Episode 177 – Accidentally Running a Firm: A Journey from Freelancer to Boutique Firm – Member Case by Miles Kailburn

In this session we will delve into the fascinating story of transforming a lifestyle firm into a thriving boutique business. Miles Kailburn, Founder and CEO of OTM will share how and when the decision was made to shift from a freelancer model to a true boutique, to today’s efforts to scale the firm. Discover the challenges, strategies, and lessons learned along the way, and gain valuable insights for your own business transformation.

TRANSCRIPT

Greg Alexander:

Hey, there, everybody. This is Greg Alexander, Founder of Collective 54. You’re listening to the Pro Serve podcast to show dedication to helping founders of thriving boutique professional services firms to grow, scale, and maybe some day exit their firms. And on today’s episode, we’ve got an interesting story and I think this story is going to resonate with everybody and that is some of us have started our firms kind of accidentally. We accidentally acted like a, for a number of years. And then the business grew and grew. And then we wake up one day and we say, jeez maybe I got something and I wanna go from this kind of freelance business model and try to build a real firm. We call that a boutique and try to scale it to something substantial that might be a wealth creation asset for the founder. So that’s what we’re going to explore today. And with us to help us explore, this is somebody who lived that very journey. He’s a longstanding well respected Collective 54 member. His name is Miles Kailburn, and Miles, would you please introduce yourself to the audience?

Miles Kailburn:

Certainly. Thanks, Greg. My name is Miles Kailburn, I’m one of the Co-Founders and CEO, at Old Town Media. We’re located here in Fort Collins, Colorado. And we’re a marketing firm that focuses on high lifetime value segments. So, medical automotive, housing, B2B pro serve those types of industries. And really behind all that is our customer journey work. So that’s the segment we’ve found ourselves in after 17 years.

Greg Alexander:

Okay. So speaking of 17 years, when you and I were speaking last, you said something to me that really stuck. And there was the reason why I asked you to be on the show and you said, listen, I accidentally ran my firm for years. So let’s hit the rewind button and go all the way back to that time period and tell everybody how the firm started, why you feel you accidentally ran it for that long? How long did that last kind of put some color around that for us?

Miles Kailburn:

Yeah, certainly it’s something that’s made us feel a little awkward. So, I think a lot of excuse me, a lot of businesses start out, you know, have this perception. They start out with this grand vision and they set out business plan to execute it and it’s just linear path. And, and our path was definitely not that at all. You know, my wife and I moved out from new York. We moved to Colorado, and she was finishing her college undergrad in design and she decided that she would do some freelance work and my background was in it. So we kinda looked at the numbers and said, hey, you could do a couple of freelance projects. While you’re going through college, you’ll make the same amount of money that you would be making work on a college job and get some experience. And so we kind of started down that path. I moonlight Ed for her writing some code, you know, she’s really just kind of a small boutique little, I shouldn’t even say boutique freelancer building web projects. And so that started to five to six ish and it slowly just kind of built on itself. I left my it consulting gig and joined her fulltime probably around 2007. And we reincorporated as otm at that point and started to just run that model. We didn’t know what the model was. We didn’t know what we’re doing. We were focused on the craft and… excuse me, couple of years into that process, you find yourself with an employee and then you find yourself looking for office space, you know, a massive 600 square foot office and you sign that lease and… you know, every year or so probably about every year we’d added a team member. So probably around 2009. Well, you know, we’ll skip right over 2008. We grew through 2008. You know, we were a small company growing through that. We didn’t know what a recession was. So, so we fared pretty well through that kept growing. And I think around 2009 or so, we had four or five people. And, and that was probably around the first time that we kind of looked around the office, and there is this moment of it’s no longer this side gig, freelance model. You know, we have stable recurring revenue. We have team members who have mortgages and there is a strong co dependence and there is this just kind of moment of we actually, I think we have a company here. I think that’s what this is now.

Greg Alexander:

It’s such a great story and you shouldn’t feel awkward about it because I will tell you, I’ve heard that story dozens of times inside collected 54. I think that is a common way that professional services firms get founded. Many of us might not have the courage to admit it like you were doing here publicly, so, thank you for that, but I think that’s, a very common way. I wanna hone in on the moment that you said, jeez there’s a co dependency here. We’ve got employees, they got mortgages, you had this sense of obligation, continue to provide employment to these people and of course, you were dependent on them because they were doing the work and, you know, helping you pay the bills and all that. When did you decide to go for it? To say we’re going to really try to scale this thing and like, and what was the motivation? Because it sounded like you and your wife had a heck of a nice lifestyle. There wasn’t a lot of stress, happy clients. You, you blew right through the greatest recession, you’ll ever see in your life and didn’t realize what happened. So, like why I screw that up and go for it?

