When to Pull the Plug, When to Pull the Trigger

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman this week Mel Gravely Jennifer Karen and Liz picarazzi start out talking about the pain of being fired by a longtime client it still stings says Jennifer who nonetheless surprised her team by writing a note of congratulations to the CEO of the company that took the business the conversation moves on to the tradeoff that comes with deciding between promoting Managers from within or hiring them from outside the organization what if your people aren't ready what if the outsiders have more experience but aren't as good a fit and that leads to a discussion of how to decide when to press on with a venture that's struggling and when to give up on it not surprisingly all three owners have some experience in that area of course they also have experience with deciding when to start a business but they have very different attitudes about risk while Mel says he's pretty much always ready to go Jennifer tells us she's been noodling on an idea that she really wants to pursue for about 5 years even in Good Times zing and running a business can be a lonely Pursuit our hope is that these weekly conversations will let owners know they are not alone in facing challenges in fact that's the whole idea behind the 21 hats Community engaging with other owners to get the kinds of insights only another entrepreneur can offer if you're interested in learning more step one is to sign up for the Morning Report newsletter which highlights the most important news of the day for business owners so you don't have to go looking for it step two is to get on our select Channel where you can ask questions get Bender recommendations and tap the wisdom of a very impressive crowd just search for the 21 hats Morning Report to sign up for a free trial joining me this week on the podcast are regulars Mel Gravely chairman of triversity construction a construction business based in Cincinnati Jennifer Karen CEO of SB Expos and events and events management business based near Baltimore and Liz picarazzi CEO of City bin which makes trash enclosures and package bins and is based in Brooklyn New York the episode is titled when to pull the plug when to pull the trigger before we get started just a quick reminder that time is running out if you want to sign up for the 21 hats marketing workshop we all know how frustrating it can be trying to get marketing right it's complicated it's expens ensive what works for one business may not work for another what works today may not work tomorrow all of which is why Jackie Russo and I are offering something different it's an unusual opportunity to participate in a collaborative Workshop that will gather virtually one day a week for five weeks starting Friday October 18th you'll be led by Jackie and you'll work with fellow business owners to create a real strategic plan tailored specifically to your own business each session lasts 2 hours and is followed by an optional 1our open discussion SL off hour session the total cost is $1,495 to get 10 plus hours of Jackie's expertise combined with the feedback and brainstorming of a 21 hats focus group to learn more check your Morning Report or just shoot me an email at Lauren 21h hats.com and now on to the show Welcome Mel Jennifer Liz great to have you here I want to start with a topic that Jennifer suggested which is what it feels like when a client fires you have you had that experience Jennifer yeah it happened recently and it was a long-term client and it wasn't anything we did it was our champion we've had several Champions over the course of many many years and the champion left and the new person that we fell under had a group of people that she had worked with for years like her own set of vendors and really smart very competent and had formed a relationship over you know 10 to 15 years with this other group and so decided to go in a different way it wasn't a matter of um our work or our experience it was just in what we do relationships with vendors is so critical as a team and that team culture when you're doing it with vendors is critical in any industry but um especially with ours because we have such tight deadlines so she very politely she didn't I wasn't say was fired for performance in that way but politely said that you know they were going in a New Direction um they paid all of our cancellation Clauses um and you know we left on good terms but it still stings it still hurts and when we look back if there's anything we could have done I'm not sure there is but it just goes to show you how much of the way you form a relationship with a client can be equally or sometimes more important than actual performance of the work you do so it's just a good reminder for us again I'm not sure there's anything I could have done but it stinks did your Champion go somewhere else where he or she might be able to hire you uh no they got a promotion in their their current organization uh was this client sufficiently large that part of the issue here is the amount of business that they represented uh the percentage of your total revenue or is that not a factor in this no that that wasn't a big issue as a matter of fact surprisingly I think it was just the length of the contract it was the the contract that started the company it was the founding client and so because of that I think there's emotional significance attached to that it wasn't really the revenue and again it wasn't performance related and they were wonderful about it it was handled well I think it's purely the emotional side of it when you get attached to a long-term client is how do you disengage from that moving forward did you try to talk them out of it at all or was it clear that this was a done decision when you found out about it over the past year when we realized who was um who was going to be our main contact we sensed about 15 months ago that this could be an issue and we worked hard to try to build up the relationship so we weren't completely surprised when it came down to it we had worked we had come up with ideas and worked for the year to try to form that relationship but again I mean I get it when you form a relationship with a certain group a team that's been really successful in your the past you want to bring that team together it's like bringing the group back together and I appreciate her perspective on it it doesn't make it any less frustrating for us we did