Episode 116 – How to Increase a Founder’s Income by Increasing Yield – Member Case by Ehsan Mirdamadi

The yield of a boutique is the ultimate measure of productivity. Yield is simply the average fee per hour times the average utilization rate. For example, $400/hour x 75% utilization rate = a yield of $300/hour. Increase yield and make more money. But, how? One effective technique is to tech automate service delivery.  On this episode, Ehsan Mirdamadi, Partner & CEO at NuBinary, explains that small service firms can now afford to tech automate service delivery by leveraging a fractional CTO (Chief Technology Officer).

Listen to this episode and learn how the fractional executive model has entered the technology office. Many Collective 54 members use fractional finance, HR, IT, and Legal executives. Now, they have the opportunity to leverage fraction technology executives. And those that do will see an increase in yield.


Greg Alexander [00:00:15] Welcome to the Pro Serv podcast with Collective 54, a podcast for leaders of thriving boutique professional services firms. For those who don’t know who we are, Collective 54 is a mastermind community dedicated entirely on the needs of leaders of thriving boutique pro serv firms. My name is Greg Alexander. I’m the founder and I’ll be your host. And on this episode I’m going to talk to you about tech automating the service delivery that you offer your clients and how that could help you expand margins. And we’re going to discuss a cost effective way and a less risky way of doing that by leveraging a fractional CTO. And we’ve got a great role model with us to help me with this. His name is, and I’m going to do my best here. Ehsan Mirdamadi. Was I close? Okay. Fantastic. Yeah. And. And this is what his firm does. His firm provides many things, one of which is fractional CTO services. So, Ehsan, thank you for being here. It’s good to see you. Would you please introduce yourself?

Ehsan Mirdamadi [00:01:29] Thank you. And this is Ehsan Mirdamadi, and I am the co-founder and the CEO of fractional CTO service company called NuBinary.

Greg Alexander [00:01:42] Okay. And say a first name for me one more time.

Ehsan Mirdamadi [00:01:46] Ehsan

Greg Alexander [00:01:47] Ehsan. Okay. Got it. I was saying Ahsan, Ehsan. I will do my best here to stick with that. I tell you what, for the rest of the show, you can call me Bob. All right, So. So the big idea here today is a lot of our members understand that automating service delivery through technology as a way to accelerate, scale, and expand margins. But many of them are not technologists, and they’ve wasted a bunch of money trying to do this, and now they’re fearful of trying it again. And usually when they waste a bunch of money is they go hire an expensive chief technology officer and they miss hire that person because they don’t know what good looks like because they’ve never hired one before and now they’ve retreated. So when I met Ehsan and he told me about his fractional CTO model, I was really excited about it because our members have leveraged fractional executives in other disciplines. CFO, head of H.R., Head of sales, etc. and the huge advantage of doing that is that Ehsan knows what good looks like. So if you are hiring a fractional cto from him, there’s a good chance that that person has been through a thorough screening process, and it’s the right person for you. So we’re going to try to take this concept of a fractional CTO and apply it to this unique use case, which is to leverage that person’s expertise to help you tech automate service delivery as a way to accelerate scale. So that’s what we’re talking about today. So let’s start with the very basics. So what is a fractional CTO?

Ehsan Mirdamadi [00:03:18] So fractional CTO offering is obviously a part-time engagement that allows us to bring in a senior chief technology officer into into the into our engagement with the clients. And and these CTOs that we are hand-selecting are the type of CTOs that have gone through their own journey and process of starting with an idea and understand the business objectives and really trying to marry the business objectives with of their technology development objectives, which in a sense means this is a obviously a senior role and that that essentially allows companies to think strategically about how they want to adopt or build technologies for their practice.

Greg Alexander [00:04:12] Okay. And how did you come up with this idea? Because this is fairly unique.

