Episode 117 – How a Staffing Firm Productized a Service and Is Changing Lives – Member Case by Nish Parikh

Productizing a service seems scary and many Founders of service firms do not know where to start. As soon as you have decided to capitalize on it, productizing your service can lead to fast growth and large scale. On this episode, Nish Parikh, CEO at Rangam Consultants, funneled cash from his staffing firm into the development of a product called Talent Arbor. As a result of this innovation, Nish is helping those on the Autism spectrum build rewarding careers. Join Nish and hear how leading with empathy drives innovation and impact.

TRANSCRIPT

Greg Alexander [00:00:15] Welcome to the Pro Serv Podcast with Collective 54, a podcast from leaders of thriving boutique professional services firms. For those that might not be familiar with us, Collective 54 is the first mastermind community dedicated to the specific and unique needs of leaders of boutique professional services firms. My name is Greg Alexander. I’m the founder and I’m going to be your host today. On this episode, we’re going to talk about productizing a service and how by doing so, you can accelerate your growth rate and accelerate the pace of scale. And we have a great role model with us who is someone who just did this. His name is Nish Parikh. And Nish, welcome to the show and would you please introduce yourself to everybody?

Nish Parikh [00:01:04] Sure. Thanks, Greg! Nish Parikh, I’m co-founder and CEO of Rangam Consultants. We are a workforce solution company with the expertise in the DEI space where we are helping companies build, scale up, and manage their disability hiring programs and neurodiversity programs.

Greg Alexander [00:01:28] Okay, very good. So today we’re going to talk about how you just productize a service and you created this thing called Talent Arbor. And let’s start with just briefly. What is it? Please.

Nish Parikh [00:01:45] So Talent Arbor is a tech-enabled workforce solution for companies with interest in bringing in holistic talent. Talent with all abilities. And this platform is helping companies identify the jobs for this type and job in different roles to manage the complete end-to-end program when it comes to hiring people with a disability or people of neurodiversity talent.

Greg Alexander [00:02:21] Okay, now you ran your company for many years successfully without this product or a product, I might say. So why now? Why did you decide to productize your service now?

Nish Parikh [00:02:39] What we have experienced. There are two two components or there are two needs. We saw about two years ago. One is managing our services. When we are serving our customers with neuro-typical candidates and neuro-diverse candidate, we were managing in two different platforms, two different applications, two different processes. So I saw it first-hand and we said, How do we manage this? The back end of our services, utilizing a product, one platform. And then our customers started asking if they can do certain things, which was part of our platform. And that’s when this whole idea of productization started. And then in recent, during COVID time, we saw another opportunity where self-service model in this particular space is becoming more and more, you know, adaptable, are, you know, successful. So that’s another reason we said how do we take what we have built and build a cookie cutter kind of a model where we can replicate this and offer this services as a cost effective solution to our customers?

Greg Alexander [00:04:04] Fantastic. So for listeners out there, this is a very typical journey towards productization. It starts with you’re performing a service for a client. You want to do it more efficiently. So you tech-automate your service delivery, deliverable delivery, excuse me, tech-automate your service delivery. And that’s a tool that you use internally to perform the work. And that alone can significantly improve scalability and, quite frankly, profitability. Then very often you then make that platform after it’s built available to clients and they start using it either in exactly the same way or slightly different ways, and then it opens up new revenue streams. In this case, the self-service revenue stream. And then that is almost another multiplier of scalability. So this is why it’s it’s such an effective way to scale a professional services firm whenever you can automate. Now, a lot of people that may be listening to this are going to say, Yeah, I get it, but I don’t know how to do this. So I’m assuming at one point in your journey you didn’t know how to do it. So how did you get started and how did you pull it off?

Nish Parikh [00:05:12] Yeah, So we started we, we brought this whole process of cost productization into two parts. One is our team facing functionality. How do we first build that base so that we can we can serve our customers in a cost-effective way. So once we solved that problem, then the real process of productization started. So in that process, what we consider we created a one-year roadmap. And our first launching pad was something where customers were asking us for this particular type of activity every single day when they start the program. And so we identify those couple of activities and we we created the model for that. And now we have started chatting and offering these services as an add-on to existing services. So we have taken this multi-phased approach. So as we are building, we are going to go to the market and enhancing our existing services with our existing customers. But with the goal to offer these services as a brand new services to new customer. Once the complete platform is ready.

Greg Alexander [00:06:36] Okay. Now productizing the service is expensive. And it’s risky. So therefore, especially if you haven’t done it before, it’s. It takes courage to do that. So how did you muster up the courage to go down this path?

Nish Parikh [00:06:58] So in my. Entrepreneurial life I how I’ve been. Pretty unsuccessful. Couple of times in. So the courage was always doing that. And no matter what, because I’m going to fail, I’m going to take it. But the difference between all my earlier ventures where I have failed. I went a little bit out of the scope, out of my core business. So my first product was e-commerce product, which is completely different than staffing. Then my second product was on the education side, special education, which is kind of related to staffing and employment. But the benefit that this particular product, I see that what we are selling to our customers, our core customers, sixty customers, they are looking for this solution. So this particular fit is or this particular productization projects as compared to my previous. So that’s that’s how I see it, that there is the higher possibility of success.

Greg Alexander [00:08:09] Just a great reminder, you know, stick to your knitting, you know, stick inside your circle of competence, you know, and if your customers are asking you for something, listen to them. Build them what they want and they’ll probably buy it. You know, it’s just just great advice. You know, I think some of our members don’t understand the term neurodiversity, which I know is how you’re building your firm and it’s your passion and your mission. Would you mind explaining what that means?

Nish Parikh [00:08:35] You know, we all have way to do things. This is very simple. This is how I have a learning experience. Neurodiversity is when we bring in the workforce who has the building ability to think out of the box. We are all influenced by so many things, but neurodiverse is like considered individuals on the autism spectrum or ADHD. ADHD is also. And then there are a lot of other mental I would not call it disorders, but you know, we call mental conditions where these individuals, they think differently, they see the world differently. And that’s the beauty of neurodiversity.

Greg Alexander [00:09:26] Okay. And you’re helping companies place neurodiverse people into jobs in their company said, I understand that correctly.

Nish Parikh [00:09:37] Yeah, that’s like blitzing is only one piece because this is where a lot of people they. Because hiring people with disability or autism or neurodiverse is not new sustaining. That’s what I always say. We help companies sustain this talent and so that they are successful. That’s what we really do.

Greg Alexander [00:09:56] Okay. And this Talent Arbor system along with your other services, is is managing the lifecycle of that employee. So it’s not just placing it, but making sure they’re successful, you know, throughout their career.

Nish Parikh [00:10:11] That’s right. That’s right. It starts with identifying the right job. Okay. Using AI and machine learning, to setting up those trainings, capturing those checkpoints, onboarding the candidates, and then most importantly, sustaining them in one-connected as the one-connected community.

Greg Alexander [00:10:32] Okay, very good. So that was helpful to understand the context of our story of prioritization today. Just a couple more questions for you. The other obstacle that founders run into is they say, Yes, I understand I need to do this, but I’m already too busy. And productization is a big project. I don’t have time for this. And when I look internal to my team, you know, maybe everybody else is just as busy as me. Or maybe, you know, if there is extra capacity, you know, they’re not skilled in, you know, turning a service into a product. So how did you find the time to do this?

Nish Parikh [00:11:10] Yeah. So in our case, we were we were fortunate that one part of the team was already serving. Our internal tech team was already working on building this innovative thing, which was helping us compete with other competitors. So that was already there and that development expertise was there. So I would say we were fortunate to have that one core competency built in in the organization.

Greg Alexander [00:11:42] Okay.

Nish Parikh [00:11:43] And then then second is the second step is then allocate some additional resources to take that product to the next level. And one of the other very important thing, which we we did was we kind of mandated or kind of everyone contributed there 5 to 10% of their time in building this solution. So we created a dedicated innovation team and who met on a weekly basis to all the subject matter experts within the organization. They come to this call, they look at what we are building, and they provided their feedback. So it was a collaborative effort and that’s how we’re kind of building this the next towards the end of this platform.

Greg Alexander [00:12:34] Okay. So I understand how you’re investing kind of non billable hours is 5 to 10% into the building of the product. I’m also assuming that you were probably taking profits generated from the service business and funneling that into this prioritization. Is that correct?

Nish Parikh [00:12:51] Absolutely. So we are using our free cash flow and we are reinvesting into additional resources to take the product to. Yeah. Okay.

Greg Alexander [00:13:01] So were you able to fund the entire the entire development effort from the free cash flow from the service business?

Nish Parikh [00:13:08] Yes, that’s what we have done so far. But we are out in the market kind of looking for external. It’s not enough to to expedite because time is, as you know, great. And we want to go to the market as quick as possible. So.

Greg Alexander [00:13:25] Well, good luck with that. I know it’s not a friendly funding fundraising environment at the moment, but hopefully things will get better here. So, listeners, this is an important thing. So, you know, he had a choice to make. You know, the service business was thrown off free cash flow and he could either stick in his bank account and take some trips and buy some cars and things like that, or he could reinvest it back into the business to try to, you know, accelerate scale and grow. And that’s what he did. And you’re able to do this at least a version of it, by using your existing free cash flow. And there’s lots of advantages. Topic for another day to do that. My point in saying this is that it’s not impossible. It’s very doable. It’s not like you don’t have to go raise $100 million to go do this. I mean, you’re not a software company that needs venture capital money. You’re trying to tech automate, which is a different scope altogether. So the money and the time is there. And I want you to encourage you to try to make it happen. All right. Well, listen, we’re at our time window here, but I want to. For all the members, on behalf of all the members, I want to thank you for being with us today and tell us a little bit about your story. It’s a great, tangible example of how a service company has productized and the journey that you went on, and I wish you the best of luck with Talent Arbor.

Nish Parikh [00:14:44] Thank you so much. Thank you, Greg.

Greg Alexander [00:14:47] Okay. A couple of call, two actions for the group. So if you’re a member and you’re listening to this, be sure to attend the Friday Q&A session that we’ll have with Nish to talk more about this. That’s an hour long session. You’ll be able to ask questions directly of him and they’ll be a wonderful learning opportunity. Also, if you’re participating in the new e-learning products that we’ve come up with that support, the two books, The Boutique in the Front, A Bottleneck within the Boutique Companion course is a couple of tools I might direct your attention to. So the first one is a vision templates. So clearly Niche had a vision for what he wanted to do. So you need a vision to figure out where you want to go with your prioritization efforts. And then you double click on that. And there’s another template called the Service Roadmap template. So those two things might help you get your thoughts organized. And I wanted to direct you to those. If you’re not a member and you’re listening to this podcast in the public domain. You want to consider joining, go to Collective54.com. That’s obvious. Fill out a contact us form and somebody will get in contact with you. However, if you’re not ready to join but you want some more contact, you can subscribe to Collective 54 Insights and you’ll get three things on Monday. You’ll get a blog, on Wednesday you’ll get a podcast, and on Friday you get a chart. And it’s a good way to educate yourself further on these topics. And maybe that’s a way to get started in the pathway towards membership. Okay, So thanks for listening. This was a great episode and until next time, I wish you the best of luck as you try to grow, scale and exit your service for.

