Episode 169 – Maximizing Revenue Growth: Transforming Early Career Professionals Into Seasoned Revenue Generating Employees – Member Case by Phil Leary

In this session, we discuss some of the secrets of unlocking expansion revenue from within existing accounts. You’ll learn how nurturing and developing employees who begin their careers in non-revenue generating positions can lead to a surprising uptick in your bottom line as they learn how to become natural rain makers. Discover the approaches used to transform these high potential employees into powerhouse revenue generators, and how this approach not only boosts your firm’s financial health but also fosters a culture of growth and innovation.

TRANSCRIPT

Greg Alexander: Hey, everybody. This is Greg Alexander, founder of Collective 54 and welcome to the Pro Serv Podcast brought to you by Collective 54. And on today’s episode, we’re gonna talk about one of the five channels of expanding revenue within a boutique professional services firms. And it’s the most important channel. We call it the expansion revenue channel and it’s defined as generating additional revenue from happy and satisfied existing clients. And we prioritize it as channel number one because it tends to be the easiest to get to most profitable because we’re dealing with happy clients. It sits on top of the other four. And the other four are in order of priority is referrals, which comes second, word of mouth, which comes third, inbound lead generation driven by content, which comes fourth, and then outbound lead generation, which comes fifth, which is, you know, cold outreach to people who don’t know who you are. So, so today we’re gonna talk about expansion revenue. So we have a longstanding well respected Collective 54 member with us. His name is Phil Leary he’s worth a late. So would you please introduce yourself and your firm to the audience?

Phil Leary: Thanks, Greg. I appreciate that. So, I’m Phil Leary, I’m the chief operating officer of a late, we’re a technology consulting firm focused on digital excellence. We work with our customers on initiatives that are client facing revenue generating or in some cases drive operational excellence. We have everything from strategy delivery around data and software product management, and experience. And recently have added on longterm manage support solutions.

Greg Alexander: Okay. Sounds great. So, Phil late, it’s been quite the success story, quite a bit of growth over the last six or seven years or so. And from what I understand, a big piece of that was the expansion of revenue that you generated from existing clients. So why don’t, you tell us a little bit more about what that means to you and kind of who’s responsible for it in the system and the method that you used to make that happen?

Phil Leary: Yeah. You know that’s been a bit of an evolution over our timeline as a company. So we’re seven years old as you know. And about two years ago we sold a stake to a private equity which has kind of changed our focus a little bit to lots of inorganic acquisition revenue in addition. But one of the core features of the company has always been that it’s easier to keep our customers and expand our customers. And it is to go and acquire new ones. We absolutely love the net, new logo. We want to do outbound. We want to be finding new customers. We want to build relationships, but we want to be really quick to make new friends and slow to get rid of the old ones. And that’s kind of the watch word we follow. So one of the ways that we did that very early on was the relationships that our executive team had, our management team, and our executive team really fostered relationships over the last 20 years that led to probably our first three years of revenue as a firm. As we’ve moved into more of a commercial sales engine. We’ve had to put processes and policies and structure in place to support that. And a lot of that effort now really goes to the relationships that are very intentionally created and managed by our account managers. So as you grow up in the firm at lata, you start out as a consultant, you move up into associate, and then the manager and then into principle. And each one of those has really within our cohort structure, a definition of so span of control for responsibility and a principle starts to manage large scale programs, lots and lots of different projects, multiple clients. But is principally responsible for the client relationship. And so their focus is to build a relationship with the client with the buyer and to expand across to others that the buyer may refer us into within that particular company. And they’re held accountable to that with an account plan with a weekly call with conversations with our sales leader and with the firm around just performance from a delivery quality and from a revenue perspective for each one of their accounts, we do that in a couple of different meeting each week?

Greg Alexander: So, this principal job which is… the elevated career of somebody who’s gone through that ladder. As you just explained to it is that the first time that this person is responsible for revenue generation or does it come before that as well?

Phil Leary: The first time that they have a quota of any sort and it’s a soft right? We, we don’t beat people up if they’re not able to make their, you know, whatever we might call it two and a half 1,000,000 or to 4,000,000 in revenue on an annual basis because in many cases, we will ask them as a firm to focus on something else, an internal initiative work across multiple clients that are, you know, needing some sort of a recovery program or something like that where revenue may not be the focus but quality might be the focus. So we don’t beat them up too hard. But, as you grow in your career, we have, a dimension that we evaluate everybody on called advisor. So as a consultant, you’re straight out of college. You’re focused on a technical stack. You’re getting, really deep, on technology, which is what we do and nobody wants to think about being a sales guy. So what we ask them to do is just, hey, bree, reach out to them on Linkedin, take them out for a coffee. If you’re working remotely, hit them up on Zoom. Everyone’s wrong and just talk personal stuff as we get to associate.

We’re like, hey, now they’ll start to do that a little bit more intentionally. We’re going to assign you some team leads throughout the organization because that’s what you are. And we want you to reach out to your peers and have those conversations with them. So they’re in a mode even early in their career, building relationships and having those conversations as they move into the manager cohort. Now, they’re having conversations where they might have to have a hard conversation, right?

Where something’s gone wrong with a project or maybe a client person is not stepping up. And so we want them to build a political capital. So that political capital is done by celebrating mutual success. If you think about it, all of these are sales activities, right? They’re building a relation to so that we can have a conversation later about, hey, we’re doing really well or we navigated this really tough time together. How can we work together on the next project? Or is there another area of the firm that you could introduce me to? Where I could have one of our sales guys come in and talk about our capabilities that might help them out. So everybody gets this little step wise process. So by the time they get to principle there, maybe not formally have done it but they’re familiar with the concepts. So we used to hear it a lot. Hey, I don’t want to become a sales guy, right? I’m a technologist. And then we sneakily get them to do this advisor to mention until by the time their principles, they’re like, yeah, it’s not a big deal just to ask somebody for a little bit more work, but the intentionality comes in with the account planning that we do around that.

