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Episode 167 – From Timelines to Bottom Lines: How a Consulting Firm Shifted From Time and Materials to Fixed Fees After 40 Years – Member Case by Alan Wyne

In this session, we peel back the layers on how a seasoned ERP implementation consulting firm revolutionized its business model, moving from the traditional time and materials approach to a groundbreaking fixed fee structure. Discover the strategic decisions that led to this bold shift, the challenges overcome along the way, and the significant impact it had on their competitive edge and profit margins. Tune in to witness a story of adaptation, resilience, and success that could redefine the way you think about how you monetize your expertise.

TRANSCRIPT

Greg Alexander [00:00:00] Hey, everybody, this is Greg Alexander, the host of the Pro Serv podcast, brought to you by Collective 54, the first community for founders of boutique professional services firms. And on this episode, we’re going to talk about how a consulting firm who’s been around a long time using the traditional time materials billing method, has recently switched to a fixed bid approach. And this firm is in the middle of this transition, which is what makes this case study so unique, because there’s lots of early findings and learnings and lots of motivations. And we’re going to jump into all of that. And I hope at the end of this, you’re all inspired by this story and you consider making a similar journey. And then for the members that are listening to this, of course, you can attend the Q&A session with Alan and we’ll get into much greater detail. But with that, let me bring in our guest. Alan, it’s good to see you. Would you please introduce yourself and your firm to the audience? 

Alan Wyne [00:01:17] Sure. So, Alan Wyne, CEO of Anovia consulting. We’ve been around about 40 plus years. We do ERP implementations and a very specific part of the market from a Microsoft product standpoint. We we do business central and it’s small to medium sized business, even though we’ve scaled that quite large for some companies. You know, most of our stuff is DNA at this point in time and materials and, you know, it’s we’ve had a good journey, but it’s the market’s changing. Everything is changing around us. And we know we’ve got to get the fixed fee to really get our profits growing the way we would like them to grow. 

Greg Alexander [00:01:58] So let’s dive on to that. It’s unusual for me to talk to a firm. It’s been around for 40 years, and it’s had all the success that you’ve had. Be willing to make this change because let’s face it, what you’ve been doing before worked. So what was the motivation to go from timing materials to fixed fee? 

Alan Wyne [00:02:18] You know, it was really a couple of things. The first was we were looking for a new competitive advantage, you know, because because it is a I wouldn’t say it’s a commodity market, but it knocks on that door quite a bit when you’re doing implementations and Ram limitations. And Microsoft on this particular product move from an on prem version. So it was never in the vision and they changed the name and they went to a fully SAS version. You can still put it on prem, but but really what everybody had been software as a service up in the cloud. And that also meant that the revenue I generated about every five years for upgrades, which was significant, or the product sales I was making when we were selling it on prem, is completely going away because the upgrades now happen every six months automatically, and our service numbers while still growing. It’s just a market that’s going to go away in ten years. So how do I how do I and we sold it as time and materials. So how do I get into a market that I’ve already and ironically and become the competitive advantage. And it is most of my competition this TNM, we wanted to say look we’ll do fixed fee on. The one final point also is while there are fixed fee companies out there for our product that we sell with Microsoft, they do small fixed fees, 75 $100,000. We and we do a lot of those small companies, but we do an awful lot of large ones, meaning 250, 500, $1 million implementations of software. Nobody wants to touch that with a ten foot pole, because they don’t have the processes and the discipline to do it. We think that’s a huge competitive advantage. So hence the change to stay up with the market. 

Greg Alexander [00:04:08] Yeah okay. Fantastic. So the the on prem the SAS movement within the Microsoft ecosystem was the stimulant. You are competing with in a mature market with the fixed fee model as a way to separate because and for those that are listening that might not be familiar with this, when somebody like Alan goes to fixed fee, the client is shifting the risk from themselves to the implementer, and that’s what’s in it for the client. Now, what’s in it for Alan is if you really know what you’re doing, you can control the risk. And this could turn out to be very profitable. And maybe you win some business that you wouldn’t have won otherwise because you’re willing to do this and your competitors are not. So that’s kind of the context behind this. So, Alan, when you were thinking about it, what I loved about your story and thank you for sending me this great note, is you’ve taken a very methodical, approach to it. You didn’t just flip the switch and say, okay, everything’s going to fix me. You kind of doing it in phases. So tell us what your your migration path looks like. 

