• Where margin actually leaks in a professional services firm, and how to find it
• The operating changes Ravit made to restore profitability
• How she carried clients and the team through the correction without losing either
• Why growing revenue while margin falls builds a bigger firm that is worth less
• Why recovery is an operating problem, not a pricing problem, which means it is solvable

Jeff Klaumann: Hey everybody, welcome to the Pro Serv Podcast, brought to you by Collective 54. I'm Jeff Klaumann, I'm the president of Collective 54, and I'm your host. If you're new to the show, here's what we're all about, helping you do three things. Make more money, make scaling easier, and make an exit achievable. Everything we record here is built exclusively for boutique professional services firms. So, if you're in the expertise business, if you market, sell, and deliver expertise, this show is for you. We have a great topic today, and a real case behind it. Most of us hear the same advice about getting a firm ready to sell. Get yourself out of the business, hire senior people so the business doesn't run through you. In other words, don't be the bottleneck. It sounds right, our guests did exactly that, and it crushed your margins. The gap between the advice and what it did is the show today. To walk us through it, I have Ravit Gutman on the show. Ravit is the co-founder and CEO of Extropy Advisors. Extropy does financial digital transformation, procedure to pay, and accounts payable work with a delivery team that runs largely offshore. Ravit founded the firm in 2019, and stepped into the CEO seat in 2024. She's a Collective 54 member, and I've known Ravit for a while now. We've spent some time together, and I have a lot of respect for how she thinks, so she's going to walk us through a hard year, and the turn she made out of it. So, Ravit, welcome to the show, great to have you here. I gave everybody the headline, but why don't you take a minute to tell the listeners about yourself and the firm?

Ravit Gutman: Perfect. First of all, thank you for having me. I'm very excited to be on this show and to be invited to this. And you're absolutely right. So, I think, really, first, we'll start with what we actually do. So, really. Besides purchase to pay, in order to cash, and really do that through finance transformation, is really… we're the place where companies really bring their finance separation, and people that are looking to actually get the work done, and to actually get the success. And not just the theory and the day-to-day of it. And essentially, we built a company that really focused on getting that through Successful finance transformation, and getting those teams, actually, to the finish line to really see the true benefits when those type of departments transform. And really, like many of other founders, I built this firm by saying yes, and really, yes to clients, and yes to the scope. And yes to the hires, yes to the logos, and… and… a certain point. Essentially, this became… a bigger yes. In 2024, you mentioned that I took the CEO seat at 2024. It wasn't really that, it was just… I really called myself a solution architect and a managing partner. Because we were small, with a limited amount of customers, and I didn't find the title of CEO, even. Applicable to a company at my size. And for many founders, that's a very nice spot to be. That's a very profitable spot to be. But what's different with this, especially with deploying a team remotely, is that you are in the entire business, and… At 2024, I decided, actually, to buy my partner out, move away from the Essentially, comfortable place of just being a boutique consulting firm, and decided to scale. Understanding what does it mean, and actually building a business, an asset that I can sell. And when I decided to scale, it started with a plan. A very, very detailed plan that I moved the entire company to work through. And that means investing in people, and capabilities and everything that you mentioned, getting myself out of the business, making sure that I have the right plan for succession, making sure that I have AI products that I'm able to scale and get the multipliers that I need. Making sure that I really build this machine So I can make a sellable asset. At the end of it. Emm… And again.

Jeff Klaumann: Fantastic. That's fantastic. I mean, there's a lot to that, and you're right as far as putting together a plan and, like, really doubling down on, hey, I'm going to turn this into a sellable asset. Part of that plan turned into hiring a, you know, full layer of U.S.-based directors that really were kind of on top of your delivery team that was mostly offshore, so… Describe that senior layer, and what you, assume that senior layer would do for the firm, and then, of course, where did the, you know, model actually kind of break in the process?

