Category: Pro Serv Blogs

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Organic Growth vs. Acquisition Growth: How Pro Serv Firms Win Through Acquisitions

growth through acquisitions visual formula.

Organic Growth vs. Acquisition Growth: How Pro Serv Firms Win Through Acquisitions

growth through acquisitions visual formula.

If you’re considering exiting your firm one day, you’re thinking about how much your firm is worth. Whether you’re passing it on to the next generation or selling it, you want your firm to be worth as much as possible. And to do that, your firm needs to grow. One method of growth is to grow by acquisition.

The reason a boutique professional service firm should consider an acquisition is to grow by entering a new market. Revenue growth drives firm valuation, and if growth in the core business has slowed, the firm is worth less. Thus, the wealth you’ve worked hard to create is reduced. Before that happens, your firm needs to find new growth opportunities. Often, these growth opportunities are in new markets, such as different geographical locations, industries, or service categories. Acquiring a firm operating in a new market is a potential way for you to enter.

Organic vs. acquisition growth

Traditionally, there are three ways to enter a new market. You can build the practice internally, partner with a firm in the desired market, or buy a firm operating in the target market. All three methods can be successful.

So, the question is: Should you build, partner, or buy? This question gets answered when you ask how much time do I have, how much is it going to cost, and how much risk am I willing to tolerate? When it is faster, cheaper, and less risky to acquire, you should make an acquisition. If it is faster, cheaper, and less risky to enter a new market by building internally or partnering, you should pursue organic growth.

Determining if it’s the right time and place for you to acquire another firm

There are five key questions a founder of a professional service firm needs to ask themselves to determine if the conditions are ripe for an acquisition. Those questions are:

1. Do you have superior information? 

For example, you know how to get access to clients and the target firm does not.

2. Are you the only bidder? 

Many, if not most, professional service firms are lifestyle businesses that cannot attract a buyer. When you are the only bidder, you dictate price and terms.

3. Are we in a recession? 

Recessions are fantastic for well-run boutiques, but they punish poorly run boutiques. During recessions, some firms get in trouble and may need a lifeline to stay in business, making them a good candidate to be bought.

4. Is the selling firm sick? 

In this instance, the underperforming firm is attractive, and the performing firm is unattractive. You can buy the sick firm, enter the new market, cure the illness, and thrive.

5. Does the seller care about things beyond price? 

Boutique professional service firms, run by founders like you, are more than financial vehicles. These founders care just as deeply about their clients, employees, and legacy as you do. A founder wants to know their people, clients, and reputation will be well taken care of post-acquisition. When dealing with an idealistic founder, conditions are ideal for an acquisition. When dealing with a mercenary founder focused only on money, the conditions are not ideal and the price will likely be too steep.

Setting up your acquisition for success

After you’ve determined it’s the right time to buy, there are two key steps to take to make sure your growth-through-acquisition strategy works.

First, you must buy at the right price. Unfortunately, most boutique pro serv firms overpay when making acquisitions. They are inexperienced in determining the right price and in doing deals. Most founders have never bought a firm before and make mistakes. They focus entirely on the math, such as a multiple of earnings before interest, taxes, depreciation, and amortization (EBITDA) or revenue. This is important, but doing a deal is much more than that.

When determining the correct price for acquisition success, only enter negotiations with a founder who has a great compulsion to sell. Walk away from sellers on the fence. Founders of boutique professional service firms who are compelled to sell usually have one or more of these complications in their life.

They have estate problems. For example, maybe they are getting divorced, and the firm is an asset owned by both spouses.

They need capital in a hurry. Maybe they have a debt on the balance sheet that needs to be paid off.

They’ve recently lost their successor and see no way out. For example, an absentee owner has been getting rich off a young executive’s back and the young executive quits.

They need capital to grow and cannot get access to it. Perhaps a firm wins a big new contract and needs to hire up before the first invoice is collected.

They realize they have a below-average management team and need new blood. For example, the founder tried to delegate, it flopped, and they’re back to grinding out 60-hour weeks.

The second key step to take is to be sure you have a unique ability to operate the acquired firm. Practically speaking, this means you have a much better team than the acquired firm. And when I say much better, I mean at least twice as good. This protects your downside. If the team of the acquired firm quits, your team is capable of picking up where the previous team left off. And it helps you capture the upside. Your team will execute better and deliver more growth and better profits.

An experienced community to support you

If this is the first acquisition you’re pursuing or your previous acquisition didn’t go smoothly, join the Collective 54 community. Our members are founders and operators of professional service firms like you that have been in your shoes. They are happy to advise you on the best next steps for your firm.

To determine where your firm is right now, your first step should be to find out the valuation of your firm. Check out our free Firm Estimator tool here.

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Trying to Jumpstart Your Business Success? Master the Ability to Pivot.

Man wearing suit

Trying to Jumpstart Your Business Success? Master the Ability to Pivot.

Man wearing suit

This article was originally published on Entrepreneur.

Business plans are like mining for gold. Miners had to start with only an educated guess on an area, canvas a stream, then pan and sift endless piles of dirt. Prospecting is largely gone, but it’s a useful metaphor for how business leaders take a problem, solve it, refine it, and continually revisit and adapt — even to the point of tearing down the essential points of their business. This ability is called “intellectual range of motion,” and it’s one of a business leader’s most important tools — especially if you’re selling your expertise.

Peloton, for example, continues to display this intellectual range of motion. While it had a few pain points — lower subscription growth, stock redemption issues and a wave of layoffs — Peloton shows a willingness to explore and change direction.

Today, Peloton has 5 million customers and is worth $3 billion. However, despite significant brand equity, Peloton is substantially changing its business model. The company is muddying the waters of the service-based business vs. product business dynamic and rolling out a “Fitness as a Service” product where people can access Peloton’s training and instructors without the bike itself.

Intellectual range of motion: A powerful tool

The extent to which an idea can be altered based on an entrepreneur’s intuition and imagination falls under their intellectual range of motion. A wide range of motion enables an entrepreneur to turn an idea into a revenue growth opportunity. In contrast, leaders of firms with narrow intellectual ranges cannot recognize an opportunity because of the limits of their imagination.

Intellectual range of motion is more highly valued in a founder of a services business than it is in a product business. This is because services are much more malleable than products. For example, modifying a product to take advantage of an opportunity might require sourcing new raw materials, reconfiguring an assembly line, re-writing software code, developing a new manufacturing process and more. With services, there is none of this, so the time from idea to execution is measured in days and, sometimes, hours.

