Are You Hitting Your Numbers?

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman this week Karen clar Cole Jay goz and Sarah seagull discuss whether their businesses are meeting expectations and how that's affecting their plans for next year they also talk about how to handle an employee who doesn't deliver whether now is a good time to hire and in answer to a listener question how to make the transition from using contractors to hiring employees and Karen explains why employee U ization that is what percentage of her people are actually billing clients is the most important metric she tracks and one she tracks on an hourly basis plus notebooks or notion all three owners tell us how they try to stay organized even in Good Times owning and running a business can be a lonely Pursuit our hope is that these weekly conversations will let owners know they are not alone and facing challenges same thing with our daily newsletter the 21 hats Morning Report with Jak magazine recently name the best newsletter for business owners and which you can subscribe to at 21h hats.com where you can also find transcripts of our podcast episodes and lots of other articles and interviews joining me this week on the podcast are regulars Karen Clark Cole who is CEO of blink a seattle-based user experience research and design firm Jay goz whose companies in Chicago include a picture frame business artist frame service and home furnishing store Jason home and Sarah seagull who is founder and C CEO of seagull Communications a public relations firm based in San Francisco and please take a listen to my quick chat with Rob Levan co-founder of our sponsor work better now the episode is titled are you hitting your numbers welcome Karen Sarah and Jay great to have you all here I want to talk about how you guys organize your lives how do you survive doing all keeping track of all the things that you need to keep track of getting done all the things you need to get done Sarah let me start with you what keeps you on track that's a really good question and I have to say um I haven't found that magic method to keep me on track my default is a notebook and this is my old partner used to do that and she had this just regular notebook that you would use in college and she'd write everything down and then she put a big strike through every time she accomplished something and then would you keep adding to it and so I kind of picked up that habit but then I also put my call notes in that and then I have this idea that I'm going to get really organized and I and I research new apps to do it I have tried every app on the planet to get organized um but again um I have not found that magic cure to my disease why don't they help you what doesn't work for you I don't know I just think I have this optimism that someday I'm going to have like a lot of time to sit down and collect all the those Post-it notes and put them in one place and be organized and then be diligent about it but my existence doesn't seem to provide me that opportunity but also I don't know that my brain works in that linear fashion well enough to leverage those uh tools but you're keeping a to to-do list on paper why can't you keep it in an app or a Google dock or well ask the follow-up question Lauren how many notebooks do I have how many notebooks do you have Sarah exactly oh um I have one two three four on my desk right now in front of me do you feel organized no I have this need and this desire like literally my porn is Instagram posts of people getting organized like there to me there's nothing better than a beautifully organized closet or a beautifully organized to-do list I just don't know that I am personally capable of doing that by myself and I am open to solutions for that Jay what app do you use um it's called a piece of paper Lauren yeah piece of paper and as I'm listening to this I'm thinking to myself I think what I've done is I've made sure I hired competent people kept them around and I've given away most of the day-to-day stuff to them you don't have a to-do list I have a to-do list but it's very short there's just not a lot of activity like if if I don't show up today nobody's looking for me nobody's calling me nobody's sending me texts no one's we would have been looking for you how do you make sure you get to your appointments I have a daytimer it's this thing yeah I think there's four of us left um there was actually a year where they didn't send them out on time I thought I think this is it they're going to go broke and they got bought by somebody do you special order them yes absolutely I special order them once a year they got bought by a big company now and I appreciate they're still making them and they're easy and it's in my pocket and I've got this thing called a pen that's hooked in there and I take it and I write down a little note and it works just fine so I have absolutely no you know I have absolutely no desire to go looking for an app or anything I and I frankly don't have that many like if you open up next week's appointment I got like two things written down you know I just don't have that much going on I've come to the conclusion that a this won't be a surprise to most people I'm not normal I recognize that I am probably a I think I'm clearly add and I don't think I could have gotten to where I'm at if I didn't there's a there's a great book called The hypomanic Edge it talks about hypomania where you think you can do anything and you're always up I'm never I'm not really down and I recognized that I do think differently and I I just gave up on trying to be the most organized yeah I'm just not but it works and I'm not torturing myself over it which is a key key part to this my new phrase is uh let me not sleep on that because that's the only thing I can't control like I do get up in the middle of the night occasionally thinking