October 31, 2022March 8, 2023

Episode 97 – How a Data Analytics Firm Developed the Courage to Charge More for Their Services – Member Case with Craig Dreiling

Innovation is a new idea. A new service. A new business model. Boutiques that innovate grow and scale rapidly. Continuous innovators become the market leaders. On this episode, Craig Dreiling, CEO at Solutions-101 LLC, shares how his firm was able to innovate and create a new product that commands a higher price.

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 are not familiar with us, Collective 54 is the first mastermind community dedicated exclusively to helping you grow, scale and exit your professional services firm. My name is Greg Alexander. I’m the founder and I’ll be your host. And today we’re going to talk about a topic that’s not often discussed when we discuss process firms. And that’s the topic of innovation. And what I hope to accomplish today is to prove. That innovating a service can have just as much impact on the success of a processor firm as innovating a product can have on a product company. And we’re very fortunate today to have a role model with us. His name is Craig Dreilling, and he’s a member of Collective 54, and he’s going to be sharing part of his journey with us today. So welcome to the show, Craig. And would you mind giving a proper introduction of you and your firm?

Craig Dreiling [00:01:25] Absolutely. Well, first of all, thanks for having me and appreciate the opportunity to work with you and Collective 54. But I started a firm back in 2014, 2015, and it was in the dental industry and we started looking at certain aspects of the business side of dentistry and kind of found out that there is a demand for something that was never being fulfilled. And when we figured that out, what happened was, is that there were pieces of it that were being talked about and examined and explored, but there was never a holistic approach to the entire process. So I went in from a different method. And, you know, you always talk about experiences and collective 54 and that’s kind of what we had to do. You know, you can go to a theme park or you can go to a theme park and you can ride rides or you can ride rides. And that’s kind of what we were looking at. There’s this this adventure, this ride going on in the industry, and no one was really kind of explaining it or going through that process. So we were able to kind of capitalize on that and look at that aspect and go from there. So what resulted from that? Long story short, is that we became a medical data analytics company out of it wasn’t what we were looking to do originally, but that’s where it really fell into place and everything started clicking.

Greg Alexander [00:02:48] Why a medical data analytics company. One thing I love about Collective 54 is I run into all kinds of interesting businesses, and that is one that I’ve never heard of before. And the fact that it was born from the dental industry, which some might suggest is not the most exciting space in the world, is a really interesting use case. So let me set this up a little bit before I jump into the question. So what is innovation in terms of a professional services firm? What could be can be a new idea, as Craig to share with us. It could be a new service offer for the idea become the new service that generates revenue. Sometimes it’s even a new business model. Let me give you a couple of examples that have jumped out at me. So the great Bruce Henderson, who started Boston Consulting Group, which is one of the leading consulting firms in the world, I mean, way back in the day, he invented the experience curve, which we all now know that the first time you do something takes a long time and costs a lot. The hundredth time you do something, you do it a lot faster and a lot cheaper. That’s the experience curve. And he pioneered that and on the back of that Boston Consulting Group was born or let’s think about there was a time in the legal profession when the deposition wasn’t recorded. You could record the deposition that changed the law profession forever. There was a time in the accounting industry where there wasn’t a ledger. Could you imagine that? The ledger was an innovation. Or maybe today when we think about things like blockchain or the web design firm Wix, you know, web design used to be a process that was incredibly labor intensive. Therefore, it was expensive to update websites, come out with new websites, and these days it’s not through artificial intelligence. I mean, you can build a website in just a few, a few moments and it’s not very expensive. So these are all wonderful innovations that have happened in the process of space. The thing that’s often not talked about is the impact that can have on the financials of a company. So Craig, as I understand it, the team has told me that your firm is doing exceptionally well financially and we in comparison to other members through the process of benchmark data. It appears that you’re you’re doing exceptionally well in some key dimensions. For example, your sales cycle is about one third the average sales cycle of our members. Your average deal size, it looks like it’s gone up by a factor of five just in the last year. The amount of revenue generated from new clients is two X, the normal rate for most pro serve firms. So I want to make the leap that this is the result of your innovation. But before I make that leap, I want you to tell me, is that true or not? And what would you attribute all these fantastic results to?

Craig Dreiling [00:05:36] Yeah, I can confirm that’s true. Those numbers are true and that experience is true, and you can contribute that to a lot of things. First and foremost is the education that I’ve received and starting a business. And when I say education, that’s hitting the ground running, not knowing what you’re doing and trying to figure it out along the way. And I always tell any of our employees or anyone that, you know, ask. There’s there’s two types of people that start a business. There’s that type of person who has to have their business plan completed 100% every crossed, every I dotted. And they won’t start until it’s done. And then there’s people like me who have a general skeleton or outline of that business plan. And we go. And by doing that, you know, post COVID has really changed a lot of things. And it was a good thing for my business because it gave me an opportunity to examine what we were doing. And then just by happenstance, I fell under Collective 54 and it really kind of shined a light on some things that I was doing wrong and not understanding how a person farm or a business, a service form firm really needed to be functioning. That education just came from hard work, trial and error and learning from our own mistakes. And so, yeah, with what we’ve been able to do and how we’ve changed that, you know, going from a month to month type contract into a project based firm has really been what’s expanded the company, those labor wise, employee wise, regional wise. We function in every state in the United States and income wise.

Greg Alexander [00:07:27] So let’s discuss that a little bit. So the the switch from kind of a timing materials pay as you go month to month model. To a project based B and the impact that that’s had on the amount of revenue and margin that you make. Could you explain that a little bit more to our members that might be wondering what that means or maybe share an example or two? That would be a good illustration.

Craig Dreiling [00:07:55] Yeah. So when you innovate something, anything, the first thing you’ve got to figure out is, you know, what’s it worth? What’s this widget worth? What’s this process worth? And I didn’t know. I didn’t know how to calculate that. I didn’t know how to even examine that number. But what I did know is our clients were making six digit, sometimes seven digit returns on the work we were doing. And I mean, when I say we were getting peanuts, we were barely getting 1% of that. And so when we finally figured that out and we looked at and we said, hang on for the amount of work that we’re doing, it’s not the same in every situation because every office, every client, every doctor is different. We need to look at this as we’re doing a project, and once that kind of came into focus, it allowed us to say, okay, the amount of effort we’re going to have in this project is X, and if the client’s making, you know, ten times, 15, 20 times what that is, should we feel guilty for charging $60,000 for a client that’s going to make $500,000 return on their investment the first year? And that was kind of what we had to really figure out was how do you calculate that? What your worth. But what’s funny is Greg, after I kind of started looking deeper into some of these concepts and some of these member cases and studies, it really was. What’s the team involvement in this? It’s not an arbitrary number. It is really based on who do you have working on these projects and where do you go from that the cheaper you charge someone. The cheaper the work becomes internally. And one of the things we did when we went from a month to month to a project based firm was we changed not only the caliber of our team, but the caliber of our clients. And that was a game changer.

Greg Alexander [00:09:48] And you were able to change the caliber of your team and the caliber of your clients because you have an innovative products, product service being applied, medical data analytics in a very well-defined niche, and therefore the value that your client is receiving is exponential. So their willingness to pay, which is a a scientific term used in pricing, willingness to pay has gone up dramatically. So what that means for those that are listening is you switch from a pricing model that’s cost up. In other words, what is my manpower, my level of effort needed to pull off this project? What does that cost me internally? And then I throw a margin on top of that. That’s the incorrect way of pricing. The correct way is to start with what’s the value I’m generating for a client and what percentage of that value will the client share with me? And that determines the willingness to pay. And when you have. Fast revenue growth as Craig does and very profitable engagements that. You’re able to hire a different caliber of person and you’re able to go after a certain type of client because you have the funds and the capital to do so. That’s the byproduct of being innovative, and that’s what we all aspire to do. Craig Let me let me keep on this subject of innovation for a moment, because it’s one thing to innovate once and it’s another thing to have continuous innovation. Sometimes things can become commoditized over time. So how have you maintained this culture of innovation inside your firm?

Craig Dreiling [00:11:30] So one of the things in any type of medical setting is that it’s a moving target. The companies we have to deal with. So the major insurance companies that we have to deal with in the data we’re pulling, they’re forever changing. They’re creating lease networks with Company A, they’re buying regional companies. They’re dissolving lease networks with Company B, that process never stops moving because that industry is so big. And one of the things I looked at when I started doing this was, is this viable? I literally Greg, I started this in the front seat of my car. I’m not kidding. My wife was working for Johnson and Johnson and her salary was funding this project, all of this data coming in. And so we had just had twins. Oh, my goodness. Yeah. And so I had to look her in the face and say, hey, I think I’m on to something. But in the back of my head, Greg, I had to say, is this viable long term? Well, thankfully. Not everyone, but almost everyone has teeth. It’s nothing that’s going to go away. And so in this field, there’s really not a lot of outside threats that can happen, which means in order for us to stay viable and to answer your question, yeah, we’re always innovating. And one of the things we do is that we don’t market or advertise. We’re actually completely organically grown that our our target audience, you know, we do a lot with CFP, with CPAs, with private equity firms. You know, you would be surprised how many of these national chains are owned by venture capitalists and private equity. That’s a huge sector, but they see what we do. So they utilize our services because they know there’s nothing else out there like it. So we’re always trying to innovate around what the industry is doing to change. You know, you look at, you know, apps and cell phones and those things are always changing. So that’s something that’s always going to be around. Well, medicine is always going to be around. So, yeah, we’re constantly trying to figure out new ways to record the data, to display the data, to get the data out to the clients, to use that data. And I know, Greg, you didn’t say it, but you repeated it one time and it stuck with me. In God, we trust everybody else. Bring data. And that is what we do every day. All day is we bring the data.

Greg Alexander [00:14:00] Yeah. You know, it’s just a great example of the riches are in the niches and you know, medical data analytics in the delta industry, in the dental industry, excuse me is just, just a great example of that. I want to come back to something that you said, and maybe this is the last line of questioning. You talked about not feeling guilty about charging your clients a certain dollar amount. When I speak to members in our private one on one officer sessions, this topic of guilt comes up a lot and I explore it and it’s an emotional thing and it gets to our our perception of our own self-worth. Tell me a little bit about your own personal sense of guilt as it relates to what you charge clients and it ultimately, how did you overcome it and what advice would you give to those that are listening to this?

