Author: Greg Alexander

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Streamlining Client Onboarding for Quick Wins and Growth Opportunities

Streamlining Client Onboarding for Quick Wins and Growth Opportunities

A Blueprint for Boutique Professional Service Firms

As founders of boutique professional service firms, one of the most critical phases in your client relationship is the onboarding process. This initial phase not only sets the tone for your working relationship but also presents opportunities for quick wins and potential upselling. Let’s explore how to optimize this process through a real-life example and a practical to-do list.

A Success Story from Management Consulting

Consider a management consulting firm that recently won a project with a Global 2000 firm, tasked to assess their new product launch process. Initially, the project’s scope was confined to a single business unit. However, the excellence in their onboarding process led to an unexpected opportunity.

The firm meticulously tailored its onboarding approach, focusing on understanding client needs, setting clear expectations, and delivering early value. This approach not only impressed the primary contacts but also caught the attention of adjacent business units. Within the first 30 days, the exceptional handling of the onboarding process led to a referral into an adjacent business unit, effectively doubling the project’s size.

There is an old saying in professional services, “Do great work and business will come to you.” This is especially true during the new client onboarding process as the firm is still in the honeymoon period with lots of enthusiasm and excitement.

To-Do List for Effective Client Onboarding

To replicate such success, here’s a comprehensive checklist to enhance your client onboarding process:

    1. Understand Client Objectives: Start with a deep dive into your client’s goals and challenges. This understanding is crucial for tailoring your services to deliver immediate value. Do not assume all personnel from the client understands the problem the executive sponsor is trying to solve.
    2. Set Clear Expectations: Ensure that both parties are on the same page regarding project scope, deliverables, timelines, and communication protocols. At times, clients forget what they signed up for.
    3. Quick Win Identification: Identify opportunities for quick wins that can demonstrate your expertise and the value you bring to the table early in the relationship. A quick win is defined as valued delivered inside of the first 30 days.
    4. Personalized Communication: Establish a communication plan that suits the client’s preferences. Personalized interactions can build trust and open doors to additional opportunities.
    5. Regular Check-Ins: Implement a schedule for regular check-ins to discuss progress, address concerns, and adjust strategies as needed.
    6. Feedback Mechanism: Create channels for receiving and acting on feedback. This shows your commitment to meeting and exceeding client expectations.
    7. Showcase Breadth of Services: Without being pushy, strategically showcase the breadth of services your firm offers, making the client aware of how you can support them beyond the current scope.
    8. Leverage Technology: Utilize technology for efficient project management, reporting, and communication. This demonstrates your firm’s competence and reliability.
    9. Build Relationships Beyond the Immediate Team: Network within the client’s organization. Building broader relationships can lead to more referrals and opportunities.
    10. Deliver on Promises: Above all, deliver what you promised, when you promised. This builds credibility and lays the foundation for a long-term relationship. On spec, on budget, and on time- no matter what.

Conclusion: Opening Doors to Growth

An effective client onboarding process is more than a step in client engagement; it’s an opportunity to solidify your firm’s value, build trust, and lay the groundwork for future upselling and cross-selling. By following these steps, you can shorten the time to value for your clients, securing quick wins that pave the way for expanded opportunities and sustained growth.

If you would like to improve on your new client onboarding process, or other areas required to scale a boutique service firm, consider joining Collective 54 by applying here.

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Why Being Unique and Having No Competitors is a Bad Business Model

Why Being Unique and Having No Competitors is a Bad Business Model

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No competition equals a bad business. If there’s no competition, there’s likely very little demand for your solution. So how can you get into a competitive space and create a successful business?

This video offers actionable steps to win deals over big firms. We provide focal points you can’t ignore, opportunities to create competitive advantage, and the benefits that will accompany you
along the way.