As a founder myself, I have grown my firm by increasing my intellectual range of motion. For example, the sector I operate in, business mastermind communities, is over 200 years old with a few hundred firms. All of these firms are horizontal providers, meaning they do not serve a specific vertical industry. My firm, on the other hand, serves a single industry — the professional services industry.

This industry specialization has appealed to many and has allowed our firm to grow consistently. The idea for this form of differentiation was found in another business entirely: SaaS. The software category has matured, and many successful SaaS companies now specialize in a vertical industry. My idea was this could (and should) work in the business mastermind community sector — and it has. Recognizing a winning strategy in another industry and successfully porting it into a different one is an example of intellectual range of motion.

Key strategies to improve intellectual range of motion

For entrepreneurs and founders who want to gain better intellectual ranges of motion, there are a few critical actions to take:

1. Ask: What does the world need from me right now?

This question is not asked often enough. The reason this question is neglected is that business owners fall into the routine of delivering what they have always delivered. Due to the benefits of the experience curve, the more often a firm provides a service, the lower the cost and the higher the margin. Business owners are driven by profit and will not discontinue a profitable service line until absolutely necessary. As a result, they stick to their knitting too long and miss opportunities. Over time, this behavior restricts one’s intellectual range of motion.

Blockbuster Video once provided us with a remarkable service: hit movies watched at home for rent. They stuck to VHS tapes but missed mail-order DVDs and video streaming. They went bankrupt as a result, and we now all binge-watch Netflix content. Blockbuster Video no longer fit the market; the market had evolved to services that came to them and, eventually, to fully digital and personalized streaming platforms. This is something founders in professional service firms have to ask themselves consistently to remain competitive in the market, but the lesson remains for large companies like Blockbuster as well.

2. Locate wasted resources in legacy operations

A common reason new ideas that could lead to break-out growth opportunities aren’t pursued is that entrepreneurs incorrectly think they do not have the resources. However, the resources they need are available, they are just consumed with legacy operations.

Legacy service offerings are ripe for optimization. Entrepreneurs should look for ways these services can be delivered with far fewer resources. These newly liberated resources could be allocated to today’s wild idea that could be tomorrow’s golden goose.

3. Produce a roadmap of future offerings

It is best to organize the service-offering roadmap by identifying boundaries. Today’s business and tomorrow’s business are always competing for scarce resources. There is only so much money, time and talent to go around. In the absence of a roadmap organized by time boundaries, today’s business wins the competition for resources. A roadmap makes sure tomorrow’s business gets the resources it needs.

For example, boundary 1 of your roadmap should be defined as offerings in the market for the next year. Boundary 2 should be defined as an offering in the market in two years’ time. And boundary 3 should be defined as offerings in the market in three years’ time. By landscaping out the roadmap in this fashion, an entrepreneur’s intellectual range of motion is increased by stimulating their imagination.

Business leaders looking to jumpstart their success — or simply maintain it — should look to see how they can improve their intellectual range of motion. In the long term, they may just strike gold.

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How Small Service Firms Win in a Declining Industry

Industry Life Cycle - Declining Industry

How Small Service Firms Win in a Declining Industry

Industry Life Cycle - Declining Industry

A declining industry is an industry with an absolute decline in unit sales over time. For example, data recovery services in the US are declining by 9% per year. Companies once backed up their data on tape drives and shipped them to offsite data-storage facilities. Today, cloud computing has largely replaced the need for this service. Therefore, the data recovery services industry is in decline.

Declining industries can, however, create pockets of opportunity for boutique professional service firms. How? When an industry is in decline, large service firms decide to exit the industry as the prospects for growth are no longer attractive. However, there can be professional service niches, or segments, of clients whereby the demand is still strong for the services. These clients get abandoned by the incumbent service provider and are thrust into the market looking for an alternative. Boutique service firms, positioned correctly, can meet these clients’ needs and satisfy this demand—even nabbing clients that are unattractive to large service providers—and thus, grow their firms.

New Opportunities Come in All Shapes and Sizes for Professional Service Niches

Declining industries present opportunities for boutique pro serv firms that are not available in growth industries. For instance, clients in declining industries are price insensitive. They realize there are fewer firms providing the service and worry more about securing continued service than the cost of the service.

In addition, clients in declining industries stick around longer than clients in growth industries. These clients often have high switching costs, such as regulations, that mandate the need for the service. The service provider supplying this type of client can enjoy long client tenure.

Lastly, there is less competition in declining industries, especially from larger firms. This can make it much easier to win this business, find your service market fit, and earn high client satisfaction in declining industries. With fewer options, clients tend to be easier to sell and serve.

For example, from the year 1900 to 2000, the legal profession grew by 793% when measured by the number of lawyers. Since 2000, the growth rate has only been 1.4%. During this same period, the population growth in the US has increased by approximately 50 million people. The growth of the legal sector has slowed considerably, and when compared to population trends, it is in decline. However, lawyers niched in mergers and acquisitions have seen excellent growth. Why? Merger and acquisition activity is up considerably, creating lots of opportunities for specialist law firms.

The Boutique Professional Services Firm Playbook in a Declining Industry

There is a specific playbook to run in declining industries for small service providers:

First, be sure to pick the correct declining industry. 

Sometimes large firms do not recognize they are in a declining industry and continue to compete fiercely. At times, large firms cannot exit a declining industry because of high fixed costs, difficult-to-shed assets, debt tied to the business, and the business unit in the declining industry being strategic to another business unit. Existing firms with high exit barriers will not leave a declining industry, and therefore, the opportunity for the small niche player does not emerge. Find an industry where the exit barriers and fixed costs are low. If the same firms are continuing to dominate the industry, it likely isn’t the right declining industry for your firm.

Second, locate the pockets of remaining demand in the declining industry. 

A declining industry is often broadly specified. Within it, there are multiple segments, some of which will remain attractive to niche service firms. This is often called a niche strategy, but it is effective in a declining market because niche segments of a declining market can still be thriving, or even growing, and a steady profit can be made.

Third, within these identified segments, understand which clients will be dropped by the firms leaving the industry.

What is unique or characteristic of these clients? Once you’ve determined the common features causing them to be dropped, tailor your sales and marketing approach to this niche. Approach these clients with a value proposition of continued uninterrupted service.

Fourth, do not make investments beyond what is required to deliver the service. 

These clients are not looking for innovation; instead, they want the continued service they were denied by being dropped by the previous firm. Lastly, be sure to create switching costs with these new clients. This can come in the form of multi-year, non-cancelable contracts, and other forms of switching costs. This will provide the boutique professional service firm with the support needed to stay in the declining industry.