Craig Dreiling [00:14:51] So one of the biggest things about our clients is that, you know, a lot of them who need us can’t afford us. They’re in a situation where they’re saying, hey, you got to call this company and you’ve got to utilize them. They’ve got to fix your books. We’ve got to figure out why your revenue stream is not happening. So that’s one thing I kind of didn’t explain when we work with these clients is because they need to increase their revenue. So the only way to do that is through this data. And knowing that, knowing that the money they’re paying us every month is almost painful for them, but they don’t have a choice. They don’t have another alternative because to my knowledge and to the industry, no one does what we do the way we do it. And so knowing that they’re in a financial hardship, but we can get them to the end of the tunnel is kind of where I had to deal with this. And I had an office and I’m not kidding. It was our first seven digit return for an office, but there is three doctors and one practice and their first year we recovered over $1.4 million for them.

Greg Alexander [00:15:56] My gosh.

Craig Dreiling [00:15:57] And our bill, it was when I first started, they paid us $36,000. That’s when the light went off. I was like, wait a minute, we can’t I can’t be doing those kind of relies and not having the caliber of people I need on my team to do that. And so when I struggled with that, it was because I knew they needed our help. But I also needed to be able to employ the best of the best. My Chief Data Officer is PhD. Yeah, the data that comes out of here. So I’ve never seen anything like it. And so I know that by charging our clients what we charge them, they’re getting the best out of us. By not charging that number, I’m getting them to the goal. It’s just probably a little bit more painful along the way. So that’s really where I struggled and coped and came to terms with it.

Greg Alexander [00:16:51] Yeah. Well, what allowed you to do that and this is a topic for another day, is we have a very clear client around $1.4 million, the 36 grand. So for those that are listening to this, that’s what you’re striving for, is striving for not a squishy or soft cost justification, but a hard cost justification. And that often comes through innovation, you know, being able to do something that no one else can do and prove its worth. And if you’re able to do that, you can charge almost whatever you want. And the result of that is much faster revenue growth and much, much higher margins, which allow a lot of you to hire people like PhDs. Craig, I can talk to you about this forever, but you know, we try to keep these podcasts short to about 15 minutes. So we’re at our window here. But listen, on behalf of the membership, you know, the way that these collectives, ours and others work is, you know, we take from the knowledge bank, but we have to make deposits in the knowledge bank. You know, that’s how peers learn from peers. So you really provide a tremendous value for us today. On behalf of everybody, I want to make sure that I publicly acknowledge and thank you for your contribution to Collective 54.

Craig Dreiling [00:18:03] Well, thank you. I appreciate your time and I appreciate the opportunity to meet with these members and ask these questions and really get that. It’s kind of like the CliffsNotes version of what to do when running a business, and it’s been instrumental in us growing.

Greg Alexander [00:18:18] Fantastic. Okay, so for those that are in the professional services space, who want to belong to a community and learn from brilliant people like Craig, consider applying to Collective 54 and you can do that a Collective54.com. And if you would like to read more about this, in addition to listening to podcasts, you can pick up a copy of my book, The Boutique on a start scale and sell a professional services firm. You can find that on our website or you can buy it on Amazon. So thanks for listening. Thanks again, Craig, and we’ll talk to you on our next show.

Craig Dreiling [00:18:50] Thank you Greg. I appreciate it.

April 4, 2022March 8, 2023

Episode 68 – How to Disrupt a Large Market with Innovative Services

Member Case with Scott Conard

The service offering is how firms deliver value to their client. Designing it correctly is mission-critical. On this episode, we discuss how to re-think innovative services design by interviewing Scott Conard, Founder of Converging Health.

TRANSCRIPT

Greg Alexander [00:00:14] 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 from bigger and faster. My name is Greg Alexander. I’m the founder, and today I’ll be your host. And on this episode, I have the pleasure to talk to Dr. Scott Conard.

And today we’re going to talk about how to apply innovation to your service offering. And Dr. Scott’s got a great story around that. So welcome. Thanks for being on the show. And would you please provide an introduction about yourself andyour firm to the audience?

Scott Conard [00:00:55] Yeah, thank you, Greg. My name’s Scott Conard, my firm is Converging Health, we’ve been in business for the last seven years and we do ITconsulting for broker consultants and directly to corporations to help them decrease the costs and increase the value.

The Cost of healthcare

Greg Alexander [00:01:17] So, Scott, one of the things that the reason why I want to talk to you about this particular subject is that you’re going after a big problem, which I’m not going to do it justice, but the cost of health care for lack of a more precise term.

And you’ve been able to combine three interesting things, in my opinion, and I’d like you to explain this because there’s a point in all this and that is obviously human capital, expertise, technology and data to bring an innovative solution to market. So would you – would you explain to everybody about what your solution is and what it does?

Scott Conard [00:01:53] Absolutely. So, Greg, probably the best way that they can – those listening can relate to it is every year when you get your health benefit bill and they say, Oh, it’s going to be five, 10, 15 this year could be 15 to 25 percent more than it was last year, which honestly for manufacturing and service companies could destroy their bottom line.

And in fact, it has destroyed some companies. Bottom line. There’s this primordial scream. We’ve got to do this different. We’ve got to do it better. And I remember experiencing that back in the 90s when they would bring you my bill of the year. So what’s happened is that the health care industry has become 20 percent of the GDP. It’s gotten incredibly complicated.

Only 30 percent of the money that’s paid into health care is actually paid for care. The other 70 percent is middlemen in some way, shape or form -or fraud, waste and abuse. And so to get access to this and to understand what’s actually happening to your money, you’ve got to have technology, you’ve got to have the ability to analyze and look at how your money is being spent, which requires data analysis.

So being a doctor, having grown up in this environment, seeing all these perversions of what should be, you know, an employer paying money to get the employees andtheir family members excellent care. I developed an IP platform that takes the claims, pharmacy and eligibility and zeroes in on what companies are paying. And itelucidates where they’re being taken advantage of and what they can do to decrease their costs. So it’s it’s a minimal human capital, but you have to have human capital to go do the evaluation, but then technology and data to reveal what’s going on.

Innovation in services

Greg Alexander [00:03:35] It’s fascinating. And I mean, when I hear those statistics on, you know, 15 to 20 percent price increases anda small percentage of it actually go into care. I mean, I literally want to get sick when I hear those things.

But you’re right. I mean, I’m experiencing that myself, and it’s incredibly frustrating. So to me, this is an opportunity to disrupt a legacy industry and do something better, faster and cheaper than what is being done today. And I believe that you’re a disruptor, and that’s why I wanted to have you on the show.

And very often people don’t put the word innovation or disruption into the service bucket. You know, they want to talk about, you know, Elon Musk and Jeff Bezos or somebody like that. But here you are innovating in a very real way, in a very disruptive way. What – how did you get to this point? Because some of our members, they want to do this, but they don’t even know where to start. They think it’s so daunting that they they kind of give up on it. So what led you to this point?

Scott Conard [00:04:34] Well, Greg, the thing is, to be honest, I mean, I’m a family doctor, I’m practicing medicine, I’m watching the industrial – medical industrial complex put barrier after barrier afterbarrier in front of me is a doctor trying to care for people, and I’m seeing the price go up higher and higher and higher for the people paying for it. It doesn’t make any sense.

So for me, I started to dive into being a businessman and entrepreneur. I’m like, Well, wait a minute, this is crazy. There’s got to be a way to dissect this and understand it. And so my career was practicing medicine, becoming frustrated, building a group, trying to get leverage. That group got as big as 500 doctors at one time and still getting an appointment with, you know, Blue Cross, Aetna, Sydney United Healthcare was difficult.

We were doing $500 million of the business and they wouldn’t talk to me. But when that sold and I became the chief medical officer of a mid-size broker firm all of a sudden I could get their attention and they’d come talk to me. And – and so I realize now I was buying a couple of billion dollars worth of health care for the corporation.

So I, you know, started off as a doctor who figured out what to do. Then I was a leader of the physician group and figured out how traumatic the system was on doctors, both personally and trying to manage them, and then realized that the broker consultant world has tremendous leverage if they woulduse it properly.

And corporations through the broker consultant can do it. But unfortunately, the sophistication of health care has left behind the, I don’t want to say, intellectual abilities- , because there’s a lot of very smart people and brokerage consulting firms, but their model is very relational.

You know, let’s go play golf, let’s go to the club. Gosh, I love you, man. You’re my best friend. They’re going to have social IQs that are off the wall, emotional IQs that are really strong, but the analytic, scientific exploration they’ve had in their past, let’s just say there’s not that high.

So the broker consultant world has gotten left behind, and so they’ve turned to these really strange perversions to increase their bottom line. And that’s where we’re at today. So you’ve got these big brokerage houses. I give you an example, Greg, we just heard about last week is another example of the hundreds I’ve already known about. So these big consulting firms will say, Hey, if you want a transparency company or if you want a second opinion company, here are the three we recommend.

And little do both companies realize, but they make those three companies pay them a quarter of a million dollars to be on that list. And then when the bid comes through for those services, guess what? They’re raised to cover the broker consultants, you know, firms, you know, rider,kicker, if you will, and the broker consultant firm that is supposed to be representing the company and protecting the company is actually getting these other flows of income that have nothing to do with defending the company.

Greg Alexander [00:07:45] I mean, it sounds like an incredible conflict of interest. Is that is it even legal?

Scott Conard [00:07:51] That’s the rule, now. It’s not the exception, whether it’s insurance companies, you know, again, we could go through 50 examples for how insurance companies are doing very similar things to – to find revenue inside the flow. And the amazing thing is they won’t give people their data to look at it frequently, so they won’t even let you see what’s going on.

The broker consultants, some of them are pure consultants where they actually take a fee and they will not take these, you know, the – the broker part of it is where you get a lot of these perverse incentives, not the consultant side. So you can be very sure that you need to be careful about that. And then you know, you’ve got all the other middlemen, all these vendors point solutions. Literally billions of dollars of “quote-unquote” innovation health care, which actually at the end of the day ends up being additional fees to corporations. And that’s why the non-medical part of this has gotten so large.

The Converging Health solution

Greg Alexander [00:08:52] Hmm. OK, so your innovative solution, particularly in the data side, does what exactly?

Scott Conard [00:09:01] Very simply, we look at the contracts for a corporation with these different than, you know, the PBM. The insurance company and other contracts that are there and understand the flow of money, follow the money, you’ll figure it out. So we understand the flow of money. That’s my – that’s the people I work with. They’re the – the people who are more the… It will be divided into eight principles on each side. So they have the – each side that is the contractual and the fixed cost side of it.

I do the clinical evaluation to see are the people receiving good care? Do they have access to excellent providers? Are they using those providers? And are the incentives in the system set up so that they encourage people to engage in their health and to get taken care of? Or what we see more often than not now is if you actually lean into trying to take care of yourself, you end up getting hit with the big bills repetitively.