Miles Kailburn:

You know, when we started the business, I don’t know, we were 20 and 21, maybe we had no idea what we were doing. You know, we’ll say business but, you know, freelancer then incorporating as a business and all that. It kind of hit in two stages. The first stage was recognizing that co-dependence and then realizing, shoot, there’s a whole lot to this that we don’t know. We need to go figure out HR. We need to figure out payroll. We need to figure out all these other systems that really were not part of the vision to date of the company. But we love the team. We love the people that we’re working with. And so I would say that was kind of the first toe in the water around building that and it was just out of, you know, obvious necessity. I would say the crazy part is, I think, you know, that aha moment was really closer to 2016 to 2018 for us, which is kind of wild, you know, it’s nine to 11 years into our journey. But, you know, when we talk about how we started it, you know, we started the business and we accidentally kept going. It was really around that 2016 time when we had probably closer to nine or 10 team members. We actually started to understand systems and processes and start to look at a sales engine and how do we actually build this? And that really was the start of we have to, we have to run this as a mature organization. And that’s really where we started to look everywhere. Ironically, the last place we looked at were agencies, you know, in my opinion, and I think you would probably share, the traditional agency model doesn’t really scale that well. Ironically, I just read a research paper in my inbox maybe a week ago and I kid you not the actual title of it was digital agencies don’t scale and let us help you grow. And I was like, no, no, we’re actually doing the other thing and it works very well and you actually need to scale. And so 2016 is, you know, that’s when we started it and,

Greg Alexander:

Yeah.

Miles Kailburn:

From there, it’s just been a journey towards persistent improvement.

Greg Alexander:

You know, so, for long-time listeners and particularly the members, they know, we have this thing called the boutique framework and it’s based on a life cycle of a firm. And we believe to go from grow to scale. The three stages are about 15 years, three stages grow, scale, exit five years each stage. And sometimes when Miles, when I talk to people like yourself, they say, well, well, jeez I’m really behind schedule. You know, I’ve been at this 17 years and I’m probably another 17 years away from selling the firm, and what I would say to those people as well. You got to really think through what the start date was. So in your case, listening to you, I would suggest that your start date, at least the way we look at it, you know, very kind of academic and methodical was really 2016 is, when you thinking about it as a firm, you know, not just a way to raise the family and pay the bills and that kind of thing. So, from that standpoint, you know, what I hear it is 2024 your eight years in. So that feels about right? Because you’re smack dab in the middle of the scale stage. I wanna ask you about that because sometimes when people make that switch, you know, from the old way to the new way and they start worrying about things like payroll and HR, the job satisfaction dips because they’re not practicing the craft anymore. They’re building a business. And sometimes that’s not as fun. Did that happen to you? Did that not happen to you? How did you deal with it? How did your wife deal with it? Like tell us about that?

Miles Kailburn:

Yeah, the first couple of years, well, jumping back to your 2016 point, that’s how we’ve come to accept it. You know, that time in, you know, we don’t really count the time in our twenties. We didn’t know what we were doing. And so, but actually before that, you know, you share some benchmarks around certain statistics, and key metrics in grow, scale, and exit, and you showed them at the founders summit. And when we look at that, we, to your point, we found, you know, some of our metrics were in exit stage. You know, a good chunk were in scale and certain ones were in growth. And so, you know, I think to your point, we’re transitioning through that. And that structure has really helped us start to fine-tune where we need to focus because I think jumping into ultimately what your question was the five years or whatever 2016 to 2021 ish when I joined collected 54, you’re just looking for pebbles to turn over and see. Is this a good idea? There’s no models in the agency world to really scale? And nor is apparently scale as a concept in our world. And so, I didn’t want to grow as a marketing company. We looked at a bunch of them. The models didn’t make sense. It didn’t actually excite us. It just introduced a lot of complexity, and not a lot of fun. And so we’re always trying to grow a different way. And, and we just kind of, you know, some people on our team refer to it. You got to kiss a lot of frogs, to find the princess and keep looking for things. And so honestly, we started to look at other time but other professional service companies. So we looked at accounting firms. We looked at legal firms who looked at architects and we started to pull elements of those back into the company. And I remember some conversations with our other partners. So, my wife and I are the cofounder majority shareholders and we have two other minority partners who I love absolutely dearly and when we kind of bring that or when I bring those ideas back, they’re like you’re nuts that’s not us that’s not our industry. And I’m like, yeah, but this is how this should work. And if we did it this way… we could do something really different, and a lot more fun. And so for me, the tipping point was, you know, finding the book, and looking at your model. I vividly remember reading it thinking, holy cow. This actually is the model I’m only 70 percent through it. He’s clarified that it is actually a model. And here’s the other 30 percent and you, I remember running back to the office and it was like, hey, this is a thing. This is what we’re gonna be. We’re going to benchmark and consider ourselves and operate as a professional services company. And, you know, we’re gonna run ourselves as a mature organization, which also then means we had to, you know, we’re very comfortable except the fact that we ran it as a lifestyle business. We had no idea what we were doing. We didn’t have metrics, and a lot of this stuff. And so, the more we started to focus on some of these elements within the professional services side, the more it became clear that we were the stereotypical lifestyle business, and that was not what we wanted to be.