Ehsan Mirdamadi [00:04:19] So myself and my co-founders, we all consider ourselves CEO entrepreneurs. We have done our own a fair bit of experimentation with other ideas and also been able to begin to to engage ourselves and really. Be out there, try to bring ideas to life in other initiatives and other endeavors that we have had in our previous businesses or as consultants helping other businesses to do so. In our first encounter. And as we started coming up with ideas on how we can position better for what we do in the market, we essentially started gathering ideas from, you know, the ecosystem that we were part of the innovation ecosystem down here in southern Ontario. And also we started going through our journeys or personal journeys as we were doing the fractional sport and the CTO offerings or helping others. And so one of the key elements, a few of the key elements that we encountered was that for the most part, companies go through a multitude of iterations in what they build. They and that’s usually on average about three times before they figure it out how to do it properly. And that good around 50% of those projects actually fail. And also that, you know, they spend a lot of their capital into really building a tech component to their businesses. And so we realized knowing all of these facts essentially is pointing out towards this this conclusion that obviously we need to do something that increases the chance of success in these type of projects and also help the founders, the owners of the companies to essentially reduce their ultimate cost doing so. So we we started just experimenting with youth with a few different types of messaging to go out there and essentially talk about our work. And we realized that the CTO word is actually a good encapsulation of what we were trying to do is to talk to to our audiences about okay.

Greg Alexander [00:06:57] And for our audience, as you know, these are non tech companies, These are small services firms. But these days, technology is touching everything. And in order for them to scale, they have to figure out a way to automate through technology, or they’re going to have ballooning labor costs and never really get to substantial profitability. The surprisingly to you, I would imagine many people don’t know what a CTO does. I think this job to the to the folks that don’t come from the tech world is a little confusing and they’re not 100% sure of what it is that they do. For example, I was on the phone with a member last week and they hired a software development firm to write some code. But the spec they gave the software development firm, you know, what they told them to build just wasn’t well thought out. So they to your point, they tried it three times. They wasted a bunch of money and they never really got anything. And what I advise them on is, is they put the cart before the horse. They really needed a CTO to tell them what they should be building in the first place based on the needs of the business. So that’s my kind of layman’s explanation as to what a CTO does. Would you provide greater clarity, you know, if you were to describe to our audience members what a CTO does, what would you say?

Ehsan Mirdamadi [00:08:18] Again. I wanted to put our attention back on this warning that we think makes a lot of sense and resonates with a lot of our audience and in this case as well, is that CTOs are the CTOs main job is to make sure that they marry the business objectives, what are the technical objectives? So as you pointed out, if you go to any software development company, that’s their job to essentially learn from from the owners on what they’re trying to build. And they essentially go back and come back with a scope. And they they obviously and the bigger the scope, the better for them. Whereas a CTO would love to understand first that what what is it that they’re trying to achieve as a business objective for their for the institution, for the corporation? And so the whole conversation of really trying to understand what needs to be built starts with that. Otherwise, we technologists to try to be fancy with our I guess technology builds and we try to make it as as complex as it can be and start, adding more features and bells and whistles into it. But a CTO obviously would like to know if any of those features and components that they’re anticipating and imagine imagining for the ultimate solution actually makes sense and delivers on a very specific basis. So to just drill down a little bit more on this topic, on this idea. The CTO needs to understand who the who the users are for those platforms and what are they trying to achieve. Is it on the matter of, for example, storing information or presenting the information in a certain way and how they are used to going about, you know, doing certain things like, for example? If you are dealing with a institution that deals with their health data, with the patient data. It is important to really understand that from the from the day first you want to have some level of security and compliance, consider or not initiate an event. So obviously one and you want to make sure that the data is anonymous and so on and so on. And also that over time you want to make sure that the company understands that the software is simply like a living mechanism, which requires maintenance, which requires which requires, you know, we’re going through an evolutionary process every now and then, getting the feedback from the clients and really try to make it better as time passes by. And so as a CTO, you also be you should be looking out into the future to see what kind of challenges it may pose for that institution, for that company to essentially continue adopting new business practices and processes.

Greg Alexander [00:11:33] Okay, very good. Yeah, that was a great example of, for example, security and compliance around health care data and understanding who the users are. And that’s the big point that Ehsan is trying to make right now, which is this chief technology officer is a hybrid business person slash technologist. And as a result of that, and that’s the key element here, they really can help our members and founders of boutique process firms. Why shouldn’t a small services firm? Just go out and hire a full time CTO. Why rent a fractional CTO?