Greg Alexander: So let’s talk about the term political capital that’s an interesting term. What, what does that mean?

Phil Leary: When times get tough, you can’t just be bringing up, a tough topic with a

stranger for the very first time and accept a good reception. So if I wanted to tell you, hey, something was really going wrong with 54 or one of your people. We probably need to have some conversations ahead of time where things are going well or we have a personal relationship where we, we’ve created some respect for each other where that conversation is not gonna come out of the blue and you’re gonna be able to accept it that’s political capital. So, one of the ways we do that is that at every opportunity we try to talk about the mutual success we’re having and it’s mutual success, right? We’re not a show you out of the way consulting firm. We want to partner on hybrid teams with the client. And so every success we have every time we deliver code, every time we complete a strategy project, it’s a mutual success. So we can celebrate that. So if we celebrate that a lot and we’re thinking, hey, this isn’t just for the project. This isn’t just for the client. But this is also for Greg Alexander, my buyers career. Well, if I’m thinking about that focus throughout the entire project or engagement delivery by the time I have to have a conversation with you, that might be a hard conversation or a conversation where I’m asking you to introduce me to somewhere else in the firm, we built up positive political capital.

Greg Alexander: Yeah, I love the term. I love the concept because, you know, generating expansion and revenue from existing clients, which is the topic of today’s podcast, it very much comes down to the strength of their relationship and focusing on something like political capital in such a structured way allows for that relationship to be built. Let me pivot to the account plan. You discuss that. You do use one. We have members in collective 54 who don’t like account plans. They view it as administrative tasks. They view it as overhead, you know, non billable time. Why am I doing this? You know, pick your flavor of the week, excuse. How have you been able to get people to use account plans effectively?

Phil Leary: By acknowledging that they suck, right? And no good template is really gonna give us everything we need. And yes, it’s a hard thing to do. But we actually went through about a year long period where we put in place a weekly call where an account manager had to come to the call and we had two or three each week and present their account plan. And everybody got feedback from those account plans. And people who had never put account plan together could attend and listen and kind of understand what was really expected in the questions that they were gonna get from the executive team around those account plans that then led a lot of people to go. Well, it’s kinda not that big a deal. It’s a eight page powerpoint template. I need to do some thinking. I need to work with my team to make sure we’ve mapped out contacts and we’re thinking about introducing services across all of our service offerings? Not just the thing we’re doing for that client. But once you get over the hurdle of hey at sucks and I don’t want to do it, it’s actually pretty easy to do. And to make as long as you carve out, you know, an hour, the first time, 15 minutes every week or so, you can update that account plan. It’s also really useful. We put in place just a couple of years ago, an internal methodology that we call the laid away. What we discovered is that we would always just do things, you know, project based kind of, the method of the process was based upon whoever the account leader was or the project manager. Some of them were fun. Some of them were exciting. Some of them had no idea, nobody knew what their expectations were. So we put that laid away methodology in place to drive expectations. Well, an account plan also drives expectations. If I go into a project. And I know according to our methodology, I’m gonna be playing the role of a project manager. And here are the 1,525, you know, checklist items that I need to be thinking about to deliver a quality project. One of those is participation in the account plan. And what that means to me is working with my account leader to know who so should be reaching out to intentionally, right? Who should I be building a relationship with? And what political capital should I be doing? Am I gonna be the project manager of fun? And I’m going to celebrate everything? And I’m gonna be super excited and extra averted about it. Or am I the guy who’s focused on quality and constantly checking to make sure that our quality is good? Either one of those can help build up political capital. So that account plan is really important to us. It helps put that structure in place. It does suck the first time you do it, but then it just becomes a routine thing. Now, we’ve got it. You know, once we got past that year of making everybody go through the sucky phase, now we’re into, hey, it’s a really easy meeting. Everybody comes, you know, talks a little bit about where the project is, what the potential for revenue and pipeline is there. And if there’s any bottle in that or a hand off, the account plan, is the glue between the two people who might be doing the hand off or the thing that they go back to. If there’s any kind of interruption, in their sales focus?

Greg Alexander: Very interesting. I love the intentionality of it, in the formality of it, you know, and it, is doing what it’s supposed to do, serving as a communication vehicle for everybody in the account, making sure everybody knows the roles they need to play, and the objective which is to keep the client happy. So the client continues to invest with us on, you know, the next project and the one after that, and the one after that et cetera. So, do you think account planning and this formal process works only with large accounts that might have multiple business units to expand into? Or do you think it also works in the mid size to small account that might not have as much complexity? What, what advice would you give our listeners and our members and as to, should they have an account plan for every account? Or just a few accounts? So I.

Phil Leary: know you’ve done a few of these with matron, and Matt says, and this is another wise little phrases that we use a lot is if it’s not written down, it doesn’t happen, right? Yeah. And an account plan is a great way to write down the intentional actions that you intend to take and then hold yourself or have others hold you accountable too. So, I think an account plan is useful regardless as to the size of the client. You can also think of it as a growth mechanism, right? So, hey, I’ve got an account manager. They’ve never put an account plan together. Let me work with them on this small easy account plan. So they understand all of the concepts, they have, the intentionality, they execute against it. Then when they’re faced with a larger client, as they move up in the organization, it’s it gets easier for them. It’s robe. So, I look at the account plan as meaningful at any level, sometimes for the client, sometimes for additional, sometimes for the account manager.

Greg Alexander: Let’s talk about skills for a moment. So, when I get hired off the college campus and I enter at that point all the way up to this principal stage where a big part of my job is expansion revenue, how long does it take to go from point a to point B? And, and how do you help that person develop those skills so that when they do hit that principal job, they can do it well?