our best but I think it was a losing battle um a while ago what was it like for your employees who worked most closely with them did they handle it well yeah they actually felt really bad for me they were like Jen we're so sorry what did we do what did we do how could I was like there's nothing you could have done they felt really guilty and I said look we all talked about this we have talked about how this might be a possibility how we can combat it and let's dissect the issue appreciate that we kind of saw it coming and things we tried and let's move on and get other business um I I don't want to dwell on it forever we took a little bit of a moment of a sort of a little bit of a grieving session where they were very concerned about me which was nice but then let's move on you know Jennifer I listening to you like I get it it's so easy for us to be not easy we get upset when this happens but we we celebrate when we do it to someone else right because almost always when we win new business someone had it before we got there and for whatever reason whether it was relationships or performance or a better value proposition you know I'm sure you've Tak business from from other folks too and it this just sounds like it was coming and you did every you saw it coming you tried to mitigate it you couldn't you did a postmortem on you know could we've done anything else the answer is can't think of anything and so you know as hard as it is I think turning the page is probably all you get to do next yeah thanks well and that's a good perspective I wrote to the company that got the book of business I've known that person just at industry events and so I wrote um that CEO and just said you know congratulations it's a great client I wish you all the best and my staff was sort of surprised that I would do that and I thought you know what this industry is too small but this world is too small there was nothing that other company did they didn't do dirty- handed tricks they didn't you know badmouth me they just won this business and so I wanted to wish them well and wish the client well cuzz it's never good to burn Bridges and I am shocked when I see people getting angry and Burning Bridges you never know what happens in the future so I tell them look if it never comes back great but you never know what could happen never know you know the band played pretty well in the previous venue but this is a different venue and um maybe that band coming back together isn't maybe you really can't go home again so you never know this could come back I never thought of though reaching out to the person coming in and wishing them well that's a nice touch that's even icing on the cak so I say hats off to you thank you did did they respond they did that CEO uh wrote me back sort of surprised and said thank you and again any industry can be too small as you start to get bigger and I never want to be perceived as sour grapes or Burning Bridges we played a fair game we we did our best and um we wish them the best right well and other partners that you worked with at that company like if they go on to other jobs where they're in a decision-making role to hire you they'll have had that experience to draw upon in considering you um when I worked in corporate I saw that a lot where maybe an agency would lose the business but then it would kind of 10 years later you know they bring in the agency back that they originally gave the business to so yeah absolutely Liz that's what I'm trying I'm hoping for reputational right it's reputation of of me as a CEO and of our company is that we do our best we try to work with you long term and if it's not a fit then we want you to do the best you can for your meeting for your convention and who knows what will happen Mel or Liz have have you guys had that kind of experience yep so I would say my kind of response to this is definitely a lot different um than Jennifer's the one that's most Vivid that came to me was when I had my handyman business checklist home services and we really focused on we had two products the handyman for a half day and the handyman for a day and so our clients would basically put together their list of all the sort of painting and talking and IKEA Assembly we'd figure out which product worked for them in terms of time and staff and that would be it that model worked really well um but I sometimes went outside of that model and on a couple of occasions there were people that wanted more than the handyman for a day they actually needed a full contractor so they would try to stuff the work into you know a regular handyman day and so on a few probably three or four occasions that happened and you know I think it was partially my fault but I think you just got to watch out for people that are trying to stuff more work in to like the service that you offer versus needing to kind of be a step up in terms of scope so I remember it really hurt and I remember feeling very righteous about you know we're trying to help her out with all of these things but seeing you know what let me stay in my Lane the way that I Market my business the way I hire my guys it all lends itself to strictly a handyman business not a GC um but it took being fired a few times for me to to realize that boundary needed to be set how about you Mel yeah of course I mean I don't know anyone that has long-term relationships with customers that hasn't had one decide to go another Direction I remember one that I would have to say is was partially because they worried about our capacity to do all of the upcoming work that they had to do so we hadn't failed to to deliver on that capacity but they worried that we might and and because of that they didn't take all the business but they took a portion of it and it wasn't a small piece it's was like 40% gave it to someone else and uh it did it didn't go well I mean you know same as Jennifer this is our founding customer and they're very important we gave a lot to them and and invested a lot in that relationship um but we we took the high road I didn't I didn't write the other CEO's notes though that's I wish I'd have done that that's a great one but we we we just kept our our heads down and we focused and we contined to execute and it turned out to be a positive only because the customer had not had a chance to compare and having others work with them that um that they didn't know um showed them oh this it is better when we're doing it with triversity we