Greg Alexander:

Yeah. You know, and when you think about this, right? In the model, I mean all that we’ve done through the community is codified, right? The story that you’re sharing with everybody is the story that everybody lives. And you hear the term professional services, people like people say what’s a well that’s the designation according to the bureau of labor statistics and the IRS. That’s why the number 54 is in the name collective 54. And what it basically is that it’s the expertise business. In the expertise business, we all have the same business model where marketing selling and delivering our expertise for a living for a fee. Now, you might package that fee. Maybe it’s hourly. Maybe it’s a retainer, maybe it’s a fixed bed, whatever it is. The expertise might be in your case, marketing, in my case, it was management consulting and others, it’s writing software. The expertise could be different, but that is the business. And there’s one point 5,000,000 of those firms just in the US alone, two trillion dollars a year spent on it. If you can believe that, which is miraculous. And over 3,000,000 people in the United States work for these firms with the overwhelming majority of them in the boutique, the small firm. So, the reason why I’m saying all this is because you said something there, that was funny. It’s a thing. Yeah, it is a thing once you recognize it, it’s the thing that all of a sudden there’s patterns that you can model yourself after what a lot of firms do, well, that’s interesting. What are accountants do? That’s intriguing consulting shops. They do it a little differently, but that’s interesting as well. And you can learn all these things and pieces things together. And that’s where the scalability comes from. And that’s the real distinction between the freelance lifestyle business. And again, there’s nothing wrong with that, but that’s never gonna scale you’re gonna make a heck of a living and live a nice lifestyle, but you’re never gonna be able to in wealth, and sell that to somebody else. Maybe your employees, maybe your clients maybe an external acquire it’s. Never going to happen. If you stay in that way. One final question then we’ll wrap this up because we’ll save all the Rich stuff for the private member. Q and a. Do you think your life cycle as a person, your age had an impact on your desire to want to have more than a lifestyle business? Because, you know, you started in your early twenties. And, and if I’m looking at you right now, you’re probably in your late thirties, maybe early forties. Is that about right?

Miles Kailburn:

Yeah, early forties.

Greg Alexander:

Yeah. So, did a, did that have an impact on your motivations?

Miles Kailburn:

Yeah, you know, certainly, in our twenties quite literally, time was an unrestricted commodity. You know, that’s how we built the business that’s what we could bring to the table… as we started to approach probably our mid thirties, and I, it’s not necessarily kids but kids factored into that picture. You just can’t do it that way. And also we needed, you know, different talent sets. We needed, you know, a little more structure and that started that shift into, you know, professionalising the firm and compared to how we operated, you know… then versus now it is night and day. You know, we’ve got systems. We’ve got predictability. We’ve got accurate forecasting, you know, these are all hard things to get through or, you know, they took some effort and some iteration to get through. But the stability and comfort at the end of the day, putting my head on the pillow, knowing that, you know, our company is supported by a mature maturing group of processes and systems is huge. I would be terrified to go back to the freelance life cycle model where it’s feast or famine on small projects. It’s the worst of most worlds. When you get to the predictability on the other side, yeah.

Greg Alexander:

Very well said. And the way you rest your head on the pillow every night, that’s one of the benefits of building a sustainable firm, repeatable processes that isn’t just, you know, flimsy, I could go away overnight. Well for those that are listening to this, you know, if you want to hear more from Miles about specifically what he did, to go from this kind of freelance lifestyle business to this professionalised professional services firm that allows him to sleep peacefully at night. I encourage you all to attend the role model session which will be on Friday and we’ll hear more about Miles story and you’ll be able to ask questions directly of him. But until then, Miles, I always appreciate you giving back to the community. You are a giver, not a taker. And we’re so lucky to have you. So, thanks for coming on the show and sharing your experience with us.

Miles Kailburn:

Yeah, thank you, Greg. My, my honor. My privilege.

Greg Alexander:

All right. Until next time, everybody, thanks for tuning in and I wish you the best of luck as you try to grow, scale, and exit your firm.

Note: This transcript was generated by Gong.

Episode 176 – From Sidekick to Success: How a Trusted Number Two Fueled a Consulting Firm’s Growth and Exit – Member Case by Brian Albers

In this session, we dive into the incredible journey of a consulting firm founder who found a pivotal ally in their number two. Join Brian Albers, the former COO at Data Clymer, and discover how his dynamic partnership with his founder drove the company’s growth, navigated the scaling challenges, and ultimately led to a successful exit. Through candid conversations and valuable insights, we explore the essential role of a strong second-in-command in transforming vision into reality.

TRANSCRIPT

Greg Alexander:

Hey, everybody. This is Greg Alexander. Welcome to the Pro Serve Podcast brought to you by Collective 54. The first community dedicated to helping founders of boutique professional services firms, make more money, make scaling easier and making an exit achievable. On today’s episode, we’re gonna look at scaling a boutique pro serve firm, eyes of the number two or in the EOS language, the integrator, and we have a Collective 54 member who played that role for one of our great success stories. His name is Brian Albers. And Brian was Aaron Climbers’ integrator at the company Data Clymer, which recently had an exit to Spaulding Ridge. So, I’m gonna hear all about that today and Brian is gonna share part of his journey with us. So, Brian, with that, welcome to the show, please introduce yourself and introduce Data Clymer.