It’s easy to assume that a declining industry is too risky to operate in, but if you look beyond the exterior, you’ll find opportunities within professional service niches. With these tips, you’ll know how to identify opportunities in the market and provide continued service for loyal clients.

Want to discuss this topic, and others, with your peers? Considering joining our community at https://www.collective54.com/contact/.

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How Service Firms Win in Emerging Industries

Emerging Industry Part of the Industry Life Cycle

How Service Firms Win in Emerging Industries

Emerging Industry Part of the Industry Life Cycle

Emerging industries present unique opportunities for both meteoric rises and swift downfalls for professional service firms. To understand the risks and rewards, it’s helpful to understand that emerging industries are newly formed industries, often created by innovations, that are populated by a new group of well-funded clients with unique needs. This overview of emerging industries, and the strategies necessary to succeed within them, will help professional service firms make the most of this challenging area.

Complex innovations like artificial intelligence, virtual reality, and many others create demand for professional service firms because clients need the expertise to utilize them for their businesses. Professional service firms that position themselves correctly can grow and scale very quickly if they can provide that expertise; however, they must understand the required strategies for emerging industries are different from the strategies in new, declining, or mature industries.

What are the opportunities for professional service firms?

Emerging industries present opportunities for boutique professional service firms because the barriers in mature industries don’t apply to an emerging industry. For example, a boutique service provider in the public accounting space needs to contend with powerful brands such as PwC and Deloitte. Those powerful brands are tough to beat. Emerging industries, conversely, do not yet have powerful brands established. The opportunity exists for a boutique service provider to become a powerful, leading brand in the emerging industry.

The benefits of becoming a credible provider in an emerging industry can be large and long-lasting. For instance, Philip Kotler was early in the digital marketing field when it was an emerging industry in the early 1990s. He wrote 60 books on the subject and became the top professor and consultant in the emerging industry. Large marketing firms, such as WPP and Ogilvey, had the same opportunity but were late to the party. Consequently, a small service provider became the leader and enjoyed approximately 30 years of extraordinary growth.

What Are the Challenges for Professional Service Firms?

There are many challenges present in emerging industries, both for clients and for professional service firms trying to support those clients. For example, clients worry about: innovation risks, sourcing stable partners, getting locked into expensive contracts in a changing field, and the personal cost of looking foolish if it does not work.

Service providers face their own set of challenges when trying to win in an emerging industry. For example, finding talent can be quite challenging in emerging industries as expertise is in limited supply. As a result of the limited talent pool, wages for employees in emerging markets can be very high. These rare employees require a different infrastructure of systems and processes to do their work, and competition can try to poach your talent.

Additionally, founders of boutique service firms often get burned by jumping into an emerging industry quickly only to see the industry become obsolete. Founders need to be careful they are not just chasing fads. Selling services in an emerging industry is hard.

Clients are confused and take a long time to make decisions, and satisfying those clients is equally difficult. Most do not know what quality looks like in an emerging industry, but these problems disappear as the industry matures and clients have options to choose from. Thus, having a concrete strategy for maximizing upside and mitigating risk is crucial to not just surviving but winning in an emerging industry.

Strategies to Maximize Opportunity in Emerging Industries

What are successful strategies for emerging industries? There are some time-tested strategies for competing in an emerging industry:

1. Advocate for the emerging industry in addition to your firm. 

As the industry grows, so will your firm.

2. Try to control the channels that prospects and clients will use to educate themselves on the emerging industry. 

For instance, consider launching a “trade rag” for the emerging industry and, therefore, become the voice of the industry.

3. Develop an image that establishes your credibility in the emerging industry. 

Clients will be looking to reduce risk, and the service provider with the best credentials will win.

4. Get on the learning curve quickly. 

The more you do something, the better you get at it and the less it costs. The service provider who moves along the learning curve the fastest will have a distinct advantage over the competitors.

Pitfalls to Avoid as a Founder in an Emerging Industry

While you need a strategy to win in an emerging industry, you must consider that it’s dangerous to be too early in an emerging industry, just as much so as it is to be too late. Being too early will result in building the wrong skills and losing a lot of money; being too late, you’ve missed out on the momentum and will fight an uphill battle against firms that have already established themselves as leaders.

Additionally, the cost of entering an emerging industry is high. Lots and lots of client education and evangelism are required. Unfortunately, these costs are often not converted into proprietary advantages. A boutique could end up educating prospects on their opportunities in emerging industries only to have them select a competitor.

Lastly, many emerging industries are a result of technological innovation, yet the tech changes very quickly. In some cases, the need for a service can disappear overnight when a tech system automates it. For example, websites are cheap templates today, yet they were expensive custom software-development projects just a decade ago.

Emerging industries provide both boundless opportunities and challenges, but only professional service firms that plan out a strategy fitted to an emerging industry will be among those who have an opportunity to become industry leaders.

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Why Founders Get Trapped in a Lifestyle Business

Life cycle of a boutique professional services firm

Why Founders Get Trapped in a Lifestyle Business

Life cycle of a boutique professional services firm

This article was originally published on CEOWORLD Magazine.

In the boutique professional services industry, there are “young” 10-year-old firms and “old” 10-year-old firms. The difference almost always boils down to the energy level of the founder. If they are energized when they realize that their problems are not theirs alone and seek out collaborative solutions, they tend to prosper. When you understand the nine lifecycle stages and how you need to maneuver through each one, you’ll set your firm up for victory — and avoid founder burnout at the same time.

When it comes to founding a boutique professional services firm, there’s a fine line between running the day-to-day operations of a so-called lifestyle business and aggressively scaling with the intention to sell. I know this from experience, having been the founder and CEO of a management consulting firm from 2006 to 2017 that I have since sold. I had expertise in sales, so the firm experienced rapid growth early. One big-name company after another was hiring our consultancy. We got to break even immediately, and cash flow ramped up exponentially from there.

This rapid success led me to become arrogant. I felt my apparent brilliance and unmatched hard work could make a success out of everything. As a result, I tried to go through all nine lifecycle stages much too quickly. Still in Childhood (stage four), I wanted to become an Adult (stage six) overnight. I attempted to skip the Adolescence stage, ignoring the systems and processes.

As a result, we experienced a crisis by losing some key clients and employees. This hit my pocketbook hard and woke me up fast. My firm was thrown back into Adolescence out of necessity, and I learned that young firms need to go through a trial-and-error period before they attempt to scale. You simply can’t skip the awkward, necessary growth stages.