Alan Wyne [00:05:11] So it’s it’s a two year migration path for us. Prior to this year we had already had some fixed fee engagements. So we had what are called planning engagements, which we go in beforehand, look at the customer and go, okay, now we can quote this properly because we understand your business. And those were fixed fee engagements and we had a few other offerings that were fixed fee. We also though a year, two years ago we had spent ten years selling block hours. So blocks of hours. So I’m getting all this money upfront, but then I’m using it, right. We’re using it through the system. And we got away from that and we got much more to what I build. I got collected in the next week or two. And so my cash flow had already changed, and we had gotten a consistent cash flow and not these big chunks. That’s important in fixed fee because you’re going to be billing monthly or however however you’re going to do it. In our case, we’ve decided we’re going to go monthly bills and with a a calculus for it. But you know, we also said, all right, we’re going to practice with our existing, fixed fee engagements, get better at change orders, which are absolutely vital to making this successful, get better at changing the way we bonus our team, because today we bonus our team. On how many billable hours did you generate? Well, I got a fixed fee. My goal is to generate as few billable hours as I can with the same amount of ultimate money that I’m going to charge the customer, and it’s it’s contradictory. Today it it isn’t. Tomorrow it will be if I don’t change that. So so we’re changing how we bonus these existing fixed fees and they’re small. So I can’t get hurt on them right now. If I screw on up that’s okay. It’s not that big of a bite and I can handle it. I screw up $1 million. The TV is slightly different, so I want to be good before I get there. And then finally, you know, we’re spending time reevaluating our processes and procedures not only in our delivery and operations, but in our sales department. How do we go to market with this? How do we get competitive with it? How do we bonus our salespeople? Because again, it was based on what did you sell and how many hours and what was the rate. Because I to then be honest on how good my rate per hour was. And so there’s, there’s several pieces of this that we’re trying to say, look, you know, I made this statement to my team in November last year. In two years, I want to be 80% fixed fee. All across the board. I’d like it faster and more, but I figured two years was a good a good runway. 80% was an acceptable number to get us started on what effectively is a, you know, a five year journey to get completely over to it. 

Greg Alexander [00:07:58] Yeah. You know, a couple things you’ve mentioned there I want to call on because there it’s a real case study. And these two particular issues changing the measurement system from from number of billable hours and then changing the sales incentive system, you know, to incent selling fixed fees versus a traditional way culturally, especially for a 40 year old company. These are massive changes. I mean, these are not incremental moves. So how did the let’s start with the delivery staff first? You know, the folks that are doing the work for the client, how did they receive it? 

Alan Wyne [00:08:33] They’re receiving it. Okay. We’re still working through it completely. You know, same with sales. I mean, this is, you know, we’re I would say we’re in the first 20 to 25% of this journey, but, you know, it’s it’s discussion. And we’ve actually brought certain people in from each department to go look at this. This is coming that the company knows we’re going to actually across the board, I’ve announced it. We talked about it every month at our staff meeting. Certain people we’ve started bringing in and going, how do we structure this bonus program for delivery? It’s I need done faster, better, cleaner. And then I’m going to incentivize you on the profitability of the project. And so this team and we work in teams. So we’re structured okay. To be able to do this with sales. It’s the same way. How did you sell it. What price did you put on it. And then I’m going this back into what was it. How many hours do I think that’s going to take. And what was my real net realized. Right. So our internals are focused on still billable hours even though we’re not building per hour. So utilization and profitability and rate to the customer, we just look at them and go, look, it’s going to be $135,000. And when they go today, we get a little bit, well, wait a minute, what’s my rate? Why do you care. There’s no right here. This is just this is what it costs. Dude, are you happy? And we actually had a successful one with that. That wasn’t one of our pre offerings. And I actually got $15 more an hour rate and probably 100 extra hours than what it would really take, because the customer was perfectly happy with the final fixed fee number. I did. You know, that’s profitability. 

Greg Alexander [00:10:12] Yeah. I mean, the customers love it because what they don’t want to do is get surprised. Right? So the the comfort level of a fixed fee is they don’t have a runaway project on their hands, you know, and their budget gets blown to heck. And they, you know, sometimes they get egg in their face. God forbid they lose their job. So the customers love it. I find that the sales guys sometimes don’t like it because it creates it creates yet another thing they have to deal with with the customer, but feel like the example that you just mentioned, you know, the customer wants to get granular, particularly procurement department, and say, yeah, but what’s your rate? So how did you how did you train the sales team around this new selling motion and how to address the the new objections that certainly came up. 

Alan Wyne [00:10:56] You know, I mean, the beauty of having sold some fixed fee projects or planning engagements and other things. Having those people already sell that they’ve kind of run into those objections and they’ve learned how not. They’ve learned how to say what to say and what not to say. And so we sell based on look, the quality of our work speaks for itself. You’re going to get this, you know, here’s what you’re going to end up with. Here’s the documentation. The planning engagement is going to give you. We’re just translating that into when you you know, when it go live, you’re going to have a fully functional system. Here’s all the things it’s going to do. Here’s the statement of work and here’s the work plan, guys. Here’s all the tasks that are going to happen. And, you know, tell me that somebody else in my industry is going to walk up and say, yeah, for a half $1 million. We guarantee that they don’t exist. So they’ve, they’ve we’re we’re slowly learning and playing training on how to get that going. And then just, you know, getting our getting our nose bloodied every once in a while. But basically practice it’s practice practice practice. It’s really what it is. Okay. 