Phil Leary: So typically, it’s about 10 years. We, we have an accelerated promotion program, that works over the first five years that you’re here at in the company. So people can move up pretty quickly to the manager ranks. But manager gets to be really impactful, not just impactful to our clients because they’re managing projects and managing relationships, but they’re also managing our people. So culture idea, intentionality, feedback, all of those things are really important. We spend a lot of time on building up our managers before we allow them to become managers at the manager rank. They may spend three to five years there. And during that time, it’s all pre principal activities. So, we have three different levels, M1, M2, M3 that are the managers. And by the time you’re in M3, you’re really being a principal, we’re just not quite ready to give you that title yet. And any of the M threes that you were to talk to in our firm would tell you that you’re like I’m a principal, I’m just not getting paid for it, which is exactly what we want, right? And when they perfect, a lot of those things that’s when they get to move into the principal ranks. So I’d say somewhere around 10 years is how long it takes and, we do a number of things. One is, you know, we have that advisor dimension. We actually have a relatively large growth framework that, you know, we’ve stood on the shoulders of giants, you know, firms 2025 years back have these expectations or growth frameworks and we’ve modified it to suit what we do as a business and what we want from our folks. But part of that is rooming them to, by the time their principal, they have the soft skills, they have the boldness, and they have the ability to be able to whiteboard a solution, be able to explain a problem, really anything that is needed by the buyer to be able to navigate whatever conversations they might have.

Greg Alexander: You know, and I have had a chance to look at your growth framework, expectations framework. And I love it. And what I love about it is it’s mostly on the job training, you know, apprenticeship model type development. Is there any kind of out of the workflow training, classroom training like that? Or is it all that apprenticeship model?

Phil Leary:  So, the only job training is a big part of it, but we, you might know about four or five years ago, we decided that we’re gonna start taking kids straight out of college who might have a mathematics degree or might have a computer science degree that had never been in consulting. And it’s a little bit different, right? You know, we used to joke that back in the old days you could sit there code in the corner and reel on your cardigan and nobody cared as long as your code was good. That’s a little bit different in the consulting room, right? We might be on a Zoom call, with a client and they expect more, they expect some soft skills. They expect some attention paid. So, for us, we put together a program that we call the ascend program which was to take these kids who had technology skills, sharpen the technology skills over a three month period. But more than 60 percent of the curriculum that we spent time with them on with soft skills relationships. How do I become a really good teammate, work with somebody who might be difficult to work with… as we came out of our acquisition by the private equity firm? And we decided to pivot to things like our near shore organization, or our offshore organization, less of the demand here in the united states for a send. And so, we pivoted our training department in the united states to really focus on continuing education if you will. So for every cohort within the organization up to the vice president level, we now have specific classes that we want people to take and they may be on, you know, relationship selling. They may be just on managing an account plan. Some of those we put together probably about 25 percent. And the other ones we utilize a Udemy professional relationship that we have, and we leverage all of those through a learning management system, allows us to track, the courses that folks take.

Greg Alexander: Yeah, fantastic. You know, the reason why I’m asking that question is it’s a big piece of, you know, being able to consistently generate expansion revenue. It’s not just the account plan, it’s having the skills. So, you know, and if you take somebody who in our terminology grows up in the delivery or, you know, someone who is delivering for the client, they don’t have a revenue generation responsibility and you just throw them into revenue generation without teaching them the skills. It usually doesn’t go very well because, they lack the skill, they lack the confidence, they lack the desire, these people through an apprenticeship model like fill it in the team and let is doing by the time they get there by the time they are in M3, they’re already doing it anyways, right? So it’s kind of, you know, part of how it works well. I could talk to you about this forever. We try to keep the podcast short to 15 minutes. We’re already over that, but we will have a member Q and a session with you. We’ll get into this in more detail and we’ll let the members ask you some questions directly. But on behalf of the membership, thank you so much for coming on the podcast and sharing with us what you guys do as it relates to this critical topic of expansion revenue.

Phil Leary: Now, I appreciate that. I look forward to the Q and a because we’re not perfect of this by any stretch of the imagination, but we are intentional, and we’re well practiced.

Greg Alexander: Yeah. Well, I will tell you better than most. I mean, you know, we have a few 100 members in the collective now. And the reason why we’re profiling you on this dimension is that the definitely above average and approaching that kind of best in class status. So again, thanks thanks so much for sharing all that and, you know, a couple of calls to action for the audience. So if you’re listening to this, you’re not a member and you want to become one, go to collective 54 dot com and fill out an application, and some will get in contact with you if you’re not ready, you know, for that just yet, and you want to just consume some content. I pointed to a couple of resources, so out, how to start scale and sell a professional services firm. You can find out on amazon. If you don’t want to read a book, it’s not your thing. You can subscribe to collect the 54 insights. We publish three pieces of content a week, a blog on Monday, a podcast on Wednesday, in a youtube video on Friday. But until next time, thank you for listening. And I wish you the best of luck is you try to grow scale and exit your professional services for thanks again, Phil. Thanks. Awesome. Thanks man. I appreciate it very much for a.

Phil Leary: You bet. Happy to help.

Episode 156 – Sealing the Deal: The Critical Role of Management Meetings in the Successful Sale of Your Firm – Member Case by Matt Rosen

Matt Rosen

In this session, we delve into the pivotal function management meetings serve during the intricate process of selling a firm. We’ll explore how these gatherings can effectively showcase the company’s strengths, address potential concerns, and foster a sense of trust and transparency with prospective buyers. Attendees will learn how to leverage management meetings to not only impress buyers but also to secure a favorable sale outcome.

TRANSCRIPT

Greg Alexander [00:00:15] Hey, everybody. This is Greg Alexander, the host of the Pro Serve podcast. Brought to you by Collective 54, the first community dedicated to founders of small services firms trying to grow, scale and someday sell their firms. On this episode, we’re going to talk about the mechanics of exiting your firm. In particular, this thing called the management meetings, which typically happens during due diligence. And we’ve got a well-respected, long-tenured, well-liked member of Collective 54 with us today. His name is Matt Rosen, and Matt has recently gone through his successful exit and lived through the management meetings and has a lot to share with us. So, Matt, as always, it’s great to see you. Thanks for being here. And would you introduce yourself to the audience? 

