Chris Fezza did what a lot of successful operators do. He left corporate America, where he had led revenue operations teams for years, and started a consulting firm based on what he knew. He set up subscriptions like a SaaS business, skipped delivery methodology, grew revenue fast, and then watched his margins collapse. In this session, Greg sits down with the co-founder and CEO of Operatus to unpack what happens when you build a consulting firm on a corporate operating playbook. Chris shares where the model broke, what he is rebuilding, and what he wishes he had known before he hung the shingle.
What you’ll get from this session:
- Why the operating assumptions from corporate America fail inside a boutique consulting firm
- What breaks first when you grow revenue without delivery methodology, scoping discipline, or the right comp structure
- How one founder is retrofitting consulting fundamentals into a firm that was built without them
Why it matters:
- Most founders who leave corporate replicate what they know, and it is the wrong model for consulting
- Revenue growth without margin discipline is not scaling, it is just getting busier
- The firms that confront this early build real businesses; the ones that don’t stay stuck trading time for money
TRANSCRIPT
Greg Alexander: Hey everybody, this is Greg Alexander. You’re listening to the Pro Serv Podcast, brought to you by Collective 54. If you’re new to this show, it is dedicated to founders of boutique professional services firms. So if you are in the expertise business, this is for you. We aim to do 3 things in this show. We aim to help you make more money, make scaling easier. and make an exit achievable. And on today’s episode, we’re going to talk about a common use case around how people get into the crazy world of professional services to start. And that is, you know, we have successful corporate careers. Many times, on the corporate side, we’re hiring professional services firms. And then we wake up one day and say, boy, that might be fun. Let me leave corporate America and start my own firm. And then we launch our firm, thinking it’s the same business. And we quickly realize it’s not the same business, and we have to learn a whole new set of Tools and tricks and methods. And I certainly had made that mistake and learned from it, and our guest today is Chris Fezza, and he runs a company called Operatus, and he has a very similar story, and he and I were catching up on a recent Office Hours And I asked him if he would share his story with you and the things that he learned from that, and that’s what we’re going to cover today. So, with that, Chris, welcome to the show. Would you please provide a, proper introduction of yourself and your firm to the audience?
Chris Fezza: Sure, yeah, thanks, Greg. Thanks for having me. So, I, am a… revenue operations professional. 16 years, this is the only career I’ve had. I kind of, you know, happened into it in an analyst role, didn’t know what I was getting myself into, ended up really enjoying it, and here I am, about half that time, in-house, and then half that time running apparatus on the consulting side.
Greg Alexander: Okay, perfect. So, let’s jump into it. So, when you started your firm, Apparatus. What did you think consulting was gonna look like?
Chris Fezza: To be honest, my only conception that I had about it was that I would have exposure to multiple orgs at the same time, you know, multiple companies, and that it would be some mixture of bringing my expertise and, you know, accelerated learning from that exposure. that’s kind of all that I thought going in, and myself and my co-founder had no prior expertise in consulting, and had never… never worked in consulting, but we… you know, thought there’s a lot of repeat… repeatability and sort of patterned recognition to what we do, and so it made sense. But for me, you know, I always, was at a company, you know, got deep in the weeds, you know, a lot of ownership, understanding of the business model, but, like, starting at 2 years in, I would kind of get that itch where, like, I’m ready for, you know, to learn something new, I’m ready for the next challenge, and, you know, if you’re at a hyperscaling company, great, like, you can kind of continue on, there always is that, but a lot of companies, you know, you’re kind of at the mercy of what’s going on, either in the market or what’s on their roadmap. and that sort of thing. So, yeah, I actually, you know, it’s funny looking back how little I knew, when I started.