Watch this video to learn more about:
– The benefits of doing business in a competitive market
– How to be better, faster, and cheaper than your competition without sacrificing profits
– How to adjust your strategy as you grow for maintained success

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Navigating the Complexity of the Net Working Capital

Navigating the Complexity of the Net Working Capital

  • Co-authored by Greg Fincke and Patrick Schmelzinger at Equiteq

In the world of mergers and acquisitions (M&A), there are multiple terms and process dynamics that come into play over the course of a transaction. One term that often stands out from the rest due to its complexity is net working capital. While it may seem like just another financial metric, the net working capital in the context of M&A transactions can have potential implications on the overall purchase price of a transaction. The purpose of this post is to provide founders with insight into net working capital, its role in a M&A transaction, and how to effectively prepare for the net working capital adjustment negotiation.

What is Net Working Capital?

Net working capital is definitionally defined as current assets minus current liabilities, but the metric takes a different form in an M&A transaction. Through the lens of a transaction, net working capital is often defined as current assets (excluding cash and cash equivalents) minus current liabilities (excluding short-term debt and debt-like items). The financial metric is utilized to assess the financial health of a business – it is a measure of the company’s ability to satisfy short-term liabilities and operational liquidity. Furthermore, an ideal position for a business is to have positive net working capital.

What is the Net Working Capital Purchase Price Adjustment?

The net working capital purchase price adjustment is often an unfamiliar term to founders prior to embarking on an M&A transaction. When a buyer submits an LOI, the terms will often include that the purchase price assumes the business will be acquired with sufficient levels of net working capital. Said differently, the purchase price implicitly included the value of the company’s net working capital. Buyers include this term to protect against the potential situation where a seller liquidates their current assets from the business and delays satisfying their current liabilities until the transaction is complete – leaving the buyer with a less valuable business. As you may be wondering, how is a sufficient level of net working capital determined and what are the mechanics for the adjustment? During the due diligence phase, buyers dive deep into the components of net working capital, analyzing trends, assessing liquidity ratios, and evaluating historical net working capital cycles. Following their analyses, the buyer will propose what they view as the sufficient level of net working capital, often called the net working capital peg. There are multiple different methods used to calculate a net working capital peg, but a typical approach buyers will take is to present the peg as the average of the last twelve months (“LTM”) net working capital. Please see below an illustrative example of a LTM peg calculation:

The net working capital peg is typically a focal point of negotiation as buyer and seller strive to reach a consensus that is a “win-win” for both parties as the adjustment isn’t traditionally thought of as a mechanism to increase or decrease value. The net working capital adjustment is the difference in the company’s net working capital as of the closing date of the transaction vs. the net working capital peg amount. For example, if the closing net working capital amount is higher (lower) than the net working capital peg, there would be an increase (decrease) to the purchase price. Please see below an illustrative example of how the net working capital adjustment works in practice:

How to Effectively Prepare for Net Working Capital Negotiations to Optimize Value

Rigorous, proactive preparation and strategic planning for net working capital negotiations is critical to ensure maximum negotiating leverage is achieved to arrive at the optimal net working capital peg. Prior to net working capital negotiations, sellers and/or their investment bankers should undergo detailed analyses to understand the historical trends of each balance account to: 1) identify any anomalies that skew historic net working capital trends, 2) understand the cycles of each account (i.e. is there seasonality?), and 3) have thorough analyses to underpin their view of the optimal net working capital peg. Being on the “front foot” with robust and accurate analyses to support your negotiation position and understanding how the buyer might counter enhance your negotiation strategy, mitigate risks, and maximize the potential for a desired outcome.

Conclusion

As founders begin on the M&A journey, understanding the nuances of net working capital and the adjustment becomes paramount. The adjustment underscores the importance of effective due diligence and preparation, sound advice from an investment banker regarding market standards, and tactical negotiation strategy. Mastering the art of successfully navigating the net working capital adjustment is crucial to preserve overall transaction consideration and ensure both parties view the result as a “win-win” ahead of creating a long-term partnership. If you would like to learn more about the net working capital adjustment or the M&A process, please feel free to contact me at [email protected].