Matt Rosen [00:01:08] Yeah, too kind of an introduction, Greg. Thanks for having me on the podcast. So I’m Matt Rosen and I’m founder and CEO of A Leader. A Leader is a consultancy focused on digital excellence that helps our clients with everything from technology, strategy and user experience through custom dev integration data and then supporting the solutions that we build. And so we went through an entire process and an exit to an investor about a year ago. And it’s been a really a great experience, better than I actually thought it could be. And Collective 54 was a great help at every step along the way. 

Greg Alexander [00:01:48] Great. All right. Well, let’s jump into it. So we’re going to talk about management meeting. So let me start with the very basics, Matt. So you went through this exit. Give us a definition of the management meeting or meetings and kind of. When did that happen? And walk us through the basics of this. 

Matt Rosen [00:02:10] Yeah. So we actually started looking at options in 2021 where I’d say we had a few dates where we had an investment banker bring us both a private equity firm and a strategic. And so they came in and spent some time with us. But it was in 2022 we really went through a formal process where we built a SIM, did equality of earnings, sent it out, and then we really had two stages of meetings. We had what they termed as fireside chats. So this would be a one hour conversation with the prospective buyer. And it was only after we had an intent of interest or an IOI that we actually did management meetings which were like a four-hour onsite session. So for the fireside chats, these were more of an introduction. These were mostly held via Zoom teams, virtual meeting with other the we really looked at a couple of different classes of buyers. There were strategics, there was private equity-backed strategics, and then there was private equities that were looking for us to be the platform. We decided early on that the only way we were going to do a transaction was if we were the platform and we were the right size and had the right team to do that. And so as we were evaluating different options, it was myself, my chief operating officer, my chief strategy officer that were involved in the majority of the meetings, both at the fireside chat stage and then the management meeting. 

Greg Alexander [00:03:39] Okay, perfect. So let’s talk about the fireside chats first. So one our Zoom meetings, three people from your team with potential acquirers on the other end of the line. The objective is an introduction. So tell me a little bit about what was covered during those meetings and how you prepared for them. 

Matt Rosen [00:04:00] Yes. So everyone had our SIM and our quality of earnings, so they already had a base understanding of our business. So I think a lot of it was just trying to for them to understand us, who they were talking to and for us to understand them. And I wish I could say we did tons of prep. We really showed up and just shared who we were and what we were looking for. We had rehearsed things like, Hey, what’s the one question we don’t want to get asked? And, you know, we’re places they’re going to take us that we need to have prepared responses. And so we practiced those. But really, once the fireside chats got going, we were doing a couple of day. We probably did. I would say somewhere between 15 and 20 of them. And at this stage, I was really more evaluating the prospective buyers than they were probably evaluating me. And the ones that I really respected were the ones that asked, Why? Why are you all here? Why do you want to do a transaction? What are each one of you looking for? Professionally and personally out of this? And there was only a couple of them that really asked that question. And so it was kind of funny. We actually knew who we were going to. Our top choice was after the fireside chat. Now, obviously, we kept everybody else engaged to keep a competitive process going, but it was pretty apparent early on to who we wanted to partner with. Yeah, but the type of questions they asked was, you know, tell us about the founding of the company. Tell us about what each one of you does. Talk about, you know, top clients talk about how you retain your people. It’s all very, I would say, basic and high-level information that, you know, frankly, is in the same. I think they just want to see how you’re going to answer it. So I found the fireside chats to be, you know, light engagement. And it was interesting. There were some of the big strategics that literally just wanted to tell you their process, asked very few questions. And so we eliminated some of those very, very early on because there were those that were looking to stroke of a true partnership and those who just want to acquire a bunch of people and capabilities and push us to the side. One story I will share that one of the groups that came in to look at us as a platform had the audacity to come into the fireside chat and tell me that they went from founder-led to professionally managed. So the three of us walked out of that meeting and debriefed and were like, Well, all of us can be out of a job in about 18 months if we choose this group. So we kept them around and I won’t name them for confidentiality purposes, but you know, they were really rough to deal with throughout the process and were exactly what I didn’t want a private equity sponsor. So it was good to have that contrast when we actually were serious about, Yeah. 

Greg Alexander [00:06:33] You know, and you were very fortunate and that you’ve built a great firm and it was growing, so you had a ton of interest. So 15 to 20 fireside chats was appropriate, you know, for, for members that might not be in that similar situation, they’re not at the same scale that Matt and his team are at. You might have fewer of those, but, you know, the goal was an introduction and it sounds like, you know, it was a bi-directional introduction and it served its purpose. All right. So let’s move to, you know, the official management meeting, not the fireside chat, but the real one. So tell me a little bit about you mentioned they were 4 hours in length, so quite a bit more intensive. Walk me through that. 