Ravit Gutman: So I think the first thing that I started to do was really, as you mentioned, looking at the model, and understanding that, I really… I need, essentially, to create that… People-led company, that is not solely based on me. Also very important to understand is that what got me here is not what's gonna take me there. And I think that's one of the hardest things to realize, that you really You understand that the people that were the closest to you and worked with you on getting to that certain level, Most likely don't have the skill set needed to get to the next level. And I'm gonna say also that I gave them a try, because there's nothing more that I wanted was to grow from within, but it was really… I needed something different, I needed a different mindset, I needed… To be able to build my vision, and that meant getting a whole layer of directors. Which was a huge investment, and here in the U.S, and… if we're talking about Director of Sales, and Director of Business Development, and Director of Professional Services, and Director of Marketing, and really being a company that had zero investment in marketing, because we grew by referral 100% throughout the years. We… I was involved pretty much in all engagement, and somehow I stretched myself to be able to support 3 enterprise customers and across with the offshore team, but I've reached my limit. And probably killed myself a little bit. In a process to get there. So… really getting that right team of leadership and understanding how does Extropy look in terms of scaling, that was the first piece that I stepped into. So, I would say 2024, I gave it a chance to… people within to try to align with the plan. By 2025, I hired a full new leadership team, trying to run it with, again, people from my industry that they… that I still knew, but really. trying to get to that scale plan with external people coming into XRP and working in a different level.

Jeff Klaumann: Fantastic, and I want to highlight a point that you made about the people who got you here may not get you there, and it's really the concept of, excuse me, pioneers, migrators, and settlers, about how in the early days, you need these people who kind of have will over skill and grit, and, you know, they're the pioneers that are willing to go first. And then as you scale, you often need a different set of people. You need people who are kind of migrators, who can do a bit of both, that can grow into the scaling side of things. And then when you're really at scale, then you kind of need settlers, people who will fall into line and do the, you know, do things in the way that have been established, and that's often a friction point as we scale our firm, so… It's a great demonstration of that, so I appreciate you pointing that out. Let's shift gears to kind of the recovery side of things, if you will. You know, didn't come from raising prices, didn't come from selling more. It really wasn't, you know, that type of problem. It came down to redesigning how the work was delivered. You landed on a pod model that kind of reproduced what had been working offshore, so why don't you explain the pod model to someone hearing it for the first time, and, you know, what did it fix for you and the firm?

Ravit Gutman: Okay. I think the pod model was version number 3 for me to fix this, as we went through when fixing this, but I think the main thing was Focusing on… actually… Fixing the business model, and not just going the easy route of just raising the prices. Because one of the things that, when you try to scale, is the fact that Again. More work has come our way, more people are handling it, more new people are handling it, and… also, the quality goes down. Like, if I was there being able to touch the quality in every single place. And making sure that the work is executed to the level that I expected. That was also part of the… the problem of that. And I should say that, probably just to expose too much, like, I came from a very, very, very comfortable place of over… 30% net profit, like, when I started this journey, with a full understanding of, like, I'm going to fund this, and I'm going to be able to get all of this leadership team, I'm going to be able to do all of our AI investment and build our operating model, I'm able to Shift my business, essentially, for, from time and material to… Really, value-based selling, and… and started really with… Building that leadership layer that… really was based off of an old model that I don't think that is equivalent anymore. And I found myself, really, at the end of 2025, really… getting rid of one of the main directors, and recalibrating everything into that pod model, and really giving the… People that have worked with me throughout the years, for the offshoring team, and people… and the people here, the ability to actually take control over the customers, and not the old way of just… Looking at the project, and project profitability, and looking at making sure that everyone are recording their time, making sure that everyone are giving their 40 hours a week work. Just really being that manager that runs after everyone, and actually spin it off to bring it… bring all the pods together. building a pod to make sure that I have the grinders that are sitting In the offshore model, but is built off of miners and even finders in each and every one of those pods. And I think when we shifted to that place, we were able to actually create Today, we're running on 3 different pods, 3 times more the customers, because we took that same model that actually worked before. All of the… scale path that we went to, and we really just replicated exactly that success model that was me being the… finder, building a small layer of winders, and having that layer of grinder to… to… that is offshore to, get the right margins. And I think when that happened, that has really shifted a lot of things as well.