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Safeguarding Your Boutique Professional Service Firm: Identifying and Mitigating Key Client Churn Risks

Safeguarding Your Boutique Professional Service Firm: Identifying and Mitigating Key Client Churn Risks

In the world of boutique professional service firms, maintaining a strong client base is not just essential – it’s imperative. But what happens when a key client unexpectedly walks away? The ripple effect can be devastating, affecting not only your revenue but also your team and overall business stability. In this blog post, we’ll delve into the art of proactively identifying key clients at risk of churning and, more importantly, how to take action when that risk starts to escalate. I will present a simple tool, the stoplight report, used to assess key client health, keeping your firm in the green, not the red.

The Stoplight Report: Assessing Key Client Health

Before diving into action steps, let’s set the stage with a visual representation of the stoplight report approach:

    • Green: No Risk of Churning
    • Yellow: Moderate Risk of Churning
    • Red: High Risk of Churning

Now, let’s explore how to identify clients within these categories and what actions to take accordingly.

Identifying Clients Moving from Green to Yellow

Scenario: Your boutique marketing agency has been serving Client X for years, consistently delivering outstanding results. However, you’ve noticed a slight decrease in their engagement and communication. It’s time to assess if Client X is transitioning from green to yellow.

    1. Monitor Engagement: Keep a close eye on client interactions, project updates, and feedback. A decrease in responsiveness or enthusiasm may be an early warning sign.
    2. Analyze Financials: Review the revenue and profitability associated with Client X. If you notice a downward trend or a plateau, it’s time to investigate further.
    3. Client Feedback: Don’t hesitate to seek feedback directly from the client. Sometimes, they may not feel heard, and addressing their concerns can reinvigorate the relationship.
    4. Upsell Opportunities: Identify opportunities for upselling or expanding your services. Offering something new and valuable can reignite their interest and commitment.
    5. Proactive Communication: Reach out to Client X proactively, expressing your dedication to their success and addressing any issues or concerns promptly.

Identifying Clients Moving from Yellow to Red

Scenario: Despite your best efforts, Client X has not responded positively to your outreach. They have expressed dissatisfaction and are considering exploring other options. It’s time to address the high risk of churning.

    1. In-Depth Analysis: Conduct a comprehensive review of the client’s history, including any ongoing issues, unmet expectations, or misalignments in goals.
    2. Alternative Solutions: Explore alternative solutions to address their concerns. This may involve revising your service offerings, pricing, or delivery methods.
    3. Escalate Communication: If the situation does not improve, consider escalating the matter within your firm. Involve senior leadership or account managers to salvage the relationship.
    4. Mitigation Plan: Develop a mitigation plan that outlines specific steps to rectify the issues. Ensure clear timelines and responsibilities are established.
    5. Diversify Your Client Base: Simultaneously, focus on diversifying your client base to reduce dependence on Client X. Attract new clients to mitigate the impact of potential loss.

The Emotional Context: A Cautionary Tale

Let’s put theory into practice with a cautionary tale. Imagine a boutique marketing agency heavily reliant on one key client, which represents 30% of the firms billings. When this client unexpectedly churned, it resulted in an immediate loss of 30% of the revenue. To stay afloat, the agency had to lay off a 30% of its team, causing emotional distress and instability within the organization. Although this is a fictionalized example meant as a teaching tools, many marketing agencies are operating within reach of this example coming to life. This horror show is avoidable if you switch from being reactive to proactive when anticipating possible churn within the key client segment of your business.

Conclusion

In the competitive world of boutique professional service firms, client churn can be a silent killer. By adopting a proactive approach to identify and address key clients at risk of churning, you can safeguard your firm’s stability and growth. Use the stoplight report method to assess client health, and when you notice clients moving from green to yellow or yellow to red, take decisive actions to salvage the relationship and diversify your client portfolio.

