Episode 86 – How a 43-year-old Marketing Agency Handled a Generational Transfer – Member Case with Rob Rankin

Decision making evolves as your firm scales and the founder must be replicated in the successor. On this episode, Rob Rankin, CEO at Clarity Coverdale Fury (CCF), shares his perspective on developing the next generation of the firm, with a focus on succession planning and how decisions are made. 


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 aren’t familiar with 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 and I’m the founder and I’ll be your host today. And on this episode, we’re going to discuss power. And when I say power, basically what I am referring to is how decisions get made inside of a boutique. And how that changes over time as we move through the lifecycle of a boutique from growth to scaled exit and even beyond. When the first generation is transitioned into the second generation and the second generation is transitioning to third generation and so on and so on, the decision making power dynamic tends to morph when that happens. That’s really important because decisions in a small firm are easy. There’s not a lot of them. They’re simple. They’re not complex. The founder who’s making the decisions can play the role of dictator because he or she is still really close to the business and has great instincts. But as you get bigger in, the founder or co-founders might be two or three steps removed from the day to day or the clients, you know, they might not be the best people to make decisions anymore because their inputs have changed quite a bit. So that’s what we’re going to discuss today. And we have we have a great role model, Rob Rankin, and Rob is in the middle of this. He has a really great perspective because he has been through a generational transfer and has a viewpoint from that standpoint. So, Rob, welcome to the show. It’s great to have you. And would you mind, please, giving a proper introduction of yourself? 

Rob Rankin [00:02:06] You got it. Thanks, Greg, and thanks for having me today. My name is Rob Rankin and I’m president and CCO of CCF, we’re a marketing communications firm that was founded in 1979 based in Minneapolis. And our sole world headquarters are still in Minneapolis. 

Greg Alexander [00:02:23] And what type of clients do you serve? 

Rob Rankin [00:02:26] About 60% of our book of business is in health care and health and wellness. And what we like to call we know health care from all four angles. So public health manufacture, payer and provider. 

Greg Alexander [00:02:39] Okay. Got it. And Rob, we wanted you to speak on this subject because as you just mentioned, your firm was founded in 1979, and right now it’s 2022. So there’s been a journey. And I’m sure the decision making power has changed over time and there’s been generational transfer. So if you wouldn’t mind, maybe kind of walk me through briefly that history from then till now and how the power dynamic changed. 

Rob Rankin [00:03:06] Yeah, so I joined the firm in 1998 and it was founded in 1979 by three Gentlemen’s Clarity, Coverdale and Furey. And in 1978, I was just an account guy and then grew up into a more leadership role account supervisor and ultimately running a department. It was also at that point in time where the gentleman who founded the company were getting ready to retire. One was very ready and the other two weren’t very far away. So over probably a 3 to 5 year period of time, we started to have discussions about a transfer. A few of us, what we call Gen two, formed a team and moved into that and we bought that firm in 2014. We’ve been running it successfully ever since. I’ve since lost one of my partners to retirement and another just is trying to retire this year. And we’re we’re going to get her out of the door to her own accord shortly here. And we’re building that Gen three team that can ultimately take it over from myself and my two other partners. 

Greg Alexander [00:04:13] Yep. And this progression. Gen one, gen two, gen three. You know, this is very common in professional services because it’s a people business. And very often there’s the next generation that wants to stay and wants to continue to do what they’re doing. And there’s an opportunity, if you handle it this way and handle it correctly, you know, for each generation to benefit for not only financially but in other ways. Rob When, when Gen one was transferring to, to Gen two, you and your partners, did it go as smoothly as you had hoped or was there, were there any bumps in the road? And what type of lessons might we learned from that, from that tale? 

Rob Rankin [00:04:59] Yeah, I’m super blessed in that it did go what I would say, relatively smoothly. Perfectly. Absolutely not. And the founding partner, Tim Clarity and myself used to say, because we intended at least to keep the name the same, that if we wake up five, seven years from now and no one know you guys bought it, it worked. And it worked really, really well. And that actually happened. I will say that there were some speed bumps early on as we were forming our Team Gen two and there was a person in place who just wasn’t going to be partner material. And so there were some really, really hard discussions that had to be had to let him know that. And to say that was what was easy. It wasn’t it wasn’t easy at all, but it had to be done or we would have been setting ourselves up not for success, but for failure. And so that was probably the most difficult thing. And then the other thing, at least from Gen two, is perspective being patient because we had we had a kind of a phased approach with each of the partners where they wanted to phase out over time for different reasons. And we allowed that to happen. And from an outside looking in perspective, it still appeared like they were in charge even though they weren’t. And that was important to them and it was okay with us. You know, it wasn’t something where we needed to be seen front and center. We also didn’t want to reinvent the enterprise. We didn’t want to rename it. We didn’t want to rebrand it. We didn’t want to blow the whole thing up. They had a model that was working and had worked for a really long time. And we felt the blow up, that type of equity in the marketplace would have been a big mistake. So that required a little bit of discipline, but we were able to do that as well. 