Greg Alexander [00:12:05] Well we try to keep these podcast short to 15 minutes and then we’ll, we’ll we’ll do a deep dive in this in the member course. I got one more question for you. What has surprised you? So you’re in the first 25% of rolling this out. You this is a multi-year journey. You know what happened that you didn’t anticipate. If anything. 

Alan Wyne [00:12:26] I didn’t I didn’t dissipate the acceptance of the company quite so fast where everybody was just like, yeah, okay, good. Let’s go. And I was I thought I’d have to bring some people kicking and screaming, you know, and, and in reality, from leadership down, everybody is just. And this sounds like a great idea. And I think it’s because we pitched it as look the next the market’s changing. We’ve all seen it. We change the way we modify the software. We don’t have a ten year journey here guys that protects us and grows it. And ultimately a job business. You know businesses primary focus is profitability. So I can bonus and pay you guys better. Can we all be together. And so that that’s been that’s been the real pleasant surprise. The other surprises are still coming. 

Greg Alexander [00:13:13] Well hopefully they’re not too ugly. You know it’s a really good point. I mean what you did there, which was a huge compliment to you as you showed that by making this move, the firm’s going to become more profitable. And when the firm becomes more profitable, there’s better paying jobs for everybody. So it’s we’re all aligned in doing that. All right, all right. Well, Alan, I appreciate you sharing your story of moving from time and materials to fixed fee here after a 40 year successful run. I’m really looking forward to the member Q&A session. So on behalf of the members, appreciate you being here. 

Alan Wyne [00:13:44] Okay. Thank you. 

Greg Alexander [00:13:45] All right. Couple of calls to action for those that are listening. If you’re not a member and you want to be one and learn from people like Alan, go to [email protected]. Fill out an application and some will get in contact with you. Do you want to just consume some more information? I would point you to my book. It’s called The Boutique How to start scale and sell a professional services firm. You can find that on Amazon. But until that and until next time, I wish you much success as you try to grow, scale, and maybe someday exit your firm.

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Episode 147 – How to Recover from the Unexpected Departure of a Key Employee – Member Case by Phillip Acosta

Small service firms are overly dependent on a few key employees. The departure of one can cause much pain for the Founder and impede the progress of the firm, especially if it was unexpected. Attend this session and prevent this trouble from stinging you.

TRANSCRIPT

Greg Alexander [00:00:10] Hi, everyone. This is Greg Alexander, the host of the Pro Serve podcast, brought to you by Collective 54, the first community dedicated to the boutique professional services industry. On today’s episode, we’re going to talk about key person risk. Key person risk is when a small firm is overdependence on a person or a small group of people. And that increases risk in our firm because if someone leaves, it tends to create a large gap inside of a small firm, and then we find ourselves in panic mode to try to improve that. And we have a member with us today. His name is Phil Acosta. And Phil recently experienced this and significant successfully navigated his way through it. So I thought he could share with you what he shared with me because as much to be learned in his story. So, Phil, it’s good to see you. Would you introduce yourself, please? 

Philip Acosta [00:01:08] Hey, thanks for having me. My name is Phillip Acosta. I am the principal here at GuROO LLC. We’re an enterprise I.T. company, primarily based in the DC area, but providing support all across the lower 48. We also have a virtualization platform that’s a SAS offering called Ibos. So that’s kind of what we do. And I’ve been running this company for about a decade. 

Greg Alexander [00:01:32] Got it. So Philip, why don’t we start off with telling the audience what happened? 

Philip Acosta [00:01:38] Okay. So basically I have had the same structure of how we’ve been run the company corporately probably for about the last 5 to 6 years, and that is myself. And then I had a number two as an operations manager, and then we had some people beneath that, but it was mainly me to him at the top. That person told me that they were going to be retiring at the end of 2024. So I kind of had a plan for that, but they moved it up to the end of this year. So 20, 23 calendar year. And I found that out a couple of months ago, three March, April. And so from that period, I started thinking, okay, what are we going to do here? Are we going to just replace the person that’s in that spot, which I think would be impossible because of the institutional knowledge and stuff like that that’s been associated with that. So, you know, you could get pretty close, but probably not a perfect fit to replace that, or at least it would be challenging. Or I looked at it as like, okay, we are in the forties going into fifties at that point. Now we’re over 50. You know, maybe this is an opportunity to restructure the company for the next stage of what we’re going to do here, because even if that individual had stayed, we probably couldn’t around the company the same way for very much longer. I chose the latter, and now I’m in the process of implementing that change. You know, the new person as a board and the person that was here prior, they’re still here overlapping currently. But you know, like as Greg was saying, we’re we’re making that transition. And so far it’s it’s going okay. 