Jeff Klaumann: Okay, that's fantastic. Great reference to the, the classic book, Managing the Professional Services Firm. So, the other half of the story was the books. You know, you started to touch on that. You rebuilt them to tell a story that a buyer needs, and, you know, not necessarily the story that you wanted to hear, so to speak. So, what do you track separately now? Gross and net profit by revenue type, as I understand it, that you were kind of blind to before, and why does a buyer care about that?

Ravit Gutman: So… I'm gonna think about… I'm gonna frame this.

Jeff Klaumann: Take your time.

Ravit Gutman: Yeah. So, I think I'm gonna start with, you can't look at your business… again, I'm doing… I've been doing finance transformation for years, and really, finance transformation is helping digitize your data to the point that you're able to tell the story. So a true optimized environment, essentially, for me, means that you're able to take that data and actually impact the business, like, really, and I'm working with different teams in finance to actually becoming those catalysts to work with operations, to work with marketing, to work with sales, to work with all the different teams, to work with the factories, to actually being able to impact and explain the story in the numbers. So, I'll start by saying that this is the world that I live and breathe in corporate America every single day, and I think, more than anything, I potentially forgot to do it a little bit about myself, but as I started with building the plan, and it was really to understand what is my different type of revenue? So, one of the things that is really… we have done in Extropy from the beginning is… Looking at professional services and how we can actually productize the service. So, when I say productize the services, yes, you'll… most professional services you have, you get a client, you implement a… A service, and not normally where it ends. So, the way we look… And the way I looked at every engagement, to me, the implementation is just that first step of getting the foot in the door. And in the beginning, I took a lot of these projects at a loss, because I said, this is what I need. I just need to get my foot in the door, they see the value, and then once the door is open. They understand they want to keep me around, to really start optimizing their teams, their systems, really… to really get the true value of systems in a world that They have so many different systems that do… Probably 10% of what they're supposed to be doing. And… and… If I go… Lost my track a little bit If I go to, looking back, like I said, on what I did, in my books was… really, I understood that I have the business of retaining customers, which is really… that is my biggest value point. The fact that I have customers that have been with me for 8, for 9 years, for even more, and really, my goal is that every customer that comes into our community stays as a customer. And I've changed the narrative of a story of an implementation software company, to actually A Finance Transformation Success House. And in order to really understand how I'm building this type of narratives and looking at my overall model, from saying yes, essentially, throughout the years, I became I have a BPO operations, because I had a customer that, through COVID, lost operators, and I've built them operating systems in India. I have our post-implementation optimization, which is really where is that steady-state retainers that we're getting, that we've productized the service. and I have the implementation, and I have product, and I have that time and material bucket that I'm continuously working on shrinking down. And I think that was really… I wanted to understand, in order for me and I've… just by sitting a lot of the calls in Collective 54, and also before that, really studying what… is the type of buyer that will buy me. I understood that they're gonna buy me for my… logos, my customer portfolio. They're gonna buy me because of… my in-depth expertise in certain area. And because of those retainers, essentially, of that secured recurring revenue. And not for my implementation. And… So I started really changing my entire operation to look at that lens. So, from looking at the pods and how they're building, essentially, to get to those retainers, and how their bonuses are structured on Net Promoter Scores, retainer, like, retaining these type of customers. And it allowed me also to enter and become a much bigger entry point with many more partners because of that post-implementation, optimization, because of productizing, essentially, that space of, great, I've implemented the product, now what? How do I get the actual best adoption? How do I get the people to actually use this? And, you know, I'm going a little bit more… more in-depth on our services, but really. really understanding what my buyer would want from my company, and I had all the way having conversations with potential buyers, and really listening to the questions that they had, and what they were looking for, and entertaining a lot of calls way before I even hired my M&A firm. Not because I wanted to sell, just because I really wanted to understand what… interests them. And based off of that, I've built the books to really represent the story that they're supposed to be telling from that, so…