about something but other than that I'm pretty you schedule that in your daytim no and I I've I really it's it's frustrating sometimes because it stuff does wake me up that I'm thinking about but I will tell you at 6: in the morning when I'm half asleep I actually come up with some great Solutions occasionally so I have that problem too like I wake up and you're just sitting there thinking and stewing in your thought yeah it's helpful sometimes I wouldn't mind just just getting a whole night's sleep without do you write down the things that you think about like do you or do you do you know that you're going to remember them because I worry that I won't remember them um once in a while I think of something oh I gotta oh I don't need to write that down then of course three hours later I can't remember what it was so uh I do write it down occasionally but I I've got organized enough on my desk every day there's a pet of paper and I have a list of stuff to do and I'm working on the list I have zero desire to go get an app I can tell you that we sense that Karen how about you do you feel organized it kind of depends sometimes I do sometimes I don't I different than Jay I don't have ADD I have OCD so I am my closet is incredible like the I mean the whole company is built on organization though so like my sock drawer is organized my Forks are organized you know everything's really organized and I'm and if it's not then it's problematic for me it makes me crazy but that's like the physical space but I tell you over the years like it's like the flavor of the week of what I do to organize my work I love paper because it's fast it's easy and um I also you know I have an art background so I like to use different color felt pens and the pen I use is very important for the notes I'm taking and if it's this kind of note I use it this color if it's that kind of note I use that color I've very specific paper that I've tried over the years a million different kinds of paper it has to be beautiful because of the sort of art side of me and um you know it's uh 5 by seven it's got dots on it and the pages pull out and so it's not meant to they're not meant to stay in there which is really important because once I'm done with that note it goes bye-bye and I don't want to wreck the book so the book stays beautiful Pages get ripped out and as it goes down to the bottom I have 10 others in different colors that I choose and I use next now what I do it took and this is a new system that I'm using which is working so far is I have a a big iPad and I use uh one note and so and with the pen and I can draw digitally in my iPad and take notes that way then I can carry it around with me because what I found is I'm walking around with these stacks of papers of all my little notes and each little note is some sort of action item so there's always something new initiative that I'm working on and I've got notes that came out of this last meeting that now I got to turn that into action and so there's all kinds of stuff and I got to get this person going and that person going and make it all happen and so what I I'm walking around these little bits of paper and I've got them all over my desk which is great until I have to move and go somewhere else and work and it was becoming really problematic because sometimes I'm at home sometimes I'm in the office sometimes I'm you know in my car all over the place and so this iPad with the with the notes on it was super helpful I'm exhausted just listening to this I think I need to take a break now my life is exhausting Jay there's never a dll moment I can tell you no I yeah and that the whole thing translates to my personal life like I have a separate piece of paper with a different color pen for like call the vet call the furnace guy like all that kind of stuff this is a serious question um J and Karen are you good at taking notes because I learned early on that I'm an auditory learner and so if I take notes I'm not hearing what the people are saying oh I'm the opposite actually I have to have a pen in my hand or I kind of can't hear you it's interesting that you say that because I think everyone is very different if I were to look at those notes typed out I don't remember the conversation hardly at all like I have to really think about it and so that's why putting it into to this app where I can draw because it with the pen it lets me do that same kind of thing where I can sort of doodle around to sort of remind me what I was thinking about I can't do that if I'm writing I'm not hearing and listening to what they're saying so like when we have client calls or potential client calls I other um make one of my members of my team take notes or I'll use something like otter um which will just record the record and transcribe the conversation so I can look at it later but um I can't write and listen at the same time I can't think of a time I don't take a whole lot of notes because I'm listening and I'm trying to find the insight into what they're saying that's what I live to do figure stuff out and so I'm processing it I can't think of a time where I'm taking a whole lot of notes so but mine unlike you Jay if I don't write down that idea first thing in the morning it's gone instantly like I have a notepad in my bathroom for when I get out of the shower to write stuff down and it would be better if I had it in the shower that's awesome yeah but the and that's where the Big Ideas happen so if I I'm not writing notes like verbatim at all I'm writing down action items like this is the thing this is the next step this is who has to do what who I've got a call to make sure that this other thing happened it's just a series of to-dos essentially that are coming out of a meeting which is what you're doing Jay but I can't remember anything if I don't write down like go downstairs and get my other shoes