Greg Alexander [00:06:38] You know, what jumps out at me about your story is that, you know, you joined as a young account person and grew up to where you are right now, which means that those that Gen one did an excellent job of identifying high potential employees and grooming them to take over bigger and bigger responsibilities. That that happened in the typical kind of apprenticeship model where it was just through osmosis or was there some formal system put in place? 

Rob Rankin [00:07:05] It was really more of an apprenticeship model. Tim Clarity I tend to be the type of person that if you give me a lot of room to move, I work better. If you constrain me, I’m not good being micromanaged. And so that’s kind of the philosophy in the culture here. We hire really responsible people and let them do their way, do their job, and we do our best just to get out of their way. That doesn’t mean they don’t need coaching. It doesn’t mean they don’t need training. It doesn’t mean they don’t need mentoring of sorts. But but we let them do their job. And Tim allowed me to do that and allowed our media director at the time, Danny there to do the same thing and in and of it. She and I both kind of grew up together in the business and became somewhat area parents at the end of the day. Diane was probably interested in retiring sooner while she was. She’s already retired sooner than I and and she’s since moved on. And because of that, she didn’t want as big a share when we transitioned. But we had a third person internally who also had really was a finance person and had really great, great credentials in that space. And so she worked in that and she was interested in buying in a little bit more. And between the three of us, we found we found a good balance for each of us. 

Greg Alexander [00:08:21] Now, you mentioned buying, so I’m assuming there was some type of transaction that happened from Gen one to Gen two. And was it the traditional way where the first generation kind of set up, maybe like a sellers note and they transitioned a piece at a time based on profits that were being generated by the business? Or did you guys have to go out and raise the money to pull this off? 

Rob Rankin [00:08:42] No, we were really fortunate. There was an owner financed buyout over a five year period of time with an option for a year, six and seven, if needed, at the seller’s discretion. So we didn’t control that, and then we did have to have some skin in the game. So there was a certain percentage of the overall price that we agreed upon that we had to we had to go to a bank and we had a we had to find financing for that. And based on our individual percentages, that’s what we had to put up. 

Greg Alexander [00:09:13] And they structured that way because they wanted skin in the game. Or was that the only way to close the gap in price? 

Rob Rankin [00:09:19] They wanted to know that we were serious and 100% owner financed buyout, I think and I believe that it was the right decision for us. It was the right decision for them. They wanted to know that we were serious and that, you know, being able to have needing to go to a bank and taking out some form of a loan, you know, it it ratcheted things up just a bit. 

Greg Alexander [00:09:40] Right. And during that transition, let’s call it five years. Back to the main topic here, which was how decisions are getting made or the power structure externally. It was important to them to still be perceived to be in charge. But internally, you and your partners were running the firm. Sometimes this gets messed up because the generation that’s on their way out, sometimes they don’t want to give up control and they they stick their nose where it doesn’t belong at times. How did that happen at all? 

Rob Rankin [00:10:09] And in not to a not to a degree where it was terribly difficult to the partners that simply wanted their name still on the door, it was more that they just wanted to be seen as still the important person that started the company, and rightfully so. They’re fantastic gentlemen, their friends and mentors to this day. There was one that loves to do the work and is just passionate about the work and was an in 30 until the day he walked out the door. But it wasn’t difficult and there wasn’t anything that was acrimonious or needed, lawyers or anything like that. 

Greg Alexander [00:10:46] Okay. You know, and then Gen2 takes over and some of them are retiring, as you mentioned. Is there like a mandatory retirement age or is there some some rules around when somebody can walk out the door there? 

Rob Rankin [00:11:02] There aren’t, other than once you decide to walk out the door. The firm has up to ten years to purchase your stock at the firm’s discretion. I say so we can do that over time. But you can’t hold on forever. And you also can’t be the one that drives that. You can’t walk out the door and say, I want to get paid tomorrow. 