Greg Alexander: Yeah, I mean, I had a very similar situation. I was a sales leader in the tech business, and I launched a sales consulting company and thought I would just, instead of doing that for one company, I’d do it for multiple companies. And at first, it was fun, because the work was intellectually stimulating, there’s a lot of variety in the work, I was meeting cool people and all that kind of stuff. And then I was like, oh, wow, this is a business, like, I gotta learn how to do this. And I carried forward, much like you did, a lot of the assumptions I had from my corporate life, and they just weren’t real. So let’s talk about some of those examples, just to put some meat on the bone. So, when we spoke, you told me that when you started your firm, your pricing model, which is a decision you have to make as a founder, like, how am I going to package and price my services. You just assumed that you can price it like a SaaS offering is priced. And then, that’s what you launched with, which seemed to make sense, but it… in the end, it didn’t work out for you the way you wanted it to work out. So, tell us what happened there and what you learned from that.
Chris Fezza: Yeah, so… Yeah, having never worked in a services business, I just, you know, I was used to, kind of, subscription models, and so, you know, and I… everyone likes recurring revenue and that sort of thing, right? So, what… I was thinking about is, okay, let’s try to, you know, put this in… into the simplest format possible. That was… that was a big thing for me in the beginning, is I didn’t, you know, again, no prior knowledge of… of… how services companies structure things, I thought, let’s just, you know, make this the least friction possible, to get new clients, you know, on board, and then, you know, prove out that it’s valuable to them. So it was a month-to-month, offering for probably the first couple of years, first two or three years completely. And, you know, basically I thought about it as it’s gonna be a, you know, 10 or 20 hours a week kind of engagement, so on average, you know, 40 or 80 hours a month, and… and just assign a fixed price, against that. And… you know, in some ways, there’s beauty in the simplicity. In other ways, it’s a bit, like, limiting. And frankly, like, the idea of, you know, just paying for hours is… it’s something that people, you know, understand. It’s kind of well-known, it’s out there, but they, you know, once, I had kind of graduated from being the sole consultant to actually starting to, you know, have a team, I thought, well, okay, this model needs a little bit more definition. People, you know, they want to know, who am I going to be working with? You know, what am I going to be getting? What types of work are you doing? You know, is this, you know, frankly, at the… 80 hours a month level, which was… You know, the most common one that we were going with. that was, you know, from a cost perspective, probably equivalent or closely equivalent to hiring an FTE, but they were getting half as many hours. And so, you know, I think having a little bit of a talk track around that, which, you know, honestly, I believe then, and I still believe today. you’re bringing the experience, you’re bringing that pattern recognition, so you’re actually accomplishing the same amount of stuff in half the time. And the value is, is, is there. But… you know, I’m actually thinking now, going back. even… even at the beginning, and sometimes, like, I just zoom right past this part mentally, Originally, we’re gonna be a training business. And the idea was there’s not enough experienced RevOps people out there. You know, the hiring process is brutal. You know, I’m getting hit up by recruiters constantly, as are, you know, all of my friends who are in similar roles. And the reality is more companies were, you know, they had sales leaders and marketing leaders who understood what, you know, is the value that a strong centralized operations function can bring, but there just weren’t enough people who had done it and had done it successfully. And so. Originally, our idea was, hey, well, let’s just go and let’s do an intensive training thing, you know, give us… give us one of your good BDRs, give us a, you know, an FP&A analyst or something like that who can get involved and go to market, and we’ll train them on, you know, the things they need to know about sales, you know, territory planning, process, systems, you know, that sort of thing. And then we’ll, you know, create a community to kind of support them as they… as they grow in this… in this new career direction. And that was going to be, you know, a quick two-week, like, intensive. You know, with the, kind of, the community as, like, the long tail for, like, the next year, where they had, resources they could go to and that sort of thing. And I think it was 20K a pop was what we did. We did, like, 2 or 3. And immediately, those companies were saying, hey. we totally understand, like, this makes sense. Yes, we would love to, like, you know, grow our talent in-house, but we have things that we need help with immediately, and you already know how to do it, so can you just do it for us? And the kind of done-for done-for-you consulting, which we were not necessarily trying to be in the beginning, ended up emerging as just kind of the demand from the customer. So. You know, maybe it’s a packaging thing, but frankly, it’s also, like, you need to pivot to what people want, and just be willing to listen to that, you know, in the beginning, for sure, but probably all the time.