thought it was just either more expensive or whatever they thought um it is actually different and so in a weird kind of way it turned out to be a positive those those those suppliers are no longer in this account we now do all of the work again but we had to work our way through yeah it's probably two and a half years of sharing the account and uh but I think it turned out to be a positive so I say just put your head down and keep doing the work take the high road and uh you never know M that's my hope is you just never know for the future right yeah some people already reached out to us for some historical knowledge and um we said we don't have access to the technology to give them we can give them old reports that we' emailed them but we're no longer in the account we don't have access into the event technology to give them and they were like oh and so I I the same thing as you is look I'm taking the high road I really wish you the best but I'm really hoping um to feel that maybe they do come back I you know it doesn't if they do or don't but uh I I do hope that that's that they see the comparison that they couldn't see before yeah the other thing is is it frees up some of your capacity to maybe find something that's even better because I think sometimes just like customers get kind of addicted to us we get addicted to them and uh little perspective doesn't hurt that is a very good point and I think what Liz said too is that you get perspective on the scope of the work you want to do and what you don't want to do and when you have a legacy client that for a long time you just assume so much oh extra work I think because it's built up slightly over the years and this is a chance it's kind of like when you if you've ever painted a room and there's like 10 layers of Paint and Wallpaper or something you start peeling back the layers you're like whoa wait a minute why are we doing this we don't do this for other clients um so hopefully we'll see uh but I feel good I think by taking the high road you can never feel bad about it uh it stings but it doesn't leave a lasting Mark y well yeah and you think about it too like let's say that company has like 30 40 people if you're connected to those 30 people on LinkedIn when they leave that job you're already connected to them I mean I get LinkedIn sometimes is helpful sometimes not but I would totally connect with them there if you aren't already because then a decade from now they're still going to be connected to you agreed agreed Jennifer are you doing anything differently than you normally do to try to replace that business um well the whole year we've been putting a lot more emphasis on marketing that we've ever done so I don't think specifically that losing that client but this is the first year I've really leaned into more marketing we've done a lot of trade shows imagine that a trade show management company doing trade shows and um we hired our first business development part-time person dedicated so not specifically because of that client but overall knowing I needed to lean in and how is that going slow we have a long cycle we have multi-year contracts and so it's a long sales cycle for us getting a new business development person up to speed took a little bit uh she's from the industry so she's been fantastic just getting her to speed of us the training and then um she she has brought two clients and and our life cycle from initial contact to when we got the signed contract was about five months so it's it's a long life cycle anyway um six to n months is pretty typical so continuing on to it what I really Iz though is I have I'm going to need next year I'm budgeting for a director of sales and marketing I have four different people involved in this and there's too many pieces and not a leader so I was trying out different things a part-time hunter in the business development language right going out to find new clients someone that's doing account management internally to try to get current clients get more business a marketing agency and then um internal some marketing support and I need to pull it all together together next year it doesn't matter that it's a lot of different vendors or different part-time employees I just need one person to report to me because there's too many and I'm not and then I have a project manager helping there's too many cooks in the kitchen I need one leader to talk to me and then to execute I can do the vision and I can set the agenda and the messaging I need someone to execute I can't have these four people it's too much that's something you've been focusing on of late as as well is an IT Jennifer develop your managers and offloading some of what you've been handling yourself yeah that's like our messaging for the entire year our mission for this year let's say my goal was Management training is as we've grown I have tried to promote from within and give them resources and I've invested heavily into them to be at a certain level director level and what has come out is this is a longer process we want to grow faster than it's going to take take someone to do some of this so last year last December we brought in a director from ex outside the company and her skill set was so fantastic and so strong in staff management it made me rethink that it is not possible to get a really good worker um to that staff management level fast or some of them don't even want it so I recently had a really strong strong competent person who was leading a department when the department was two people and her she did fantastic it's now six she asked to step down she said it was too much and I tell you that was the best decision I'm so proud of her for taking a step back so that she could move forward in her career because it's going to be better for the company and better for her career to get someone in that actually has better experience because the managing of staff that track of being a technical or subject matter expert is one thing but the whole track of managing staff I have learned so much about it's a different skill set you don't want to take your best expert and put them in staff management because sometimes they hate it and then sometimes staff managers can manage two people but you start to manage more and more it it it takes a while it's an entirely different skill set so I've learned as a CEO what it takes to manage staff at that department level what it's taking for them to do it and um I'm not sure