And so people withdraw from care and then they have things go a long time before they get intervened on. And then it’s very severe and very expensive. So I’m the clinician that’s looking at everything. We have the contractual fixed cost side that looks at everything, and we put that together and come back to the company and say, Here’s what’s working. Here’s what’s not working. Here’s what you can do about it.

And… I would say that 90 percent of the time, maybe 95 percent of the time, there’s 10 percent of what a company’s paying that can be fixed within the next enrollment period or the next cycle. You can get rid of 10 percent of costs.

With the clinical side of it, that takes a little longer within two years, two and a half years. You’re talking about another 10 percent of costs that can be removed, so you can think about the fact the average company is spending 10000 to 12000 dollars right now for their health benefits. And we are able to save 2000 of the 10000 over the next two years. It’s a tremendous value (per employee). Yeah, that’s per employee.

Greg Alexander [00:11:08] Yeah. I mean, that adds up in a hurry. That’s a big number. OK, so

Scott Conard [00:11:12] straight to the bottom line. So.

Convincing the corporate customers

Greg Alexander [00:11:14] Yeah, exactly. OK, so obviously incredibly innovative thing combination again of expertize data tech to go after this big, big, big problem in trying to disrupt it when taking something that innovative to market and calling on the end customer in this case, the big corporation. Are they… Is there a big kind of evangelism or education that needs to be done, or do they get it right away?

Scott Conard [00:11:42] No, well, the thing is, if you were t…o this is – this is the catch 22. If you were to meet with the CEO and CFO and you were to share what’s happening, how to figure it out, it’d be a relatively quick meeting. What happens, though, is they delegate everything to H.R. and H.R. Folks… I appreciate them. But they are not part of the C-suite. They do not get rewarded for innovation. They do not get rewarded for taking any chances.

And so you get a lot of – literally the first question I usually get is what is everybody else doing? How many clients do you have and who are they? Because they’re more concerned about job preservation than they are actually doing what’s right for the corporation? So you have to literally – the CFO wants to save money just as hard as they can. The H.R. wants to be no disruption, and the CEO wants to be very popular and make as much money as possible.

But what happens to me frequently I will be with the CEO or CFO. They’re like, We got to do this. They delegate me to the H.R. and you can never get it over the finish line, like no matter how hard the CEO or CFO told them to do it. It’s not the business they’re in. But most companies don’t realize, they’re running a health care business inside their business.

Greg Alexander [00:13:00] Yeah, it certainly sounds like it..

Scott Conard [00:13:03] Yeah.

Health Convergence early adopters

Greg Alexander [00:13:04] OK, now you’ve had some success. I know it’s whenever you’re bringing an innovation like this to market, there’s lots of obstacles to overcome andwalls to run through. But share with the audience a little bit about, you know, the early adopters or the innovators that you’ve been able to sell to. And and where does a firm stand right now?

Scott Conard [00:13:22] Okay. So we have about 40 companies that we’re working with. We’re working with a number of broker consulting firms. So the converging health is providing the clinical and IT support for a number of consulting firms, one in particular. And so we, you know, our growth, we’ve been 30 to 40 percent growth over the last two years. COVIDreally, as you can imagine, took some wind out of our sails.

We thought we’d be 40, 50 percent growth two years ago and go up from there. What we find is once we start working with somebody, we have incredibly high retention and they telland there areother people. So it’s very much growing dramatically as we get in and get things going.

So right now, we’ve got about 40 companies. We are the thing that’s fascinating to me, Greg, is Istarted off thinking, I’m going to serve self-insured companies in the mid-market where I get a YPO type leader who’s able to make decisions and we’re not delegated and we can make things happen. And that’s the segment that I’ve been focused on.

Believe it or not, I just got hired by a huge health care system in New York City, and because they said, what you’re doing is going to help us with our Medicare and Medicaid risk contracts. And so now I have a contract for one hundred and seventy seven thousand lives that the same I.T. analytics is serving. Ihave a captive of smaller companies that has hired us, that we’re doing that we’re doing their I.T. analytics.

And so what’s happening is that, believe it or not, the amount of pain, even at ten to twelve thousand dollars per employee that corporations are serving, they’re not willing to spend the energy to get it done frequently, even 40 of them. But that that’s a we would like to be 400 or 4000 and other segments are coming to us and saying what you’re doing matters and it makes a big difference.

So the federal government right now is forcing hospital systems to take financial risks for Medicare and Medicaid, and they’re like, Holy cow, we’ve got to figure out how to have people be healthy and spend less money and your system does that.

And so it’s an interesting life for me right now because those with whom I thought I would be serving, I think what’s going to happen is this year when they get told, Hey, it’s going to be 15 percent, 25 percent more next year for health insurance, they’ll they’ll, you know, there’ll be a premier, you’ll scream and maybe another 40 or 50 will come on board. And at some point in the next three years, this is just so unsustainable that the marketplace is going to there’s going to be ready to act and not just hear about it, get excited about it delegated and then come back a year later and say, Yeah, we should have done that.

Breaking assumptions

Greg Alexander [00:16:00] Yep. So, audience member, there’s there’s a lesson here that I want to underline through Scott’s fantastic example. When you truly are innovative ,and he isand you’re going after really large problem, which he is, you got to hang in there because sometimes the original assumptions proved to be incorrect and there’s new things that happen that represent wonderful opportunities, as we just heard with the federal government. So the lesson here is to remind ourselves on the adoption curve and the great Jeffrey Moore once wrote about the adoption curve.

And I’ll briefly summarize it here. Think of a bell curve, and whenever an innovation hits the market in the first place, it goes is the innovators meaning. And customers who like to be first. And they are willing to take a risk and experiment. Then it moves past innovators to the early adopter community, and these are people who also like to be early but not necessarily on the bleeding edge, but they see such a tremendous win that they’re willing to take a chance.

Then once you get solidified in that group, you make it to the mainstream market and then that’s when all the great things happen. And that early majority and that mainstream market is when things really kick into gear. So if you want to be an innovator, as Scott is, you’ve got to make it through those cycles.

And the way you do that is you just listen, you push as hard as you can into the market and you let a thousand flowers bloom because you never know where it’s going to take you. And that’s what it means to be an innovator. And so there are audience members who are trying to innovate their firms and disrupt other firms, larger firms and go after big giant problems, which as a percentage of our group, you got to hang in there as you go through those stages.

And hopefully you’re hearing from Dr. Scott today an inspiring story. I mean, he got to 40 companies, right? That’s a lot. You know, sometimes early firms get to one or two, or three or four, and they don’t get past that – I mean, 40 issubstantial. And now he’s got this new wonderful market segment to go after,g iven the recent success story of New York.

So, Scott, thanks for sharing your story. Today was inspirational. Every time I talk to you, I find myself rooting for you, and I hope that you keep pushing and you and you make it happen. And I hope those that are listening to this are inspired with by what what you’re trying to do.

Conclusion

Scott Conard [00:18:16] Well, Greg, thanks so much. And you know anybody listening to this. We do a free 30 day assessment where we take your contracts. We take your reports from Blue Cross United Cigna from last year. We do a bunch of work and then we come back and educate you.

And it may not be the first year that you get that, that you engage with. There’ll be a moment where you go, Thank God, I talk to them and I know and understand what’s going on, because that made us an additional X million on the bottom line, particularly when you sell and you get a multiple of five to 12. There’s no reason to be decreasing your EBITDA because you’re paying too much for health care.

Greg Alexander [00:18:52] So somebody that wants to take you up on that offer, how do they how do they get it?

Scott Conard [00:18:58] [email protected]. Just say, hey, I want an assessment done and we’ll reach out to you. We’ll get it done. I have a team around me that that does the basic work and that I lean in and have the final meeting with you that we’ll show you and educate you at what’s going on.

Greg Alexander [00:19:13] OK, awesome. OK, so for those that are interested in this subject and others like it growing and scaling a firm, check out the book The Boutique: How to Start, Scale and Sell a Professional Services Firm. You can find it on Amazon.

And for those that want to meet really interesting people like Scott, consider joining our mastermind community. You can find it at Collective 54.com. Scott, thanks again and enjoy the rest of the conference, and hopefully I’ll see you soon.

Scott Conard [00:19:42] Yeah, Greg, it’s been great being a part of Collective 54, it’s added so much to our corporation. I’d really encourage everybody hearing this to think about it and join. Greg Alexander [00:19:50] Hey, thanks for saying that. I appreciate it. Be good.

June 21, 2021June 28, 2023

Episode 36: The Boutique: The 3 Commandments of Service Design

Collective 54 founder Greg Alexander discusses how to re-think service design and delivery to accelerated profits.

TRANSCRIPT

Sean Magennis [00:00:15] Welcome to The Boutique with Capital 54, a podcast for owners of professional services firms. My goal with this show is to help you grow scale and sell your firm at the right time for the right price and on the right terms. I’m Sean Magennis, CEO of Capital 54 and your host. On this episode, I will make the case there are three commandments of service design. The service offering is to the founder of a professional services firm, what the product is to the founder of a product company. It’s how they deliver value to the client and designing it correctly is a mission critical task.

Sean Magennis [00:01:01] I’ll try to prove this theory by interviewing Greg Alexander, Capital 54’s chief investment officer. Greg is actually one of the pioneers in service offering design in the boutique professional services industry. His approach has helped many founders rethink how they deliver their service value, leading to accelerated profits. Greg, great to see you. Welcome.

Greg Alexander [00:01:29] Good to be here.

Sean Magennis [00:01:30] OK, Greg, let’s jump in. Explain to our listeners why they should care about this subject.

Greg Alexander [00:01:36] OK, so many founders and executives leading boutiques are not imaginative when designing their service offerings. They do not think about how to design the service in a way that increases the value it brings to clients while simultaneously decreasing the cost to deliver it. So let me share a story to make this point. Not too long ago, I met a brilliant bookkeeper. She developed a way for small business owners to outsource bookkeeping for one hundred and nineteen bucks per year. Her prospects are those who do bookkeeping in-house, paying internal staff on average 40,000 dollars per year. She is, get this, three hundred and thirty six times cheaper for the same service as you can imagine, she is shooting ducks in a barrel and growing like a weed. So how did she do it? She reimagined. Our bookkeeping should be performed by uniquely blending technology automation in offshore labor. This is an example of a boutique founder winning because of intelligence service design.

Sean Magennis [00:02:42] Geez, I would not put growth and bookkeeping in the same sentence, but it seems to me this is a commodity service with an with an attractive growth prospects.

Greg Alexander [00:02:52] When I met her, I entered the meeting with the same assumption and she corrected this false assumption by telling me that she is one of a 183,000 bookkeeping firms in the U.S. That is a lot of firms, a lot of firm owners making money in the bookkeeping space.

Sean Magennis [00:03:09] And why are you attracted to such a crowded field?