Brian Albers:

Yeah, thank you, Greg. Happy to be here. Start off with Data Clymer, boutique services firm, and we are in the data and analytics arena. So providing different data services to our customers. My role there was started off in the operations side where I took on the title of COO, took on the financial responsibilities to CFO as well. And then initially moved into the president’s role. I came in and said, Aaron, I see what you’re doing. I like the space here and can I come in and help you? And Aaron said, yeah, won’t you come in and do that. So the last three and a half years, we’ve gone from that growth phase through the scale phase. Obviously some pieces in there that were up and down, but we were able to get them to the exit and we’ve had a great success with Spaulding so far.

Greg Alexander:

Awesome. Okay. So let’s start with the basics. I think most of our members know what the term integrator means and the EOS methodology. But for those that don’t can you describe, you know, that term and then how you played that role at Data Climber, and specifically what you did versus what Aaron did as the founder?

Brian Albers:

Yeah. When I think of integrator, I really think about handling the day to day, right within the EOS and the integrator there’s six pieces and that’s making sure we’re handling the vision and have that set. We’re making sure that we have our people and resources put together. We’re looking at our metrics. We’re looking at our issues. We’re looking at our processes. So taking those pieces and really owning it and driving it to make sure that we are accountable to each other, that we are aligned with each other and that we executed. And so Aaron’s role then could spend more time where he was really good at and that was on the sales side and the vision piece to bring in those components. And then we mesh together to drive the revenue forward.

Greg Alexander:

Okay. Sounds good. And, why and when did Aaron hire you?

Brian Albers:

So Aaron hired me at the very end of 2020. I think it was December 28. I remember the date specifically and he hired me because I told him to… we had worked together through a company called Matillion. So, I knew Aaron a couple of years and he had been spending his time just trying to grow the business and I have experience doing that. So I put together a job description. I put together exactly how I was going to come in and help the team. I didn’t call it EOS at the time. I wasn’t familiar with it, but that’s basically what I was doing and he looked at that model and said, yeah, I want that in my firm, I want to be able to make sure we have the right people, the right culture. I wanna make sure we’re tracking the right metrics. I want someone to track the P and L and keep us honest. And that’s why he said yes to me.

Greg Alexander:

Okay. Now there’s a lot of founders, and I’m one of them and a walking Lisa, everything applies to me there who resist hiring a COO type to run the day to day. Aaron obviously didn’t, what advice would you give a founder when considering bringing somebody like that on?

Brian Albers:

Yeah, it really comes down to trust, you know, Aaron trusted me and for me, where trust comes from is just integrity of doing what you say, you’re gonna do so each and every step along the way, if I said I was gonna take care of creating a process for recruiting, I did that and provided to them the metrics that we decided to track, I would report and have a system that we could regularly review them. So I had to continually build that trust. And as time went by, it allowed him to be more comfortable with giving me more pieces. And then it allowed me to just take more pieces as well. As I noticed this needs to be done taking it getting it completed. So, yeah, trust is earned. Does take that time. But really for Aaron is he wanted to do more of what he was good at within the business. Again, the vision part, the sales meeting with customers. He then was able to hand that off and know over time that I would be able to do it because I did.

Greg Alexander:

Okay. And then from your perspective, you know, when you think about the founder, so you had to learn how to work with a founder, you had to learn how to practice kind of upward empathy for those that are listening to this or watching this, that are in the COO, integrator role, what advice would you give them to help them work with founders who at times can be a little eccentric?

Brian Albers:

Yeah. It’s just understanding that they’re gonna be a little eccentric and sometimes they’re gonna find an area that they want to go after and it’s just sitting down and having an honest conversation. We put together this plan. We put together this formula. We want to stick with that plan in that formula. And here’s why, and here’s the reason why we decided and having that open up open conversation because it’s very easily. I’ve worked lots of entrepreneurs who just get excited about the next thing and you have to reel them in and bring them back and just be able to have that honest conversation and be able to say no to each other and, you know, overall, you’re just being respectful, it’s their business. You know, they’re going to want to do at the end of the day, it is their decision by giving them that honest opinion and being able to push back at times. It’s extremely important because you can’t be honest with each other and have those businesses. If you can’t be honest with each other and have those business discussions. You’re probably not going to succeed. Yeah.

Greg Alexander:

Now, when you, when it sounds like if I understand your journey correctly, and thank you for walking me through that, you came in kind of in one role and then responsibilities kept getting added as you earned Aaron’s trust which led you to the integrator president role. First off, is that accurate? And secondly, do you recommend that? And do you think that helped you perform as well as you did as the integrator, or do you recommend hiring somebody into the role of integrator right away?