I can always promote from within just from timing not that they'll never get there they'll get there um it's just going to be a longer time period And I need people immediately Mel how have you come to think about that issue of whether you promote from within or hire somebody with more experience from outside yeah I mean uh I'm with Jennifer on that you know it's it's a mix because we're the age of our company and the our aspirations for the rate of growth the individuals we bring in out of college which is our highest retention and promote up through we're moving too fast for them you know we'll have we're planning for their growth we're planning for their future leadership but it's 8 10 12 years out and we've got to pace ourselves on that so we're sprinkling in um culturally aligned professionals from from outside I I will say that um it's harder to retain them at least we're finding it harder to retain them we're also finding it harder to make sure they're aligned culturally but um because we have such a deeply different culture here so sometimes people say they get it until they get here and they say oh I didn't think you meant that so that's a little bit more of a challenge but it's worth it because we we we're sprinkling in these professionals and when they work out they help us grow and when they don't we help find what they should be doing next what are you referring to about your culture Mel what's so deeply different well if you start with um a purpose statement to to the diverse and inclusive world we want to live in that's a strange purpose statement for a construction company and um I keep telling them I mean no one needs another construction company but they need another model in the world so the way we hire the way we promote the way we engage the way we talk to one another the expectations around uh empathy the expectations around acceptance of others they create these non-negotiables for our culture where I don't think a lot of companies find those things to be imperative they find them to be important here you we just can't be who we are without them so they're they're all bound up and everything all the processes and procedures and some people just don't like that do you think you've lost good people as a result I would say we've lost people who should work someplace else um they weren't good for us I I can't think of a person that we lost that I thought man that's a darn it darn it darn it um usually it's pretty obvious that they don't they're not going to thrive here because of uh because of who we are but if we aren't who we are then we're really just a construction company and I got to tell you that would suck Jennifer it sounds like you kind of won the lottery you went outside maybe for the first time to hire an experienced manager and you got exactly what you were hoping for what did you do right it wasn't the first time I think it was the second time the first time um didn't work out okay and I I will Echo Mel's statement is everything he said is is what I've seen on a smaller scale but you just can't move fast enough sometimes for the internal people you need to sprinkle in and then finding people that fit the culture the first one that I brought in from the outside the culture actually it was two people I'm sorry one only lasted eight days yeah that was a really really bad hiring decision on my part yeah but wait now I'm me let you off the hook who hasn't had one of those every you it's like wow that was a bad choice did you end it or did they end it oh I ended it after it was at the eight day mark and um and she wasn't surprised at all when I called her at all um it's I probably could have done it at the day four five but I thought oh maybe this is just the first week um so this was actually the third person I brought from the outside and um what I have learned and anyone who's been in um recruitment or hiring who's good at it will probably be like well do of course is really understanding not just the day-to-day culture but the type of person that will succeed in your company and in this in this industry is really important so for us if you know trade shows fantastic but you have to also understand being what we call the third party being we're in an agency environment with clients if you have not been in that side and you've only worked on trade show from internally you don't understand the client management side of it and I did not realize that until this person was hired and I thought oh well now on my interview checklist I have to add in okay trade to experience is great cultural aspects of our compan is great but you have to understand what it's like to be on the agency side I did not realize that before that person was hired and it's changed my mindset of hiring quite a bit can you explain what it is that they're missing if they don't haven't had that agency experience two things one is um decision-making ability you have uh some but not unlimited decision-making ability when it's not your event so you have to work autonomously but understand when to ask for approval people who work internally for um a trade show make the decisions so here you don't have final decision- making and then second is switching between one client and another um one client's best practice may be different than another clients and you can give them your best practices and the industry standards But ultimately the nuances of client work is different and so anybody who's worked in an agency and and there's a lot of similarities with marketing agencies um that that creative type work can be nuances for clients that's difficult sometimes for people to transfer over and understand that so I want to talk about another uplifting topic uh which is how do you know it's time to pull the plug on something that's not working Mel I gather you've had some experience in this area can you tell us about it yeah you know I I I I've been thinking about this Lauren and I think that I've got a disproportionate amount of these examples because I try crazy things at times um some might call them entrepreneurial some might call them opportunistic but I apparently have a low threshold for trying right and so you have these things that you go try and you realize that they um they don't always work out so uh yes I had a number of including a business that I think I've mentioned on on this podcast before that um deserved to be gone it had died long before we let it have its peace and um I so