The professional services industry is one that’s incredibly susceptible to stagnation. These firms can easily become lifestyle businesses because their founders get stuck in one part of the lifecycle instead of growing a service business.

Lifestyle Business vs. Growth Business

Firms can get trapped in the lifecycle and experience stilted growth for a couple of reasons.

First, founders are by-and-large unaware of the lifecycle stages of a professional services firm. Firms are born, grow, age, and die. Second, leadership styles need to change from stage to stage in order to progress successfully. That necessary adaptation usually doesn’t happen. Breakdowns occur during the transition from one stage to another, as founders are not aware of the transitions taking place. Costly mistakes are made. For example, in the early stages, firms need cash to survive; therefore, sales trumps all. However, in the later stages, once survival is not the concern, firms need steady profits. As such, processes and systems need to become the priority.

This lack of lifecycle awareness causes a founder to work too much, not make enough money, and never get to an exit — often leading to founder burnout. This happens because the founder is focused on solving all problems instead of focusing on solving the right problems for the firm’s particular life stage. Much easier said than done, but a founder needs to make the deliberate decision to switch from working harder to working smarter; failure to do so will result in premature founder burnout.

A New Found(er) Perspective

If you find yourself putting out too many fires and feel burnout creeping up as a result, take a breath. This is fixable. As mentioned earlier, it’s all about working smarter and focusing on the right problems for this specific moment. Here are a few recommendations on how to avoid being snagged in the lifecycle churn and get back on track to successfully scale, sell, and exit your boutique firm:

1. Know Exactly What Your Stage Entails

Future-thinking founders should anticipate and prepare for problems before they cripple performance. This is best done by determining where they are in the firm’s lifecycle.

To figure out the correct stage, ask yourself if an individual is running the firm or if a system is running the firm. If it is an individual, the firm is in a pre-Adolescence stage. If it is a system, the firm is past Adolescence. If it is a little bit of both, the firm is squarely in Adolescence (stage 5), and this marks the need for new leadership to move to the next stage. How agile are you?

In the boutique professional services industry, there are “young” 10-year-old firms and “old” 10-year-old firms. The difference almost always boils down to the energy level of the founder. If they are energized when they realize that their problems are not theirs alone and seek out collaborative solutions, they tend to prosper. When you understand the nine lifecycle stages and how you need to maneuver through each one, you’ll set your firm up for victory — and avoid founder burnout at the same time.

2. Embrace the Daily Solving of Problems


When attempting to scale, firms never go from a state of problems to absolutely no problems. It’s never happened and it never will. Firms evolve from one set of problems to the next. Those next problems are more complex and difficult, but you are as big as the problems you contend with, so the correct approach is to match the lifecycle stage of a firm with the skill set of the leader. If you don’t feel capable of solving new problems, it means you need to expand your skill set before your firm can continue to grow. Don’t run from the challenges that arise. Meet them head-on.

In my personal journey, I did four specific things to expand my skill set each time I felt stuck. First, I identified a role model — someone you don’t have access to but can study. While in the management consulting industry, I chose the founding father of this industry, Marvin Bower of McKinsey & Co. I then studied him and modeled his behavior.

Second, I developed mentors — which are different from role models because you must have access to your mentor, and they should not have conflicts of interest. Mentors are people who “have been there and done that,” so they helped me avoid paying full price for dumb mistakes. Third, I joined a mastermind community to surround myself with peers. I found much value in being able to bounce ideas off of people who are in a similar situation. And lastly, I had a coach. The coach worked with me intentionally to develop the needed skills. With a team around me, I was able to get outside opinions on what I wasn’t seeing or where I had room to grow.

While the skill you might be lacking depends on what stage your business or firm is at, some of the common things you should learn include dealing with risk, becoming an effective decision-maker (even with incomplete information), building commitment within your team, and the ability to distribute power. As a leader of your business, you will continually be presented with information that may not be complete or accurate, but you still need to make decisions. This is closely related to risk. You will be taking a risk on the decisions you make with available information, but without risk, there is no reward.

Additionally, one of the biggest ways you can help both yourself and your business is to distribute your power and let others wield it effectively. You can’t lead a growing firm all on your own, so you must trust others to help you — and eventually even take the wheel from you entirely.

3. Keep Pushing for More


Founders of boutique professional services firms often don’t dream big enough. Many start their firms with a modest level of ambition, anticipating that a nice lifestyle business is the inevitable end goal. They hear that professional services firms don’t scale easily. As a result, they settle instead of actively looking for more.

If a founder desires more than a lifestyle business, they must expand their level of ambition and go for it. The path forward is to master the lifecycle stages and learn from peers who are a few stages ahead. Find a community of like-minded entrepreneurs and founders and learn from each other as you stretch to reach those lofty goals.

Founders and operators of firms often come to communities with questions about winning new clients, recruiting star employees, improving pricing, etc. However, the most successful founders come to learn about what might be possible. Yes, they have these problems; however, their dreams and ambitions expand when they meet their peers, many of whom are doing what is thought to be impossible.

Instead of just asking about new clients and pricing, shift your attention from the income statement to the balance sheet — from “how much can I make?” to “how much wealth can I create?” There are millions of founders of professional service firms who make a great living. However, there are few who create real generational wealth. Founders should think like the owners they are, not like an employee.

Avoiding burnout as a founder is hard. Your heart and soul go into cultivating this idea and sharing it with others, but it’s possible to curb burnout by asking the right questions and addressing the problems that fit your firm’s current stage. Sometimes, the best way to do that is by asking more experienced peers.

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How Professional Service Firms Win in a Mature Industry

Industry Life Cycle - Mature

How Professional Service Firms Win in a Mature Industry

Industry Life Cycle - Mature

 

 

Many professional service firms compete in mature industries. This overview of the mature industry environment, its challenges, and strategies for success can provide a starting point for founders to find their way.

The Surrounding Environment: Tough for the Boutique

It’s important for founders of professional service firms to understand the characteristics of a mature industry. A mature industry is defined as an industry that has passed the growth phase of the industry formation. Firms in mature industries tend to be older, larger, stable, and slow-growing. For example, the consulting industry began in 1925 when James O’Mckinsey launched Mckinsey & Co. Today, 98 years later, there are 717,019 consulting firms in the United States. It is mature.