I'll be like what am I supposed to be doing like I really I have no idea so so let me ask you this Karen do you think if I said what percentage of you as entrepreneur and what percentage of you was manager do you have a feel for that do you think you're 5050 well I I don't the word manager to me means it's totally that's like running stuff telling people what to do for me managing is more the operation side I am an Ops person for sure okay my sort of initial role in the company was Ops you know so making sure that everything's organized we have the right system for everything we have process we have systems I'm super into process and systems I'm super into that I just can't do it one of my first hires um is now our operations manager and I think that I drive her nuts on many levels because she's always trying to find process and systems I'm a big fan of not having to reinvent the wheel like you know if you do it once and you have to do it again you shouldn't be starting from scratch but I think I'm more optimistic um in my ability to make that happen um than my bandwidth allows okay this just illustrates that people are very different and manage to get the job done but they come at from very different mindsets I'm 80% entrepreneur and 20% manager op maybe call it operations that's fine because I just get bored with it so why do you have to be one or the other like in order to be a good entrepreneur you have to have some operations there's no question but I'm just saying that some people are are like quote unquote running their business all day long they're on the phone they're dealing with customers and there's other people that have set up the thing and a very little to do with day-to-day operations so there is a difference in entrepreneurs as to the mentality or you have some somebody on your team that's really good at that dayto day and it sounds like Jay that you've outsourced a lot of that dayto day in a very effective manner it took me many many years I trust me many many years like 25 years I mean it wasn't like I did it overnight well yeah you have to trust those people are going to accomplish the things that you want like yeah I can imagine it taking a while to do that so I have an entire company that I've outsourced what I used to do it's same as you Jay but but my job though and if I didn't show up to work everything would go just fine and people would probably be pretty happy because I wouldn't be driving them nuts you tried that a couple years ago yeah it was great they were really excited because we're growing and we're evolving we're changing constantly I'm constantly looking for what's next how can we be better you know how do we need to you know grow and shape and then and then getting it going just like like I am the entrepreneur in that sense of I'm sort of making stuff up all day long if it sticks then I go and create the team around who's going to execute and Implement that thing and then I'm out of there well there's a difference between our mental I just want to grow it I'm not pushing it that hard anymore you're still in the go stage of growing it which more power to you I and and you're also younger than I am so I that makes sense I just I'm at the stage of just like hey if I can grow it uh I don't know six seven per a year hey I'm good I don't I don't really have any desire to push it to grow any faster than that because I know that it's going to take a lot more energy and money and and I don't really care so I'm in I'm totally opposite from both of you I think I'm in the the the baby phase compared to both of you where I'm still well our company and our parent company can live by the the the rule that we all do windows we all do floors overall my job is kind of high level but like I have no problem rolling up my sleeves and doing what needs to be done we have a client we love and they did a wine and dut tasting menu with a local wine iny and nobody on my team can do these deliveries the client is a beloved Legacy client of ours that doesn't have budget to like pay messenger services so I'm literally driving um a case of wine and a box of donuts to two locations in San Francisco today and dropping them off and I don't mind doing it because I have calls during that time um that I could just do in the car but I'm 20% in the weed still for sure from the the your partners there what is your directive are you supposed to grow that company as fast as you can or not or they want you to grow at some I mean is there a clear-cut mission as to do they want you to double the company in the next three years no there's no pressure like that but I put pressure on myself but they didn't they you don't have a mandate of a certain amount of growth that you have to perform no oh that's great if not half how about want would they like to see you know if youve grew at 10% uh next year would they be happy with that yeah I mean they would be happy with that but they would you know I keep them in the loop of everything and they know what they bought when they bought bought it and we're growing um in in a slow and thoughtful way but I put enough pressure on myself I had somebody ask me they're like well what's your what's your fiveyear plan like where do you want where do you see yourself um and I have a lot of trouble I a lot trouble with that question I can't do that question because I don't know I got no problem with a three-year plan cuz it's tangible you can do it five years is like who knows what's going years crazy like how about six months maybe a year let's take a quick break to hear from our sponsor which happens to be a sponsor that can help with people who need help getting organized I'm here with Rob Levan co-founder of work better now which provides top remote Talent from Latin America and the Caribbean Rob I gather you found that businesses are using your remote workers in ways