Ehsan Mirdamadi [00:12:14] There are many reasons for that. One of them is that you obviously don’t know what you don’t know as as a leader of your company. You may think that certain skill sets is just simply what you need for for your type of business. And so when it comes to the CTO world, there is a vast range of different types of technologies that people are exposed to, and maybe their experience, as it may seem relevant. It may not be as you may think. The other reason that we are seeing it more and more and often these things is that technology deals are becoming more and more complex these days. So the time and the era of when you could actually build and build an app and conquer the world with that what the Uber of the world did is over. The technology has become a lot more complex and has many different components to it, and so you probably won’t be able to find the CTO that has that bad range of expertise to be able to to achieve the goals and objectives, because what they are designed for, for that individual. So when it comes to fractional CTO often because our CTOs are exposed to a whole range of different things, not only through their own direct engagement with the clients but also being part of the cloud, and other CTOs that can essentially reach out to another individual from the team and say, I think I need a security expert or cybersecurity expert to take a look at this and say we are in the right. They need to be able to reach out to another person that understands the cloud architecture, for example, to understand if they are concerned about their scalability considerations. And so the list goes on and on. But it’s actually quite a big list starts with the business continuity again, compliance and high visibility considerations and audit things that it can provide us as a few examples. Yeah.

Greg Alexander [00:14:25] You know, I’ll share a real example with our members because they know Collective 54 and this might highlighted for it. You know, there used to be a time when we had a smaller membership and a member had a problem and wanted to speak to another member and it was this manual process they would call their customer service rep and say, Hey, do you know anybody that can do this has done X, Y, Z, and then would have to manually go through all of our members and and make connection for that person. So we obviously said, well, you know, when we get to a few hundred members, which we’re at now, that doesn’t work. It doesn’t scale. So we need to create a member directory in the member directory needs to be made public to our members and they should be able to connect with one another and have a robust search feature. So we engage with a CTO and and you know, I as the owner of the firm and all these assumptions as to what it should do and all this and and he said, Greg, you’re getting ready to make a bunch of mistakes If you keep going down, the path is going on, you know, you’re going to have to rebuild this thing several times. And he caused me to pump the brakes. He spent some time with the members actually understood from the member’s perspective, you know, what the typical use cases were and what they would want in the future functionality. So when we did it, we got it right the first time, which was hugely impactful for us because it was a better experience for members, it was a way better experience for our employees. It reduced my labor component and it was just a win for everybody. So it’s just a great example of how you can use technology as a service company to deliver service for your members or in your case, your clients. That improves the client experience and improves your P&L because now the tech is doing the service instead of a person, which means, you know, the tech works 24 hours a day with no bathroom breaks. Right? It’s just less costly and it will be forever. So I want to encourage everybody that’s listening to this. Here’s your call-to-action readers and listeners, is that you need to engage tech automation. I mean, it’s no longer optional. So if you’re a services firm and you don’t have a tech component, you’re falling behind. And if you think you can’t afford it, you’re wrong. You can because there’s this new concept called the fractional CTO. And if you engage with firms like this, you, you shift some of the risk to them. I mean, it’s their job to build the right community of fractional CTOs and understand what your needs are and give you the right resource. So it’s a lot more doable now than it ever has been and it’s a big win for you. So listen, thanks for being on the show today. It was wonderful to listen to you and hear about your company. I know you’re a relatively new member, but your presence means a lot because I don’t think our members are tapping this resources resource as often as they could. And the way we all get better is, you know, every time a bright person like yourself joins the community, collective wisdom goes up for everybody. So on behalf of everyone that’s listening to this, thank you so much, Ehsan, for being on the show today and for being part of Collective 54.

Ehsan Mirdamadi [00:17:32] Thank you so much for having me. And what I wanted to leave you off with this statement that we have, this thesis that every company on this planet is now becoming a type of technology company. And the same way that they required lawyers and accountants as a baseline, we think that they also require a CTO.

Greg Alexander [00:17:52] Yeah, I agree with you. I really do. And I think we’re going to agree with you more and more as time goes on. For sure. I mean, that old phrase, I forget who said it, but software is eating. The world is accurate and we have to develop this core competency in order to do well. So. Okay. So that’s the end of this show. Thanks for listening. And a couple of things for you. So members, be sure to attend the Friday Q&A session with Ehsan. I’m sure you’ve got a lot of questions. The devil’s always in the details, like how much does this cost, etc., etc. And we’ll address all that on the Friday Q&A. And if you’re not a member, but you think you might want to be and meet really smart people like Ehsan, consider joining Collective 54 and you can do so at collective54.com. Just fill out the contact us form and somebody will get in contact with you. And then lastly, if you’re not ready to join but you want access to content like this, consider subscribing to collective 54 insights. If you do so, you get three things every week a blog, a podcast and a chart, and you can find that also a collective54.com. Okay, Thanks for listening and look forward to the next the next episode. Take care.