profitability range. That is, they end up with a checking account with 20 percent of their revenue at the end of the year. And we give out pretty sizable bonuses when we can, when we have that nice pocket of funds. And that also helps us maintain our employees and makes people happy. And it’s a nice way to end the year.
I’ve been able to maintain that as a minimum. But it’s always nice to reach toward a 30- or 40-percent profitability, which gives us that nice bucket of cash to play with at the end of the year, either by giving it away to staffers or reinvesting in the company.
Loren Feldman:
How do you try to manage profitability? What’s the key point there?
Sarah Segal:
Ooh, that’s the million-dollar question. I have a P&L that I literally look at every single day. I’m looking at expenses. I’m looking at how much it really costs to hire a person. I only have one person on staff who’s not billable. Everybody else is billable. And literally, it’s like you’re balancing your checkbook every day. And that’s how I make sure that, at the end of the month, we’re not at zero balance in our checking account. I want to make sure that there’s a buffer.
And going into this year, January 1st, I started with zero dollars in our account because we left, which was really, really hard. Because I had payroll two weeks in and had zero dollars in my account. Thankfully, I actually had one client pay their monthly retainer early, so that helped. But I also invested some of my own money temporarily, just to kind of get going. My hope is to eventually have a nice little buffer that I can rely on throughout the year. But I knew going into this year that the first quarter was going to be a lot of robbing Peter to pay Paul.
As a company grows, CEOs have to get good at letting go of tasks. Passing on tasks can help CEOs focus on the areas of the business that need the most attention. This helps CEOs scale their businesses faster.
Loren Feldman:
And this is something that a lot of people struggle with, because you do have to decide between hiring someone—what’s the best person you can get to bring in to work for you as an employee—versus spending that money with an agency? Have you given a lot of thought to the trade-offs involved in that decision?
Sarah Segal:
Oh, please do tell, Liz. I’m very curious. How do you decide? Because I see openings all the time for like, head of communications. I’m like, “We could do that. They don’t need to hire somebody in-house, and we have all the resources and tools that they would need,” at least for PR, not for traditional marketing.
Liz Picarazzi:
Yeah. Well, I so far have mostly had agency or myself do all the comms. And in a couple of situations, when I did hire that out, sometimes it worked, sometimes it didn’t. Overall, I think I got a good return on investment in marketing and PR work that I paid for. But I have often had good success from me doing it on my own. And that’s the issue with needing to grow the company is that, if I don’t get someone else to do those functions, I’m not going to grow as I want to.
And that’s some work I need to do, is finding that right person and letting go. Lately, I think I’ve been a little bit more hands-on because of this new category of municipal where I have to—I shouldn’t say “I have to”—I plan on rewriting everything in the marketing, in the newsletters, in all the sales materials. And it has barely crossed my mind to hire someone to help me with that. And that’s probably something I need to get over. Because I am feeling really overwhelmed.
Leveraging the interests of your employees and keeping them in positions where they can explore that interest can increase employee job satisfaction. It can also increase the quality of work being produced since employees will be excited about the work they're doing.
Sarah Segal:
I agree. I agree with you on that. In my industry, there are people who are independent contributors. And they like their focus, and they don’t really want to do anything else besides that focus. And I’m a person who, I want to do everything. I want to be a generalist. I want to learn how to do everything. I want to continually push myself and educate myself and try new things. And I have to remind myself that not everybody really wants that. And not everybody is looking for a career. And some people are just looking for a job. And so there’s that.
And then on the other side, I really try to listen to my staff and figure out what they’re interested in doing. Because I feel like, if there’s an opportunity where they say, “Oh, I really want to do more content and more video.” And we have clients, and we can offer that service, and we can build that, then I want to leverage that natural interest, because they’re going to put a lot of energy into that. So really trying to build our offerings based on individual interests.
Yes, there are things that are necessary evils that we all have to deal with. And right now I have a staffer who I love, she’s ready to transition out of some of the day-to-day stuff that she does. But we don’t have anybody to take over those duties yet. And I basically was like, “I want to relieve you of some of these chores so you can do cooler things. But I have to kind of backfill and find more business so I can relieve you of those duties.”
So it’s a matter of listening to what people want, but also seeing their roadmap for what work means to them. If somebody just wants a job, then that’s a different path forward than somebody who wants a career. Not everybody is going to become a VP and go out and do client sales and pitches and this and that. Some people can do that, and for some people, that will never be something they’re interested in doing.
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