Matt Rosen [00:07:11] Yeah. So we were very fortunate, as Graham mentions, you know, we probably did 15 to 20 fireside chats. We had 11. I was actually a few people tried to preempt the process with letters of intent, but we said we wanted to go through the management team meetings before we signed off on an otherwise. So we invited, I think it was five groups to Dallas. One of the groups is actually based in Dallas. We just went to their offices, but we sat down in an afternoon session in a board room and walked through our SIM in detail. Oftentimes they had prepared a pitch of what a partnership with them would look like. To help us understand how would this relationship work? What would the board look like, what would their responsibilities be? You know, would they have an operating partner not have an operating partner? Then they really asked us a series of intensive questions and they dug pretty deep. I mean, they did their analysis. We did have some concentration risk, so they dug really, really deep into those relationships and really got to know who they were with. What was the nature of the work, How were we building it, what was the structure of the teams? And so they went pretty deep during those those four hour sessions. And after that, we either did a lunch or a dinner, which was, you know, them getting to know us as people and us getting to know them. And so those management team meetings required a bit more prep. We had wanted to representatives from our banker in the room with us, you know, to help with any detailed financial questions. But at this point in time, you know, they’d been exposed. We’re a data room. They pretty much had access to everything we had to share. We had nothing to hide. You know, we were fortunate not having any lawsuits or crazy things that happened. We run a pretty clean set of books for three years since I founded it. And so a lot of the questions we got that were the most challenging were really just around customers, people retention, what were plans to grow. We also shared with them we had a list of acquisition targets that we wanted to go after, and that’s part of the reason we took on an investment is I had never done M&A. I don’t know how to go to the capital markets and get money. And so we were looking for the expertise of a private equity partner that could bring both of those and take on some of the risk and let us take some chips off the table and recapitalize the company. 

Greg Alexander [00:09:27] So who was in the room? So it was it the same three you, your CEO, your chief strategy officer, plus a couple of people from your banker? And then who was in the room from the. Party? 

Matt Rosen [00:09:40] Yes, a good question. So we had two or three strategics and then three private equity platform meetings. And so when we met with the strategics, it would be their president, their head of M&A, and maybe a key person or two that we’re going to be involved in the integration that would be there. And we kept a really tight circle at later on the entire process. Almost nobody outside of the three of us knew other than our controller and our CTO, until the very, very end. We reveal it to them literally a week before we closed. And it was a really positive thing because we I give a lot of my rolled equity to our senior leadership team. It really sent them to stay. And so it was it was a good situation that we were able to explain. So during the strategic meetings, it was three or four people from their end, it was me, my CEO, Phil Leary, my Chief strategy officer, Trish Webb, that were that were in the room. And then literally the banking team head, Greg, who was the lead banker, and he had a team of four that were part of it to the transaction. And so it would be one or two of them that would be there for the meetings. One was the platform meetings. They were bringing the 2 to 3 folks that were going to be on our board. And so we got to see who we were going to be working with day in and day out over the next 3 to 5, seven year old period as we got to know them, because obviously those are the people who are going to be working with very closely. So there’s no bait-and-switch type scenario that we were talking to the folks that were going to be our board and our team until the next transaction. Yep. 

Greg Alexander [00:11:11] You mentioned Greg. That’s Greg Fink from Equity Tech, who’s also a member of Collective 54, and he was Matt Rosen’s banker. I’ve seen Greg execute these meetings. I’m assuming that Greg and his team played the role of facilitator. Is that correct? 

Matt Rosen [00:11:26] They did. They would tee up the meetings, they would organize that, they would get the agenda out ahead of time and they would keep things untracked. They were also really helpful when there was a really deep financial question asked, they were able to jump in, but for the most part it was the my myself and my senior leaders that really led the meeting and of really tried to have them do a lot of the talking. Obviously, they know the aspects of the business at a more detailed level than I did, and I was very fortunate to have Phil interest, you know, in the trenches with me preparing all the information and being there to present it and explain it to our potential suitors. 

Greg Alexander [00:12:01] Yep. And the content of the meeting was the same, correct? 

Matt Rosen [00:12:06] I’m sorry. 

Greg Alexander [00:12:07] The content of the meeting was the same as that, correct? 

Matt Rosen [00:12:11] The content of the meeting was the same, but generally what they were, it was very similar. They wanted to understand what was the founding story. What? How did we go to market? What did our customers look like? What type of work were we doing? What did we incent our people? And we retain our people? What differentiated us? What were our service offerings? And then it turned to, Well, if we become your partner, how are you going to grow? And that was more so in the platform conversations. They really wanted to understand who are we going to acquire, what strategic directions, where are we going to go, how are we going to expand our ability to go to market? When it was the strategics, it was more a conversation of how, how and where were we going to fit into their team? 

Greg Alexander [00:12:54] Yeah. Okay. You know, a point that I would like to add for listeners is that, you know, Matt suggested that he let his executive team do a lot of the talking. And that’s really smart. And that’s something that all of us should pay attention to, because when somebody is in a management meeting, an investor or strategic thinking about making an acquisition, they want to make sure that there’s a real team. You know, there’s not an overdependence on the founder because, you know, God forbid something happens to the founder, you know, does the firm fall apart? So it’s really important to have a solid management team in the management meetings. And I think that’s why these meetings are called management meetings, in part is to assess the quality of the management team. All right, Matt, one last question before we wrap it up here is, you know, was this a high-stress moment for you? And, you know, and looking back on it now, was the stress appropriate or were they easier than you thought they were going to be? Kind of give us a retrospective? 

Matt Rosen [00:13:49] Sure. Yeah. So I’m sitting here. The transaction happened in September of 2022. So we’re know, 13 months in now. And looking back on it, you know, the process itself was not quite as grueling as I had envisioned it to be, at least not the fireside chats and the management team meetings. I mean, I had to get together with people and talk about my business, and that’s what I do all day long. I would say it was by much more stressful for my CFO and Chief strategy officer, as well as our controller, who had to put together a lot of the documents in preparation meeting. I think they had a bit more PTSD around the process than I did. You know, the meetings themselves. We were very fortunate. We didn’t have to sell the business. Not everyone’s in that position. So we went into it and I started almost every meeting saying if I can’t look my people and my clients in the eye and tell them this is good for everyone, not just me and my leaders, we’re not going to do the transaction. So we were in a position of strength from a negotiation standpoint with with all the suitors involved. And we had a lot of suitors at the table. Kotek and Greg ran a great process and had a lot of good options for us. So we were fortunate and the timing was right. And so I would say the hardest part was once we signed and although I went through due diligence, you know, where I got most heavily involved in the negotiation of legal contracts and employment agreements, the non-compete and all all the equity structure, I would say that was the most stressful part was the last couple of weeks leading up to closing. But the process itself of getting people interested in our business and talking about what we do, I actually found that kind of fun. You know, the only downside to it and anyone who goes through the process is you’ve got to have people kind of running the business as you’re selling the business because it’s easy to get distracted. And I think this happens with every firm is, you know, the whole process, you know, either ends with a sale without a sale, but with key leaders not keeping an eye on the ball, the business things do tend to slip. And so I think an important thing to think about if you’re about to go through a process, is make sure you have people that can sell the business, make sure you have people to run the business because it becomes a full-time job being part of a deal team. 