Jeff Klaumann: There's a huge lesson in all of that, Ravit, and that's really starting with the end in mind. Like, that's essentially what you've kind of done. You're looking at what the exit will be like, and you're kind of reverse engineering how you will position the firm, the things that matter, the clients, the retention, the… how the books will look. how you will sell additional work to your existing clients, the business model, all of those things are all through the lens of starting with the end in mind and designing the firm accordingly, which is a perfect application of how to actually scale and build your firm to sell one day. So that's a fantastic lesson for everybody who's listening. So, one question here on, you know, in 2025, when you're executing the plan and it's kind of quietly starting to cause issues within the firm. You know, how long before, you know, the numbers told you that there was something going on, or, like, how did you start to put your finger on, wait a minute, something is actually happening and this isn't going as planned?

Ravit Gutman: I think, somewhere around August, I try… I start freaking out, and… And I understood that something needs to change. And I think mainly, I don't know how for others, but 2025 was not the year to sell technology. Like, between… between everything that was… like, corporate America went into a freeze, so those that do work with the, like I said, large, mid-sized businesses. No one was buying anything. So, and probably one of the reasons why we still were able to grow in 2025 is because we were able to expand our services with our existing customers, but reality, it was… I just hired In half a million dollars, a director of business development, a director of sales, and director of marketing, and nothing came out of that in 2025. I would say… Probably the only thing that came out of it in 2025 was part of that plan was to become a thought leader. And anyways… position ourself in the front versus behind our partners that we've been working with. That was probably the only thing that really… Moved a little bit, but the biggest indicators for me is I started having people resign. The place that people stayed for years, my offshore team in India started, and my best players Hitting the highest, productivity, essentially, levels with the, with our clients. though they just started dropping like flies. And I understood that something… something is broken. something from my own messaging, the way it's going down, the way I've put, essentially, this director layer, and trying to create that team-led company that will push my vision down and get there. By December, I understood that it's, like, Something gonna change now. 100%. And if it's, like I said, the margins going… from… like, close to now, to really, like, being… being to… being in the red line completely. From losing, very important team members, from… the level of service going down, essentially, throughout the team. I understood that if I'm not making a drastic move in… come January 2026, I broke the company, and I'm… I can shut down.

Jeff Klaumann: I, I remember that time very, very well. Ravit. We coincidentally had office hours right as that was happening, so I remember that time quite well. It's interesting to, to hear it now, going back and kind of seeing all of the pieces played out. So, one of the pieces of your plan was building an AI strategy, and you built one, you scrapped it, and started over. So, why did the first one ever get adopted, and what changed the second time?

Ravit Gutman: I think the first thing, again, I… The vision of the product was the same. It was… the execution… the approach… And… really following the same methodology that makes who we are as a company internally. So, pretty much do what we preach. More than anything. Emm… I think… it's really hard, especially, like I said, you're learning about AI, you're coming, you have this vision about how you're gonna transform your organization. you invest the money, like I said, everything in it, you bring the product people into it, you bring the right AI expert into it, you put your team into it, into the vision. And really, the way it failed, beside… From an execution standpoint, is the fact that we had A full AI tool that no one used. no one actually saw the benefits of it. It just created another system that people need to log into, and the goal was still the same, of creating that Extropy Brain, like I said, we've been digitizing our company from day one. We have… All of the knowledge that we can, essentially, to create that brain. But it wasn't built… with the right intention, and with the user in the center, and I'm also gonna say, potentially, not with my focus. In the center of it. And I think this is where… It's one of these mistakes, costly mistake, but I'm very grateful for it. Because a couple of things. First of all. A lot of the people that have built last year had to rebuild this year, because so much have changed just in the past 6 months. So, actually having all the lesson learned, but having the infrastructure of the brain to really restart, actually gave us a huge head start in 2026 to rebuild this. So I think don't be shy to just scrap everything and start fresh, because Every. Week. something starts new. I think I was just in my… in my AI leadership team, someone said, okay, now with Rock's new tool, like, I'm trying to see if I can… I can use that for that. And being… being able to really think about how you're navigating through all the different tools right now, and I think that's… the person… the people that I brought to build, the people that I hired to build, It was built in… a mindset, and in a way that I don't think is applicable today, because I think in the world of AI, I truly believe it's a mindset game. It's… it's… you need to change your people mindset to really use it. You need to change how your business operates. Like, you need to think about your business model, how you're servicing your customer, and how AI is incorporated in it. It's how your leadership team looks like in a world of AI, because, again, 2025, I tried to create the pyramid. No, now I have a flat organization that works through the pods, and it works beautifully. And… It's… it's all these different elements that… Again, building on… Very painful 2025 brought me to completely rethink 2026.