you weren't expecting can you tell us about that yeah it's a great Point Lauren uh initially wbn was providing personal and executive assistance for business owners who understand that their time is better spent on impactful items like increasing Revenue improving the customer experience and improving company culture they were drowning in admin and we initially were focused on saving them time we're still doing a lot of that but then we saw that some of our clients were hiring four five six people from work better now wow what are they having them do you know they're putting him in a very wide range of roles things like project management bookkeeping marketing and customer service stuff like that and we're actually helping them build out their departments with our talent now we're recruiting and attracting top talent for those roles as well what does using wbn cost for $1,900 a month you get a dedicated full-time work better now assistant you can have a matched assistant who is perfect for your needs within 2 weeks and there are no contracts and and if you mention 21 hats when you are having your free consult you get $150 off your first three months and that is for each assistant that you hire where can we learn more workb better now.com thanks Rob and we're back Sarah this is did you have numbers that you had wanted to hit this year and and are you hitting them uh yes I had numbers I wanted to hit and no I am not hitting them I've told this to a number of people it this was a learning year for me as a business owner I invested in hiring uh some senior people that didn't deliver uh I also had realized that I need to have more um lengthier contracts just for that consistency I mean there's a lot of Sarah were those senior people that you were expecting to uh bring in new business no not so much that but like let me take my hands off the wheels so I could focus on that right I think I was impacted by what's referred to now as a a a slow quitting situation we played out Severance and let the person go in a you know an amiable way but it set me back like so if you look at my I'm literally this year because of I made a I made a mistake um or two um my growth is level this year the person that you hire because I've been through this when you say senior person give us a handle are they like 20 years old than you are they how senior are they are they in their 50s they've been doing this for 30 years no PR is a Young Person's game so this is somebody who's in their in their early 30s wow you know they had a lot of great credentials but it just wasn't a match and um they didn't deliver and I I gave probably too many opportunities to okay well let's see if we can fix this cuz I I believe in people and I I'm always glass half full about things um and I I should have just went with my gut early on and said no this is not going to work yeah and if it makes you feel better you and everyone else I've ever talked to in business would say the exact I've never met anybody who wouldn't say the exact same thing you just said so I learned my lesson you got to listen to your gut you know and I listen to somebody else not to somebody else but I kind of listened to the the cohesive feedback was your gut telling you that you didn't listen to even when I was interviewing this person I was like I don't know I I just don't know if this is going to be the right person but the other members of the team that interviewed this person they were like this person's great you know definitely we love this person this is going to be a great fit and so I second guessed to myself and I said you know what let's do this and I kick myself for that but I can't kick myself too long so was there something on the interview that you look back in hindsight I always do an autopsy and frequently I find out yeah I should have known better they did say that and I blew it off and I should have paid more attention was there something they said on the interview that you think to yourself yeah I should have heard that better no it it was just a lack of linear thinking so we just did media training for a large um organization yesterday and you sit down and you me Media train these people you teach them to think and and put together sound bites that have a start middle and end right and if a person can do that that is like golden that's great for media that's great for sound bites that's great for press that's great for everybody and it means that they have coni like to me it says they they know what they want to say and they're going to say it and so if I'm talking to somebody and they start here and then they deviate and go off there and then they go here I know oh my God they're not going to be good for client relations I'm looking for people Jay that aren't me CU I'm not a necess necessarily a linear thinker with everything I do and so I need people that are going to be like Karen or yourself and have those lists and be able to go I'm going to prioritize this this this and this and check these down and my gut was like I don't know that this person can do it but um they have all these this great kind of interesting experience and and F fascinating background Maybe I'm Wrong well that's part of the learning curve of figuring out how to hire because I certainly have hired plenty of the wrong people I did learn from okay in the future you need I call what you just said being deliberate you figure out what do I want to get from this and what do I need to say to do that versus just wandering and uh did this person come from a bigger firm uh yeah from not a bigger firm but a firm yeah I didn't hit my my targeted goals that I had set myself for the beginning of the year but I also we got some really great new clients that I'm super excited about and we we honed our skills in terms of making the most of what we have right I have this wonderful team of people