Attend this session to learn how it is never too late to get serious about converting a lifestyle firm into a scalable boutique. This session will discuss the use of a dedicated task force to make up for lost time and how it can restart the boutique lifecycle clock. You will learn the who, what, when, where, why, and how to invest in a dedicated task force inside a small service firm to get back on track.
TRANSCRIPT
Greg Alexander [00:00:10] Hello, everybody. This is Greg Alexander, the host of the ProServ podcast, brought to you by Collective 54, the first mastermind community dedicated to the unique needs of leaders of boutique professional services firms. Today on today’s episode, we’re going to discuss scaling a boutique processor firm. We’re going to talk with a member about a new initiative they’ve launched called the Scaling Task Force, which I can’t wait to hear. We’re going to kick around a few tools that they’re using and discuss how it’s going so far. And the purpose in doing so is to maybe give everybody that’s listening to an idea that, maybe a scaling task force might work for them, or at least pieces of it. And maybe that might help you accelerate the rate of scale and improve the probability of success. So we have two collective 54 people here with us, Andy Thompson and Jeff Weathers. They’re with a company called Notch Partners. And, why don’t I start with you, Andy, and if you wouldn’t mind introducing yourself and the firm, and then Jeff, I’ll ask you to do the same.
Andrew Thompson [00:01:20] Sure. Greg. Thanks for having us. I co-founded Notch Partners in O2. We work for private equity funds. Our role is to help create transformative relationships between senior executives and our private equity clients. Our mission is to improve their financial returns through better access to deal flow, better analysis of investment opportunities, better value creation planning, and better corporate governance. So you can think of us as a high-end headhunter with a very strong deal focus and private equity focus.
Greg Alexander [00:01:55] Okay. Sounds great. Jeff, how about you?
Jeff Weathers [00:01:58] Yeah. So I’ve been with Notch, almost eight years now and have a background in investment banking. I lead our business in financial services team, which is one of the five industry verticals at notch. And I also lead our newly formed skill-building task force.
Greg Alexander [00:02:16] Okay. Fantastic. All right. I’ll ask a question, and I’d love to get both of your answers on it, but and I’m going to start at, kind of 30,000ft, but maybe to give us some context. So so in Andy, I’ll start with you. So what prompted you to focus on scaling your firm at this stage? You mentioned you founded it in 2002. It’s 2024. Yeah. You’ve put a you put a lot of emphasis around scale right now. How come?
Andrew Thompson [00:02:41] That’s right. I bought out my co-founder a year ago. It was a long time coming, and it freed me up to do a number of things with the business that I’d been hoping to do. For example, adding equity partners, Jeff being one of them. But I realized as soon as I had the freedom to do what I wanted to do, I realized that the old adage is true. It’s lonely at the top. If I were going to be able to transform the business, I needed some guidance. And I wasn’t ready to constitute a board of directors yet. I started to look into CEO peer groups when I, which I had never invested in. I looked at several of them, collected 54 was recommended. I was the only one that was, entirely focused on professional services companies. So I read your book boutique, and I immediately recognized that we had a host of scaling opportunities to pursue. I bought five more copies of the book. I gave them all to my senior team. I told them we were in the scaling phase. They probably looked at me like, what are you talking about? They didn’t know. Growth scale. Exit. Yeah. They said, you know, they were drinking from a fire hose. I said, we’re in a scaling phase. I want you to read that whole section of this book. And then and then I signed myself up for Collective 54 and got to work for the team. I defined scalability as creating processes that enable and facilitate profitable growth. For a more tangible illustration, I say it this way at the company level. I say if the world were suddenly to hand us a doubling of our business, meaning a doubling of our client base and a doubling of our staff, which of our processes would break and which would hold steady? The ones that would hold are scalable. The rest need work.
Greg Alexander [00:04:33] I love that definition. That’s a great way to look at it. And and, Jeff, I’ll come to you with the next question, which is since you’ve been there for eight years, I’m sure you’ve been attempting to scale at least, maybe even without knowing that’s what you were doing or calling it that, I should say. What are the biggest challenges, Jeff, and from your perspective in scaling a small services firm?
Jeff Weathers [00:04:56] Yeah. So one of the, the big ones I think that we need to think about or starting to think about is getting our colleagues really excited about change. Because when you’re scaling a business, you need everybody on board, and there’s a lot of apprehension when you say, hey, we’re going to make some changes to the company. So. What does that mean to for us? What did we need to do? So the first thing was communicate. So we we decided we need to explain what scalability was. To explain what the benefits would be to the firm, and even how it would improve our colleagues day to day work, how their lives are going to change as we put these processes in place.
Greg Alexander [00:05:38] Yeah, it always does come back down to the individuals and them asking themselves the question like, what does this mean to me? Literally day to day? Like, how is my life going to change? That’s a great way to say it. So I’m pleased that the book is playing a role. And thank you for the kind words and that I put a lot of work into it. It’s rewarding to hear that you got something out of it. And I know that you’ve you’ve recently launched a scaling task force. So I’d love and Jeff, I understand that you’re the leader of that. So I’m going to direct this to you. I’d love for you to kind of tell us what the scaling task force is. Who’s a member of it? You know how it operates. Just kind of riff on this, a forming.