Remember, the key to long-term success is not just acquiring clients but also retaining and nurturing them. Your boutique firm’s future depends on it.

Stay vigilant, stay proactive, and stay green.

If you are concerned about key client churn risk, consider joining Collective 54. This topic, as well as many others, are dealt with directly with peers providing solutions to one another. Apply here.

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Double Your Sales Goal in 30 Days With This Simple Sales Technique

Double Your Sales Goal in 30 Days With This Simple Sales Technique

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When was the last time you, as a founder, reached out to your top clients with unique insights? We often assume our clients are paying attention to everything we do. But they’re not. It’s our job to keep them informed.

So how can we effectively educate our clients about new service offerings without bombarding them with information that doesn’t solve their problems? Let’s explore a simple sales technique to keep clients engaged at every stage.

In this video, you’ll learn:
– How to market new services to existing clients
– An effective strategy for re-engaging past clients with new offerings
– How to identify new opportunities by listening

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The Corporate Transparency Act Mandates New Requirements for Business Owners | Schwab Center for Financial Research

The Corporate Transparency Act Mandates New Requirements for Business Owners | Schwab Center for Financial Research

As you prepare to meet with your CPA this year, you may have some new reporting requirements about your business. Here is some information on the new Corporate Transparency Act from Schwab Center for Financial Research’s Austin Jarvis.

Overview

The Corporate Transparency Act (CTA) was passed as part of the National Defense Authorization Act for Fiscal Year 2021. The CTA mandates the creation of a database of “Beneficial Ownership Information” (BOI) and the filing of beneficial information effective January 1, 2024. New entities created after January 1, 2024, are required to file a report within 30 calendar days of their creation, and existing entities as of January 1, 2024, have until January 1, 2025, to file a report. Any changes after the initial report is filed (due to sales, minor children reaching majority, death, etc.) are required to be reported within 30 days of the change occurring.

The stated purpose of the law is to combat money laundering and the concealment of illicit money using shell companies in the United States. However good the intentions may be, the regulations have been written so broadly that nearly every small business in the United States could be required to make informational filings or incur penalties of $500 a day (up to $10,000) and up to two years in prison.

The following is a broad overview of the CTA to help build awareness of the new rules. Due to the complexities and nuances of the rules, it is important to discuss your unique circumstances with your professional team to ensure you remain fully compliant with the law.

Who is required to report?

The CTA requires certain reporting companies to disclose the identities of their beneficial owners to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

What qualifies as a reporting company?

Under the CTA, a reporting company is a corporation, limited liability company (LLC), or other similar entity created by filing a document with the Secretary of State (or a foreign entity registered to do business in the state). Entities that are highly regulated, such as banks, insurance companies, and accounting firms, are exempt from the reporting requirements. Charitable entities and large operating companies (defined as having more than 20 full-time employees, $5 million in gross receipts or sales, and a physical office in the U.S.) are also exempt from reporting.

Are trusts reporting companies? Generally, trusts are not reporting companies because they are not formed by filing a document with the Secretary of State.

Who is a beneficial owner?

The law defines beneficial owners as individuals who directly or indirectly:

1) exercise substantial control over the reporting company, or

2) own or control at least 25% or more ownership interest in the reporting company.

Substantial control could mean that the individual serves as a senior officer, has authority to appoint or remove senior officers, or has influence over important decisions made by the reporting company or a majority of the board of directors.

Furthermore, individuals may exercise substantial control, directly or indirectly, through board representation, ownership, rights associated with financing arrangements, or control over intermediary entities that separately or collectively exercise substantial control.

