Episode 99 – How a Software Development Firm Tripled Revenue in 18 Months by Using The $10,000/Hour Rate Rule – Member Case with Gregory Hausheer

Growing and scaling a professional services firm requires management of the firm’s lifecycle. On this episode, Gregory Hausheer, CEO at Lightmatter, shares how he is evolving the firm through 5-year phases to grow revenue, and how his firm is focused on productizing and tech enabling services.


Greg Alexander [00:00:15] Welcome to the ProServ podcast with Collective 54, a podcast with founders and leaders of boutique professional services firms. For those that are not familiar with us, Collective 54 is the first mastermind community dedicated exclusively to helping you grow, scale and maybe someday exit your professional services firm. My name is Greg Alexander and I’m the founder of this great group and I’ll be your host today. And on this episode, we’re going to talk about the life cycle of a firm. And what I hope to accomplish in doing so is to share some wisdom on how to compartmentalize your strategy. And what I mean by that is that our point of view is that growing scaling and selling a boutique processor firm takes approximately 15 years, and there’s usually three phases along the way. We call them Grow, Scale and Exit. And the firm moves from being what’s called an intellect firm to a wisdom firm to a method firm. Now that’s a generic framework, and it’s important to understand and have enough self-awareness to know where you are in your lifecycle. Because the way that you manage your firm and the resources that you commit will change based on where you are in the lifecycle. So we’ve got a great role model with us today. His name is Greg House Year and he runs a fantastic software development company in the health care sector. And he’s going to share his perspective with us on this. And he’s he’s got his own lifecycle, as I understand it. He’s methodically processing a few phases along the way that have some some timestamps on them. So. So, Greg, welcome to the show and please introduce yourself. 

Gregory Hausheer [00:02:07] It’s awesome and nice to see you and thanks for having me. Name’s Craig Cashier and I’m a founder at Light Matter. We’re on year nine of our business and we build digital health products. So we design and develop software applications for the world’s most promising health care companies with the ultimate goal of improving their lives for their patients. Our team is based in New York and happy to be here. Thanks for having me. 

Greg Alexander [00:02:36] Excellent. Fantastic. So I set it up. Talking about lifecycle. Now what I from my understanding, your. Deploying kind of a phased approach to the evolution of your firm. And I’d love to give you the floor and have you explain that to the audience. 

Gregory Hausheer [00:02:54] Yeah, absolutely. I think at a high level, when you look at the history of our company and the phases we’ve gone through, we have spent the majority of our time stuck, as many founders are, of boutiques and phases where they can achieve that escape velocity. And I think being very upfront, joining Collective 54 has helped us realize, hey, we can do things differently here. We have to get the right people in the right seats. We have to identify our high potentials. We have to also identify our top, top performers and get them in the right seats, too. And I think. Looking at our company, that’s something we didn’t do soon enough. We had our founders, myself and my co-founder, working within the business. Right, doing client work for too long. And I think one thing that we have been very methodical about now is removing ourselves from that and learning how do we scale, how do we delegate work appropriately, and how do we have the discipline to follow the advice that’s right in front of us. And that’s a very hard thing to do. 

Greg Alexander [00:04:08] So tell me a little bit more about that, because you’re right, this is a very common thing, particularly we have quite a few software development companies in collective and right now they’re all doing very well because, as they say, software is leading the world and you’re a great example of that in your niche. Sometimes I find. Engineers, for lack of a better label. They love doing the work, so it’s hard to give that up and focus on the business side of the firm. And I think because of that. It takes too long to get to scale because as you pointed out, if you’re doing the work, you’re really not building the firm. There’s only so many hours in the day. So you and your co-founder. Are you engineers by trade and does that portrayal accurately describe you or was there something else going on there? 

Gregory Hausheer [00:05:06] We are. And as you mentioned, engineers love to build. It’s an addiction. It’s so much fun. You have the power to create something and make magic happen with software. And with that comes design, branding, product design, user experience, user interface design. So you kind of have this full conveyor belt and spectrum of tools and team members on your team to go and build. And I think what we didn’t do soon enough but have done now, and I’ll say as we specialized as an agency, we went from a generic company that’s a design firm, not focused on health, to focusing on health around 2018. Then the pandemic came and we had an increase in business in about two years. We tripled our revenue because we specialized and especially because we stopped doing client work and we had a framework for doing that. We focused on what we call $10,000 an hour type of work, where if you think of what is the highest valued task that you can do, there are one or two key contributions to the company. What is that? And it’s clearly not client work. What it is, at least for my role and responsibility, is removing myself. So from the sales process, that’s one key contribution and something that I consider a $10,000 hourly task now. Another is ensuring our expertize is translated into our brand and our people through coaching. And when you take all the leaders on your team, whether it’s your CTO, your head of marketing, your head of your creative, coaching them and getting them out of that client work is it’s invaluable. It’s something that we have, you know, what I would call forehead tattoo or where you put it up on your wall, you put it up on your mirror. You don’t let anyone deviate from that because it’s so easy. You want to make that client happy and you really want to make sure the project is correct. But you have to take a step back and say if the work is 80 to 90% good to your standards, that is more than enough to delegate. 