Greg Alexander: You know, one thing that jumped out at me during our conversation is that, you know, 16 years at revenue operations, so you’re an expert on how to grow revenue. But as a business owner. You’re just as interested, if not more so, in growing profits, because your income is tied to that. And you were explaining to me that you were so focused on the revenue side of things. Not as focused on the cost side of things, and… everything looked great, revenues were up and to the right, but you were busy, but you weren’t necessarily making more money. So, tell the audience a little bit about that revelation that you had.
Chris Fezza: Yeah, that, that was interesting. So, we were, you know, in the earlier years, growing very rapidly, and depending on the year, you know, 200% growth. So, so pretty rapid. And there was a, there’s a little bit of a sweet spot when you’re kind of first starting out very small, you’re just, you know, a couple people in the firm, and you can have great margins. You have no overhead at all, right? And you’re in delivery yourself, too, right? So you’re thinking, okay, these margins are excellent. Then as you grow, and really as we were scaling the fastest, that’s when margin crunched, and I was completely unprepared, because I wasn’t focused on it at all, to your point. You know, what ended up happening was I was thinking, okay, we’re busy, I gotta staff people, and, you know, it was… the crunch of trying to find people to put on these engagements, in a short enough timeframe. So I was, you know, for sure going out to people in my network and that sort of thing, some of whom were too senior to do some of the things that they were being asked to do all the time, but, you know, they were… they were known entities, and other times I was having to go out to, you know, recruiting agencies and staffing and that sort of thing, and pay premiums, again, for people, and I was, you know, putting more value on I think these people need less oversight, and so, you know, I’m willing to pay the premium, but, you know, I had crappy, gross margins on some of those project engagements. And then, of course, I found out later, well, actually, they don’t need less oversight. Everyone needs the same amount of oversight, and that was a… that was a misconception. So, from a quality perspective, too, you know, there’s no free ride, really. So, I’m not saying, you know, a small firm needs to have tons of layers of management and that sort of thing, but you need to figure out, you know. systems and processes to… to run the engagements, not just, you know, bring people on who you think are… are, you know, well, I’m paying more, so they’ll be… they’ll be better. Sometimes, sometimes not.
Greg Alexander: Yep. You know, we’ve seen this over and over again, and the remedy to this. is you take your tribal knowledge, your expertise that you accumulated over the years, and you turn it into a delivery methodology, you know, step-by-step procedure, here’s how we produce XYZ. So therefore, you can hire less experienced, less expensive people, and they can still do an excellent job for the customer. And those less expensive people then allow you to preserve your margins, so that when the revenue is growing, expenses aren’t growing at the same rate. In fact, expenses are growing slower, and that is margin expansion, which allows you to, you know, make the money you want to make. This is very, very common, and I’m harping on this because Most people leave corporate America and start a firm. Most people in corporate America were on the revenue side, not the expense side, so they missed us. And they just think, well, I’ll get the gig and figure out the expense side of it, and it doesn’t work that way. You wake up one day, you’re working 80 hours a week, and you’re not making any more money, and you’re like, why am I doing this, right? So, that’s a very common thing that happens a lot. All right, let’s now switch to the fix. Those are some of the challenges that you had, and we could go on and on, and we will when we have more time on the Friday private member Q&A. You told me to fix this, you went and hired a delivery leader, if I remember the story correctly. So what was the mandate that you gave that person, and what has changed since that person arrived?