Greg Alexander [00:03:15] So that’s it’s a great story. Thanks for sharing that with me. And I think it’s very real. I mean, I think, you know, this has happened to several of our members and, you know, what are you going to say to somebody when they want to retire? I mean, they they’ve done a great job for you. I’m sure you’ve got a great relationship and you want them to have a happy retirement. So it’s a it’s a tricky situation because on the other side, you got you got a business to run. And this creates creates a gap. Tell me short term, so you get deliver this news. You know, now you’ve been able to digest it, remove emotion, think logically, make a sound business decision, which we’ll get to in a moment. It sounds like that’s working out. But in the moment when that happened, you know, was there any fallout? Was there you know, did the business take a hit? Was there a lot of stress placed on you? Kind of bring us back to that moment. 

Philip Acosta [00:04:05] Um, yeah. I don’t think the business necessarily took a hit. There was a lot of stress placed on me. 

Greg Alexander [00:04:12] Yeah. 

Philip Acosta [00:04:13] You know, it goes. You know, the timing is just, um, you know, not to get into my personal life, but I have a bunch of small kids that I just, you know, I just had recently disasters in our family, so you got to know the personal side of it. But, you know, I try to have some structure in how I do things. And I had a plan to start this process at the end of 2023 and basically to give myself the whole calendar year of 2024, to make this a smooth thing to, you know, you know, go out, interview, look for people, figure out the right, do the integration and it kind of crunch that entire timeline. So I was a little upset initially. And I think one of the things that I’ve tried to do is not take one moment, which I kind of looked at, is like you told me you would do one thing and now you’re kind of going back on your word. I tried to do that. Take one moment and allow it to define what is a 19 year working relationship with this person, which is mostly been really good. And so to me, I wouldn’t want to take that moment and allow that to, you know, you know, take away from all the good things that have happened over the years. So I’m not going to lie. I’m an imperfect person. It took me time to process and get to that point to be able to look at it that way. But, you know, that is the way that I’ve helped myself get through it. And then, you know, it’s like, okay, now we got to refocus and figure out how we’re going to do this. Yeah. 

Greg Alexander [00:05:42] Well, it’s very mature of you, and I appreciate you being honest and vulnerable. I mean, I’ve had this happen to me before in the past, and I reacted very emotionally initially. And then, you know, once I said, okay, it is what it is, I got to deal with it. You know, I brought some clarity to the situation. And listen, we got to acknowledge that we are people and, you know, emotions are going to be part of it because the implications of this, as you just mentioned, not just professionally but personally, you know, can be traumatic. You know, you’ve got a plan and all of a sudden the plan goes up in smoke and that can be very, very disturbing. So you talked about your two options and the criteria upon which you made the choice, which, if I repeat back, was you didn’t think that you could replace this person as is because of all the institutional knowledge. And that would be really tough to replicate. And then you were peeking into the future and you’re saying we’re a 50 people now in a few years will be at 500 people, like what do I need going forward? Which is a very good set of decision criteria. Sometimes there’s a third choice that people consider. And I want to ask you if you did consider this and why you ruled it out, and that is you could promote somebody from within. And that sometimes works because that tribal knowledge issue, that institutional knowledge is less felt if it’s an internal promotion. So did you consider that and why did you decide against it? 

Philip Acosta [00:07:01] Yeah, I did consider it. I think the problem is that and it’s a it’s a fault of something we’ve done here. We didn’t build anybody to take that role and we should have done that. And I won’t make that mistake again because like you said, it makes it easier to have an internal hire. But when I look at the things that I needed, there was nobody that had been dealt to take over in that capacity. Yeah. Without creating a hole in some other area and then basically just playing, you know, whack a mole of replacing people. So to me, that’s the reason that we didn’t go that route. Yeah. 

Greg Alexander [00:07:39] So, so the lesson for members is the talent supply chain concept, right. Which says you should be developing, you know, everybody along the chain, if you will. So if one person leads, another person steps in. But that Whac-A-Mole concept we are creating holes throughout the org chart isn’t an issue because, you know, everybody gets pulled up accordingly. Now, listen, I understand how hard that is. I know we’re all super busy and it sounds great in theory and it makes a ton of sense. Meanwhile, you’re working 50 hours a week, running around trying to serve clients like it’s hard to compartmentalize these things. But if you’re learning anything from Phillips story is it’s really important to have that talent supply chain in place so that if something like this was to happen again or happened to you for the first time, it’s not that big of a deal. It doesn’t mean that you’re going to promote from within, but it means you have the option, it’s a viable option. And then you can compare the internal promotion to the external recruit and make a good choice. So I just wanted to point that out. So let’s move to the the external recruitment. So this is a big job that you’re you’re filling. This person is going to play a huge role in your success going forward. So how did you find this person and how did you decide on who to hire? 