Many, if not most, of the professional services industry categories are mature. For instance, there are approximately 350,000 legal firms, 185,000 accounting firms, 264,000 architecture firms, and 232,000 software development firms. The competitive strategy required to be successful in a mature industry is very different from a strategy used in a growth industry. Understanding the challenges of competing in a mature industry can help service firms learn how to thrive in a mature industry and follow the best strategy.

A Tough Road: The Challenges Facing Professional Services Firms Operating in a Mature Industry

There are six key challenges present when competing in a mature industry:

1. Slower growth means more competition. 

Fewer opportunities mean a lot of firms competing for scarce budget dollars.

2. Firms must sell to experienced replacement buyers.

A replacement buyer is a decision-maker looking to replace an existing provider with a new provider. This type of executive knows how to buy the service and is a capable negotiator.

3. Differentiation is ineffective as a strategy in mature industries.

There are many providers capable of providing a similar service. Therefore, to win, a firm must compete on service and price.

4. Mature industries often have too many providers and too much capacity.

This creates downward pressure on fees.

5. International competition is more prevalent in mature industries as competition forces firms to look for deals anywhere they can find them.

6. Profit margins are often lower in mature industries, usually due to competition on all fronts.

These are some, but not all, of the challenges present. Recognizing these challenge of a mature industry can help you better compete.

Keys to Success: What You Need to Realize About Competing in a Mature Industry

There are several things to watch out for when competing in a mature industry. Realizing you are in one is key to understanding how to thrive in a mature industry. Many boutique founders do not know they are operating in a mature industry and try to win using strategies more appropriate for growth industries, only to fail and not know why.

At times, an industry starts to mature, and a founder of a boutique does not recognize the change. As a result, they start to struggle because they are clinging to the old ways of doing things. New providers enter the market with similar services at much lower prices, and clients flock to them. It is essential that a founder sees the transition from a growth industry to a mature industry when it happens.

Sometimes, a founder of a boutique tries to innovate inside a mature industry. This results in them launching new services, only to be disappointed when clients don’t buy them. Clients in a mature industry are not looking for innovation. They want cheap, reliable, steady service. Founders should re-design the current service to be more efficient rather than attempt to launch something brand new.

It is not uncommon to hear a founder complain that the competitors are “irrational” and are “buying” the business. When in actuality, the competition is earning an acceptable margin at the lower price point because they re-engineered how the service is delivered, often using technology instead of labor. Leaders of boutiques need to deal with the way things are, not the way they wish things were.

And lastly, founders try to move up market in a mature industry, claiming to have higher quality. Unfortunately, clients are often not willing to pay for higher quality in a mature industry. Founders need to resist the urge to focus on quality in a mature industry. Good enough is good enough.

Putting it in Place: 5 Strategies for Professional Service Firms Competing in a Mature Industry

Here are five recommendations on how to compete successfully in a mature industry.

1. Rationalize the service mix. 

Sunset unprofitable service lines and concentrate the firm’s resources on the services that are in demand and where the firm can win.

2. Fix the pricing strategy. 

Experienced buyers know what the going rate is for a service. Pricing transparency in a mature industry is high. Price competitively to win.

3. Reinvent how the service is delivered. 

Reduce the labor component of delivering the service by substituting with technology where possible. Replace expensive domestic labor with inexpensive global talent. Standardize service delivery to allow “junior” talent to produce deliverables.

4. Focus on repeat purchases from existing clients. 

This reduces or eliminates the sales and marketing costs from a boutique’s income statement. This can turn a marginally profitable firm into a profit-generating machine.

5. Consider exiting the business. 

There may be more attractive industries available to the firm that they should pursue.

Implementing these strategies can be difficult and may require guidance. A mastermind community might be the source of guidance founders need when operating in a mature industry.

Mastermind Communities: A Curated Solution

A mastermind community, such as Collective 54, can help founders of service firms operating in mature industries. Joining a mastermind group dedicated to professional services firms means you are joining a community populated with some firms operating in mature industries. The tools, templates, and frameworks created by a mastermind community focused on the professional service industry are highly relevant to mature industries, and the benchmarking data produced by Collective 54 is sourced from firms like yours.

Professional service firms have to learn how to compete in mature industries. Despite the challenges, there is success to be had for those who learn the business environment and adapt to it. And with your peers at Collective 54, you get the advantage of communal wisdom to give you the leg up you need.

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The Capital Formation Process of Professional Service Firms

One hundred dollar bill distributed among five phases.

The Capital Formation Process of Professional Service Firms

One hundred dollar bill distributed among five phases.

Professional service firms need capital to scale, as do product companies. However, the capital-formation process used by a service firm is different than the one used by product companies.

Why should founders of boutique professional service firms care about this distinction? Founders of service firms who do not pay attention pay a dear price. For example, founders dilute their ownership stake more than they should. And when they exit their firms, their payout is less than they had hoped for. They often enter partnerships that are very difficult to get out of if the need should arise. And many others.

 

Capital formation is a fancy term but the definition is simple. It is the process used by a company to create the funding to start, scale, and exit a firm.

Professional Service Firms: A Unique Capital-Formation Process

Founders who go through a capital-formation process can expect a demanding and long path. However, those demands and processes are not the same between product-based firms and professional service firms. The following is an overview of the process of capital formation for professional service firms.

Step 1 – Pre-Launch Capital:

This is a grit phase. An aspiring founder is employed full-time for a company and works a side hustle as a 1099 contractor serving a small number of clients. She uses extra cash saved as capital to provide the runway to quit the job and make the side hustle the primary job.

Step 2 – Launch Capital: 

The founder has moved the capital generation beyond himself; the founder uses an anchor client who commits to a “large” project. The cash flow from the large project is used to hire employees and launch the firm.

Step 3 – Growth Capital: 

The founder uses debt to fund the working capital needed for growth and to deal with the unpredictable revenue stream of a young boutique professional service firm. This often begins with credit cards and progresses to real estate lines of credit, then eventually to a personally guaranteed small business loan from either the government or the service firm’s bank.

Step 4 – Scale Capital: 

The founder uses the free cash flow from operations to fund the scale of her boutique. The firm is generating enough free cash flow to fund expansion, and the founder is disciplined enough to pour the cash back into the business.

Step 5 – Exit Capital: 

The founder taps into institutional capital for the first time to fund his exit. This comes from a strategic acquirer, a financial acquirer, or a lending institution. The funds are used to buy out the first generation of leaders and support the next generation of leadership.