Greg Alexander [00:03:13] I am attracted to her because she’s going to take lots of share. For instance, her typical competitor charges a small business owner sixty two hundred dollars per year for the same service. The way this will play out is more and more small business owners will outsource bookkeeping because of the 40000 dollar per year internal cost mentioned earlier. When these new prospects enter the market, they will look at her service at 119 dollars a year in her competitor’s service at sixty two hundred dollars a year. She’s going to win a lot of deals and take a lot of share. She just needs to get into as many deals as possible. Her close rate will be crazy high. This is why I’m attracted to her.

Sean Magennis [00:03:55] Greg, this is a great story. What lessons should the audience take from this?

Greg Alexander [00:04:00] Gosh, there are many. Let me share a few. So the first lesson is to be imaginative with designing a service. Too many boutique founders, a conventional in this area, for example, they turn their expertize into a methodology. They hire expensive domestic labor, train them on it and take it to market. This conventional approach constrains growth. Why? To earn an acceptable margin on this, a founder must charge a certain price and sometimes his price will price them out of the market. As you can see in the bookkeeping story, a little tech automation and offshore labor can go a long way. The second lesson is commodity services are ripe for disruption prior to meeting her. I would not have believed that bookkeeping is a growth industry and in the aggregate it is not. But she is a growth company. What is different between her and her industry? Intelligent design. The third lesson takes us to the three commandments of service design. Are you ready for them?

Sean Magennis [00:05:00] Yes have at it.

Greg Alexander [00:05:01] OK, so clients are boutiques for one of three reasons. The first reason is you can do what they can do better. The second reason is you can do what they can do faster. The third reason is you can do what they can do cheaper. Ideally, the boutique combines better, faster, cheaper into a single value proposition. And when I say better, faster, cheaper, I mean in relation to the alternatives, which can be internal staff, other boutiques, the big firms, etc.. So the three commandments of service design are better, faster, cheaper.

Sean Magennis [00:05:38] Excellent. I understand the three commandments better, faster, cheaper. How should we listen to put them to work in his or her business?

Greg Alexander [00:05:47] I suggest two immediate actions. First, screen all your current service offerings against the Three Commandments. If they are not clearly better, faster or cheaper than the alternatives, redesign them or sunset them. Second, screen your service roadmap against the Three Commandments. Do not bring a new service to market until you know for sure it is better, faster and cheaper than the alternatives.

Sean Magennis [00:06:13] Greg, that’s great practical advice. Thank you. Of course, this assumes our listeners have a service roadmap, but that is a topic for another day.

Greg Alexander [00:06:22] It is.

Sean Magennis [00:06:26] And now a word from our sponsor, Collective 54, Collective 54 is a membership organization for owners of professional services firms. Members joined to work with their industry peers to grow scale and someday sell their firms at the right time for the right price and on the right terms. Let us meet one of the collective 54 members.

Jessica Nunez [00:06:52] Hello, my name is Jessica Nunez. I own TruePoint Communications. We serve a company’s marketing needs with B2B and consumer services. Our clients turn to us to propel their brand forward through marketing, public relations and social media. We solve this problem by providing a custom marketing and communication strategy tied to business goals and designed to meet the unique needs of their core audience. If you need help with awareness for your business that propels your brand forward, visit our website at TruePointAgency.com.

[00:07:27] If you are trying to grow scale or sell your firm and feel you would benefit from being a part of a community of peers, visit Collective54.com. OK, this takes us to the end of the episode, let’s try to help listeners apply this. We end each show with a tool. We do so because this allows a listener to apply the lessons to his or her firm. Our preferred tool is a checklist and our style of checklist is a yes-no questionnaire, we aim to keep it simple by asking only 10 questions. In this instance, if you answer yes to eight or more of these questions, your service design is working for you. If you answer no too many times your service design is likely getting in the way of your attempts to scale. Let’s begin.

Sean Magennis [00:08:27] Number one, are you offering a service that clients already by? Number two, are there many legacy firms providing the service? Number three, are these legacy firms ripe for disruption?

Greg Alexander [00:08:45] Yes, I mean, one, two and three, if you answer yes to those three questions, I mean, you’re in a great space.

Sean Magennis [00:08:49] Yep.

Greg Alexander [00:08:50] Just outmaneuver everybody.

Sean Magennis [00:08:52] Number four, can you use less expensive labor to deliver it?

Greg Alexander [00:08:57] And that’s where to start, because 80 percent of the cost structure is is human capital.

Sean Magennis [00:09:01] Number five, can you use technology automation to streamline it? Number six, can you perform the service better than the alternatives?

Greg Alexander [00:09:13] And that’s in the eyes of the beholder. The client.

Sean Magennis [00:09:14] Right. Number seven, can you perform the service faster than the alternatives? And number eight, can you perform the service cheaper than the alternatives? Number nine, can you combine better, faster and cheaper into a single value proposition? And number ten, are you staying away from the latest fad that might not have staying power?

Greg Alexander [00:09:45] So number 10 may appear to be out of place when compared to one through nine, but it’s been there for a reason, and that is sometimes boutique owners think the only way to grow is to get into the new thing. And as you saw with bookkeeping, that’s not true. You know, if you’re in a large, quote, commodities market, then be the disruptor. And if you are the disruptor, meaning you do things differently, can make a lot of money in traditional marketplaces.

Sean Magennis [00:10:08] That’s what I love about this Greg, it’s introducing contrarian thoughts, very powerful. So in summary, entrepreneurs often do not put innovation and service design in the same sentence. Boutiques do not look at themselves as disruptors. The innovator label is most often only applied to leaders of product companies. Yet the facts point in another direction. 67 percent of the US economy comes from the service industry, and 49 percent of the workforce is employed by small businesses. The biggest opportunity for you is to disrupt the legacy professional services sector. If you enjoyed the show and want to learn more, pick up a copy of Greg Alexander’s book titled The Boutique How to Start Scale and Sell a Professional Services Firm. Thank you, Greg. I’m Sean Magennis and thank you for listening.

May 17, 2021June 28, 2023

Episode 32: The Boutique: The Anatomy of the Buy vs. Build Decision

To sell your firm you must prove to a buyer that buying your firm is a better move than building the practice internally. Collective 54 founder Greg Alexander reviews a framework to assess the buy vs. build decision from the perspective of an investor.

TRANSCRIPT

Sean Magennis [00:00:15] Welcome to the Boutique with Capital 54, a podcast for owners of professional services firms. My goal with this show is to help you grow scale and sell your firm at the right time for the right price and on the right terms. I’m Sean Magennis, CEO of Capital 54, and your host on this episode. I will make the case that to sell your firm, you must prove to a buyer that buying your firm is a better move than building the practice internally. I’ll try to prove this theory by interviewing Greg Alexander, Capital 54’s, founder and chief investment officer. Greg has developed a framework to help you think through the buy versus build decision from the perspective of an investor. Greg, great to see you. Welcome.

Greg Alexander [00:01:11] Thanks, Sean. Good to be with you today.

Sean Magennis [00:01:13] So allow me to set the stage a bit before I begin asking you some questions. When considering an acquisition, a strategic acquirer starts with a fundamental question. Should we buy this boutique or build the practice internally and owners who want to sell their boutiques must make it more attractive for a strategic to buy. Greg, in this context, what makes it more attractive to buy?

Greg Alexander [00:01:41] Three things. Time, cost and probability of success.

Sean Magennis [00:01:46] So time, cost and probability of success. Let’s take this one at a time when you say time. What do you mean exactly?

Greg Alexander [00:01:56] Sure. When a strategic buyer is looking at acquisition it is often to fill a gap. The market shifts and at times larger firms portfolio of service offerings falls behind. Clients are asking them for help in a certain area and they cannot deliver. So they must often miss the revenue opportunity. This gap can be filled either by building the capability internally or it can be filled by purchasing a firm who specializes in the area. The urgency on which the gap needs to be filled drives the timeline. If the market allows the strategic enough time to build the capability internally, they will. However, if the market is moving very fast, the strategic will buy a boutique. This gives them the capability the day the deal closes. And this is much, much faster.

Sean Magennis [00:02:49] Excellent. That this makes total sense. So let’s now turn to number two cost. So in this context, how does cost impact the buy versus build decision?

Greg Alexander [00:03:01] Well, cost is just as important as time. So, for example, right now, marketing agencies are buying up tech specialists. Why? Their clients are demanding more and more digital capability from them. And it is very expensive to build this out internally. Those who have tried to do so have failed miserably and paid a lot of dump tax. It is much more cost effective to acquire boutiques with specific digital capabilities.

Sean Magennis [00:03:33] I can see that, Greg, and there are many examples of multi-million dollar technology mistakes. Number three is probability of success. I think I know what you’re referring to here, but please expand for the audience.

Greg Alexander [00:03:48] So probability of success is often added to time and cost when deciding to buy or build. Professional services firms are only as successful as their reputation allows. A few high profile failed projects and a firm could become worthless overnight. When a large firm expands into new service areas, they are putting at risk long standing client relationships and millions of dollars of annual billings. They cannot afford to stub their toe, so they often buy and pay up great boutiques just to be sure this is going to work.

Sean Magennis [00:04:30] These are great examples, Greg. So this three point framework to think through the buy versus build decision from the viewpoint of the buyer is very helpful.

Sean Magennis [00:04:43] And now a word from our sponsor. Collective 54, Collective 54 is a membership organization for owners of professional services firms. Members join to work with their industry peers to grow scale and someday sell their firms at the right time for the right price and on the right terms. Let us meet one of the collective 54 members.

Charles Fenstermaker [00:05:09] Hello. My name is Charles Fenstermaker. My family owns CH Fenstermaker and Associates LLC. For over 70 years, we served customers in the energy market as well as state and municipal governments, primarily throughout the Gulf Coast region. Our clients turn to us for help with projects dealing with surveying and mapping, civil engineering and environmental regulatory challenges. If you need our help in the surveying civil engineering and environmental regulatory space, you can find us at www.Fenstermaker.com. That’s www.f-e-n-s-t-e-r-m-a-k-e-r.com.

Sean Magennis [00:05:49] If you are trying to grow scale or sell your firm and feel you would benefit from being a part of a community of peers, visit collective54.com.

Sean Magennis [00:06:05] So this takes us to the end of this episode. And as is customary, we end each show with a tool. We do so because this allows a listener to apply the lessons to his or her firm, our preferred tool as a checklist. And our style of checklist is a yes, no questionnaire. We aim to keep it simple, by asking only ten yes-no questions. In this instance, if you answer yes to eight or more of these questions, strategics will find buying you is more attractive than building internally. If you to no, too many times strategics will most likely decide not to buy you and instead build internally. Let’s begin.

Sean Magennis [00:06:48] Question number one, as the market shifted, creating a gap in the service portfolios of the market leaders in your niche? Number two, are these market leaders aware of this gap?

Greg Alexander [00:07:03] Don’t assume that sometimes these big firms are just plotting blind. Yeah.