Philip Acosta [00:08:50] So I really turned to people that I knew in the industry that were either mentors or, you know, I know had had this experience in prior, you know, interactions because honestly, it was brand new territory for me. You know, I’ve made a bazillion hires in this company, but I’ve never hired someone to kind of run the company. And so trying to figure out the right choice for that was challenging. So I reached out to people that, like I said, that I trusted. I asked them if they knew people in the market. That’s another thing is it’s kind of a word of mouth thing, not saying you can’t go higher. A CEO often bandied, but it’s certainly not as common as like going and hiring a network engineer. So, you know, you kind of want to ask what they’ve done in the industry and be able to vet some of that stuff. So, you know, with the person that I ultimately landed on, you know, it came from a source that I trusted that I felt like it just didn’t work out. I could hold accountable. And it also, you know, I vetted a lot of their there are folks that they gave me and asked them about background, you know, not really to ask them, was this person good for the job? Because anybody you put down for a reference, I got selected for the job or probably shouldn’t put them down for reference, but I just tried to pull out of them, you know, what they had done and line it up against what I thought we needed and wanted it to be clear on a theme. One of the big things I wanted to hear is what their growth story where had taken a division and grown it and how they scaled that, what they did and what they left in place and how they got there. 

Greg Alexander [00:10:24] What was the pitch to the candidate? Because it sounds like these are big shoes to fill and how did you convince them to take the job? 

Philip Acosta [00:10:34] Oh, well, I mean, he actually really liked the company, so, I mean, it was helpful that, you know, when I presented what the company did, he thought it was attractive. He thought it was ripe to go for. But, you know, I did One of the big things that I told them is that, you know, you know, I’ve ran this company even though I had a number opportunity before. It’s kind of been like my way on everything for a very, very long time. I’ve kind of been the driving force for this company. I said, But I’m not looking for someone to come in and report to me. I said, I’m looking for someone to be a partner and grow with me. And I am willing to step back and embrace your ideas and not be saying, Well, that’s not how we do this here. So I think part of what made the job attractive was how open I was to new things. And, you know, that’s I mean, I’ve talked with Greg about it and that’s proving hard so far and practice to do. But but I mean, I’m working at it. I’m trying not to, you know, get in the way too much. 

Greg Alexander [00:11:32] Well, good for you for being aware of that. That’s an issue. You know, entrepreneurs and I’m one of them. We all struggle with that, right? It’s the control issues. And in order to get a company to a certain level, you have to have talented people and empower them to be successful. And it’s really hard to let go. So and it’s not like you flick a switch and it happens overnight. Just it’ll happen over time. And then once this new person and underline the word new, that’s the issue. Once they demonstrate their ability, your your trust in them will go up and up and up, not the you don’t trust them now. I’m sure you do, but it’ll be an earned trust and you’ll sleep better at night knowing about your delegation decisions. All right. My last question would be, so you have somebody leaving in the next six months and you have somebody who just started within the last two. How have you structured their relationships so that the transition goes as smooth as possible? 

Philip Acosta [00:12:24] And so one of the things I did immediately is I wanted them to marry up and spend a lot of time together. In fact, as we’re doing this podcast, they’re in the conference room right now. We’re working on some stuff together. So I told them basically in week one, I said I just kind of wanted them to spend time together because I had talked a lot with the candidate before he ever came here. So he kind of knew what I wanted. And I also had the benefit of I’m probably going to be here for quite a long time and I want to make sure that we get as much done in figuring out a transition prior to them. You know, with us having our person that’s in place moving on. So they’ve you know, I’ve encouraged them to go out, have lunches together. They seem to genuinely be getting along and doing well. I think another bonding point is talking about me, not necessarily in a bad way, but, you know, things like, hey, does this, you know, kind of the challenges of working with me or the good things and, you know, different stylistic things that I like to see. I think they’ve kind of bonded over that. But I’ve tried to make sure that they spend a lot of time together. And I said, I had this person that’s taking the job now that’s been in place. I had these two talking throughout the interview process, so they already knew a bunch about each other before the job, so were accepted. 