Brian Albers:

It worked for us well in this case, in a couple of other service companies where I’ve taken on the operations role, that’s also the way I did it there. And part of that was I was really the first person to come in from an operation standpoint and take over. So it made more sense to earn it over time rather than just hand over everything because there’s also the opportunity or there’s also the need for training. I need to understand the business. I need to understand how was going about these processes like an integrator can’t come in and just start changing things, right? You really need to understand from day one and that takes time. So, yeah, for my seat start small and then grow and take in more and more pieces over time. It also gave iron that ability to again the trust. And I did what I said I was gonna do and then we could grow. Yeah.

Greg Alexander:

Okay. So now let’s talk about the exit. So, you guys went full circle which is great. You know, you started it, you grew it, you scaled it and you sold it and you sold it to a great firm, J labs and Spalding Rich. So what was your role during the exit process?

Brian Albers:

Yeah. My primary role was to work with the Spalding Rich team on providing a lot of the documentation, the information we had put together, you know, a lot of time was spent with P and L, the financials, a lot of time was spent on the processes. How do we go about the methodologies? How do we go about the day to day and provide? It probably was over 125 different pieces of material that they wanted to have and take a look at. And so they have lots of questions. So I would provide a lot of the information about how we’re doing it, why we are doing it as well. Another big piece that they had asked for the think is important is really that… the other piece that was really important is, the other piece that’s really important is the sales pipeline. You know, there is a lot of time spent on the pipeline. A lot of time, a lot of time we spent reviewing the forecast just to give them an accurate picture of what we see coming down the pipe because they’re gonna be taking that over. So a lot of time spent allowing them to understand where our business was going as well.

Greg Alexander:

Now, sometimes founders are reluctant to involve their president slash integrator in the exit process because usually, which happened in this case, and we’ll talk about that in a moment after the sale happens, the integrator leaves the firm because there’s duplication, you know, the things that you do for the firm exist already with the new acquired company. So, how early did Aaron get you involved in? And were you worried about, you know, if the deal closed, you’re gonna lose your job.

Brian Albers:

Yeah, I’ve known about Spalding Ridge for a couple of years, you know, people reach out to me, they reach out to Aaron. We’re in a really great space where a lot of companies were interested in buying. So we’ve had discussions in the past about that possibly happening and knowing what my role is comes with the territory a little bit as well knowing that, hey, I might not be coming along the ride and so, you know, personally, you want to be a part of that, you build it to a certain point, you want to help take it to that next point. But, the nice thing is I know I can take it to the next point with another firm.

Brian Albers:

Another company in the future Spalding Ridge has been, you know, great to work with. I really enjoy the team over there, but I also understand from a business perspective, they already have several people in these roles that I’m taking on. So I’m just happy for our team as a whole because at the end of the day, we always talked about culture and growth and experience and learning we can provide a lot of that more to our people. And I think that’s what’s really important, what comes out of it. And I take more pride in that. And, you know, worrying about where my, where next paycheck will come from.

Greg Alexander:

Yeah, I was so happy to hear that you were landing with Spalding Ridge because I have a lot of respect for them and your clients and your employees have landed in a great spot and they both gonna be very well taken care of, right? So let’s talk about, your new initiative. So you’re now gonna go from the world of being an integrator to a founder yourself. You’re launching your own firm. So I have to ask why did you finally come over to the dark side?

Brian Albers:

Yeah. I’ve been on too many calls with you. They’ve told me how wonderful and it easy it is, to build up a consulting firm. No, I think I’ve always enjoyed working for myself, working with small companies decades ago. I started a restaurant, you know. So I’ve had a little bit of an entrepreneurial spirit and myself and I have a belief in myself and what I’m able to do and provide. And, and really that comes down to understanding entrepreneurs founders, where they’re at how they build a vision and taking that vision and really driving that. In a company, I really love working on the business and helping them empower and other people grow within that business that’s where I get the most enjoyment. So, yeah, I’m moving over to the dark side but very excited about it and I know the collective 54 will help guide me along the way.

Greg Alexander:

So, if I understand it correctly, you’re basically going to offer fractional integrator services to founders of boutique pro, server firms, people that don’t have an integrator or number two and want one, but they would prefer to rent one instead of buy one. Did I describe that correctly?

Brian Albers:

Yeah, that’s the thought right now is I see a lot of companies that just we talked to through the network that need help, but they’re not sure where they are in the journey. They’re not sure if they want to do that full-time they don’t know the right attribute. So if I can step in and take that over for them and help them show the possibilities of what an integrator can do, how it can be done and make that as efficient for them as possible. They don’t need to hire someone full-time but they can rely on me but I think it can be a huge asset to those companies and really help them strive more in the growth, get into scale and then prepare for that exit.

Greg Alexander:

Yeah. Awesome. I absolutely see the need and especially within our tribe, our community for sure. If somebody is interested in that, Brian, how do they get a hold of you?

Brian Albers:

Yeah, you can. Right now, it’s just my personal e-mail Brian, do, L, dot Albert at Gmail. Dot com. And then my phone number is seven, two, zero, two, five, zero, eight, four, four one. Those are the easiest right now. I’m in the process of setting up my own business entity. So this is moving pretty fast. I don’t have all my pieces in place but I am getting there shortly and I’ll be ready to roll starting august first.