Greg Alexander [00:15:53] Yeah, that’s good advice. It is all time-consuming for sure. Okay, so let’s just put a bow on this thing. So we’re breaking down the mechanics of an exit. And today we spoke about one element of it, which was this mystical thing called the management meetings. And we learned that there’s really two types is the fireside chat. And then there’s a formal management meeting, and we learned a little bit about what their goal is, why they happen, who attends them, how you prepare, what’s covered, etc.. And and we heard from Matt Rosen who recently went through this. So so Matt, on behalf of all the membership, as always, thanks for coming and giving back to the community. Really appreciate it. 

Matt Rosen [00:16:31] But be on. Thanks for having me. 

Greg Alexander [00:16:33] All right. Well, a couple of calls to action for those that are listening. So first, if you’re a member, look for the meeting invitation formats, Q&A session, where you can ask him your questions directly of these management meetings. We’ll go into much more depth and allowed on a podcast. If you’re not a member and you think you might want to become one, go to Collective 54 dot com and fill out an application. We’ll get in contact with you. And if you’re not ready for that, you just want to kick the tires and learn a little bit more. Check out my book called The Boutique How to Start Scale and sell a professional services firm, which you can find on Amazon. Okay. With that, That’s the end of this week’s episode. I wish you all the best as you look to grow, scale and sell your firms.

Episode 76 – How an IT Services Firm Built an Executive Leadership Team – Member Case with Matt Rosen

Matt Rosen

The quality of the executive leadership team is paramount as professional services firms grow, scale, and exit. In this episode, we speak with Matt Rosen, founder, and CEO of Allata. He shares how he structured his executive team to replicate himself, developed a succession plan, and spent time working on the vision of the future.  

TRANSCRIPT

Greg Alexander [00:00:15] Welcome to the Boutique with Collective 54, a podcast for founders and leaders of boutique professional services firms. For those that don’t know us, Collective 54 is the first mastermind community to help you grow, scale and exit your firm bigger and faster. 

My name is Greg Alexander. I’m the founder, and I’ll be your host today. And on this episode, we have the privilege of talking to Matt Rosen and the leader of a company called Allata, which I’ll introduce in a moment. We’re going to talk about building a quality management team, and how he’s done that at his firm and hopefully learn a few things along the way. So, Matt, it’s good to see you. Would you introduce yourself to the audience, please? 

Matt Rosen [00:00:54] Yeah. Thanks for having me on the show, Greg. So my name is Matt Rosen, and I’m the founder and CEO of Allata. Allata is a tech consulting firm based in Dallas with offices in Pheonix, Boise, and Provo. And what we do is we help companies with their most complex technology initiatives from a strategy, architecture, development, and data standpoint. 

Greg Alexander [00:01:14] Okay, awesome. And Matt, when did you find the firm to grow? 

Matt Rosen [00:01:18] I founded the firm back in 2006. It was just myself and a developer. And now we’re over 220 people and growing quickly. 

Greg Alexander [00:01:25] It’s an incredible story. It really is. Congratulations on all that. So let me set up the topic because I asked you that question about when you founded it and where you are today because you’ve scaled so fast. And I think one of the reasons why you’ve done that is because you’ve been able to build a quality management team, and I’ve had the privilege of meeting a few of them. 

And it’s a big subject because sometimes, founders that are growing like that hit a bottleneck eventually. And that is, they’re kind of the hero within a group of helpers. It doesn’t work, you know. There’s just too much work for one person. And you got to hire senior people or develop senior people. You have to give them enough autonomy to make the contributions that they need to make, empower them to be successful. And I think you’ve done a really good job with that. 

So I’d like to start with an opening question, which is at a high level, explain to the audience kind of the organizational structure of your leadership team that reports to you by role. Maybe, I don’t know if you need to mention names, what by role? And tell me how you came to that conclusion and why you built it the way you built it. 

The Structure of an Executive Leadership Team Matters

Matt Rosen [00:02:35] So where we’re at today is I really have three direct reports. I have a chief strategy officer and she owns sales,marketing,go to market offerings as well as our partnerships. I have a chief technology officer and he’s really looking forward to the technology direction, what new trends d we should be jumping on. He’s also my personal helpdesk when I run into issues. And then I’ve got a chief operating officer, so the Office Leadership Report is sent to him. 

So I have leaders for four different groups in the company. There’s Dallas, Pheonix, Virtual and Boise, and then he’s got all our back office functions from recruiting, H.R to finance. And so really everything falls to the three of them. And underneath them they’ve got leadership structures and sales and marketing, especially at a delivery level. There’s four group leaders that almost all the consulting resources roll into. 

And then we’ve got practice lead. So for strategy, for architecture, for product and design, for technology solutions and for data, we’ve got vice presidents that head up each of those service lines, if you will, and people are really matrixed across the organization into their office leaders, as well as the practice leaders. 

Greg Alexander [00:03:51] What I find remarkable about your story is you’ve been around five or six years. You’ve grown like crazy, and yet you personally only have three direct reports. Now, I know underneath those three, they have their teams, but that’s pretty remarkable. 

Sometimes I see guys and gals like you with eight to ten , and they’re living almost miserable lives because there are not enough hours in the day. So how did you get it so tight to only three? 