Chris Fezza: The mandate I, gave them was… Basically, standardization. And… Gross margin. And… Quality, was a expected outcome of standardization. And so… You know, in some ways. that, their remit, and they’re… they’re a little over a year in, now. So, really hasn’t changed. But, you know, the goalposts changed, right? They’re trying to get gross margin even higher than… and they did, you know, meaningful improvements in the first year, but… but, you know, still… Still further to go. And… What we realized, You know, especially around the standardization, is that, that is something you need to, accurately, like, address up front. even before you think about delivery. And so what I mean by that is, like. the… the types of services that we deliver in RevOps, I mean, we have… you know, planning and forecasting. We have analytics and insights, we have data and data governance, we have systems and technology. We have process, sometimes enablement. It’s a lot. You know, it’s quite a breadth of different topics, and so when you You know, go into an engagement and You know, I’ve been lucky in my past to touch the majority of those, and have, you know, at least enough experience to be dangerous in the majority. A lot of people don’t, you know, and so you can’t say, hey, we’re gonna drop a consulting team on an engagement, and they’re gonna be able to do any of these 7 things for you. You know, that’s a little bit of a recipe for disaster sometimes, so… really getting more focused in terms of what are the services that we are offering, what are the use cases of the pain points that we’re solving for, and how do we standardize around those? So, it’s not just, hey, let’s write down all the things we do, because, you know, I was like a lot of founders. I was saying, yeah, I could probably do that, or yeah, I could probably do that, or yeah, I know this person who’s asking me, you know, to do something, and I feel like it’s a… we should definitely sign this deal. You know, it’s getting more selective. Because there’s no way you can have high quality, you know, standardized methodology and improved margins if you’re trying to just do everything free-for-all. And that was another big learning.
Greg Alexander: Yeah, it is a huge learning, right? I mean. Especially in the early days, when, you know, you’re worried about making payroll. you never say no to anything. You say yes to everything, because it’s revenue coming through the front door. But then, as you get a little bit bigger, and you realize you’re not going to go out of business, it’s not about surviving, it’s about thriving, and it’s about scaling, as opposed to just growing. You start to narrow your suite of services, because you begin to understand the economics of the consulting business. Which is, yeah, we could probably go do this, but… That’s… this is the first time we’re doing it. We’re not going to be efficient. I’m going to have to go hire a very expensive person to go do that and build the methodology as we’re flying the plane. I might not make any money on that deal, do I really want to do that? And what’s my opportunity cost? Because if I just stick to my knitting, I can probably go do these 3 other projects, which we’ve done 10 times, and we make 80 points on. It’s a whole trade-off thing in understanding how a consulting firm works, so I wanted to hear that story from you, because I… we have a cohort within our community That is where you were a few years back, and they’re struggling with that very issue right now. One other thing I wanted to ask you about, which we spoke in depth about, and I’m not sure if you remember, it was a while ago since we had the call, was you brought the comp plan. from corporate America into your firm, and you found that that didn’t work like you wanted it to, and you made some changes. So tell us a little bit about that.
Chris Fezza: Yeah. Yeah, that’s been a very interesting one. I think, in hindsight, I really should have… I wish I had done, you know, some learning, some reading, some talking to people, whatever, to understand what is a really good, simple, standard compensation model, that could be adopted across the org, you know, at the different levels, and that sort of thing. Because… I think I, you know, in some cases, overcomplicated it, in some cases, I extended too far, or just made things up, because I was like, well, this sounds like it could be, you know, driving the right behavior, but honestly, like. it’s… It is an area where alignment is important, and you have to be compensating on the right things, but you can also just waste a whole lot of time, you know, trying to create the plans, as well as For people to figure out, you know, they… again, they have to be able to, like, know how they’re getting paid, and, you know, what does it mean for me this week, this month, that sort of thing, so… Yeah, I think… I think there’s definitely some areas where… you know, overcomplicated a little bit. And then the other, you know, big one I would call out is, again, in the beginning. was only thinking about revenue growth, right? And so, you know, everyone had some level of bonus and mostly tied to top-line revenue growth, but again, doesn’t take into account, you know, the margin and EBITDA and, So, little… a little short-sighted, yeah.