Jeff Weathers [00:06:15] Sure. So the skill of the task force, simply stated, was designed to look inside the firm, look at all of the ways that we do business with our clients, look at internal processes, anything really, and say, how are we doing this, doing this? And is this scalable to big as the business grows? The skill-building task force, to start with, we’ve really been focused on the service delivery part. And that’s where we felt like we would have the most benefit at the beginning. So what we did is we actually took an employee who had been with us for for several years now, who’s who’s an outstanding worker. And we said, we want you to, to be a part of this and be full time. So I’m spending a lot of my time on the task force. She’s full-time on the task force. And then we took a representative number of employees from across the firm to act as as members, we meet on a weekly basis and evaluate, different processes where we’re trying to change and update and improve. And then we also actually, every week at the at the beginning of the week, talk to the firm about what are we doing, what should you all expect this week? Here are some changes that we, we think are going to come this month or two months from now. Again, trying to make sure that we’re indicating to the firm, so folks are comfortable with what’s happening.
Greg Alexander [00:07:45] So, Andy, taking a high potential employee and dedicating that person full time, non-bailable, I’m assuming, to leading the task force. Boy, that’s quite a commitment. How did you get there?
Andrew Thompson [00:08:01] So, Jeff, Jeff is absolutely one of our top and most experienced, players. And he’s about half-time on it. And then we have a very we have a high potential mid-level person full-time. In total we probably have over two FTE is a little over two FTEs out of 30. Look, I wish we had started this stuff years ago. I wish we were not playing doing some cleanup, but I. But it’s time we have some inefficiencies and missed opportunities that could have been capitalized on much sooner in our evolution. There’s no time like the present. We put ourselves, clearly on, in the scaling phase, but we feel like we’re late-stage scaling. There are a lot of things that, unbeknownst to us, it was, you know, covered in your book that we were doing. But when we started doing the math on what the yield impact could be of creating more scalable processes, it’s clear to me that this more than pays for itself in a in a pretty short order. So for me, it was it was not a hard decision. To me.
Greg Alexander [00:09:14] Interesting. You know, when you express it like that, you know, two FTEs out of 30, it seems like a reasonable investment. But I was on your website and I was looking at some of the bios. I mean, you employ highly skilled people, even at the mid-level. And I’m, I’m guessing in my mind what you’re paying them. So from a dollars perspective, it’s a significant investment. So I just wanted to acknowledge and compliment you for, you know, being willing to make that kind of investment.
Andrew Thompson [00:09:40] I’ll tell you this. We’re going to be watching closely, and tracking our results as closely as we can. We don’t have all of the gauges and dials that we need to know exactly the impact day to day. If we had all the time in the world, we would have built more dashboards and more insight before we even started. But we’re sort of we’re getting going, and we’re going to do our best to track the results because we’ve got to justify this expense for ourselves. Yeah.
Greg Alexander [00:10:07] Now, Jeff, you mentioned that you started with service delivery. That’s interesting. You know, when I’ve talked to members attempting to scale and maybe less formally, I don’t know if they’re calling it a scalable task force. They usually start with sales. And the reason for that is because they want to be able to measure it. They want to see revenue coming in. And also the founder is usually trying to replace him or herself as the firm’s primary rainmaker. But you chose to start with service delivery instead of sales. Can you tell us a little bit about what went into that decision?
Jeff Weathers [00:10:38] So we actually look through all 17 topics in section two of critique. And what we did is we said, okay, what’s the level of impact of each one? And what’s the time frame to achieve? Not surprising business development and pricing. We’re at the top of the list. We actually have been spending a lot of time on business development and pricing over well over a year now. Okay. So to answer your questions, they’re already they were already underway. Makes it makes sense.
Greg Alexander [00:11:10] Makes a lot of sense.
Jeff Weathers [00:11:10] Yep. So the next two that we looked at on that list are client experience and yield. And of course client experiences. You know, in looking how you support the individual client. Goal and yield is within the efficiency of how our teams can deliver high-impact service to to their clients. Those two, we decided were, all the other areas we had identified and we knew there were opportunities. We decided, look, these are by far the next two highest priority, probably behind business development and pricing. Got very.
Andrew Thompson [00:11:43] Well. The reality there, Greg, is that the our our cost structure is built of service delivery. And we are we are the premium provider with premium pricing. With increasing competition, we need to be really conscious of our pricing to manage our gross margin.