A Professional Services Firm Needs Great Leaders

Matt Rosen [00:04:18] Well, you have to have really good leaders. I mean, that’s really what it comes down to. You’ve got to have people that you can set goals for. You know, I’m not a micromanager. I’m not even really a macro manager. I said high level goals, and I get the heck out of the way. I hire bright people, you know, I do have one-on-ones with the three of them. 

And I probably talk to the layer below them at least every other week. But, you know, we’ve got a real structured way in which we do a sales meeting every Monday. We do an operations meeting every Tuesday. I’m always in on those, or people are sending me a synopsis of them. So it gives me just enough information really to run the firm. And it took a while to really trust folks and hand things off, especially in the sales arena. 

That was based on one of the recommendations you made when I was early on in the Collective was, “You’ve got to stop being the hero sales guy.” That was really hard for me to let go of, but I finally have found a leader who came from a large firm, and she brought a lot of process with her and is now leading the sales team and is a very effective seller herself. 

A lot of it comes down to finding people that are great at doing the things that you don’t or can’t do well, empowering them to do their job, and staying out of their way unless they’re just not meeting their goals. They know that people are going to do things the way you do them. And that’s okay. 

Greg Alexander [00:05:27] Yep. Okay. So, awesome story. I’m really proud of you for what you did on the sale side, and it was hard for you to let go because you enjoyed it. I remember talking just. 

Matt Rosen [00:05:37] I still get involved. I still get pulled in from time to time, but I’m not actively leading sales cycles. I’m spinning them up from time to time but I’m handing them off. 

Greg Alexander [00:05:44] Yeah. And it’s tough to let go of the things that you really like to do. So that’s a great story to hear that you’re doing that. I know that your company is not for sale, but given your growth, I imagine the phone rings. And one of the things that potential acquirers are always looking at as part of their diligence is the quality of the management team. 

So if someone came to you with an offer you couldn’t refuse, you know, some crazy number that you’d be ridiculous if you didn’t take it. Do you know who your successor is and who you would hand the firm over to? Or would you plan on staying after the sale? And then if you were to hand it off, does everybody get pulled up the org chart, so to speak, so that the thing doesn’t fall apart post-sale? 

Matt Rosen [00:06:28] That’s a great question. You know, we’re not for sale. If some crazy offer came along, I would foresee myself sticking around for a couple of years to make sure that there was a smooth transition integration. Ultimately, I built this firm because I didn’t want to work for others, and know I wanted to build a firm that was sustainable and successful with or without me. 

So, you know, there definitely is a succession plan in place that we’re executing on. There’s definitely a couple of folks that could, with some training and tenure, probably step into my shoes. Nobody’s replaceable. It takes time for them to grow into the role. 

And what we’ve got is a really good mix of people that were career consultants and a mix of people that were in the industry. I had a lot of clients that were VPs about those that I was going to work for me. You’ve got this really nice group of leaders that have either consulted their whole careers or sat on the side of the desk of those that we’re selling to. That adds a lot of credibility when working with clients. 

How Professional Services Firm Owners Can Leverage Executive Leadership Teams to Their Advantage

Greg Alexander [00:07:25] Awesome. Glad to hear that. Sometimes when I talk to members and I suggest that they do what you’ve done, I hear particularly from maybe the younger firms, those that haven’t reached the scale that you’ve reached. They say, “Well if I have all these people that are going to do all this stuff, what am I going to do?” Which I tell them, “Hold on, you know, you’ll have plenty. If things go well, you’ll never ask that question again. There’s going to be too much to do.” 

So now that you have put this great team in place and you’ve elevated yourself, what do you personally spend your time on? 

Matt Rosen [00:08:01] You know, I spend my time thinking about where we need to head next. From a company’s perspective, what geos we might want to go into, what offerings we might want to have. I spend time visiting with a lot of our larger clients and spending time with them just understanding what’s important to them. Like a lot of them are my close personal friends. I spend time talking with leaders as they need, you know, strategic advice. 

You know, they might call me and say, “Hey, we’ve got this situation. What do you think?” And they run things by me, you know. By putting this great leadership team in place, it allows me to actually get out and, you know, play a round of golf every now and again, which I hadn’t done in about 20 years. 

So that’s kind of nice fun that, you know, folks like you or, you know, clients that like to get out there as well and enjoy a walk ruined by golf. But, you know, there’s always things you can be working on, looking for ways to make the firm better or, you know, taking leadership courses. 

Um, you know, doing interviews such as this, and really being a thought leader in your space as well as looking for how can you grow the firm maybe through M&A. So we’re actively talking to a couple of companies that might be accretive and be good partners for us as we grow. 

The Importance of Letting Go When Building a Leadership Team

Greg Alexander [00:09:10] Yeah. So listeners what we just heard there is that Matt spends his time on the business, not in the business, spends a little time in the business in the right spots, but he has a team that’s doing that for him. So he’s pursuing the vision, the future. And unless somebody is dedicated to that vision, the future, it never happens. You are just constantly in reaction mode. 

Matt is being proactive now and he’s leading. He’s not managing. There’s a difference between managing and leading. And what we’re hearing from Matt today is he’s leading, which is a great role model for all of us to follow. Got one more question regarding the management team and the structure in particular. 

I know when I went through this process that you have gone through the thing that I was less willing to give up and I clung to the most, which was a flaw, and I didn’t do it the right way. This was a mistake. It came to investment decisions when money was going to get spent. I held on to this money like it was my first communion money. I was unwilling to let anybody, you know, make those decisions other than me. How is that handled in your firm? Do you approve all expenses or do people have authority to do these types of things? 

Matt Rosen [00:10:23] So in this, I would say over the last twelve to eighteen months, we’ve moved to a budget. As long as people are spending what’s in that budget, there is not a problem with it. In fact, they put the budget in, in some respects, to control me from spending too much on different things. 