Greg Alexander:

Well, you have two really important pieces in place. Number one is you have the success story of data climber, and our members know that firm, respect that firm and know what you and Aaron did together there. So that’s huge and you have our endorsement Collective 54. You know, you’ve been a very productive member. Always a giver, never a taker. So we’re rooting for you. We hope that you have a ton of success and we’re pleased that you’re gonna stay in the community and help some of our other members.

Brian Albers:

Yeah, I definitely look forward to more with the members are looking forward to, the founders summit coming up here in a few months. Now, I really enjoy everyone that I’ve spoken with and there’s so many different unique perspectives and, you know, even people come up, you know, Greg, you’ve been doing this for a long time. You’re a huge mentor, but people have that ability to say, no, I don’t agree with you here and I think those are some of the best conversations we have is to get those different opinions and everyone’s willing to bring that forward.

Greg Alexander:

100 percent. It takes a village for. Yeah. So all right. Well, listen on behalf of the members. I appreciate you being here and a few calls to action for the members. So if you want to have the participate in the Q&A session, look for that meeting invite, which will come out shortly and this will give you a chance to learn more about Brian’s story at Data Clymer and what he’s up to next. And you can ask questions of him directly if you’re not a member and you want to become one, go to collective54.com, fill out an app, and one of our representatives will get in contact with you. You’re not ready for either of those two things you just want to learn more. I would point you to my book. It’s called “The Boutique”, how to start scale and sell a professional services firm. Written by yours truly, Greg Alexander, and you can find that on Amazon. But until next time, I wish you all the best of luck as you try to grow, scale and someday exit your boutique.

Note: This transcript was generated by Gong.

Episode 175 – Best Practices For Handling Layoffs and Restructuring a Boutique Professional Service Firm – Member Case by Ken Yager and Tim Stone

In this session, we explore what to do when the rosy forecast does not materialize, and you need to restructure your firm. This includes how to determine who to layoff, when to lay them off, how to do so in the proper way, how to support the now former employees during the transition and how to preserve the culture and keep morale up with the remaining employees.

TRANSCRIPT

Greg Alexander:

Hey, everybody. This is Greg Alexander, founder of Collective 54 and welcome to the Pro Podcast. This is a show dedicated to helping founders of boutique professional services firms make more money, make scaling easier, making an exit achievable, etc. etc. And today, we have a very interesting topic and the topic is restructuring and layoffs. It’s kind of a bummer to have to talk about this topic, but it is coming up. You know, we’re recording this in June of 2024, we’re about halfway through the year and we have some members of Collective 54 whose rosy forecast to kick the year off with didn’t materialize and they’re gonna have to figure out how to cut some expenses. In the services business, that means trimming some heads. So we have two experts, restructuring experts with us today, two members of Collective 54, Ken Yager and Tim Stone of Newport Advisors. So first, when I send it over to you guys and Ken, I’ll start with you. Can you give a brief introduction of yourself and the firm, and then I’ll jump into some questions.

Ken Yager:

Fantastic. All right. Yes, I’m Ken Yager, founder and president of Newpoint Advisors Corporation. We’re around 11 years. We’ve got 30 professionals all over the United States helping smaller companies with distress caught five to 50,000,000 dollars in revenue. Is the typical client base. I’ve been at this for 35 years, worked with companies of all different sizes and now work with just dedicating ourselves to focusing on being a service company for the small and distressed. I will add one caveat. One thing too. We talked about the bummer, right? So everybody wants a growth coach, and this is why I’m in Collective 54 because Greg Alexander, you are an amazing growth coach.

Greg Alexander:

Sure.

Ken Yager:

But, you know, what people don’t know, they also need is a down cycle coach. And that’s why we’re here.

Greg Alexander:

Sure. Yeah, exactly. Well, we’re glad you’re here because this has gotta be done correctly. Yeah, Tim, why don’t you tell the audience a little bit about yourself?

Tim Stone:

Thank you, Greg. Tim Stone, Newpoint Advisors Corporation. I’ve been at Newpoint for 11 years. My background primarily focuses in the financial area of companies helping them to decide really if they are going to downsize what’s the benefits of downsizing in specific areas. So, glad to be on this topic today. Thank you.

Greg Alexander:

Very good. So, guys, I’ve got four questions that I’ve prepared and I’m just going to jump into those. And, and to keep this orchestrated correctly, Ken, I guess I’ll let you quarterback, I’ll send them to you. And then when you think Tim has some things to add, I’ll let you direct us in that way. Yeah. So question number one. So what are the key factors to consider when deciding which employees to lay off during a restructure?