Greg Alexander [00:11:23] Very good. I mean, that makes a lot of sense. That keeps everybody on the same page there. It sounds like to me you had some great legal counsel that held your hand here and put these things in place to make sure that, you know, there was no unnecessary tension and drama. Is that fair to say? You had great counsel. 

Rob Rankin [00:11:40] We we had fantastic counsel. And my only disappointment is that he moved on and went and worked for his dad’s company. So he’s no longer my lawyer. So. 

Greg Alexander [00:11:52] And would you advise our members that might attempt to do this, not to do it themselves and find the right attorney to help? 

Rob Rankin [00:12:01] 100%. I would say that unless you’re an attorney yourself, and even if you are, it would be a mistake to try to do this without the one. Putting the structure in place from a legal standpoint. Kept us all in line. Yeah, we all knew the rules. We agreed to the rules, and we knew we had to follow them. And we did. Yeah. 

Greg Alexander [00:12:18] And that’s the important thing. And everybody agrees upfront, right? So there’s, there’s no surprises. And when I’ve seen this and I’ve seen it several times now, it’s very rare. Does a dispute wind up in court because of this? I mean, it was it’s friends cell and a friends, so to speak. And it’s a very natural, organic thing to do. And this is well-worn territory. This isn’t something for those that are listening. You don’t have to go invent the wheel here. I mean, this has been going on for a long time period just because it’s the first time that you may be doing it members. It’s not the first time that it’s been done. Okay. So now let’s fast forward a little bit. So your partners are retiring. At some point you’re going to retire and you’re going to have to go to June three. Do you plan on using the same approach or are things the world is different now than it was back in 1979, 1998, even 2014 does is the process still workers? Is it changing? Does it need to be modernized? 

Rob Rankin [00:13:13] I think it can work, but we have to be sure that certain components are in place. So right now we have one gentleman who’s actually a member of Collective 54 as well, because he’s brought in and is a partner and and he’s a candidate to take that lead. Now, we have to do a few things. We have to surround him with people just like I was surrounded with great team members to be a part of that. And so if we can do that over the next 3 to 5 years, then we’ll have a gen3 and I think it can work pretty seamlessly. If not, we do need a plan B, you know, whether that’s a merger and acquisition selling, where we’re bringing on talent to help round out that individual or surround him, I should say, with others that can help him with the day to day business. And then that’s an option too. So I’ve seen several people in our space, specifically marketing communications, be left at the altar by that internal person who was supposed to buy. And so I know that we do need a plan B. 

Greg Alexander [00:14:14] Yeah, I’ve seen that happen too, you know. And then also, I mean. Can you go so far as to think about zero on Jan three? Can you peak down to Jan four? Is that too far of a stretch? Too many years will pass by by then. 

Rob Rankin [00:14:27] I think for me I don’t I think by by the time I hand off the torch it’s it’s then there’s to have and I think that’s part of what really worked with us is the guys never came back and wanted to be back in the business. They let they let Jan to run it the way they they saw fit. And there’s also just a spirit and a culture here that’s been built, starting with Jan one, carried on by Jan two. That’s really important. Yeah. And it’s why I know that while it’s likely, maybe even probable that we could get more money if we did an external sale, it’s not in the spirit of the enterprise and what the guys were gracious enough to do for me and my other partners, we want to do for those that have been working with us side by side for years as well. 

Greg Alexander [00:15:11] Yeah, well, this is a great story. You’re a fantastic role model. This topic is underrepresented in the world. It’s not talked about enough. And the way these collectives work, ours and others, is that, you know, people have to make a deposit into the collective body of knowledge, and that’s how we all get smarter. And you did that today, and I’m very grateful. So on behalf of the members, thanks for being here and sharing your story with us. 

Rob Rankin [00:15:37] You got it. Thanks so much, Greg. And I’ll see you at the boutique on Friday. 

Greg Alexander [00:15:41] Okay. Very good. And for those that are listening to this and they want to learn more about this topic and all the other ones related to growing, scaling and exiting, if you haven’t already, pick up a copy of the book The Boutique, How to Start Scale and Sell a Professional Services Firm. And if you’re not a member and you’re listening to this and you want that type of tribal knowledge, which is very tough to come by and meet, really interesting people like Rob consider becoming part of our community and you can find that at Collective54.com. Thanks again, Rob. 

Rob Rankin [00:16:15] All right. Take care.