that I've hired who you know understand that like yeah this year we're going to chalk it up as kind of like all right we're going to learn things along the way and then 2023 is going to be that growth year that we were thinking about Karen are you going to hit your numbers this year um some of them we have lots of Targets in terms of Revenue growth 20% is our sort of standard Target at the beginning of the year after the first quarter we were up more like 35% growth and so we adjusted a lot of our targets thinking that that was going to keep up at least some sort of higher Pace um but then it didn't Q2 was not good and Q3 sort of half not good and so um anyway but we're still going to meet the 20% Which is important for our parent company that's tremendous growth 20% is tremendous growth it is yeah it it is but when you when it seemed like we were going to do 35 it's kind of a drag there's a lot of targets right so we're looking at there's Revenue there we have sales targets and and the problem is it all starts with the sales right and so the sales dropped off and is that just related to the economy as a whole or is there something else going on it's possible or the worry of the economy yeah and then we're seeing right now that we've had some big clients just pausing on opening POS and just sort of pausing to check in at the end of Q3 of what's happening and then they're going to go we think they're going to go Gang Busters in Q4 for us which is this one coming up are any of these VC funded no no these are Big tech companies yeah we've got we've gotten a couple like reductions from VC funded companies because the VC money money has dried up yeah you know so for us we have there's there's all kinds of targets we have to watch so I have to watch the the sales number which you know leads into the revenue number which leads into our iida our our net profit and our gross margin our numbers that we watch very carefully and then also percentage of just different kinds of work that we're doing I have to watch that really carefully so it's sort of like a constant every day always looking at these numbers this is the time of year looking forward that I always say optimism is the gift for the entrepreneur and also the occupational hazard is both and I'm optimistic but then sometimes I I'm too optimistic and I the economy is kind of weird are you hitting your numbers this year Jay uh no part of it is all relative to the year before the year before everybody was out there spending money fixing up their house so it's all relative but no I'm not hitting the numbers um I'm adjusting next year's numbers and you know I've been through this 20 times it's just like I I don't want to be overly optimistic that's for sure so I'm bringing the numbers down looking at the expenses to match you think about you know the hiring thing in my case my biggest expense by far is labor so I just have to make sure I try to match the right amount of people but I will tell you as a customer oh my God the companies I'm dealing with are so messed up and I'm seeing lots of companies that are under staffed and they think it's okay and I don't think it's okay they're losing business um and I don't want to be one of those companies so I'm still trying to not trying I'm still maintaining our customer service levels because in the long run uh you can do a lot of damage Yourself by cutting back too much Jay how do you think about it when you see your numbers off how much do you attribute that to the economy and how much do you think you need to adjust your marketing my marketing is next to nothing in that it's you know I've got a website and I've got my locations but I spend very little in advertising so I definitely am not blaming any of it on marketing you you have spent a good bit of money on advertising in the past over the years but I'm not anymore because the stuff I used to do just simply doesn't work anymore um it used to be you could go on the radio and expect a decent return that's over so you you're not doing direct mail or ads or print or anything I am GNA do another direct mail but it's still not a no but but that never was a major driver of the business to begin with uh the major driver to my business always was and will continue to be repeat business I'm selling a lot of um discretionary income stuff nobody needs to frame a picture today they can wait till next month or the month after and frankly when you talk to people frequently they say oh I've got something I've been meaning to frame and they've been meaning to frame it for five years so I have a big stack I think you should start doing pickup and service where you can come to my house and do it get car as soon as we're done and drive over there and get your stuff cuz we need to get there seriously like that would really help me out that's my barrier is I got to get it in the car I got to take it down there I got to spend the time if you came here it' be amazing the problem is that you know the stock markets way off and people probably concerned about oh I just not you know they're they're probably being concerned about spending some money it doesn't take a lot to throw things off well the housing market is collapsing yeah it certainly doesn't help I have a stack of frame things that need a free frame because it's on my it's in one of my notebooks on my to-do list all right I'm GNA dispatch someone to go to both of your houses so the question is is there's some blocking and tackling that you could be doing Sarah to go get some more business like here's my question for you how come I've been in business for 43 years and I can't ever remember reading a story about a PR firm a small PR firm that was looking to do how come I've never seen an article that I can ever remember well we actually we're F new business is like like hitting us hard Fast and Furious right now it's