Indirect ownership, or control of a company or its ownership interests, may include:

    • Joint ownership with one or more other persons
    • Ownership through another individual acting as a nominee, intermediary, custodian, or agent
    • Ownership as trustee, grantor/settlor, or beneficiary of a trust
    • Ownership or control of one or more intermediary entities that separately or collectively own or control ownership interests of the reporting company

Can a trust be a beneficial owner? If a trust owns 25% or more or a reporting company, or has significant control over it, the trust is a beneficial owner. However, because the law states that a beneficial owner must be an individual, the trust document will have to be reviewed to determine whether the grantor, trustee, or beneficiaries are considered beneficial owners, given the facts and circumstances.

Who is not considered a beneficial owner?

    • Minor children. However, the reporting company must report information regarding the minor child’s parent or legal guardian. Once the minor attains the age of majority, an updated report must be filed with FinCEN within 30 days.
    • An individual whose only interest in a reporting company is a future interest through a right of inheritance.
    • A creditor of a reporting company.
    • Agents, nominees, intermediaries, or custodians acting on behalf of another person.

What information must be provided to FinCEN?

Reporting companies (as defined above) must file with FinCEN: the business name, current address, state of formation, and the Employer Identification Number (EIN) of each entity, as well as the name, birthdate, address, and government issued photo ID (driver’s license or passport) of every direct or indirect beneficial owner of the entity.

What is the impact on business operations?

The CTA may have an impact on small business operations as the owners will now have to incur the administrative costs associated with compliance. Some business owners claim the law will affect their privacy and confidentiality, because their personal information will be disclosed to FinCEN.

In addition, the CTA may have implications for mergers and acquisitions. Potential buyers may require access to the beneficial ownership information as part of their due diligence process. This could make it difficult to attract buyers or negotiate favorable terms.

What is the impact on estate planning?

The CTA is likely to have a chilling effect on the use of LLCs, which have become popular in estate planning over the last decade. Individuals who value privacy are likely to forgo the use of LLCs in favor of other structures that still allow for some level of anonymity, such as irrevocable trusts. Individuals who continue to use LLCs despite the loss of privacy will likely face the added compliance costs of reporting to FinCEN, maintaining accurate records, and updating reports whenever membership shares are transferred.

Bottom line

The CTA is a new law with the goal of preventing certain financial crimes. The requirements of the law put new burdens on certain businesses and entities that carry stiff penalties if ignored. Anyone who owns more than 25% of a business or has substantial control over a business should consult with their attorney, CPA, and other professionals to determine whether they are required to comply with the CTA.

Austin Jarvis, JD

As Director of Estate, Trust, and HNW Tax for the Schwab Center for Financial Research, Austin provides analysis and insights on topics including complex estate, gift, and trust planning, advanced charitable strategies, business succession, and executive compensation.

Important disclosures

This information provided here is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, you should consult with a qualified tax advisor, CPA, Financial Planner or Investment Manager.

All expressions of opinion are subject to change without notice in reaction to shifting market, economic or political conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

This material is approved for retail investor use only when viewed in its entirety. It must not be forwarded or made available in part.

The Schwab Center for Financial Research (SCFR) is a division of Charles Schwab & Co., Inc.

The Charles Corporation (“Charles Schwab”) provides a full range of brokerage, banking and financial advisory services through its operation subsidiaries. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (“Schwab”) Member SIPC, offers investment services and products, including the Schwab One® brokerage account. Its banking subsidiary, Charles Schwab Bank, SSB (Member FDIC and an Equal Housing Lender), provides deposit and lending services and products.

Access to Electronic Services may be limited or unavailable during periods of peak demand, market volatility, systems upgrade, maintenance, or for other reasons.

© 2023 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.

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Understanding the Transition: From Non-Recurring to Recurring Revenue Models in Boutique Professional Service Firms

Understanding the Transition: From Non-Recurring to Recurring Revenue Models in Boutique Professional Service Firms

Understanding the Challenge

For founders of boutique professional service firms, the shift from a non-recurring revenue model to a recurring revenue model is often a strategic move towards long-term stability and growth. However, this transition can be challenging, especially in terms of cash flow management. This article aims to guide you through this complex yet rewarding journey.