now I'm just much more aware of the of the signs what have you learned uh what are those signs well I promise you I'm going to learn some new ones because I want to keep doing things that you know are opportunistic and entrepreneurial I'm guessing but you know let's just take a company that we were running and call it a c we might gust up to B minus performance level it was an engineering firm we had great people we just didn't have a a very well-developed business plan or business model we weren't clear about who we were um so we had kind of take what we could get kind of mentality and it just it was just a very uninspiring business um and I learned a lot about what a business has to be from that experience it was my first business that got to any scale so I learned a lot about the people part of it and the positioning and strategic planning and all that none of which did we do very well um but it got to a point where we kept having to try different things to survive different billing models different pay terms different even ways we pay our employees to stretch out cash flow and when you start doing things like that to survive it's a sign that something's wrong right and um and you at least should evaluate and it probably whatever you find a deep deep problem in your business my B's opinion I'd say over 75% of the time it is a business model flaw that you may it may be too late to fix that there's something wrong with the way you the value you're creating and the way you're getting paid for it that it is probably too late to go back and fix and so the only way out is out and people don't like to do that but before you cash in your 401k before you borrow money from friends that you probably aren't going to be to pay back and ruin loans long term capabilities and opportunities um it is almost always better to cut your losses and and and move on and I'll just say one last thing I only learned one thing in business school and that is the uh theory of sun costs and if if if people are making a decision to keep going because of everything they've already put into it um you will always make a bad decision so you should only be calculating what are my opportunities in front of me because the other things are already in your past I did a whole bunch of that we've been added long and we put so much into it and course there's ego and all of that stuff in it so um yeah I've got project examples business idea examples it's been it's been a fun ride Liz I know you mentioned your handyman business which you had before you started City bin in fact City bin grew out of it because you were your handyman were making trash enclosures if I recall what you've told us previously correctly I know you sold that business but I'm I'm curious I'm not sure how well it did did you ever think about whether it was time to move on or pull the plug before you discovered the opportunity with City bin um let me think I would say I thought that I could do both and after two years of really grinding myself with both I realized I couldn't do both and I chose City bin so there was a couple of years where I was running both of them because I saw tremendous synergies between them so we had you know a shared bookkeeper a shared workspace we had a um shared installers shared Vehicles like it all seemed to work together well but one business was profitable cityin and the other one was not and so I had the opportunity to sell checklist and I took it and I I'm just I'm so glad that I had the opportunity to do that because quite frankly if I had stayed in that handyman business any longer I I don't know what would have happened I was really done with it by the end of it so looking back on that experience is there a lesson you take from that it it sounds like you didn't go looking for the opportunity to sell it maybe that opportunity just it did it was someone from EO actually so I'm part of EO and someone really loved the business wanted to franchise it I thought that would be a great idea too if you know he could could have done it and you know it turned out not to be scalable it turned out that without me doing the marketing and strategy and Business Development all the stuff I did that it was less valuable and so you know it died a couple of years after that less than two years after I sold it and um I mean I sound it does sound like a death I don't I'm I grieved for quite a while but I also really love what I'm doing now that's interesting what you had another business that was doing well and was profitable why were you grieving um I really loved what the service was I really loved the idea I think there's a customer need there that is so so obvious like someone should do that business it's just not going to be me anymore I think it's such a good worthwhile service for someone to be able to take care of their honeydew list in a day like I'm a consumer of those Services now too and I really Val value it it's so clear but it's also hard to run profitably because if you want to have W2 you know on the books employees which I did who were licensed and we had insurance that costs a lot so if people are accustomed to paying from a for a handyman that they found on Craigslist you know my service is going to sound really astronomical but I had to focus on that client that that was important for them sounds like maybe you should partner with somebody who has a construction business oh my God I'm going to stay on product for the rest of my life you know I was just thinking like that is it sounds like a great business but when you try to scale something the challenge is is does the customer recognize the differentiation and if they don't then they won't pay for it right yep so if it is handyman services they put that into a category and if you're 35% over I made that number up they just at scale they won't pay for it of course some people will because they'll they they'll get it but um that's what I mean by business model challenge like you know sometimes you don't know until you're out in the market whether it's a B2B business or B Toc whether the model really works and if you don't check in on that business model early you could do this for a few years and really get yourself screwed up before you gear it out right or you can think that it's going to succeed based on your early results which are probably largely due to it being small and you being highly involved absolutely so you may have not have the view at that point or the