like all of a sudden people opened up their wallets I literally signed three contracts in the last week so I don't want to hire anybody full-time until next year so we're my goal is to go into next year with a beautifully healthy p&l like for PR agencies if your profitability your monthly profitability is you know minimum 20% like ideally 40% you're in the gold standard right um so I don't necessarily want to add additional headcount before the new year because I want to go into the new year with like a we have this wonderful profitability we have clients that have signed on for you know uh six to 9 months like we're in a really good place because last year we had a number of contracts that expired at the end of the year so I went into January with I'm in the red right now because those contracts ended and January is like the death for new business because people haven't figured out their marketing budgets for the year January is just like a wasteland Sarah for your hiring why why do you need to hire at all if everything's going well we have to work like as I said like my time is in dealing with new business is I literally will easily be up until 10 o'clock 11 o'clock at night every day just catching up on things because I'm trying to juggle new business but also we need to hire an additional person for a consumer team so Sarah isn't it more important to hire that person and get the work done than to make sure you're the way you want it to look yeah but I don't want to yeah I hear what you're saying but I also hiring somebody and then having them not work for half a month in December is like why because then you hit the ground running in January that's true and you can service clients in November I if they just signed on are they going to wait until January you're going to hire someone bring them on and then what February they start to get the work done and two if you're paying every two weeks then that's not that much money in a salary we have found a couple contractors one of which has been a contractor with us forever and um she won't let me hire her because she's you know an independent contractor um so we're able to fully service all of our current clients I just I don't want to make that commitment until I know in the new year that you know we're in a really good place have one client a big client whose contract ends February 9th and so if they go then that just going to cause me stress in the new year and so I'm kind of just trying to prepare myself in the best way for that and and using contractors is fine because it's really hard to find people to hire it just so happens we're almost out of time and I have a listener question that addresses exactly that point let me read this to you this question comes from NY Livingston who owns a design business in Philadelphia called creative repute her question is this many of the people I work with are contract because the work we take on is so inconsistent plus contractors allow us to maintain a deep bench of Specialists to call on however I will be taking steps to convert longtime contractors that consistently work with us each week into employees soon I've learned that offering flat rates for each project is fair unless it's a minimal task otherwise I risk having contractors milk the clock plus flat rates help us budget better salary will be a new Endeavor for me I'm excited to learn some lessons about managing that I don't want to pay for people to sit around for long periods but I need to retain Talent that's my question thoughts anybody was like a four-part question it is yes it is which part would you like to address Karen well I mean I think the first two points are true which is you get Specialists and you you just pay for them when you need them there are laws now that make it so you can't just use contractors over and over and over and have your whole business using contractors and avoid any kind of taxes it's to get at paying employment taxes so like in California and Washington you can only use contractors on a temporary and very specialized basis and you have to prove that they're not instead of having them as a full-time employee so you have to be really careful about that so that's the difference between a 1099 and a W2 but yeah managing bench time and utilization utilization is the number one thing that I look at every day it's the most important thing it is the single most important thing that that impacts our profitability what is utilization is there a an equation that you're referring to yeah people working on projects so people billing so we have we're Consultants so we Bill our employees time to the clients essentially and we mostly do flat fee projects um as well because they are they're nice to manage so so do you keep track of what percentage of your people are billing on a daily basis is that oh yeah but I know every hour what do you use to track their hour hours curious uh you know time tracking system we've used a bunch of different ones over the years they're just just just basic time tracking but everyone has to enter their time the way a law firm has lawyers keep track of their time it's exactly the same yeah so they have to show what project they're billing to and they have to record their time and it may just be 40 hours billing to this one project and it's super simple it doesn't have to be complicated but we don't get to track Revenue until those hours have been entered into our time tracking system so until their hours are entered it's considered a sale so like let's say we have a $100,000 project that's $100,000 in sales number and it doesn't convert till Revenue until those people have entered those hours into the time tracking system because the revenue is work done and we are measured mostly on Revenue that's the most important number for us because you can have all these big sales and we haven't we