Greg Alexander [00:13:44] You know, and it’s fortunate that it was a retirement situation which gave you some runway. It gave you an opportunity to have the retiring person participate in the interview process. But imagine a scenario, listeners, where that’s not the case. You show up for work one day and your key person walks in and gives you two weeks notice now. So it’s a it’s a very different situation in that. And that that just puts you puts an emphasis on bond. This key person risk issue and making sure that you’re building that talent supply chain. So, Phillip, we’re out of time here, but I appreciate you sharing your story with us. It’s incredibly relevant and I appreciate you being in the community. Every time I speak to you, I learn something. So. So thanks for being here today.

Philip Acosta [00:14:29] Oh, thank you so much for having me. She has. Have a good day. 

Greg Alexander [00:14:33] All right. Couple of calls to action for listeners. If you’re a member and you’re listening, look out for the meeting invite. So Phil will do his Q&A session with us. If you’re want to be a member and you’re not yet, go to collective 54 dot com and fill out an application or get in contact with you. And then if you’re not ready for either of those two things, you just want to learn more. Go to Amazon. You can find my book. It’s called The Boutique How to Start School and Sell the Professional Services Firm. Okay. Thanks, everybody. Take care.

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Episode 144 – Revenue Mix: Balancing Staff Augmentation, Advisory, and Managed Services to Drive Margins – Member Case by Ryan Buell

Boutique service firms often confuse staff augmentation work with advisory work and with managed services work. These are three different types of services that are marketed, sold, and delivered differently. Each has its own margin profile. Balancing the mix of these three correctly can be the difference between running a firm with good margins or a firm with poor margins. Attend this session and get clear on how to manage the revenue mix.

TRANSCRIPT

Greg Alexander [00:00:10] Hi, everyone. This is Greg Alexander, the host of the Pro Serv Podcast, brought to you by Collective 54, the first community dedicated to the boutique professional services industry. On today’s episode, we’re going to talk about finding the right revenue mix, the balance of revenue to hit your profit targets. And there’s different types of revenue that happen in services firms. And sometimes we don’t think about the mix. And that’s what we’re going to discuss today. And we’ve got a collective 54 member with us. His name is Ryan Buell, and Ryan has several types of revenue in his firm and we’re going to ask him to talk about those and discuss how he handles the balance of them to try to hit his targets. So, Ryan, it’s good to see you. Thanks for being here. Please introduce yourself to the audience. 

Ryan Buell [00:01:08] Yeah. Thanks, Greg. I appreciate you having me. My name’s Ryan Buell and I’m the founder and CEO of Save US Solutions. We’ve been around for about nine years and obviously professional services firm, we kind of have three main services that we offer consulting, recruiting and managed services, and we specialize in finance and accounting, tech and h.r. And we’re located here in sunny san diego. 

Greg Alexander [00:01:37] Okay, so, very good. So i’m going to ask you to kind of give me three definitions and then we’ll kick that around a bit and then we’ll have the conversation around mix. So give me your definition of staff augmentation work. 

Ryan Buell [00:01:51] Yeah, sure. So, you know, staff augmentation, at least for us, it really means that we’re providing specialized resources to support project execution or interim needs. You know, our consultants may own certain aspects of the project or provide some strategic guidance, but ultimately, we do not own the outcome. We’re typically operating under the guidance of the client and helping them with the execution of the project. So they’re especially with our enterprise level clients relying on us to provide specialized resources to really come in and complement their team to help get the work done. 

Greg Alexander [00:02:31] So maybe give me a sample use case just to let me sink my teeth into it a bit. 

Ryan Buell [00:02:37] Yeah, sure. So we have, you know, as an example, we have some clients currently transitioning to the new S4 Hana SFP product, and it’s an extremely large undertaking and these are large multibillion dollar global public companies and they’ll come to us to bring in project manager or Scrum Masters to to really help complement their existing team. And they’ll leverage obviously all the background and experience of our team to help because the resources we’re providing have a lot of experience in that technical space. But ultimately they have somebody there as part of the PMO that really is owning the strategy, and then they’ll also have an external third party implementation partner. Really, our role there is, is to be kind of the interim interim communication between the implementation partner and the client to help make sure that requirements are defined, that the outcomes are consistent with the expectations that have been set with the implementation partner. We’ll help with testing and change control and some other areas, but all of it’s really under the guidance of the project champion there within the PMO. 

Greg Alexander [00:03:54] Okay, perfect example that that brings great clarity to that. Okay, let’s move to the the second type of work that you do, which is advisory work. So please explain that and then maybe give us an example of that. 

Ryan Buell [00:04:07] Yeah. So the advisory work that we do is and this is probably more just a function of San Diego, but typically those are going to be with more small to mid-market clients. You know, the difference there is really we have full ownership of the project and outcomes. So typically, you know, the work’s very specialized. There’s going to be a proposal upfront with a clearly defined scope of responsibilities, estimated costs, and then, you know, the costs may have, you know, various deliverables or performance milestones associated with it. So although a lot of times we’ll still bill time and materials for advisory work, not always, but but typically we will there’s there’s usually a lot more work upfront to set expectations with the client so they know what they’re getting. 