experience to know that it's not scalable due to all the reasons why businesses tend not to scale Bell you know for me the liability issue of realizing every time I send someone that I may have just hired a week before into someone's home I'm at risk both professionally and personally that's not a risk that I'm willing to take without having good enough Insurance to do that which brings you know the price on something like that so it seemed great when it was small but then hiring handyman was not very easy I'll just put it that way shocked never experience that problem Jennifer you clearly uh have learned uh that there are times when you need to pull the plug in on employee quickly have you also had the experience on pulling the plug on uh some sort of venture or service that you've offered um I I don't say Venture service I think clients early on I was really good some people were kind of shocked I'd pull I'd pull the plug on a client really quickly I um quickly learned in the first couple years that I wanted to be in a very very Niche industry and not to do extras and I I like pruned if you think of like a wild apple tree or something I was I was going crazy easy with pruning the first three or four years which has been successful I I have learned do not try to be everything to everyone that's that's a way to death the best way to start off as a small business is to do one thing really really really well um in one one client group um and then you can eventually expand and some people question a lot of people question me on this that we are only right now doing um convention and trade show management for associations we get calls all the time from corations or we get ones where it's like a quasi government um one uh we get it from foundations I won't do it and everybody's like well why why I'm like nope I only want to work because that is a marketing leverage and that is what my staff understands they understand the timelines I understand the governance structure they understand the budgets and from a marketing perspective that I know their language there's a lot of other dumb mistakes I've made not that one what's shocking to me is that when you try to tell people they just don't get it they just we don't do any Government Contracting just as an example and we are now one of the I don't know top 10 insize construction companies in our region and people are like why wouldn't you go do this for the city or this for the county or that for the state one day that might change but all of the things you said that your team understands we understand none of that with the government we don't know their motivations we don't like their procurement process we don't like all the paperwork on the front end we don't understand how they do budgeting I mean we can do the construction it's all the other stuff that's the problem for us people just don't get yeah well and a lot of time could be spent looking at how things are done at every level you know now that we're doing more stuff in other states and nationally the bureaucracy of it is sort of daunting and um there's not every company is going to want to spend time doing that they're going to want to focus on the clients that don't have that red tape involved right well and I'd actually say I'm more risk adverse than Mel I think I want some of Mel's entrepreneurialism or ambition to be honest I have a new idea that I'm not ready to talk about but I have a new idea that's new in the fact that it's new for the past five years I've been talking maybe it's time to tell us about it Jennifer now's the time it is going to be my 2025 goal it's a new service and I I am tired of talking about it and tired of not making the leap so I've told myself I'm putting in the budget for next year but Mel I'm the like the exact opposite I'm too risk adverse to try this and what's the worst that can happen it fails and I think I'll probably lose $50,000 like I'm I'm trying to figure out how much money I'd lose which is significant right I'm not but it's not I'm not going to lose everything right and and I'm still it's been five years still scared of it yeah well you know I get it by the way um and and the reason I think I am the way I am is I sometimes don't know any better so keep in mind I used to run a construction company and I'm not a construction person so I these ideas made sense to me and my team would freak out and then I'd go do it anyway because I was CEO and I could um and then they'd have to Rally to save Me For Myself later on and we just talked about this last week that the concern that I have and the board has now is there are no entrepreneurs left in our company and so the fear is we're going to become a construction compan and if we are we're going to have a real tough time competing so they're they're working through that here's what I would say I think how much would you lose is a great question there are two other questions I just invite you to to ask uh Jennifer and one is what is the true upside and like is this a sustainable business that drives an upside that you'll say glad we did it if it wins and the second part is how distracted will it make you and your team because what I have found is if it doesn't have a big enough upside and it distracts the team too much then it probably wasn't worth it that makes any sense it totally does I'm writing this down right now and I'll tell you by the end of the year yeah you're gonna do it with the existing team probably and so someone's going to be a bit distracted and um what's that going to look like because you know I'm assuming people are busy in your organization like they in all of our companies and um but if you can work your way through that then um man I say go for it if it doesn't work stop doing it and try something else I'll let you guys know how it goes Jennifer just to confirm it it sounds like this is an idea that you would do within the structure of your existing business not an entirely new business correct it's a joint venture it is in the same industry it would be with my staff doing the work and I have thought considerably more about my distraction level that's one of the big reasons I didn't do it before because we have been in Rapid growth mode and I could not devote one more minute in my brain or or my body to to do something new but I'm I'm as we've talked before almost at the end of the valley of death and so um the the new idea would would be with my staff but as a joint