The J Curve: A Critical Concept

Before delving into the specifics, it’s essential to understand the concept of the J Curve in the context of this transition. The J Curve is a visual representation of a company’s cash flow following a significant investment or change in business strategy – initially, there’s a significant outflow of cash (the bottom of the ‘J’), but with time and effective management, the curve ascends, leading to increased profitability.

How the J Curve Applies

When switching to a recurring revenue model, your firm initially faces increased costs without immediate returns. These costs include client acquisition, setting up systems for recurring billing, and potentially, a temporary dip in revenues as you transition existing clients or onboard new ones. This initial phase represents the bottom of the J Curve.

Calculating Break-Even for a Given Client

To navigate this period, a clear understanding of the break-even point for each client is crucial. Here’s how to calculate it:

    1. Cost to Acquire (CTA): This includes marketing expenses, sales team costs, and any other costs directly related to acquiring a new client.
    2. Cost to Serve (CTS): These are the ongoing costs of servicing a client, including labor, software, or other resources.
    3. Overhead Allocation: Allocate a portion of your firm’s overhead costs to each client, based on a reasonable metric like revenue contribution or service hours.

Break-Even Point Calculation

Your break-even point is when your cumulative revenues from a client equal the sum of CTA, CTS, and allocated overhead.

The Exponential Profit Beyond Break-Even

Once the break-even point is met, each additional dollar from the client significantly contributes to your firm’s profitability. This exponential increase is due to the recurring nature of the revenue and the decreasing marginal cost of serving a client over time.

The number one reason boutique professional service firms do not make the transition to recurring revenues is they cannot handle the cash crunch. Firms get used to big checks hitting the bank account in a traditional project-based billing cycle. It is difficult to tell a client not to pay them so much this quick but rather pay them over time pro rata over the life of the contract. The founder sees the payroll going out without the revenue coming in and the cash balance in the bank account dwindle month over month, panics, and says “recurring revenue is not for us.” This is a mistake and there are solutions to the cash flow issues.

Overcoming Cash Flow Obstacles

Short-Term Solutions

    • Leverage Credit Facilities: A short-term loan or line of credit can help manage cash flow during the initial phase.
    • Re-negotiate Payment Terms: With suppliers or landlords, for instance, to align outflows with your new revenue model.

Long-Term Strategies

    • Optimize Client Acquisition Costs: Use data-driven marketing and sales strategies to reduce CTA.
    • Efficiency in Service Delivery: Streamline processes to lower CTS.
    • Client Retention: Implement strategies to retain clients, as the longer a client stays, the more profitable they become.

Conclusion

Transitioning to a recurring revenue model in a boutique professional service firm is a strategic move towards sustainable growth. Understanding and managing the J Curve, accurately calculating the break-even point, and implementing strategies to mitigate cash flow challenges are key to successfully navigating this transition. With careful planning and execution, the move to a recurring revenue model can lead to increased stability and profitability for your firm.

Are you wondering how to transition to recurring revenue? Or how to address the cash flow issues associated with the move? These strategic questions, as well as many others, get answered by your peers in the Collective 54 mastermind community. Consider joining by applying here

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Is Your Solution Falling Short of What Clients Actually Need?

Is Your Solution Falling Short of What Clients Actually Need?

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Sometimes our solution isn’t really a solution. But most prospects are looking for a vendor that can solve their problem in totality. So what steps can you take to ensure your solution isn’t falling short of what your client actually needs?

This video unravels the importance of knowing and understanding why your clients are seeking your solutions. We explore effective questions to ask your prospects, what information you should look for in a loss review, and how to position your proposal to trigger positive action.

Tune in to learn more about:

    • Understanding why someone is looking for your solution
    • How to gather data and use it to better position your solution
    • Useful tactics to help you discover what your clients really need

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