Greg Alexander [00:04:57] Okay. And an example of that would be. 

Ryan Buell [00:05:01] So a lot of the companies here in San Diego are small to midsize tech and life sciences companies, just as an example. So as part of their IPO prep, they might come to analysts to implement technical accounting standards. Okay. They may come to us to help with some sort of a system implementation or change control. We’ve had companies come to us to help stand up an integration management office for a company that was looking to become very acquisitive as part of their growth strategy. So, you know, there’s there’s different examples. But for us, it’s it’s typically all going to be under that that finance, accounting or maybe tech. 

Greg Alexander [00:05:45] So yeah so the IPO prep great example that that helps us understand the difference between advisory work and staff legwork. Okay. So let’s go to number three, which is the MSSP or managed service provider space. So what’s your definition of that? 

Ryan Buell [00:06:00] So the MSSP is where a company typically a small to midsize business is going to completely outsource all or certain aspects of their business functions to us. So for us, again, those those functions on the on the managed services side are finance and accounting in h.R. And so we typically have full ownership of the function with the ability to implement our best practices, systems, tech stacks and other strategies that we believe are going to really help the customer be in the best position for for growth. You know, billing for that can be fixed fee or we’ll sometimes do essentially a consolidation of timing materials, but there’s always a very clear scope of responsibilities. And for us, a monthly cost kind of do not exceed amount without approval arrangement with the client. 

Greg Alexander [00:06:51] Okay. And an example of that might be what? 

Ryan Buell [00:06:55] So, you know, a good example would be, you know, we have a collective 54 member as a client. We’ll work with a lot of VC backed companies. Usually what they’re coming to us, maybe they have a bookkeeper or CFO who’s maybe not quite what they’re looking for. We will provide a team, a dedicated team, a department, so to speak, to that client. And each client receives a CFO control or accounting manager, an accountant in the works, then fractionally allocated based on scope and workload to the appropriate level to provide a kind of a more cost effective solution. So really, it’s you know, it’s any company, usually less than 100 million is going to come to us to outsource either all or part of that function. 

Greg Alexander [00:07:44] Perfect. And I think the key word there is outsourcing. That helps us to distinguish between the other two. Okay. So so with that, that’s a great distinction. And I know this sounds basic, and for you, maybe it is, but for some of our members, these terms tend to get blurred. And we really don’t know the differences between the two. And it’s important to understand the differences between the three. Excuse me. So right when you think about it from your perspective, the founder and CEO, you know, do you have an optimal mix you’re shooting for and if so, why? And how do you manage to that? 

Ryan Buell [00:08:18] Yeah. Yeah. I mean, we’re actually working on that right now. I mean, we have found that because we also provide recruiting services as well. And so, you know what? We have found that if if we can get to right around a 90% or more of the recurring revenue and maybe 10% on on some of the recruiting side, that’s that’s been relatively optimal. The obviously, from an enterprise value perspective, the managed services piece is going to be going to be the highest just due to the nature of the client outsourcing the work to us and the stickiness of the work. And it’s usually a much longer term duration, but. You know, I would say right now about 90 about 90%. Consulting and consulting advisory and staff augmentation compared to the recruiting side is the mix that we’re shooting for. 

Greg Alexander [00:09:20] Okay. And I understand why, because you want recurring revenue as opposed to kind of one off projects. That makes a lot of sense. Are there any other considerations? Like in my experience, the advisory work tends to have the highest margin. MSP work would come in second and then the staff augmentation work would come in third. That’s a generalization, but there’s a margin profile of the services come into play, or is it just focused on as little project work as possible and as much recurring revenue as possible? 

Ryan Buell [00:09:55] I mean, the margins definitely come into play. I think on the staff augmentation side of the House, we will sometimes get more pricing pressure, which can lower margin. So although the volumes there, the margins may suffer, especially if things in the economy shift like, you know, things have softened a bit recently, although we’ve stayed relatively busy on the advisory side, it’s a lot more specialized. And so if the needs are truly there, although budgets always a piece of the fact, you know, a piece of it, you know, usually they’re they’re looking for the right partner that truly specializes in that area and can deliver value. Mm hmm. The managed services piece, the margins are definitely there. I think the challenge there is it’s a full bench model. And so with us being in high growth mode, it’s always the balance of, you know, how how much do we want to get ahead of the demand for service to have a strong bench available as we bring on clients? Because we, you know, we never want to you know, we never want to have quality suffer. And we’ve heard feedback from clients in the market that some of our competitors had tried to grow too fast. So they struggle with continuity and quality. And so, you know, we’re trying to find the right balance of aggressive growth with quality and not sacrificing the culture. 