Professional Service Firms vs. Product-Based Firms: Important Differences and Distinctions

The primary difference between a service firm and a product business is the founder of a service firm takes institutional capital only at the end (exit), whereas a founder of a product business takes institutional capital in the beginning and at every step along the way. Why? There are several key reasons why the capital-formation process varies between product-based firms and professional service firms.

Difference 1: 

In a professional service firm, the founder provides the pre-launch capital himself. A founder of a product company, in contrast, would raise money from friends and family in the pre-launch stage. Why? The amount of capital required for a product company in pre-launch exceeds the founder’s ability to self-fund. The capital to hire employees, buy technology, develop a product, and fund the initial overhead can be too significant of a hurdle for a product company to generate itself.

Difference 2:

An anchor client provides the launch capital for a professional services firm. A founder in a product company, in contrast, would raise money from a seed-stage venture-capital firm. And the reason for the difference is the same—the capital intensity of a product company is much greater than a service firm. Therefore, a founder of a service firm has a big advantage in that she does not have to dilute her equity percentage by taking on venture-capital funding.

Difference 3: 

In a professional service firm, the founder provides the growth capital himself. He does this by borrowing money from credit-card companies, mortgage companies, banks, or the government. The founder personally guarantees the debt, exposing himself to financial risk if the firm fails. A product company founder, in contrast, raises a Series A round of growth capital from a venture-capital investor. Rarely does the founder have to personally guarantee this funding because it comes in the form of equity—not debt.

Difference 4: 

The service firm provides the scale capital itself. Therefore, the time it takes to scale a service firm is constrained by the amount of free cash flow generated. In contrast, a product company can scale much faster because it is using institutional money and is not constrained by free cash flow. However, the founder becomes a minority shareholder in the process.

A Similarity: 

An institution provides the exit capital in both professional service and product-based companies. This is the only stage of the capital-formation process whereby there are similarities between a service business and a product company.

Professional Service Founders Need to Begin with the End in Mind

The most important thing for founders of boutique professional service firms is to not make an irreversible mistake. Many founders are first-time founders and, therefore, do not know what they do not know. When faced with a need for capital, they follow the advice given to product companies, and this is very costly.

For example, raising money from an institution early means giving up equity much too soon and, consequently, at a big discount. This equity will be worth much more later on. This mistake destroys wealth. Why do founders of pro serv firms make this mistake? They do not know any better.

Hopefully, this advice from an experienced founder will prevent this mistake from happening in the future to you. Take a deep breath and carefully study your capital-formation plans, making sure you’re considering your downside protection and how to manage the upside.

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How Selling Professional Services Is Different Than Selling Products

The R Technique Funnel

How Selling Professional Services Is Different Than Selling Products

The R Technique Funnel

There’s a big difference between selling a professional service versus selling a product. Failure to recognize this difference has three major implications: lower close rates, smaller deal sizes, and longer sales cycles. To avoid these ramifications, you must understand what makes selling services unique and then adapt how to sell professional services accordingly.

There are three primary differences between selling a professional service vs product-based business. First, professional services are “leap of faith” purchase decisions. A prospective client cannot try on a service to see if it fits before purchasing it. Instead, it is bought when a prospect trusts the service provider can—and will—do what is being proposed. In contrast, a product can be sampled before a prospect commits to purchasing it, as in the case of a customer trying on a wedding gown before purchasing it.

The second difference in selling a service versus a product is the information inequality between the prospect and the provider when selling and purchasing professional services. The prospect is often purchasing the service for the first time. Or, if the prospect has purchased it before, it has been some time since the last decision. Regardless, the service provider is engaged with prospects making a purchase decision over and over again. As a result, the information the seller has is far superior to the information the prospect has. But when purchasing a product, a prospect can read hundreds of reviews and discover the information he/she needs. Information discoverability is much more difficult when purchasing services.

Lastly, the evaluation criteria a prospect uses to decide which service provider to select is different from the criteria a prospect uses when deciding on which product to buy. For example, a prospect values a service provider’s reputation in the market when making a decision. However, when a prospect is buying a product, the reputation of the manufacturer is less important than the product features, warranty, return policy, etc.

The R Technique: Designed to Sell Services

If a service provider attempts to sell a service with a sales technique designed for selling products, he/she will have poor sales results.

To illustrate this point, let’s review Collective 54’s sales methodology, called The R-Technique.

The R-Technique is built upon the eight steps a prospect takes when making a purchase decision. Below is a description of the eight steps and an example of how a product company and a service firm might approach each step differently.

1. Resting: When a prospect is not in the market for the service and does not know the service provider exists.

A product company would invest in a sales force to cover a territory and make outbound cold calls. A service firm would invest in a referral program asking happy clients to refer others.

2. Receptive: When a prospect becomes aware they have a problem and are receptive to hearing about different solutions.

A product company will invest in advertising to push a prospect into the market for the product. A service firm does not advertise. Instead, they publish thought leadership content that pulls a prospect to them.

3. Recognize: When a prospect recognizes who the service provider is, what they do, and how they do it.

A product company buys a booth at a trade show and displays the product to prospects. A service firm does not display on the trade show floor. Instead, they secure speaking engagements at trade shows and impress prospects with their expertise.

4. Relevance: When a prospect decides if he/she should spend more time with the service provider based on whether the firm is relevant to their needs..

A product company performs a demonstration to show a prospect what the product does. A service firm shows a prospect product examples from previous engagements whereby they solved a specific set of problems for clients.

5. Regard: When a prospect reviews the track record of a service provider to determine if they should be well-regarded.

A product company shows a prospect the awards they have won for quality, performance, etc. A service firm shows a prospect the biographies of the team members who would be assigned to the engagement.

6. Rely: When a prospect is willing to take a leap of faith and rely on the service provider.

A product company will offer a product warranty, and service-level agreements from the customer service department. A service firm will provide the prospect with references.

7. Resourceful: When the prospect gets the resources, the budget, and organizational support to move forward.

A product company provides a total cost of ownership calculator and attempts to justify the purchase of the product. A service firm builds a project plan with budget, timeline, team, deliverables, and milestones to show the prospect how to make the project successful.

8. Ripe: When a prospect determines now is the right time to move forward. They are ripe for change.

A product company times the sales campaign to coincide with the budget season. A service firm guides a prospect through the timing decision. Case in point: Is now the right time based on the organizational dynamics, the prospect’s culture, and their openness to change?

How to sell professional services always has been and always will be different from marketing and selling products. Accordingly, throw away the sales techniques built to sell products. If you want to sell your services more effectively, efficiently, and confidently, adopt a sales technique purpose-built for selling professional services such as The R Technique from Collective 54.