Jeff Klaumann: Great lessons learned, and you're right, I mean, it is changing so fast that, sometimes you do have to just… you know, step away from something, rethink it altogether. Change management is a lot harder than I think anybody, you know, really thought it would be as it relates to AI, so there's a lot that goes into it. So, one, one more question, and then we'll wrap this up, but, you know, if a founder is sitting, you know, on a get-sellable plan right now, and they did one thing to kind of pressure test whether that plan was quietly kind of breaking the model, what should it be?

Ravit Gutman: Wow. I would say, I potentially… Try to do too many things at once. I wanted to build an AI product. like, to become an AI native implementation team, I wanted to, make… Like I said. a team-led company. I wanted to make have my own finance transformation, which, essentially, that's what I've also done, like, restructuring the books, maybe building the books to tell the story for the right seller, like, that's a whole finance transformation by itself. And… and becoming, again, a thought leader, marketing, all these different things, I think… focusing… on… Small things to move the needle is potentially a… one of the things that I would recommend. understand, and that's why I said, again, with… when I got to a place of red, when I freaked out this year, to the point that I, for the first time ever, because I've never took… I've never taken any finance to Extropy, it was always self-funded, it was always profitable. It's always been… a place I didn't need to worry about, and for the first time, to be, as a founder, to put your hand in the pocket to pay people. and… and not pay yourself. Like, these are all… Uncharted territories that, that… I don't recommend anyone to get to, because… Again, we don't want to be in that place. But if, potentially, I would have looked at… all of my plan, and potentially, even though I've broke it to quarters and different things, but understood that I need to finish these type of milestone first, do a proof of concept, see where I'm getting the return, not hire all the directors simultaneously at once. That… that is my… My look back. But, there's a caveat to that. In the same time. I'm gonna say that we live in a world that… You don't even need all of these directors. I started with hiring 6 directors, and probably… by the end of this year, I'm gonna stay with 2. Emm… I've built my… AI finance manager, and I've built my collection, and, and, and essentially, like I said, my billing and everything. I've… I was able to take so many different functions Including ADA, which is our AI delivery assistant, essentially, for deploy to each and every one of our employee To really looking, at how AI can assist us throughout these processes. And… that is what I would say, if you are looking at your plan right now for exit. Start looking, go back to your org chart, go back to your processes, go back to your… What is your biggest value delivery, and think how you can restructure Your delivery, restructure things internally. And, and, and focus on the operating model, Emm… before raising prices or anything like that. And that has been, for us, the biggest Biggest game changer. I did not know what I knew… know today. And thankful for Collective 54 for a lot of the lessons and things that we've got on the way. But… That's how I would approach this today.

Jeff Klaumann: Fantastic guidance, Ravit. Thank you so much for joining us today, and for showing, sharing your wisdom and experience. I appreciate it greatly.

Ravit Gutman: Thank you very much for having me.

Jeff Klaumann: Absolutely. Alright, before we wrap up, a couple calls to action. If you're a member, keep an eye out for the invitation to our private member Q&A session with Rebeat, where you can ask her your questions directly. If you're not a member, and today's conversation has you thinking about joining, head over to Collective54.com and fill out an application, and we'll be in touch. And if you're not quite ready for either of those, we have lots of content and past episodes on Collective54.com, so check those out. And thanks for listening. Until next time, I wish you the best of luck as you grow, scale, and someday exit your firm.