Greg Alexander [00:11:17] You know, and you brought to my attention and I had forgotten about this, but you have a fourth service as well called recruiting. So how does that compare on these dimensions? 

Ryan Buell [00:11:26] Yeah, I mean, the recruiting piece, it’s it’s a nice piece of the puzzle because, you know, at the end of the day, it’s pure gross margin. So from a business perspective, it’s great for the business. The downside is it doesn’t really add much to enterprise value. Yeah, because there’s nothing about it that’s recurring. So, you know, it’s nice for us to be able to offer it because clients need it and ask for it. And there’s a lot of synergies from a recruiting perspective when we’re out in the market bringing in more consultants or internal employees to our practice, we obviously come across individuals looking for full time opportunities. So it’s easy for us to be able to provide that service, but we have to be careful that we don’t emphasize it too much. And so, you know, we’ve done that through how we structure comp plans and we’ve implemented a very specific sales strategy, you know, which has helped. So I guess the short answer is we want it to be part of the business, but we have to be careful about the mix of of revenue and how how we strategize how we’re going to achieve the right mix to optimize profitability and enterprise value. Yeah. 

Greg Alexander [00:12:38] Okay. Very good. All right. My last question would be, you know, for service lines, for different staffing requirements, for different margin profiles. It sounds complex to manage. Is that true or not true? 

Ryan Buell [00:12:54] Yeah. I mean, you know, there’s good and bad everything. And I think, you know, the good is that we never lose clients. We work with them through every stage of growth and they essentially graduate from one service to the next. The challenge can be. I think sometimes market confusion on maybe what we do or to be able to answer that question in a simple answer. I know there’s a lot of companies out there that have a lot more complexity than we do, but that but that’s a bit of a of a challenge. The delivery models, the nice thing is, is we’re able to leverage our internal recruiting team to feed the other lines of business, which is another another kind of competitive advantage. So anytime we’re hiring on the managed services team, the same recruiters that are working for these large multi, you know, helping support these large multibillion dollar public companies that have the highest standards you can imagine are the same people that are filling our positions. So we’re able to scale with quality. But but yeah, it creates challenges. There’s different business needs, different systems. So we essentially run run two different businesses. We have a managed services business and then the consulting, recruiting and advisory side of the business as two separate business entities. We have separate budgets by service and different leaders for each service just to ensure that someone’s accountable for the growth and strategy because, you know, they are they are different with different challenges. 

Greg Alexander [00:14:23] And is that distinction between Mr. MSP and the rest of it because of the full bench model? 

Ryan Buell [00:14:32] Well we have is what distinction that the. 

Greg Alexander [00:14:35] So between the MSRP business that’s one line of business and then you grouping the other businesses together. As I understand what you just said and I’m wondering why you’re running those as two separate businesses. 

Ryan Buell [00:14:47] Well, the the MSP we originally set up as a different business because we wanted to bring in leadership to really be incentivized to grow and scale the managed service side of the business. So I have a different cap table, different systems, different budget. Um, and, and it’s really a, it’s a different delivery model and in a lot of ways. 

Greg Alexander [00:15:08] Okay, Very good. All right. Well, listen, you know, this was good old fashioned one on one education distinguishing these things. And as Brian and I just demonstrated even amongst us and we know each other, you know, clarification was required. Put yourself in the shoes of a client, you know, who might not know the difference between these things. And then you submit a price and they react to it because maybe they don’t know. So having clarity around these different types of services and when clients should leverage one versus the other, when it’s appropriate to use one versus the other, how the other cost benefit analysis might be thought about as a really important thing for all of us to keep in mind. 

Ryan Buell [00:15:52] Yeah. Yeah, for sure. Revenue mixes is definitely something that we’re focused on right now. And you know, with the market shifting and us trying to continue to work on our ongoing growth strategy, it’s it’s something that is top priority. 

Greg Alexander [00:16:05] All right, listeners, I’m going to give you three calls. Action. So if you’re a member, watch for the meeting invitation. Well, you’ll get invited to Ryan’s Q&A and you can ask questions directly for him. If you’re not a member and you want to become one, go to collect 254 dotcom and fill out an application. We’ll review that and get back in contact with you. And if you just want to learn more directed to Amazon in our book, it’s called The Boutique How to Start Scale and Sell a Professional Services Firm. But Ryan, thanks a bunch for coming on the show today and making a deposit into the collective body of knowledge. I enjoyed listening to you and we’ll talk to you again. 

Ryan Buell [00:16:41] All right. Thanks, Greg.

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