Sean Magennis [00:07:08] Number three is the gap, one that urgently needs to be filled? Number four, have you directly competed with the market leaders on a deal in this specific area? Number five, did you win?

Greg Alexander [00:07:25] Yeah, I mean, the quickest way to get people’s attention is be to beat them at that deal.

Sean Magennis [00:07:29] Question number six, do the market leaders know they lost to you? Number seven, do they know they lost because you have a capability advantage over them?

Greg Alexander [00:07:40] This is key. Very often they assume they lost because you were cheaper. What would be fantastic if the listeners could pull this off, is you competed head to head, you won and you were more expensive than them. That will really catch their attention.

Sean Magennis [00:07:54] Outstanding. Number eight, if they were to fill the gap, would it be faster to buy you? Number nine, if they were to fill the gap, would it be cheaper to buy? And number ten, does their probability of successfully filling the gap go up if they buy you?

Sean Magennis [00:08:16] In summary, the buy versus build discussion is happening with or without you. It is best for you to participate in and frame that discussion. Make a strong case that acquiring your firm is faster, cheaper and more likely to be successful than building out an internal practice.

Sean Magennis [00:08:40] If you enjoyed the show and want to learn more, pick up a copy of Greg Alexander’s book titled The Boutique Artist Start Scale and Sell a professional services firm. I’m Sean Magennis. Thank you for listening.

May 10, 2021June 28, 2023

Episode 31: The Boutique: 5 WAYS TO REMAIN RELEVANT TO YOUR CLIENTS

Scaling a boutique requires creating new service offerings. Firms that keep bringing the same thing to clients, over and over, stall out due to client fatigue. Building a system to continuously listen to clients and develop new offerings is key.

TRANSCRIPT

Sean Magennis [00:00:15] Welcome to The Boutique with Capital 54, a podcast for owners of professional services firms. My goal with this show is to help you grow scale and sell your firm at the right time for the right price and on the right terms. I’m Sean Magennis, CEO of Capital 54 and your host. On this episode, I will make the case that to scale a boutique, it is required to develop new service offerings. Firms that keep bringing the same thing to clients over and over stall out due to client fatigue. I’ll try to prove this theory by interviewing Greg Alexander, Capital 54’s chief investment officer. Greg took his firm from one offering at launch to 100 offerings at Exit. Greg, good to see you and welcome.

Greg Alexander [00:01:13] Sean, it’s good to be with you today. I look forward to today’s episode.

Sean Magennis [00:01:16] Greg, the other day, we were meeting with an entrepreneur who was inquiring about growth capital from Capital 54. Her firm is nine years old and she asked you how you broke out of the complacency trap. You answered her by saying, we went from a one hit wonder to a firm with a greatest hits album. Can you explain to the audience what you meant by this?

Greg Alexander [00:01:43] Sure. So I launched SBI in 2006 with one service offering. It was a methodology to interview and hire salespeople. It was a hit. It got me on the main stage keynoting the INC 500 show, got me on TV and on the bestseller list. It generated lots of clients and it got me in the door of top companies. As we began servicing clients in this niche, we noticed our clients had other problems. For example, you could hire a great salesperson, but if you did not train him, he would fail. We would bring this to the attention of the client and because they trusted us, they acted on it. Unfortunately, at that time, this meant they hired other consulting firms who specialized in that problem area. I felt this was revenue that was rightfully ours as we identified the need. Yet we did not have service offerings in these areas, so we missed out. This prompted me to build a system to continuously listen to clients and develop new offerings. This significantly increased our addressable market and was a main contributor to our future growth.

Sean Magennis [00:02:55] Excellent, Greg. And when you say we built a system to continuously listen to clients, what do you mean?

Greg Alexander [00:03:02] Yeah, we did five specific things, and I’ll walk you through each one because this will be helpful to the audience. So first we created a client advisory board. This consisted of a mix of current and past clients. We met periodically through the year whereby they told us the problems they were having, their priorities and goals, and described for us the solutions that they were looking for. Number two, we created a post project review process. In practical terms, this meant we did an autopsy on project objectives, timelines, profitability, budgets, deliverables and adherence to our SOPs. This often led to ideas for new service offerings. Number three, we initiated a client satisfaction program. This consisted of sending client personnel a questionnaire from time to time. And some of the questions were defined to get input on our product roadmap. Number four, we obsessed over our win loss program. After every sales campaign, the client told us why we won and the client told us why we lost. This was a treasure trove. Often we lost because we lacked the capability the prospect wanted. We immediately built that capability and watch the close rate improve as a result. And number five, we sent the team to conferences and these were not conferences for our industry. The sales effectiveness industry. No, we went to the conferences our prospects and clients went to. We would deconstruct the speaker decks, the agenda, the trade show floor, the sponsors. This told us where the market was heading. It told us what our clients were focused on and we would build offerings directed at these top priority items. And I should say this was a lot of work. But I can tell you, it taught us a very important lesson that I’d like to share with the audience. The lesson is your opinion doesn’t matter. The only thing that matters is the clients start with the big question what does the client want? And expand your offerings to make yourself more valuable to your clients. They will reward you with their budget dollars.

Sean Magennis [00:05:17] This is so excellent, Greg. And right on. So start with the question. What does the client want? And do five things to find the answers. One, create an advisory board. Two, conduct post project reviews. Three, execute a client satisfaction program for and this is one of my favorites, perform win-loss interviews after each sales campaign and five attend the conferences your clients attend.

Greg Alexander [00:05:51] You got it partner.

Sean Magennis [00:05:51] Perfect Greg. So, great takeaway value for our listeners. And now a word from our sponsor, Collective 54, Collective 54 is a membership organization for owners of professional services firms. Members joined to work with their industry peers to grow scale and someday sell their firms at the right time for the right price and on the right terms. Let us meet one of the collective 54 members.

John Amos [00:06:25] Hello, my name is John Amos and I’m the founder and owner of Invex Technology Solutions. Index is a veteran on small business that provides cloud cybersecurity and big data services for the federal government and commercial businesses in the Washington, D.C. metro area. Our clients turn to us for help with designing and building and operating their systems in a secure cloud environment. We apply industry best practices to deliver cloud based systems that meet the client’s goals and objectives while complying with rigorous security constraints. If you need help with moving or operating your systems in a secure cloud environment, reach out to me www.Invextechs.com or drop me an email at [email protected].

Sean Magennis [00:07:09] If you are trying to grow scale or sell your firm and feel you would benefit from being a part of a community of peers, visit Collective54.com. This takes us to the end of the episode, as is customary, we end each show with a tool. We do so because this allows the listener to apply the lessons to his or her firm. Our preferred tool is a checklist and our style of checklist is a yes-no questionnaire. We aim to keep it simple by asking only 10 questions in this instance, if you answer yes to eight or more of these questions, developing new service offerings is not getting in your way. If you answer no too many times you have a lack of new service offerings, which is a problem. Let’s begin.

Sean Magennis [00:08:10] Number one, is your growth dependent on increasing revenue from existing clients?

Greg Alexander [00:08:17] And in scale, it has to be.

Sean Magennis [00:08:18] Yep. Number two, do you need new reasons to remain relevant to your clients?

Greg Alexander [00:08:25] All the time.

Sean Magennis [00:08:27] Number three, do your clients eventually get fatigued? Number four, do you know what your clients need?

Greg Alexander [00:08:37] Now, let’s be careful, audience, don’t be arrogant here. You think you do, but you only know the answer to that question if you ask him relentlessly.

Sean Magennis [00:08:44] 100 percent. Number five, can you continuously learn what your clients need?

Greg Alexander [00:08:50] It’s right under your nose to do some of the basics.

Sean Magennis [00:08:53] Yep. Six. Would your clients participate on a client advisory board?

Greg Alexander [00:08:59] You’d be surprised. Clients love to do that. They if you have a good relationship with them, they’re happy to participate.

Sean Magennis [00:09:05] Number seven, can you implement post project reviews?

Greg Alexander [00:09:10] Well-worn territory, lots of best practices available.

Sean Magennis [00:09:13] Yep. Number eight, can you perform client satisfaction reviews after every project?

Greg Alexander [00:09:20] Also c sats everywhere.

Sean Magennis [00:09:21] Got to do it. Number nine, and you perform when the reviews after every sales campaign?

Greg Alexander [00:09:28] You know, I’m shocked at this, but I would tell you that within collective 54 as an example. I’d say less than 10 percent of members do that religiously, and it’s such a shame to missed opportunity.

Sean Magennis [00:09:38] It’s a huge missed opportunity and a missed opportunity for your sales professionals who really get a tremendous amount out of it. And number ten, are they relevant industry conferences that you can attend?

Greg Alexander [00:09:51] You know, the people that put on those conferences know what they’re doing. Right?

Sean Magennis [00:09:54] They sure do.

Greg Alexander [00:09:54] So they think long and hard about that agenda. So if there’s a topic on that agenda, you can guarantee that your clients care about it.

Sean Magennis [00:10:00] I love that idea. And in summary, if you have one thing to sell and deliver, scale will be very hard. Expand your offerings, increase your addressable market, be more valuable to your clients, accelerate scale through service offering development. If you enjoyed the show and want to learn more, pick up a copy of Greg Alexander’s book titled The Boutique How to Start Scale and Sell a Professional Services Firm. Greg, great to be with you. I’m Sean Magennis. Thank you for listening.

February 8, 2021June 28, 2023

Episode 19: The Boutique: A Smart Strategy to Make Scaling Easier

A lack of lifecycle awareness and management prevents scale. It results in expensive senior people doing junior work. Boutiques with poor cash flow and low client satisfaction do not scale.

TRANSCRIPT

Sean Magennis [00:00:15] Welcome to the Boutique with Capital 54 a podcast for owners of professional services firms. My goal with this show is to help you grow scale and sell your firm at the right time for the right price and on the right terms. I’m Sean Magennis, CEO of Capital 54 and your host. On this episode, I’ll make the case boutiques often suffer from an identity crisis, and this makes scaling harder than it needs to be. I’ll try to prove this theory by interviewing Gregg Alexander, Capital 54’s founder and chief investment officer. Greg has developed an approach to solving this problem. It’s called lifecycle management. And I’d like him to share that with you. Greg, great to see you. Welcome.

Greg Alexander [00:01:09] Hey pal, good to be with you. I think it was Aristotle that once said when asked the key to happiness, know thyself. Today I’m going to modify this quote in state when asked the key to scaling know thy firm.

Sean Magennis [00:01:24] Excellent. So why do you feel boutiques need to know thyself when trying to scale?

Greg Alexander [00:01:31] Sometimes boutiques suffer from an identity crisis. They are unsure of the type of firm they are and the types of clients and projects they should pursue. This makes the challenge of scaling a boutique harder than it needs to be. You see, conflicting client needs drive, confusing staffing models, and this leads to overly complex financials. For instance, one month there is not enough work and employees are underutilized. And yet the next month the firm is at 120 percent capacity. These violent swings between boom and bust make it very hard to scale.