Greg Alexander [00:12:00] Yeah. Yeah. Well, I’m glad that you’re doing that. It’s sometimes people don’t focus on pricing enough, and it’s it’s a lever that we all have to pull, especially if you’re a premium provider. I mean, being intelligent about pricing is so important. So I love the fact and for those that are listening to this that might not have read the book yet. What they’re referring to is section two of the book is called the scale section. And there’s chapters in there. And they they use it as a menu, if you will, to choose the things and to come up with the priority list. And there’s a checklist at the end of every chapter that can help kind of eyeball whether or not this topic is of interest to you. So that’s a really good teaching for all of us, and maybe a way for those that want to start a similar task for us to get started. Jeff, any any, early results so far, is it or is it is it too early? Any even anecdotal stories that would suggest that you guys are off to a good start?
Jeff Weathers [00:12:50] Yeah, it’s it’s definitely early in the process. So, you know, we’re hoping to see more results to come, but I think one of the first things that I noticed, is actually an openness from our employees, an openness for them to go out and find scalable opportunities because the task force we can identify, we can try to put processes in place, but we’re really going to rely on our employees to look at what they do on a daily basis and say, what can I do to scale the business? So there’s an openness and we’re excited about that. Second, we’re already even within a couple of months. There were some really. Easier. Easy target soon than I thought. They’re already putting processes in place. That are going to help us engage with our clients at a much higher value of service. Yet to be seen how much impact it has that we’re excited to to see those through. And then I would say, lastly, we came up with a whole list of efficiency of efficiencies. And what we have to do is rank that list and say, okay, where do we start and how do we attack it? And so we’re doing that and we’re ticking down and, and I think there’s plenty of opportunities there as well. So I’m excited about that.
Greg Alexander [00:14:06] Yeah, I’m pleased to hear the employees are open to it. You know, that’s half the battle. Sometimes with any change, initiative is just getting people on board. So congrats on that. I guess guys, my last question is for both of you. And that is, you know, for those that are listening to this, members that are saying, Jesus, maybe it’s something that I should do. What, what words of encouragement would you give them or what would you tell them to stay away from? Like, were there any things that, surprised you, you know, as you designed and launched this new initiative?
Andrew Thompson [00:14:37] You won’t be surprised. At one of the answers. The communication is so important. Just the word scaling that’s new to most people. Yield is new. We were approaching it with a level of transparency that was new. And so we’ve gone through yield analysis. What does scalability mean? At least two times both of those for the whole company. Pretty slowly and carefully. And it came from the top. So I was I was walking folks through that. We also, I would say while a task force can be incredibly effective and we’re already seeing some early returns, we look forward to keeping you abreast over the next couple of months. As I said to the team, in our in our annual state of the company, the task force is not going to hand you scalability. They may and you tools and and processes to help you scale, but the scalability happens with you. And so the message for the team and this is you’ll love this Greg. The theme for the year is practice scalability every day in every way. And so it is not something that can be isolated with two and a half FTEs and turned into a little project with announcements every week. It’s got to be something that’s a way of life across the company.
Greg Alexander [00:16:00] Interesting. Jeff, anything that.
Jeff Weathers [00:16:02] No, I’m just very excited about, you know, you you look at it and you say, look at all the opportunities we have. Look at how much growth we can find. So really excited to see what the results will be, right.
Greg Alexander [00:16:15] You know, I would like to add something to this comment, and maybe this is a give back to Andy and Jeff for their generous, time today, when I had my firm and I was focused on scaling it, the two measures that we tracked more than any other. Or the cost to acquire a client. Was it going down and going up? And if we were scaling our business development efforts correctly, then we were. We are more efficient in how we acquired clients. That was no one. And then the second was the cost to serve a client. Was that? Was that staying at a minimum flat while revenue was increasing. So therefore we saw margin expansion or was it declining? The cost to serve a client was going down and price was staying the same. So also a margin expansion opportunity because we were more efficient in how we delivered the service. So I don’t know if those are on your scorecards, but I would encourage you both the kind of macro numbers, if you will, and there’s many sub metrics that lead into both of those numbers. But if you think about scalability, what really is it scalability in a services firm is this revenue is growing at a clip faster than headcount. In the end, that’s the essence of it. And if you can get revenue growing at a fast clip, maybe it’s growing at 25%, but head counsel and growing at 5%, then you’re scaling. If you if revenue is growing at 25% and headcount is growing at 25%, you’re really kind of running in place. I mean, you’re you’re not that’s you’re you have higher revenues, but you’re not necessarily earning more, creating more enterprise value for yourself. So just thought I would share that with you guys as a give back. And hopefully that’s helpful.
Andrew Thompson [00:17:55] All right. Thank you.
Greg Alexander [00:17:57] All right. Well Andy and Jeff it was great to have you both. We look forward to being a weekly role model with the member Q&A session. So thank you for that. And congratulations on your new initiative for having the courage to launch it. And I wish you the best of luck with it.
Andrew Thompson [00:18:11] Thanks, Greg.
Jeff Weathers [00:18:13] I.
Greg Alexander [00:18:14] All right, everybody, that’s the end of, today’s episode. If you want to learn more, go to Collective54.com. If you want to read about this book that we just discussed, you can find it on Amazon. Again, it’s called The Boutique How to start scale and sell a professional services firm. But until next time, I wish you the best of luck as you try to grow, scale, and exit your firm.