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The Concealed Steep Personal Cost of Being a Founder of a Professional Services Firm

The Concealed Steep Personal Cost of Being a Founder of a Professional Services Firm

According to the US Census Bureau, an average of 4.4 million companies are launched every year. Sixty-nine percent of them fall into the category of service businesses requiring a startup budget of under $25,000. In other words, these founders aren’t typically investing their life’s savings, hawking everything they own, or giving up equity to investors in exchange for capital. They’re running capital-light businesses. However, they’re still incurring some serious personal costs, and they need to understand what they are and how to navigate them.

For those of us who have founded professional services firms, “personal costs” aren’t just monetary. They can run the gamut from risking the loss of a partner to suffering from business owner burnout.

Beyond Finances: The Real Personal Costs of Running a Professional Services Firm

There are two primary personal costs a founder of any professional service firm incurs: relationship costs and opportunity costs.

Let’s start with relationship costs. A founder’s relationships with a spouse, kids, extended family members, and friends tend to take a beating during the development of a boutique professional service firm. This phenomenon has become so intense that new terms have entered our vocabulary to discuss it. For example, a wife who has not seen her founder husband much is frequently referred to as an “entrepreneur’s widow.”

This cost is completely understandable, of course. There are only so many hours in the day. Nevertheless, an hour spent working is an hour you did not spend with someone you care about. You can try to multitask: Plenty of founders come to their children’s athletic games with AirPods so they can stay tethered to a Zoom meeting. This is not being present, though, and kids quickly learn what their founder parent deems important. And it is work, not them. Founders have been known to be on a family vacation with grandpa and grandma, only to be late for the group activity because of an urgent email that needed to go out. Unfortunately, years pass quickly. That’s why so many founders wake up and realize they haven’t seen childhood friends or college roommates in a decade or longer.

What about the opportunity cost of running a boutique service firm? Opportunity cost is best described as the loss of the potential gain from a path not taken. Boutique owners are highly employable, but they often work years for below-market wages to build their firms when they could be working elsewhere for a substantial wage at a big corporation. The gap between what they could earn as an employee (including salary, raises, benefits, stock options, 401k matches, etc.) and what they pay themselves is the opportunity cost.

The opportunity cost of running your own business grows with each passing year. So does the gap. Since it takes approximately 15 years to start, scale, and sell a professional services firm, the end result can be pretty hefty. After all, the opportunity cost would be the gap times 15. Not exactly small change.

How to Limit the Effects of Relationship and Opportunity Costs

You can’t get away from the reality that being the founder of a professional service firm will mean incurring some personal costs. Still, you can mitigate the effects of these costs by taking two steps.

1. Build a firm, not a practice.

A firm is a business that is not dependent on the founder to be successful. In a firm, the founder deliberately surrounds himself or herself with an executive team. The founder then delegates key activities to those team members. Scaling a boutique professional service firm is too much work for one person. A team can get a lot more done faster and with less personal toll on the founder.

In contrast, a practice is over-dependent on the founder to be successful. Practices tend to be run by hero-style founders. They have a bunch of helpers running around carrying out orders, but those helpers don’t have authority or empowerment. Running a practice results in the founder paying a dear personal price as relationships crumble. Why? Because the founder has to do everything.

It’s not unusual for practice founders to work 70- or 100-hour weeks. A founder who runs a firm instead of a practice works hard, too. But only between 40-50 hours. That founder has time to spend time with the people who matter most. A firm founder can maintain meaningful, deep relationships rather than risk losing them.

2. Scale a firm beyond a lifestyle business.

A firm built using a lifestyle business does not produce enough rewards to compensate the founder for opportunity costs. In most cases, founders running lifestyle firms make less money than they would make working for someone else.

A founder took a risk when starting his firm. He should be compensated for this risk, and earn more than he would working for someone else.

The way to resolve this issue is to scale a firm beyond being just a lifestyle business. That way, the firm will be able to fairly compensate the founder far beyond any opportunity costs. This makes all the risks worth the founder’s time, effort, and energy.

You can’t get around the fact that you will always pay some personal costs as a founder. Just don’t let those personal costs get out of control. They’re very manageable as long as you take measures to mitigate their impact.

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The Maturing Founder: How to Go From a State of Immaturity to a State of Maturity (Part 2)

9 Stages of founder

The Maturing Founder: How to Go From a State of Immaturity to a State of Maturity (Part 2)

If you’ve been keeping up with the Maturing Founder (and if you haven’t, check out the first installment discussing the Flirt through Childhood Stages here), you know that as a founder of a boutique pro serv firm, you’re very attached to your work. And rightly so. You dreamed up the idea of a business, made it a reality, and now, it is growing under your care. But as it has grown, new problems have come up as old ones were solved.

Thankfully, you can rewind your firm if you slip up by going too fast. In the early stages of the business life cycle, that might mean going back to the drawing board to get a strong idea for your ideal founder market fit or focusing only on sales to grow your firm before attempting to scale.

But if you want to reach the maturity stage in the business life cycle and eventually begin exit planning, you need to avoid the immature founder’s mistakes and look to the mature founder for guidance.

From Adolescence to Maturity: The Life Cycle of a Professional Services Firm

Stage 5 – Adolescence.

This is the most difficult life cycle stage for boutique professional services firms. This marks the first attempt at scale for the firm. It is when the firm installs repeatable processes and systems and when the old and the new meet on the battlefield. And it is when the firm and the founder separate.

    • Immature Founder Behavior: An immature founder half-commits to evolving in the adolescence stage. For example, the immature founder hires or promotes a CEO, which is the appropriate move in adolescence. The problems of the adolescence stage require an entirely different skill set with an emphasis on systems, processes, and policies to drive consistent performance at scale. Yet, the immature founder is insecure, so instead of hiring a real leader, he hires a puppet focused on carrying out the founder’s wishes. He doesn’t put the firm first and himself second. He prevents the new CEO from swapping out the old guard for the new blood and waits for too long to adjust to the adolescence stage. He feels he can grow into the new role and is having fun. The idea of passing the baton to someone else is unattractive. When morale falls, which it does during this stage, the immature founder attempts to save the defecting old guard with compensation and equity when he should let them leave. It is a natural progression as a firm moves along its life cycle.