Sean Magennis [00:02:09] Yeah, I can see how this can make managing the boutique difficult and frustrating. So what advice do you have for listeners who might be suffering from this?

Greg Alexander [00:02:19] So the first step is to understand what type of firm you are, in my opinion. There are three types of firms. First, we have what we call an intellect firm. Intellect firm is hired by clients to solve difficult never before seen one of a kind problems. These firms are staffed by brilliant people, very senior, with lots of experience. An example might be a think tank or something like that where there’s P.H.D.’s everywhere. Second, we have what we call a wisdom firm, a wisdom firm decided by clients because they are a been there and done that style of firm. The client problem is new to that client, but is not a new problem. Others have had it and wisdom firms have accumulated the wisdom to solve this problem. These firms are staffed in a traditional sense. Partners, mid-level managers and some junior staff examples to think about from the consulting industry are firms like Bain and McKinsey and Boston Consulting Group. Third, we have what we call a method firm, a method firm hit hard by clients because of their unique methodologies. The problem is well understood by the client, but by hiring a method firm. It can be solved faster and a lot cheaper. These firms are staffed with lots and lots of junior staff who have been trained on this highly procedurized method. Examples are the BPO firms such as Accenture and the like.

Sean Magennis [00:03:59] Got it, Greg. So three types of firms, intellect, wisdom and method. But I’m I’m not connecting the dots as to how this understanding helps firms scale.

Greg Alexander [00:04:13] OK, so let me explain. So imagine you are in Method’s firm in one of your BD people sell an intellect like Project, a never before seen one of a kind problem. How will this project be staffed?

Greg Alexander [00:04:27] Well, it cannot be because a method firm does not have a bunch of gray haired P.H.D.’s lying around. This forces them to go outside the firm and either rent some contractors or hire some new talent. Both approaches come with different salaries and utilization rates, and this will blow up staffing in the financial models. Or let’s say imagine you are a wisdom firm and one of your BD guys goes after a method style project, one where the work can be off-shored or completed with junior staff. Well, in this instance, there will not be enough junior staff to do the work. So what happens? Senior expensive staff now must perform cheap junior level work. This destroys margins in the financial model.

Sean Magennis [00:05:10] Okay, now I get it. So the advice is to collect the type of client and the project to the type of firm you are. Only go off to work that the firm is staffed to handle based on skill level. By doing so, an owner, one of our listeners can predict the skills needed to perform the work. And with this understanding of required skills, the owner can forecast labor costs and utilization rates. And then, with precision on labor costs and utilization rates, the owner can more easily scale the firm. He or she can match the demand coming in with the supply on the org chart. Did I get this correct?

Greg Alexander [00:05:53] Yes, you did. You are about to ask me why owners do not do this. And the answer is because they lack discipline. They think all revenue is good revenue and they take any deal that comes their way when in fact some deals, if taken, can destroy a firm’s ability to scale. Adopting lifecycle management, which is what this is called, requires prudence to go without today for the promise of a better future. Greg, I get the concept, but I’m struggling a little to get the name. The lifecycle management. Can you explain it? Sure. So boutiques like humans have a lifecycle. For instance. They are born. They grow. They scale an exit much like a human is born. Comes of age, matures and dies.

Greg Alexander [00:06:50] And firms like humans are different based on where they are on the life curve. For example, is very common at birth, a firm is an intellect firm. The partners have some secret sauce to a brand new problem. Then as time passes, the secret sauce gets out.

Greg Alexander [00:07:10] Others have it and eventually it becomes a commodity. Well, an owner manages a firm very differently when it is an intellect firm than a wisdom or method firm. Everything is different from the pricing of deals to staffing, utilization, salaries, etc. So lifecycle management refers to the active management by the owner of the boutique as it scales through the lifecycle stages.

Sean Magennis [00:07:36] Okay, now I get it. And it does make a lot of sense. So this is an illustration as to why there are only about 4000 firms out of about one point five million that have actually reached scale. It’s hard to do. And it takes an exceptionally skilled owner to pull it off. And now a word from our sponsor. Collective 54, Collective 54 is a membership organization for owners of professional services firms. Members join to work with their industry peers to grow scale and someday sell live firms at the right time for the right price and on the right terms. Let us meet one of the collective 54 members.

Rich Campe [00:08:24] Hello. My name is Rich Campe. I’m the CEO of Pro Advisor Coach. We serve executive and leadership teams. We partner with organizations to create high performance team cultures of ownership and radical honesty. Our key is gamification. It’s about leverage versus effort. What if every player in your team knew if they were winning or losing both personally and as a team in 10 seconds or less? If you’re part of the collective 54 family, please reach out to me directly at 704-752-7760. Check us out at proadvisorcoach.com or [email protected].

Sean Magennis [00:09:05] If you are trying to grow scale or sell your firm and feel you would benefit from being a part of a community of peers, visit the collective54.com. So this takes us to the end of this episode. And as is customary, we end each show with a tool. We do so because this allows the listener to apply the lessons to his or her firm. Our preferred tool is a checklist. And our style of checklist is a yes-no questionnaire. We aim to keep it simple. By asking only 10 questions in this instance, if you answer yes to questions one through three. You are an intellect firm. If you answer to questions, four to six, you are wisdom firm. And if you answer yes to seven to nine, you are a method firm. And lastly, if you answer yes to question, ten lifecycle management should be a top priority.

Sean Magennis [00:10:10] Let’s begin. Number one, do your clients hire you for never before seen problems? Number two, do you employ leading experts in the field? Number three, do you have legally protected intellectual property? Number four, do your clients hire you because you have solved their problem before? Number five, do your clients hire you because you have direct, relevant case studies? Number six, do your clients hire you because you help them avoid common mistakes? Number seven, do your clients hire you because they are busy and need an extra pair of hands? Number eight, do your clients hire you because you can get the work done quickly? Number nine, do your clients hire you because you have an army of trained people to deploy immediately? And number ten, does your service offering start out as leading edge and over time become a commodity?

Greg Alexander [00:11:26] OK, so just a quick recap there. So yes, to one through three, your intellect. Yes to four to six, you’re wisdom. Yes to seven and nine, your method. And then obviously, number ten is regarding lifestyle management. So does your service offering start out as leading edge and over time become a commodity? If you answer the questions that answer, that question is yes, then you should prioritize lifecycle management.

Sean Magennis [00:11:48] Great. Thank you, Greg. So in summary, a lack of lifecycle awareness can make scaling more difficult than it needs to be. It can lead to poor cash flow and unhappy clients and employees.

Sean Magennis [00:12:01] If you enjoyed the show and want to learn more, pick up a copy of Greg Alexander’s book titled The Boutique How to Start Scale and Sell a professional services firm. I’m Sean Magennis. Thank you for listening.

January 18, 2021June 28, 2023

Episode 16: The Boutique: Tomorrow is More Important than Today.

What have you done for me lately? Buyers of your boutique are purchasing who you are becoming. They are not buying who you have been. Yesterday is worthless to them. They are looking forward. And need to be excited about your potential to improve.

TRANSCRIPT

Various Speakers [00:00:01] You can avoid these landmines. It’s a buy versus build conversation. What’s the root cause of that mistake? Very moved by your story. Dive all on the next chapter of your life.

Sean Magennis [00:00:15] Welcome to the Boutique with Capital 54, a podcast for owners of professional services firms. My goal with this show is to help you grow scale and sell your firm at the right time for the right price and on the right terms. I’m Sean Magennis, CEO of Capital 54 and your host. On this episode, I will make the case that the ability to sell your firm for the right price is more about your future and less about your past. I’ll try to prove this theory by interviewing Greg Alexander, Capital 54’s chief investment officer. Greg will share his perspective on how to prove to investors that your future is very bright. Greg, today’s show will focus on helping owners paint a bright picture for their future. How should our audience begin that process?

Greg Alexander [00:01:14] The big idea for today is continuous improvement. Investors and potential acquirers do not want to buy a development project. They want to invest in a firm that is accretive immediately and whose contribution increases over time. When considering an investment, they will need to understand how a firm continuously improves.

Sean Magennis [00:01:33] Excellent. And how will they do that?

Greg Alexander [00:01:36] Well, there are many ways. Let me share a few just to get the audience thinking a bit. Investors will want to see how and how often a boutique upgrades their methodologies. They do not want to buy firms with aging methods that are no longer attractive to clients. So, for instance, years ago, if you recall, Six Sigma was all the rage. Today, not so much. It is important that boutiques stay on the leading edge. Another way, potential buyers consider firms continuous improvement ability is to plot client satisfaction scores over time. So, for example, if client sat has flatlined, this would suggest a future might not be very exciting. Boutique owners should have a keen eye on the trend line associated with client satisfaction. And here’s one more to consider, technology adoption is often viewed as a sign of a firm’s progressiveness. For example, small management consulting firms are still producing PowerPoint decks as deliverables, whereas the larger firms produce custom apps instead. Today, there seems to be an app for everything. If a firm is still producing decks, it is a sign that they might not make it through this digital transformation wave that is upon us.

Sean Magennis [00:02:58] I get that, Greg. So updating one’s methodologies consistently, improving client sat over time and technology adoption are three ways to prove to an investor that a firm can continuously improve. These are three excellent practical examples, and I’m sure there are others. Greg, are there any others?

Greg Alexander [00:03:21] Sure. There’s hundreds. So since we try to keep our shows short, let me just share a few more. So profit growth is probably the purest way to demonstrate continuous improvement. Profit growth proves to an investor that the firm has decoupled revenue growth with headcount growth. And as our listeners know at this point, that’s the silver bullet. This is how a firm scales. A firm whose revenue and headcount growth are the same does not have a bright future. Investors are unlikely to bet on that type of firm. Pricing improvement is also another excellent way to prove continuous improvement. If a boutique can raise prices with existing clients, they have a very bright future. The same client willing to pay more for the same service says the quality of the work has gone up. And lastly, let me conclude with the ultimate sign. A firm is continuously improving. The ultimate sign is the firm’s client roster. For example, if a boutique client roster goes from no names to brand name clients or from struggling clients to thriving clients, that says a lot about the firm’s future.

Greg Alexander [00:04:42] The logo sheet looks a lot better with Amazon on it than it did with Kmart.

Sean Magennis [00:04:48] Fantastic. So profit growth, price improvement and declined roster as three additional signs a firm is continuously improving, all pointing to a very bright tomorrow. I can see why this would attract potential investors and acquirers.

Sean Magennis [00:05:10] And now a word from our sponsor. Collective 54, Collective 54 is a membership organization for owners of professional services firms. Members join to work with their industry peers to grow scale and someday sell live firms at the right time for the right price and on the right terms. Let us meet one of the collective 54 members.