venture intriguing I'll let you know I'm very intrigued yeah by the end of the year okay I'm writing that down end of the year back with J Liz I want to check in with you uh the last few times you've been on here we've talked about your issues with uh the China tariffs and your attempts to find another place to manufacture where do things stand so I'm actually in a very good place with it um because it really was a lot of uh worry in the early part of the year with uncertainty um starting in January when Trump said that the import would be 60% my tariff would have been 60% and then you know sort of putting into motion where else could we produce and then that led to Vietnam so then in May uh we went to Vietnam we met with a couple of factories there we then um basically sort of put together a spreadsheet of all the numbers um for the various options we had in China and Vietnam and then I was like I want to try the us or Canada I'm G to just try one more time it's been like four or five times over the years that I've tried to make that work and I found what I think is a really good option in Canada um and we're going to be going to visit it to meet the factory owner and to see the sample um it is about 25 to 30% more than what we would be paying in Asia but there are some incredible supply chain efficiencies that are created um they would just be nine um hours like a 9-h hour truck ride to Brooklyn and we might be able to even Warehouse product up there um having sort of an inventory bank system whereby we can decrement from our own inventory instead of you know down here we we pay for um a warehouse in Brooklyn which is very expensive so you think about as we grow something like a warehouse expense you know you don't really think about a whole lot until you really see that number and you see oh my God my growth is causing me to have skyrocketing Warehouse costs but then a vendor comes along that can take that entire cost off of you that's something that doesn't fit into an easy analysis but is a huge factor in the way that I look at the costs so there's sort of like the columns in our spreadsheet that are just numbers and then there's a couple of columns that are about I would say if you want to call them the soft considerations but something like the warehouse the speed um as well as the terms of payment so I I really like the terms that I'm getting from the suppliers I chose so um there's still basic Bally three options there's with my current supplier that I work with in Shanghai and then they've set me up in Vietnam so that's my Asia option I'm working with my current company which I love and they're they're doing both countries we have production going on in both countries now this Canada thing is what we're exploring next so you know I've got three really good options and I feel ready for whatever happens I have a a plan in case Trump is elected it Vietnam is the plan and if kamla Harris is elected I have three options all of which I like I think you said you were going to give one more shot to checking out both Canada and the US what happened uh with your efforts in the US ohh Lauren I was afraid you'd ask that question I it didn't go anywhere you know I talked to three or four factories I had a really good meeting with one of them that I expected to get boat from and I never got it and I just I'm I'm tired of chasing and you know I went back to a couple of the places that I had bids from the last time I tried a few years ago but the pricing was so much more that it would still cost a lot less to produce in China um even with like an increase in my tariff so disappointing but Canada is closer and um you know if the state of New York or the country of the US want to help me a small manufacturer that wants to reshore my production to the US I will take that assistance have you thought about if you do move more work to Canada how you will divvy that up um in terms of will it be duplicating uh manufacturing that you do elsewhere or a separate product or what are you thinking that's something I'm kind of enjoying designing right now because there are different types of clients that have different like speed for example so if I have a city that really really wants bins but they need them in six to eight weeks China really isn't an option for me nor is Vietnam so stuff that's really fast I would probably put up to Canada um stuff that is very sort of high volume and rep replicable like certain products that we have or higher volume would probably go to Vietnam um and then anything that is really like we've really worked on the product together and developed together and like for instance our bare resistant en closures I wouldn't put that into Vietnam or Canada because I still view China as my partner in developing that product and it's something that's really important so I wouldn't move that great options you've made the the choice that Mel said he didn't want to make with his construction business in terms of dealing both with private and government clients I'm I'm just curious since it came up in our previous conversation how has that worked out for you and would you encourage Mel to rethink that so I have two sort of past to government client one is like directly with a city um like I did in New York but then the second one is with business Improvement districts which are like all over the country in New York City we have 76 of them and those are all pseudo government entities but they're much easier to work with there's less red tape and so that's sort of my way to get in I didn't have to go through any huge RFP or any RFP process for that matter to get that work so it's almost like government adjacent you know if you have someone who can set up the stuff with you know these government databases if it drives you crazy like it does me I just have someone else do it and I I don't go any near it because that sort of work it just it it drives me nuts I hate the red tape so I guess what I'm saying is that I would only do more uh work with government if I continue to have the staff I have that has the patience to deal with it and they do I totally agree you to me it all comes down to do you have people who can engage with their stuff the good news is about it is it's known and it's repeatable but you got to have a bit of an expertise in doing it and Lauren there's a little bit of a difference between a product and a service you know we're delivering a service to them so there's