Greg Alexander [00:10:36] But the budget was for you. 

Matt Rosen [00:10:38] So that was actually from a year ago. But we’re doing a good job and you know, we’re performing ahead of plan as a result of it. So, no, you know, again, that comes back to empowering people. I mean, the only thing I’ve not given up is, you know, I’m the only one that sends wires. 

But other than that, people have corporate cards, they have budgets they can spend on what they need, we have a good controller, you know, authorizes money to go out. And so most of that I’ve given up and people make a lot of decisions where we spend that budget that’s been allocated without my involvement. 

How Does Allata Create a Budget for its Professional Services Firm?

Greg Alexander [00:11:10] Yeah. Interesting. That’s really inspiring. In the budget process,  it sounds like this is a relatively new thing, let’s say, in the last couple of years. So how do you guys create the budget? Is it done once a year? Is it done at the beginning of the year, or the end of the year? How does all that work? 

Matt Rosen [00:11:26] Yeah, it gets done, you know, as the year is wrapping up. So towards the end of 2021, we set the budget for 2022. You know, we reviewed it with the group leaders. You know, we had them put in things that they wanted. We were meeting with sales and marketing and the, you know, the practice leads and everyone kind of put in their wish list, and we kind of whittle it down to what we thought we could spend in addition to where we think we could achieve from a revenue top-line standpoint. 

And so we review it monthly, we do at the end of each month kind of a financial review, see how we’re tracking. And you know, if we’re doing ahead of plan, we might spend more on certain things or make more investments in certain areas. But the big you know, the big thing for 2022 is making sure we’re focused on EBITDA, building a sustainable organization and, you know, spending where we need to and not spending where we shouldn’t. Yeah. 

Greg Alexander [00:12:17] It’s great that you review it monthly. It’s kind of like a variance-to-plan type meeting. 

Matt Rosen [00:12:22] Absolutely. We go through line by line in the major categories, see where we are under, and see where we are over. And you know, we adjust as necessary as we go into the next month, and at least for January, we’re on track. We’ll see how we’re doing for February next week. Yeah. 

Greg Alexander [00:12:36] You know, the hardest part about budgeting for me was the forecasting part of it. You know, it’s easy to look at what’s happened and you can do the variance to plan on that. But then if someone says, “Hey, what’s going to happen in six months?” 

It’s tough because professional services can be a little lumpy. And, you know, it’s not as much forward visibility as we might like. Have you implemented any type of forecasting system that sits on top of the budget that predicts the future? And if so, how’s that going so far? 

Matt Rosen [00:13:02] You know, it’s really a combination of two tools. You know, we’ve got a CRM tool, as most organizations do, and we try and put it in as much as we know. We’ve got, you know, kind of a four-stage sales process and just waited. So, we’ve got that, kind of that weighted pipeline. And we’re always trying to have 2 to 3 X or revenue plan and we do pipeline. It never turns out to be that much because we tend to be a little bit conservative, but we have that weighted forecast of all the deals that are in the pipeline, what’s coming as well as our forecast of what we think clients are going to do between now and the end of the calendar year. 

And then we invest in a professional services automation tool that allows us to see weekly how we’re tracking a plan, making sure hours are up to date. We also have some modeling scenarios where we can figure out, you know, based on the people we have available, you know, what type of team can we put together, what’s their profitability? Because for the longest time we only understood margin at a company level. We didn’t understand it at a project or client level. 

And now we have that visibility and that visibility is allowing us to make smarter decisions. You know, I think about consulting hours. It’s like bananas. They spoil at the end of each month. So you’ve really got to manage them tightly and ensure that you’re watching them and leveraging them and try not to leave anything behind. Yeah. 

Greg Alexander [00:14:15] Question on the PSA platform, which I’m so glad to hear that you’ve installed. I’m a big advocate and I think it really helps, particularly on those two items, project and client level profitability and managing that inventory. What advice would you have for younger, smaller firms on when it’s appropriate to progress to the point where you would install a professional services automation tool? 

Matt Rosen [00:14:41] When the Excel spreadsheet starts breaking. 

Greg Alexander [00:14:44] Which happens early. Yeah. 

Matt Rosen [00:14:48] It was probably better. My team had to push me for years and I don’t mind mentioning the tool. We were able to cut a pretty good deal with them and they had professional services that helped us implement it. The challenge is you do have to take someone senior and have them help line your  implementation. 

So it is an investment, one that I had to be pushed on for a while. I should have done  that sooner. We probably would have actually been a bit more profitable. I probably waited a year or two too long. But now that we have it and we are seeing returns from it, we are capturing time that we weren’t previously. 

It’s allowing us to model up skill sets and understand where we need to be investing. You know, it probably is something we should have done two years prior and my team pushed me for it, but I held off because I wasn’t ready to make the investment. But I’m glad they finally pushed me to do that. That mix of harvest and spreadsheets was no longer getting the job done for 200 plus people. 

Greg Alexander [00:15:44] Yeah, exactly. Well, listen, man, you’re absolutely knocking it out of the park. I mean, every single thing you’re supposed to be doing to be on the business and scaling the business is working really great. And your results back it up.

And I want to, on behalf of the membership, just thank you publicly. This is a big contribution. You’re a role model for many. And hearing your story and how quickly you’ve gotten to this point is an inspiration. So thanks for being on the show. 

Matt Rosen [00:16:10] Yeah, thanks for having me on the show, Greg. Appreciate it. 

Greg Alexander [00:16:13] All right. And for those that are interested in learning more about this subject, building a quality management team, and others like it, pick up the book. It’s called The Boutique: How to Start, Scale, and Sell a Professional Services Firm. You can find it on Amazon. And for those that are listening that want to meet really bright professional services owners like Matt, consider joining our community. You can find it at collective54.com. Thanks again, Matt. Take care. Matt Rosen [00:16:36] Thanks. Take it easy.