Greg Alexander: Yeah, I mean, again, it’s a mistake that we all make, so don’t feel bad about this. And the purpose of today’s call is to help others not make that mistake, but if you’re paying on revenue and services, you’re making a big mistake. Because somebody hits their revenue target, you owe them the bonus, and you might not have the money, because the margins aren’t there. Now what do you do? So, in services, people get paid on profit, not on revenue. And if they say, well, you know, how do… that’s out of my control. No, it’s not. You’re running your projects, so manage to the scope. you know, bring the project in on time, on spec, on budget, and you’ll hit your margin targets, and you’ll get your bonus. It’s very, very, very different than in the corporate world. So I just wanted to highlight that one item. It’s just an example of what we talked about. All right, why don’t we conclude with one more question, and then we’ll save the double clicks for the private member Q&A, but, you know, if you were to maybe say, one thing to somebody who has recently left corporate America, or maybe even thinking about leaving corporate America, and starting their own firm because they’ve got the entrepreneurial itch. Like, you know, if you were to wind the clock back and maybe say, you know, this is the one thing I would have done differently then, you know, if I knew then what I now know, what would it be?
Chris Fezza: One thing.
Greg Alexander: It’s hard, there’s a lot of things.
Chris Fezza: It’s tough, it’s tough. You know what it… honestly, there’s… figure out what parts of the business you really want to focus on, what parts you’re really good at. You know, maybe it is the sales side, maybe it’s the, you know, delivery side, or, you know, something more specific within that. You know, do you want to be the visionary? Do you want to be the operator? And find someone who You know, can help fill in some of those gaps. early. You know, I… I probably… I liked the idea of starting my own firm and being able to… I’ve been around, you know, sales for years. I wanted to, like, be selling, you know, on my own, and I thought, oh, this is gonna be great. And I learned a lot, and I still enjoy the heck out of it. But, I mean, I’m not a, you know, I’m not an experienced seller, and so there’s a lot of things that I probably, you know, even when it comes down to, like. our positioning, or like we said, how we package the services, whatever, like, that stuff happened way later, because they didn’t have anyone really looking at it with a critical eye, you know, and trying to say, hey, cool, you’re the founder, I’m sure people will buy from you, but will they buy from anyone, random, who’s in the sales world, like, that’s kind of how you know you have something that’s, you know, a little bit more substantial, to it. So, yeah, I probably, you know, I ended up hiring, sales, 2 or 3 years ago, and I… would have done it earlier, or would have, you know, had a discussion with my co-founder, hey, we need to kind of define this a little better.
Greg Alexander: Yeah, very good advice, is knowing, you know, the role that you want to play, and being comfortable enough in your own skin to hiring into the other functions that are mission critical, you know, to the firm. You know, if I could add my two cents to Chris’s wisdom there. You know, we’re in the expertise business. So what I would tell people that are leaving corporate America to start their own firms. is focused on the business side of the description, the expertise business. You’re already an expert in your thing. Domain expertise is super important, otherwise you don’t have a firm, but by itself. doesn’t translate. Into a scalable firm. You gotta learn the business side of the expertise business. And, you know, that’s a journey that we all have to go through. It’s not hard, you just have to go through it. You just have to learn it. Good news about professional services. extremely well-worn territory. It’s not like we’ve got to invent something. You know, there are playbooks out there, proven best practices, and just become aware of what they are, and adopt them, and you’ll be successful, so… Well, Chris, listen, on behalf of the membership, this was a nice contribution to our collective body of knowledge here at Collective 54, so I just wanted to thank you for coming on the show today, and we look forward to your Q&A session.
Chris Fezza: Yeah, thank you. Appreciate it, Greg.
Greg Alexander: Alright, very good. A couple calls to action for listeners. So, if you’re not a member of Collective 54, you might be interested in becoming one. Go to collective54.com, fill out an application, we’ll get in contact with you. If you are a member, and after listening to this, you have some questions for Chris. Please, attend the private member Q&A session. You’ll be getting an invitation on that shortly. And, we’ll have 60 minutes with Chris, and you can ask your questions directly. But, until next time, I thank all of you for working me into your busy day, giving me a little bit of your attention. And I wish you the best of luck as you try to grow, scale, and someday exit your firm.