these constant interactions over months and months of time that are all intertwined with their different procedures and practices than in my private work where I think I'd sell product to to the government I think again I don't sell products so just feels like it would be a little bit more transactional that way am I wrong I I have a thought though Mel that you know I've become more interested in Government Contracting from meeting other businesses that are doing it successfully so if in your area the sort of contracts that you might bid on you look at what are those compan is doing to be successful is this a space I want to be in you know someone might be able to tell you like this is a real grind or this is totally worth it if you get XYZ correct I wouldn't completely turn away from it yet but maybe have someone like have coffee with a couple of people who can tell you what it's really like to to be a government contractor because you can learn from them well I think that's good advice and yeah and and we've talked so we've even looked at a few uh projects with the University of Cincinnati which is a state agency and so it's good advice we are opening an office next year in Columbus Ohio which is the state capital and again remember I'm not the CEO anymore so I don't make these decisions I I I was I was think think we should go to a different city next but they didn't care what I thought so that's cool we're going to Columbus is a great growing Market I I bet they cared what you thought you are the owner right yeah I don't think they car they didn't act like they cared how about that but we're going to Columbus so Liz this is our moment because when you go to the state capital I mean if you're not going to do state government work yes you just you you decided that half the economy you're just not going to pay attention to whereas government work in Cincinnati is there's it's it's a good bit but it's not near nearly as large Columbus so I agree I think we've got some learning to do some benchmarking with some others to do to to look into that the good news is I don't have to actually lead the troops up that hill Liz what's uh what's your goal when you go to Canada and and where in Canada is it what do you need to find out so we're going to go and see the factory meet the owners see the sample um I'm sure kind of do a tour of the factory um and really kind of go over a potential plan um for me this is you know I like going to the factory to meet people because they're usually family-owned small businesses like mine and I like to have that sort of connection so I do think there's a part of it that is sort of what would the experience of working with this person or this Factory be like um and then you know maybe discuss some specifics of terms so like I said something about like the warehouse that's part of my negotiation quite frankly like when I went on this whole journey I never expected that at the end of it I might be talking about how my warehousing costs could be reduced by working with a partner but it took a while to get here and now it's like we're fine-tuning so that's my goal and I'm actually not going to share where in Canada it is wow because I I don't want any any competitors to figure that out good for you you I think you use the term soft cost to describe the the warehousing cost that seems like a bigger deal to to me than that like a crucial part of this uh am I wrong it is but it's harder to quantify because I'm not taking the number directly from a quote so when I'm writing out the hard costs I'm looking at you know what are my production costs what are my tariffs what is my container cost those are the three things so that's the landed costs but that doesn't include managing the supply chain that's quite a lot of work actually and it doesn't include really stuff like looking at the warehouse cost in Brooklyn versus this place in Canada so it's something that initially when we laid out the analysis we didn't really think to look at but it does matter and it could be an influencing factor in what we do I know it will be actually wherever it is in Canada I'm guessing the warehouse space is cheaper than it is in Brooklyn yes you know how many times I've talked about my warehouse on this podcast and in you know my 21 hats columns it's a it's a weird thing that you have to deal with when you're in inventory business it's part of the supply chain and I when I got my MBA I actually got a C in operations and I always stayed away from operations and all of my work and um now I am not super I'm not like Frank is really focused on it but but I like thinking about it conceptually because this exercise was not about where do I get the cheapest bins the exercise was where do I get bins that are are reasonably cost effective and in a way that it simplifies my supply chain so the simplification of my supply chain has some sort of a dollar amount and I guess what I'm saying is that's sort of the soft cost that I have a hunch about what that is but I haven't actually put in like a multiple like there's a % cost to us because of the hassle of working with China like when you really boil it down that's what that number is is how much is that number and we're going to have conversations to figure out what that is well we will be eager to hear more um but we're out of time now my thanks to Mel Gravely Jennifer Karen and Liz picarazzi thanks for sharing guys one thing before you go everything we do at 21 hats is created by entrepreneurs for entrepreneurs to help us all learn together if you get something out of listening to these podcast episodes consider joining the conversation you can do so by joining the 21 hats sounding board a slack Channel where you can tap the wisdom of a very smart crowd or by becoming a founding member and joining our monthly Zoom Forum where you can be part of conversations much like the ones we have on the podcast you can sign up for both by subscribing to the morning report if you have any questions you can email me at Lauren l o Ren at21 hats.com and if you get something out of this podcast or out of the morning report please tell a friend tell an enemy tell every business owner you know your word of mouth owner to owner will always be the most effective way to build this community for all of us thank you it means a lot this episode was produced by another entrepreneur Jess thubron founder of blank word Productions thanks for listening everyone [Music]