Ken Yager:

All right, fantastic. Well, we’re getting to the easy ones first: cash. Do I have the cash to pay this payroll? And that’s the easy short-term answer, right? That’s what I’m looking at tomorrow and trying to say, I’m gonna make payroll. But then we’ve got another issue which is the time and forecast. I’ve got, you know, if you’ve missed your forecast for this year, you should be re-forecasting. And also I want to talk about a tool that everyone needs to own. It’s the golden tool, the quiet tool owned by private equity and venture capital. It’s called a weekly cash flow forecast model. They don’t teach it in business schools. You’re not gonna find any academic books on it. You can google it and you, if you’re finding yourself in this moment but you need or your CFO needs to be putting together a 13-week cash model and you need to be looking at a conservative model that looks over the horizon. 13 weeks is by, you know, three months out that’s a very good place where you should be able to understand your world. You can extend it. They just, everyone starts at a, that’s the minimum and you should be able to look over that horizon and determine whether your cash is coming back into play or if it is going to continue to sink or disappear on you. This then starts to set the scenario about how deep and wide the cuts need to happen before we start to get to the questions about functionality?

Greg Alexander:

Can I just ask a follow-up question? I’m already breaking my own rules here. But what I hear from members, I, so first off, I don’t think a lot of them have a 13-week cash flow model. So that’s a great piece of advice, right? And small business owners tend to be a little less sophisticated when it comes to financial management. So that’s a great lead. What I hear sometimes though is listen, business is soft, the forecast didn’t materialize however, you know, growth is right around the corner and I can’t let go of Bob because Bob is a key person. And when I get that one deal, I’m gonna need Bob. And if I let Bob go now, it’s really hard to find another Bob. So I’m gonna hold on to him. This, this happens all the time. Meanwhile, they’re bleeding cash left and right? And, you know, how long did they hang in there for?

Ken Yager:

Not well, okay, great. That great question. You, how long do you want to hang in there for? Because Bob and you may be separated by your cash flow at some point in the very near future, you got to decide, you got to you’ve, got to get right into your soul and decide how much do I really believe that this is going to change? And it was so many of our members deal with fortune 500 companies and big departments and they don’t see you, you’re invisible. I don’t care how good your relationship is with, your contact, if he started to cycle back and pull back on their budgets, these are long tail events. You need to be digging in other places. So if you’re dealing with that and the whole thing that Bob is helpful for is when that comes back, I’m gonna tell you the first order of business is you may need to consider that Bob may not be the utility player that you need. If all you’re doing is holding on to him for the dream while other people are doing work that is cash flowing for your business. So sometimes a little bit of the here and now so that we can live to fight another day.

Greg Alexander:

Yeah. Now, now, Tim, you described yourself as, you know, the financial expert and I want to bring you in here because guys like you usually cut through the emotion and get to the issue. So I just teed up an example of this fictitious guy called Bob. So what comments do you have around this?

Tim Stone:

I’ll kind of echo a little bit what Ken said from a Bob scenario. You almost look at it. If you’re just holding on to Bob just to provide a specific service that potentially could be provided by someone else, I would say it’s better to move on from Bob for the moment and conserve the cash, and really apply them in different areas of your business to help sustain and get over this down cycle.

Greg Alexander:

Yeah. So I agree with you guys. The goofy metaphor I’m gonna share with the audience is imagine you’re in an airplane and the thing nose dives and you’re headed towards a crash and out pops the oxygen mask. What do they tell you? Put your mask on first?

Ken Yager:

Yes.

Greg Alexander:

Before you put somebody else’s mask on. So in this case, when it comes to Bob, Bob goes before you do. So, let’s be sure that we thank Bob for his time and we move on and we move to the next crisis.

Ken Yager:

And I’ll add another point to that. I love the analogy of Bob. So Bob is actually bobbing up and down in your cash flow, right? Bob does have a full-time purpose. Let’s move Bob on to somewhere else. He looks like a fractional partnership that you might want to consider at this moment and not necessarily the dead weight that he is in the current scenario.

Greg Alexander:

All right. So our little Bob bobbing up and down leads me to my second question and it’s a good lead because it’s related. So the question is how can we ensure transparency and clear communication with employees throughout the layoff process? And just a little color on that back to Bob. Our members are nervous about letting Bob go because they think it’s going to crush the culture. So they’re worried about the people that are left behind, which is admirable to be worried about. But, you know, how do we deal with that?

Ken Yager:

All right. So one thing we do is we don’t let this wound linger. Waiting for Bob to go and watching other crises start to bubble up around you. Instead of being one problem, if you don’t take care of the one problem, it’s like an infection in the body. It will grow and systemically move. That’s gonna eat culture up faster than letting go of Bob.

Greg Alexander:

Good point.

Ken Yager:

The other thing I would say is the timing of communication. I imagine it’s funny and collective. I think of the little group of like five or six people holding themselves together. We’re an organization, the 25-50 member company. And then you’ve got the 100-member person, the little band around the fire. You just get together and we’re just gonna keep muscling forward. It’s okay. We had to let Bob go, but the rest of us here are good. For 25-50 people, we organize a conversation with the team, but you can’t talk to every single person. So that might be layers of conversations where you’re communicating through the bosses. You don’t break up what you already created as an infrastructure. And then the larger groups, we’re getting into an HR story that we can pick for another time.