can't complete the work because we don't have people or something went wrong then it's no it's no good until we've actually done the work so it the it's the number one thing that we have you know had to manage and deal with and create all kinds of systems and checks and balances around utilization so that we know that we don't have people sitting on the bench is what we call it which is the single most expensive thing for us and we have a whole team that manages putting people on projects to make sure that we don't have anybody who's not being utilized do you have like different levels of like this person has to be 80% billable this person has to be yeah we do higher up in management so more senior managers have less billable time can you clarify those rules for 1099 have been around it's an IRS thing is there extra stuff in California more than that yeah California and Washington have new rules and maybe Oregon as well we had a bunch of people that we used as contract and it came around um after the you know Uber andyt having all these you know temporary gig workers and not paying any benefits meanwhile they were working full-time for those companies and so that's when they really cracked down and so we had to convert a a big huge portion of our 1099 people into um part-time W2 so that we were paying employment taxes they get benefits that kind of thing I think one of the critical questions are if they if you're if you are their only client that's a problem I think that's one of the red flags y for sure and they have to be set up with their own business they have to have a business license all that kind of stuff Karen would you have advice for Sarah uh or for the The Listener who raised this question about how a smaller business can try to make sure that they're not paying people to sit around yeah I mean you just have to watch it really carefully you have to be careful about who you hire like we've always hired behind the curve right so we've got work coming so you have to be really watching when's the work in a land what kind of work is it who do I need to do that work and then have we have a pool of contractors that we use to EB and flow for this kind of stuff and we have to keep track of when they're available right because the problem with contractors is they have their own life and they're off doing something else and when you need them they're not available so we have a person who manages the contractor pool they know who's available when what their skill set is you know what kind of work we can use them for but then with our employees how we manage growth is if we have too much work for the people we use contractors until we know that that's the new normal and as soon as we as soon as we can see that okay we've been using our percentage of contractors like 20% is a good number for us if it's higher than that consistently over several months then we start looking at okay we we have a new normal we need to we need to hire now so we'll either some of the contractors may want to convert others we just have to hire new people to fill that bandwidth and so it's a constant constant eye on the ball it just it never ends it's always been like this you know for 22 years nothing has changed in this area I only have one contractor at the moment and it's worked out very well she does marketing for me but generally speaking that question from The Listener she doesn't want you know people doing nothing if you have a lot of employees there are going to be times where they're just not a lot I mean there are es and flows and trust me when I walk through my framing showroom and there's three people sitting there buying shoes on zapo it doesn't feel great but I recognize all right I figured out what the cost of sales are it fits into it people there are abs and flows of business and if you have employees which you have to have at some point there are going to be some times where they're not that busy it goes with the territory I think to Karen's Point yeah if you're using a lot of contractors at some point it's I would think it'd be more cost effective to have them as employees because I would think you get more bang for the dollar actually for us Jay it's more profitable to use contractors but then you have the downside which is you can't keep them and then your IP goes out the door right so we do a lot of work training we don't we want our knowledge to stay inhouse and with contractors it comes and goes so right I can't I I I have a hard time imagining a company that's built on all contractors I guess they probably exist but Sarah is this debate between contractors and employees relevant to you is that something you've wrestled with um yeah no it's an ongoing um I love contractors I think they're fantastic I think that there are some people that are a lot of people actually um postco have found really good stable um sources of revenue being a contractor and they don't want to work for a company so some of those contractors are like the best members of your team they don't want to be hired by you that's a great Point all right my thanks to Karen Clark Co Jay goz and Sarah seagull and to our sponsor work better now we'll see you all next week wait wait don't leave yet if you have a question or a comment that you'd like the 21 hats owners to address send it to me by replying to your Morning Report or by email at Lauren 21h hats.com that's l r n21 hats.com do it now before you forget and don't be afraid to tell Jay what you really think you can take it and if you got something out of this conversation help us reach more business owners tell a friend subscribe and review us wherever you get your podcast follow us on Twitter subscribe to the morning report at 21h hats.com this episode was produced by just Theron founder of blank word Productions okay now you can leave thanks for listening everyone hey [Music]