    • Mature Founder Behavior: The mature founder considers selling the firm at this point. He is aware of his gifts as an entrepreneur and understands the firm needs a different leader going forward. If a sale cannot be completed, he hands the firm over to a successor who he has been grooming for years. This successor is given real authority and is empowered to transform the culture. He leads by example by following all new rules and procedures. The mature founder does not mettle in the new CEO’s business but rather thrives in the new role, whatever that may be. When morale dips during the transition, the duration of the dip is short because the founder squashes conflict when it comes up, and he is never pitted against the firm, the CEO, or himself in any way.

Stage 6 – Adulthood.

This is the firm’s prime, the optimum point in the life cycle. Sustained excellence is happening. Client satisfaction and employee satisfaction are high, and profitability is well above average.

    • Immature Founder Behavior: The immature founder doesn’t understand the difference between excellence and sustained excellence. She becomes complacent and thinks the good times will never end. Complacency must be kept at bay, but the founder is busy taking a victory lap. The leadership team is in place, but they need to be trained and developed continuously. The firm still needs to grow during adulthood. The immature founder wants to be recognized for her achievements and hires a PR firm to win awards and be featured in the press. This creates a problem as the firm appears to outsiders to be completely dependent on the founder.
    • Mature Founder Behavior: The mature founder understands it is harder to maintain success than it is to reach it the first time. She is never satisfied and deals with complacency by punching it in the mouth. Small services firms can go from hero to goat overnight. The mature founder understands this and takes nothing for granted. A leadership team is installed and led aggressively by the CEO. A spot on the leadership team is not an entitlement and must be earned every day. The firm continues to innovate and expand and accepts no limitations on its size. The mature founder, anticipating the need to exit someday, removes herself from the spotlight. She pushes the leadership team forward, establishing them as the keys to the firm’s success. This makes the founder irrelevant and replaceable, increasing the value of the professional services firm. Thus, giving her the opportunity to sell if she chooses to do so.

Stage 7 – Middle Age.

This is the first maturity stage in the business life cycle. The founder will want to move on someday and begins getting the firm ready for the next generation.

    • Immature Founder Behavior: The immature founder starts spending money on status symbols. These can be fancy offices, elaborate client entertainment, first-class travel accommodations, personal assistants, and many others. He does this because the firm is very stable. The P&L looks great, and heck, if it ain’t broke, don’t fix it. The immature founder is almost entirely focused on short-term profitability to fund these toys. He spends more time with the inner circle than he does with clients and prospects. The immature founder’s new favorite person is the finance leader. He clamps down on funding for growth and begins demanding large owner distributions. The immature founder begins to tell stories about the good old days. Past accomplishments become more important than the future vision for the firm. There is little risk-taking and rewards go to those who do what they are told to do. The immature founder wants the firm to become more professional, and the informality that once made it great gets replaced with rigidness. He is more concerned with how things are done than he is with what gets done and why things are getting done. The immature founder does not realize the core has begun to rot.

    • Mature Founder Behavior: The mature founder invests excess profit into the development of a world-class leadership team. He remains a scrappy entrepreneur and does not let success go to his head. The firm is still run like a bootstrapped early-stage firm. The founder and the team are hungry. There are no extravagancies unless they directly contribute to the creation of enterprise value. The balance sheet is more important to the mature founder than the income statement. He spends time with prospects, clients, recruits, competitors, and acquirers, constantly keeping a pulse on the market. The mature founder’s favorite people are the rainmakers. He never forgot that nothing happens until someone sells something. The mature founder understands the good old days were never that good. Lots of work and heartbreak is more like it. He is fixated on the future. The mature founder rewards those that develop new revenue streams and outsources those that maintain the old revenue sources. The mature founder obsesses over the culture and keeps it authentic. He shoots to kill when spotting an empty suit. The mature founder leaves the how and the what to the capable CEO and contributes by thinking about the how.

Stage 8 – Retiree.

This is the stage where a founder harvests the firm for profits and begins to wind down.

    • Immature Founder Behavior: The immature founder needs to ease into retirement, but she fights it. She feels working is going to keep her young. Her identity is wrapped up in the firm, and she can’t imagine a time when her name is not on the door. The team under her resents that she still draws a salary and is a drag on the financials. When she sees a problem, she does not have the energy to solve it, so instead, she blames someone. Who caused the problem is more important than what caused it. Around her, everyone lies low. The immature founder has been known to run hot, and everyone is paranoid. Out of touch with the market, the immature founder’s growth strategy is to raise prices. Eventually, clients push back on fees, and new competitors emerge, which leads to a decline in revenue and profits.
    • Mature Founder Behavior: The mature founder works out a deal with the next generation of leaders. The deal is fair for everyone, balancing the founder’s retirement needs with the next generation’s income requirements. The deal acknowledges the past contributions of the founder and the current contributions of the leadership team. The mature founder takes on a new role, maybe chairwoman emeritus. This allows her to feel significant but not hog the spotlight. The CEO, and her leadership team, are the new faces of the firm. The mature founder keeps her mouth shut until she is asked for an opinion. As a result, she is often asked for advice. She gets much fulfillment from helping where she can, and her advice is the best available. The mature founder is celebrated by the new generation. She is asked to welcome new employees to the firm and attend the company retreat. She is grateful to be included but mature enough to realize she is a participant, not a leader. The mature founder knows who she is, what she has accomplished, and is comfortable in her own skin.

Stage 9 – Death or Rebirth.

The firm shuts down, or it is sold to a new ownership group.

    • Immature Founder Behavior: The immature founder tries to hold off death or rebirth for as long as possible through artificial life support systems. He runs the firm as a government official runs a government agency; there are lots and lots of systems. Clients develop elaborate ways to work around the founder. The founder and the firm resent this and attempt to prevent the clients’ bypasses. The immature founder neglected succession planning and any kind of investment in the future. The firm never became more than a lifestyle business, so it dies when the immature founder dies.

    • Mature Founder Behavior: The mature founder makes sure his life’s work lives on after he is gone. This is accomplished through rebirth. A new ownership group, either from within or externally, takes over from the founder. With youth, energy, and enthusiasm, the mature founder’s firm is reborn. New employees enter, new clients arrive, and new markets are entered. The mature founder never neglected the firm. He always knew that someday he would pass, and he wanted his firm to live on. It is his legacy, and he treated it with respect always.

In conclusion, my hope with this article is to show immature first-time founders of boutique professional services firms how to go from a state of immaturity to a state of maturity. And in so doing, have a more enjoyable and successful entrepreneurial journey.

If you’re ready to stop going it alone and rely on the support of experienced pro serv founders, contact us. Or check out my book, the Amazon #1 bestseller, “The Boutique: How to Start, Scale, and Sell a Professional Services Firm.”

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