Greg Alexander [00:07:16] Yeah. Yeah. You know, you’re using some terminology that you and I have talked about personally. It’s some of it’s in the new book, The Founder Bottleneck How to Scale Yourself. You talked about high potential employees and identifying who they are in a hybrid. Such employee is somebody who, yes, is a top performer, but also has capacity to do even more and a top performer, someone who is excellent at what they do, but they’re probably tapped out in terms of their contribution to the firm. So when I hear things like $10,000 per hour task work and you know, what is your key contribution to the firm? It really puts a smile on my face. You know, it takes us to this this life cycle question again, which is here you are in year nine and you’re executing all these things. And I’m confident it’s going to result in an exponential increase in scale. A lot of our members haven’t gotten to where you are just yet. They’re still in those earlier days that earlier part of the lifecycle and they haven’t had the epiphany yet. You had an epiphany and said, okay, I’ve got to do this differently. Or else like what was the the aha moment that got you to realize you needed to do this? 

Gregory Hausheer [00:08:32] That is such a good question and I wish there were a thought I had on a walk or bike or just sitting at my computer that was kind of that lightning bolt. But if I had to think of maybe a period of time where we realized, hey, this is how we kind of escape this, I would say it probably came during a period in the pandemic where we’re all working from home and we kind of have that pent up frustration and not being able to get in an office with your leadership team or even with your team members, maybe you’re fatigued from typing on the keyboard. You have your kids home or your family home and you think, Is this it? Like, I’ve got a client call to do and it’s 830 at night and I’ve also got all these other chores and obligations. And I think at that moment I realized. You know what? We have some people on our team who have been so loyal and so helpful and working with us for three or four or five. We even have one employee of our our boutique who’s been with us for seven years. So. Almost the entire history of the company. And I think we realized at that moment we need to delegate even more than we already are. It wasn’t like we weren’t delegating anything, but it came at a time when we said. There are some people we promoted and we have been so pleasantly surprised by how well they’ve done. I wasn’t sure if it was a title change or just a confidence boost. What happens if we do more of that? We need to take more experiments. We have to iterate. And at that moment, I think we kind of realized how powerful delegation is as a as a framework. And it’s you don’t think of it because you’re too busy to, you know, get out of client work and look at yourself running the business. 

Greg Alexander [00:10:19] Greg, tell me a little bit about the personal benefit that you have received by having this new mental model and delegating more than you were previously. 

Gregory Hausheer [00:10:30] I think it frees up your time to focus on more important tasks for the business. That’s $10,000 an hour ones and kind of like I’ve learned with Collective 54, right? The rules can be split up, but you have to have someone creating new lines of business, new revenue. You have to have someone closing that sale or being the face of the company. And then you have to have someone executing on the work. And those can be delegated to different people. Maybe split if you’re very focused on having a clear delegation of responsibilities. But we weren’t doing the thinking of new business. That role was absent because I was the one. Finding the sales and closing our CTO is the one to selling the work with the team is empowered. And I think now it’s allowed us to go from 1550 people and just a year and a half, you know, and triple revenue to sustain that is having free time. To allow the serendipity of our network in our sales clothes and have done opportunities as they come, rather than be reactive to the emails and the slacks and all the calls that come in budgeting time to allow that proactive behavior is the single most important task we’ve done. 