Jerome Redmond [00:05:36] Hello. My name is Jerome Redmond. I own American Truck Training. We serve the Oklahoma City metro, in other areas around Oklahoma and soon the entire United States. These clients turn to us for help with obtaining a commercial driver’s license and job placement. We’ve solved this problem by addressing the vast shortage of CDO drivers across the country. The country needs over 60000 CDO drivers. So we’re training individuals through private and government agency funding to obtain a commercial driver’s license and training. If you need help with training your professional drivers, reach out to me at AmericaLovesTrucking.com and Jay Redmond, that’s [email protected].

Sean Magennis [00:06:18] If you are trying to grow scale or sell your firm and feel you would benefit from being a part of a community of peers, visit collective54.com.

Sean Magennis [00:06:35] OK. So this takes us to the end of this episode. And as is customary, we end each show with a tool. We do so because this allows the listener to apply the lessons to his or her firm. Our preferred tool is a checklist. And our style of checklist is a yes no checklist. We aim to keep it simple by asking only ten yes-no questions. In this instance, if you answer yes to eight or more of these questions, you can prove your future is really bright. If you answer no too many times, you’ve got some work to do. Let’s begin.

Sean Magennis [00:07:14] Number one, do you version control your methodologies?

Greg Alexander [00:07:18] So V1, V2, V3 thats what that means.

Sean Magennis [00:07:20] Yes. Number two, do you progressively certify your employees?

Greg Alexander [00:07:26] One oh one, two oh one, three oh one.

Sean Magennis [00:07:29] Number three, are you charging existing clients more for the same service? Number four, are your client satisfaction scores trending up over time? Number five, are your employee engagement scores trending up over time?

Greg Alexander [00:07:50] Often overlooked.

Sean Magennis [00:07:51] Yes.

Greg Alexander [00:07:51] But employees want to be intrigued by the work they’re doing and if they’re just doing the same thing over and over and over again, they’re going to get bored.

Sean Magennis [00:08:04] Yep. It kills their passion.

Sean Magennis [00:08:07] Number six, all your profit margins trending up? Number seven, have you replaced onsite delivery with virtual delivery?

Greg Alexander [00:08:17] This is a great point. Yeah. I mean, we’re right in the middle of this global pandemic and this was once once optional. Now it’s mandatory and firms that can make it from onsite to virtual are gonna make it.

Sean Magennis [00:08:32] Yes. Number eight, have you digitized your client deliverables?

Greg Alexander [00:08:37] Yeah, this is gonna wipe out, I guess, half the firms. I mean, if you don’t have the ability to write code going forward, it’s game over.

Sean Magennis [00:08:45] Yep, agreed. Number nine, have your price levels trended up over time? And number ten, and the ultimate proof point, has the quality of your client roster improved over time?

Sean Magennis [00:09:01] So in summary, buyers are interested in who you are becoming. They are less interested in who you have been. Tomorrow is much more important than yesterday. They need to be excited about your ability to continuously improve.

Sean Magennis [00:09:19] If you enjoyed the show and want to learn more, pick up a copy of Greg Alexander’s book titled The Boutique How to Start Scale and Sell a Professional Services Firm. I’m Sean Magennis. Thank you for listening.

December 21, 2020June 28, 2023

Episode 14: The Boutique: Are You a True Expert in Your Field?

The “wow” factor matters. Like it, or not, you are in show business. You are an expert. And your firm is made up of experts. No one wants to buy the boutique that regurgitates other people’s innovations. They want to buy the song writers, aka The Rolling Stones.

TRANSCRIPT

Sean Magennis [00:00:16] Welcome to the Boutique with Capital 54, a podcast for owners of professional services firms. My goal with this show is to help you grow scale and sell your firm at the right time for the right price and on the right terms. I’m Sean Magennis, CEO of Capital 54 and your host. On this episode, I will make the case that when selling your firm, the wow factor matters. And when I say the wow factor, I’m referring to the innovation you’re generating in your field of expertise. I’ll try to prove this theory by interviewing Greg Alexander, Capital 54’s founder and chief investment officer. Greg is considered to be one of the most innovative thinkers in the professional services industry. And, in fact, don’t take my word for it. Adam Prager of Korn Ferry was recently quoted as saying, and I quote, Greg is a world class visionary in our industry. End quote. Greg, great to see you. Welcome to the show today.

Greg Alexander [00:01:22] Thanks, Sean. Good to be here. And thanks for the kind introduction.

Sean Magennis [00:01:25] Let’s begin with a simple definition of innovation specific to the professional services industry. How would you define it, Greg?

Greg Alexander [00:01:35] So innovation is a new idea, a new service, a new business model, maybe a new way of solving a problem. It matters to professional service firms more than other types of businesses because pro-serve firms position themselves as experts and experts innovate. Clients do not pay firms to regurgitate other people’s innovations. And investors surely do not buy firms that are copy cat body shops. They buy firms who are true experts today and will continue to be excellent.

Sean Magennis [00:02:10] Excellent, Greg. So when I think of innovation, I, I think mostly of products. For example, Elon Musk innovated in the auto industry and brought us the Tesla. Reed Hastings innovated in the entertainment industry incredibly and brought us Netflix. I do not think of professional services firms in this way, so can you share some examples in the pro-serve of industry?

Greg Alexander [00:02:34] I’d be happy to. In fact, I am somewhat of a amateur historian in the professional services industry, and I have found many great examples of innovation in our space throughout history. So here are a few fun ones to think about.

Greg Alexander [00:02:50] I admire greatly, Boston Consulting Group. They have built a private partnership with thousands of employees and billions in revenue. But it all started with their founder, Bruce Henderson, and one of his early innovations called the experience curve. This proved that a company’s costs fell as their experience increased. Today, this is widely understood. Back in the 1960s, this was a real innovation. Let’s turn to the law profession. The law profession has pioneered the use of technology for centuries. For example, in the 1920s, the recorded deposition changed the litigator’s relationship to witness testimony forever. Law firms that embraced this scaled rapidly. Imagine the law today without recorded depositions. Very scary. Well, how about the great Italian innovator Luca Bartolomes Pacioli. Say that 20 times in a row. Around fifteen hundred, he invented a system of record keeping that used a ledger and later he wrote the first accounting books that explained the use of journals. This earned him the title of the father of bookkeeping, bookkeeping. And Sean, if the accounting industry can innovate, anyone can.

Sean Magennis [00:04:13] These are really great, Greg, and super interesting. These pioneers were truly the Zuckerberg’s of their day. Are there any others that come to mind for you?

Greg Alexander [00:04:24] Sure, there are dozens and I enjoy speaking about this. Let me share a few more. So I have recently studied the innovations in the marketing and advertising industry. Sean, did you remember these campaigns? When it rains, it pours and a diamond is forever.

Sean Magennis [00:04:37] Yes. And the second one, to my chagrin, because I had to buy a big one once.

Greg Alexander [00:04:43] Well, these were created by an agency led by a gentleman, by the name of N.W. Ayer in the 19th century. He convinced the likes of AT&T, the U.S. Army, [inaudible] to hire a new kind of firm called the Full Service Agency. Rather than just selling advertising space in publication, he offered planning creative and campaign execution. Mr. Ayer innovated at the firm level, creating an entirely new kind of marketing agency. He was a giant. I wish I had the chance to know him. How about I share a few recent examples because we are living in the golden era of boutique innovation. In 2008, the distributed ledger, known as Block Chain, was invented by Satoshi Nakamoto. Transactions will never be the same. An architect by the name of Daniel Cuzzi has turned shipping containers into working farms, producing the equivalent of five acres per container. And I love Wix. They have injected artificial intelligence into website design. What used to take months now takes nanoseconds. A brilliant example of tech enabled services. You get the point. I could go on and on forever.

Sean Magennis [00:06:09] Wow, these these are inspiring examples of innovative pioneers and the professional services industry from yesterday and today and this is a standard all of us should aspire to. And now a word from our sponsor. Collective 54, Collective 54 is a membership organization for owners of professional services firms. Members join to work with their industry peers to grow scale and someday sell live firms at the right time for the right price and on the right terms. Let us meet one of the collective 54 members.

Abbie Jones [00:06:49] Hello. My name is Abbie Jones and I own Abbie Jones Consulting. We serve business owners and facility managers in energy, aviation and industrial spaces. Our current footprint is Kentucky, Tennessee, West Virginia, Virginia, Georgia and we’re expanding. These industrial and commercial clients like you turn to us for many services, including campus utility as builds. Our private utility locators, professional land surveyors, professional engineers and drafting staff can upgrade your random paper as built into a single as filled with critical items like shutoffs. Learned how we can make facility managers happy at Abbie-Jones.com. That’s a-b-b-i-e hyphen j-o-n-e-s.com.

Sean Magennis [00:07:37] If you are trying to grow scale or sell your firm and feel you would benefit from being a part of a community of peers, visit the collective.54.com. So this takes us to the end of this episode and as is customary, we end each show with a tool. We do so because this allows the listener to apply the lessons to his or her firm. Our preferred tool is a checklist. And our style of checklist is a yes-no questionnaire. We aim to keep it simple by asking only 10 yes-no questions. In this instance, if you answer yes to eight or more of these questions, you can prove you were a true expert and you are innovating. If you answer no too many times, you have some work to do. Let’s begin.

Sean Magennis [00:08:33] Number one, have you pioneered a new approach in your niche? Number two, are you more than a one hit wonder? Number three, has your industry adopted your way of doing things? Number four, does your industry use your language as its own? Number five, do the smartest in your niche come to you with the most challenging issues? Number six, as an ecosystem of boutiques formed around your innovation? Number seven, do you mainstage the keynote for the most important industry conference? Number eight, do you get more than fifty thousand dollars for a speech?

Greg Alexander [00:09:34] That’s a real sign that you’re in high demand and a true innovator.

Sean Magennis [00:09:38] Absolutely. Number nine, do employees join your firm for the opportunity to learn from you? And number ten, have you created a legacy that will live on in your niche after you leave?

Greg Alexander [00:09:55] Yeah. I just walked the audience through history and I cited all these examples. Imagine how fortunate we would be if people are speaking about us 500 years from now.

Sean Magennis [00:10:04] That that is part of our goal.

Greg Alexander [00:10:06] Yes, I love that.

Sean Magennis [00:10:08] So in summary, the wow factor really matters. Like it or not, you are in show business. You are an expert. And your firm is made up of experts, investors and acquirers want to invest in and or buy the true experts. The innovators challenge yourself to be one every day.

Sean Magennis [00:10:33] If you enjoy the show and want to learn more, pick up a copy of Greg Alexander’s book titled The Boutique How to Start Scale and Sell Professional Services Firm. I’m Sean Magennis. Thank you for listening.

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Member Case with Scott Conard￼

TRANSCRIPT

The Cost of healthcare

Innovation in services

The Converging Health solution

Convincing the corporate customers

Health Convergence early adopters

Breaking assumptions

Conclusion

Member Case with Scott Conard