Greg Alexander:

Okay… Tim, anything to add to that or do you think we captured it there?

Tim Stone:

I think that really in essence captures how you would, the total transparency of communicating why you’re having to kind of downsize in this particular individual is by, for instance, is having to go because it’s for the better good of everyone involved with a company.

Greg Alexander:

Yeah, yeah, very good point. You know, I’ve been through this a few times, 2024 represents my thirtieth anniversary in my career. And I’ve been through four major crises and several minor ones. But the major ones were the dot com blew up and I was in a tech company and that was tragic in many fronts and we laid off a lot of people. Then we had 911, which changed the entire society. That was a nightmare. Then we had the eight or nine financial crisis where we all thought we were going bankrupt. Of course, we just made it through COVID, right? So these were four major disruptions. And you know, when you’re an old guy like me and you remember those four things. Surprisingly, it fills you with optimism because you can say those are four really bad moments. But here we are, we’re still fighting, right? The sun is still coming up so we can make it through it. But when you’re in the middle of it going through it, it’s like my gosh. Am I never gonna get through this? So keep in mind that, it stinks to lose Bob. But if you lose Bob and you save 10 jobs in the process, you’re actually doing everybody else a service.

Ken Yager:

Good. Yes. And if you do it right, Bob doesn’t burn a bridge and Bob becomes a partner or helpful in some other way in the future. Remember the network of people you live with. I tell people, you don’t live in a territory, you live in a tribe, take care of the people around you. Make sure Bob lands softly and understands why it all happened. It’s not Bob’s fault. These are things that happen.

Greg Alexander:

Question, right? So, when you’re laying people off and you wanna do it as smoothly as possible with as little disruption as possible. Are there any kind of rules of thumb to follow?

Ken Yager:

We always let the people who can be terminated leave the building first. And then you have your communications with the survivors and that happens in the same day or the same hour. Termination conversations should be short. Do not try to sit there and pat someone on the back and tell them what a great person they are, you know, so sorry about this stuff. That’s the kind of stuff, believe it or not, that unfortunately in that moment of emotions leads to a lawsuit. It’s just, it’s unfortunate. Those meetings, if you had a termination meeting with someone that lasts more than five minutes, you should be watching yourself. What’s coming out of your mouth can get you into a lot of trouble. It’s unfortunate, but that’s kind of the rules, that’s the way society operates. But you can choose those five minutes to do a really good job. So be mindful and intentional.

Greg Alexander:

What do you do in a virtual setting? Most of our members don’t have offices anymore and everybody’s on Zoom like we are today. So you can’t get someone to leave the building first. How does it change in a virtual setting?

Ken Yager:

Yes. So in a virtual world, we worry a little bit more about technology and who has access to what. So one of the things is making sure that someone is sitting there with their finger on the trigger, making sure that Bob can’t go and do something horrible to the business right after he gets taken into an emotional tailspin. Otherwise, the communication goes look. I would offer up a great example, a great story of what not to do. You fly to Bob’s town and you go to take him to lunch to let him go. Don’t do it. It’s the bad signal and the most painful meal you ever had in your entire life. I did it once and I know another person who did it and that’s about it. That’s how many times you’ll do it before you realize it’s a terrible idea. The remote is okay. I love the picture of the Zoom, you know, our teams, you can emote just enough empathy and move things forward. But you have the technology at your back because you don’t want someone tearing your business up either.

Tim Stone:

And I would add also, it helps to have basically an exit checklist of the things that need to be done prior to informing HR, informing managers that this person is gonna be leaving on this date, so that when it happens, they’re not surprised. And then when you also have this quick conversation, it’s like have your agenda of here’s what you’re gonna say. And here’s the paperwork. If you’re going to provide them with any covered severance packages or whatever, have that stuff available and ready to go.

Greg Alexander:

Yeah. Okay. Well, listen, we’re at our window here, we try to keep the podcast to 15 minutes. We’ve learned that that’s the attention span of podcasters. Of course, this will be followed up with our one-hour private member Q&A session where our members will be able to ask questions directly of you. But guys, thanks for being here today, and handling this tough subject. But it’s comforting to know that there’s people like you in the world. Not just growth coaches but downturn coaches as we started off with. So thanks for being here today.

Ken Yager:

Absolutely. Thank you, Greg.

Greg Alexander:

All right. So, audience members, I’m gonna leave you with some calls to action. If you’re a member and you think you might be going through this and you want some expert help, look out for the invitation that you’ll get to Ken and Tim’s Q&A session. If you’re not a member and you want to become one, go to collective54.com, fill out an app and somebody will get in contact with you. And if you’re not ready for either of those things, you just want to consume some more content, I push you to my book, it’s called “The Boutique: How to Start, Scale, and Sell a Professional Services Firm” written by yours truly. You can find it on amazon.com. But until next time, I appreciate your attention and I wish you the best of luck as you try to grow, scale, and someday exit your pro service firm.

Note: This transcript was generated by Gong.