Greg Alexander [00:11:43] It’s just a great a great example. And just to summarize this a little bit for the audience, you know, and I’ll use the collective 54 framework three phases grow, scale, exit. Typically 15 years start to finish five years in each phase. And the growth stage where Gregg was previously, your you’ve launch your firm, you’re in survival mode. You’re doing everything, you’re selling the work, you’re delivering the work, you’re recruiting the team, you’re training the team. And that’s appropriate in that stage for those that are listening. If you’re doing that and you find yourself in that scenario, keep doing it and don’t necessarily work about scaling just yet. Right around year five, all of that varies quite a bit. You’re going to say, okay, so survival is no longer the task. I have a real business. Happy clients have the happy employees. We’re producing a profit, I’m making a living. So now what do I want to do? Do I want to stick with the lifestyle business? Do I want to scale it? And when I scale it, you enter the second phase. And the second phase requires a different management style, as Greg just laid out for you, the new life cycle phase. And in that case it becomes, as they say, cliché, working on the business, start in the business, it becomes the business side of the expertize business. So for example, you delegate, you locate who your high potential people are, you discuss what you want to delegate. When you want to delegate it, how are you going to delegate it? And if you’re able to pull it off, you know, maybe you might go from 15 to 50 people and triple revenue in one and a half years. I mean, that’s that’s the whole essence of lifecycle management of a boutique professional services firm. Now, Greg, I’m going to ask you to project out into the future. Okay. So you’re clearly in the scale phase right now and you’re scaling very nicely. And hats off to you and all the hard working folks in your firm. When do you foresee going into the exit stage, if at all, and what do you think the management method needs to be when you do that? 

Gregory Hausheer [00:13:46] One thing that I think is going to be critical for us to get to that phase and I’m going to borrow another term from you, but it’s having our roles as executives. My co-founder and I began even thinking, we don’t even have to worry about sales right now because we have a delegated sales process that is measurable with our high potentials running it. So what do we do now? The term is talent supply chain manager. 

Greg Alexander [00:14:12] Yep. 

Gregory Hausheer [00:14:13] All our role is now is focusing on finding quality people to fill in our delegated roles on that management chart, that org chart that are key contributions. And as our company grows, we’re going to be breaking rules part because there’s more to manage for each role. So my, my founder and I were really thinking deeply about how do we find the best talent? How do we coach and train them? What’s the right amount? Is it one day a week, 8 hours, 10 hours, 15 hours? It’ll vary. But I think if we really want to get to that exit phase, our marketing and sales humming along the work getting produces better and better every year. Quality is getting higher and so now it’s a people problem. And at the top all problems I think trickle up the sales and people it doesn’t matter if you’re technical, you’re creative. Learning to manage others and be a leader is something that we’re focused on for the next 4 to 5 years as we get towards. That’s a. 

Greg Alexander [00:15:10] Great answer. The talent supply chain, it is key. You know, if you think about what a professional services business is, it’s a people business. We sell hours. You may package them up however you want to package them up, fixed bid, retainer, time of materials, performance based, whatever you want to call it. At the end of the day, your inventory are the billable hours, which means the way that you grow and you scale and you exit as you produce more billable hours. Well, how do you do that? You hire more and more people, clients hire you, and then you deploy larger and larger teams and ever increasing rates. That’s how you scale. So what that means is you need access, regular, consistent access to high quality raw material. If you think about yourself like a manufacturing company and you think and you use the the metaphor, if you will, of a supply chain, what is your raw material or your raw material is human capital. So building a repeatable, steady stream of high quality raw material that comes in that you then can train to do what you do the way you do it for your specific client base. And I’ll pop on the other side a finished product. And where we often get stuck on scale is we’re always looking for we never have enough people like we. I hear that all the time. And that’s because you haven’t built a system. You haven’t built a supply chain. I mean, imagine a goofy example. Imagine Apple Computer. You know what? The phones well, if they didn’t have agreements in place with the raw materials, the chip makers, the glass providers, etc., they wouldn’t be able to keep up with demand. It’s the same thing in a professional services business. So you need the talent supply chain. Listen, I could talk to you about this forever and I can’t wait for our member live Q&A session. It’s going to be extremely well attended. It’s going to be a ton of questions. But today we’re we’re just, you know, having a summary conversation of it. And it was it was wonderful to speak to you about this in particular. And we love having you in the group. So thanks for being here. 

Gregory Hausheer [00:17:20] Thanks. Great. It’s been great and happy to help and appreciate the time. 

Greg Alexander [00:17:24] Okay, fantastic. So if you’re a founder, a leader of a boutique processor firm and you want to belong to a community of peers and meet great people like Greg, consider joining Collective 54 and you can apply for membership at Collective 54 dot com. And if you want to educate yourself more on topics like this one, subscribe to Collective for Insights, which you can also find at our Web site, Collective 54 dot com. There we have a chart of the week which is a visual expression of benchmarking data. We’ve got an award winning blog, we’ve got the weekly podcast, we’ve got a best selling book. So lots of good stuff there and and give that a try. And for those that are listening that that are tuned in every week, I appreciate that very much and thanks for listening and I look forward to the next episode.