Episode 170 – Taking the Reins: A CEO’s Journey of Buying Out the Founder and Shaping the Future of a Boutique Professional Service Firm – Member Case by Jessica Knox

In this session, we delve into the ambitious journey of a CEO who took the bold step of buying out the founder of a boutique professional service firm. Through an intimate conversation, we explore the intricate negotiations, strategic planning, and the emotional rollercoaster that defined this pivotal transition. Discover how this daring move not only reshaped the firm’s future but also set a new course for its legacy, culture, and the very essence of leadership within the industry. Join us as we unveil the challenges, triumphs, and the profound lessons learned along the way in transforming vision into reality.


Greg Alexander: Okay, good. All right. Well, if you’re ready, I’m going to jump into it. Okay. Hey, everybody, this is Greg Alexander, founder of Collective 54 and welcome to the Pro Serv podcast brought to you by Collective 54. For those that aren’t familiar with us, we are the first community dedicated to the needs of the boutique professional services firms that are trying to grow scale and maybe someday exit their firms. And on today’s episode, we’re gonna talk about a familiar topic, but with a different twist, the topic is succession plan. But I guess today is the success or, and that’s the different twist. Oftentimes we talk about the need for the founder to find a high-potential employee to eventually transfer the firm to. But we don’t do enough speaking and analyzing and studying of the high potential person who eventually takes over for the founder and we’re gonna do that. Today. We’ve got a wonderful guess, a Collective 54 member, Jessica Knox.  Jessica, would you introduce yourself and the firm to the community? 

Jessica Knox: Absolutely. And thanks for having me today, Greg. So my name is Jessica Knox. I’m the CEO of Metrix and Metrix is an agency that helps life sciences companies, mostly pharmaceutical and biotech market their products to doctors, train their employees and support their patients through education. 

Greg Alexander: Okay, great. And your role there, and then I understand you have quite a journey with this firm. So I’d love to hear about that. 

Jessica Knox: Absolutely. So I started at metrics very young early in my career about 17 years ago. If you can believe, it is very rare. I say I defy most demographics trajectories for people of my generation that I, I’ve been with the company for most of that time. I did leave for a couple of years to do my own tech startup, which I think gave me the entrepreneurial bug, but I really started as an instructional designer, which is essentially designing corporate training. And I worked there, and got successive responsibility until I became coo and then CEO, and then finally CEO and owner. 

Greg Alexander: So fantastic. So tell us about the founder and how the founder transitioned the business to you first job transition, you know, CEO to CEO, and then ownership transition, owner to owner, please? 

Jessica Knox: Yeah, absolutely. So as I mentioned, I had left to do my own tech startup. I came back actually under, the agreement that I was going to help the founder sell the company essentially. So she knew that she needed a good, you know, person to operate the business as she was looking at ways, to, for selling for sale. And so I had come in really to take over a lot of the operations but she was still pretty involved in the business. She was, I would say not as active in project work, but definitely more on the strategy side. She would still from time to time even come and engage with our clients. But really I was slowly transitioning that role, but it was still under the guys. Not that I was gonna take over. It was really to get it ready for sale. 

Greg Alexander: Okay. But you knew, when you came back to take on these responsibilities that she was going to sell the firm, correct? 

 Jessica Knox: Yeah. 

 Greg Alexander:  Okay. So I’d like, to get inside your head for a moment and understand what concerns that you had given that context. And let me tell you why I’m asking that question. Most of our members are on the other side of that, they’re the founder, they do want to sell their business for whatever reason and they want and they want to leave after they sell the business. So they knew they need to develop a successor, but they’re hesitant to be that transparent and open with their successor, but your founder was open with it and you got comfortable with it. So tell me a little bit about that. 

 Jessica Knox: Yeah. I think one of the keys to that. So she was very transparent with me and, but at the same time, I mean, that I would say sometimes worked for and against us as we were on, you know, making the right arrangements because she would also maybe be transparent with what was on her mind. And maybe that would change over time. But I would say that a big reason why it was successful was just the level of trust that we had after working together for 17 years. So that was a big part I think of why we were able to do this successfully despite, you know, some bumps in the road and challenges as we tried to work through what it would look like? 

Greg Alexander:  Yeah. And what was it about the business and the opportunity that made you want to go from being, you know, a hired gun leader with no skin in a game and no risk to actually owning the place? 

 Jessica Knox: Yeah. I think that again, a deep familiarity with the company was obviously an asset for me. I had never when I was starting off my career imagined myself as a business owner ever. It was the furthest thing from my mind and it was really through doing the work. I love the work that we do. I’m passionate about what we do. And then as I spent time in the coo role, and then even stepping into the CEO role, I started to realize, wait a second. I do a, I can slowly build the skills to run a business. And so, I built confidence, in myself and I knew, you know, obviously it’s a journey. I’m still on that journey but definitely, you know, the closer you get to actually doing the job, you say, hey, wait a second. This is possible for me. 

Greg Alexander:  And I’m gonna ask you to put some words in your founder’s mouth, which is unfair, but I’m gonna do it anyway. And that is, you know, she was trying to sell the business and she could have sold it to other people, but she did, she decided to sell it to you. Why did she decide to sell it to you? 

Jessica Knox: Yeah. I don’t want to go into too much, of the details of what happened, but really I think there was a big part of her that wanted to leave a legacy that she was proud of. You know, this was her fourth child in a way this business and just seeing some of the options and seeing some of the plans that some of the potential buyers had for the business and really working that through. She said wait a second, and that we had enough trust, to structure it in a way where she could get what she wanted out of the sales financially. You know, there were a few sort of concessions of exactly how that would happen. But I think for the most part just making sure that she felt really good about, you know, where the company would go and had obviously a lot of trust because of our working relationship in that. 

Greg Alexander: It’s such a big thing, you know, I, I’m a founder myself and I do think about legacy. And to me, that means, you know, when I leave my employees who helped me build this great firm are going to stay and they’re still going to have jobs, and who are they going to be working for? And how are they going to be treated? That’s? Number one and number two. You know, most of our businesses are built on the backs of longstanding client relationships. So you also have a tremendous sense of loyalty and obligation to them. And you want to make sure that there’s no dropoff in service and that they continue to serve well. So by selling it to somebody like yourself who obviously, after 17 years is a tremendous amount of trust. It checks those boxes probably better than any other alternative. And, I just wanted to highlight that because for those founders that are listening to this don’t overlook the opportunity to, you know, sell your firm to a trusted employee that has earned the right to be considered. 

Jessica Knox:  Absolutely. I think that there’s this perception out there that there’s some kind of when to sell it to an external company. But when you think it through, I think it probably aligns better if you can find the right structure in the right mechanism to, you know, get certain needs met that you’re looking for? I think there, there can be a lot of real satisfaction, in doing that for sure. 

 Greg Alexander: Yeah. How long did you spend in the coo job? And then how long did you spend in the CEO job before you put the hat of owner on? 

 Jessica Knox:  Yeah. And I have to admit I’m not always good at saying exact chronology but CEO, I was about a year or two and then CEO… while I was CEO, we were in the process of negotiation. It did take some time. So, it was probably around the time that we started talking about what this could look like that I stepped into the CEO role in it. It really did take about two years before we figured out a way to make it work. 

 Greg Alexander:  Okay. And then once you figure out how to make it work, did the founder leave that day or is, did the founder stay on for some transitionary period? 

 Jessica Knox:  Well, the funny thing about that is we talked about a transitionary period, but as I’m sure, you know, many owners that have been so embedded in all the decision making of the business. It’s really hard to strike that balance. And because I was so embedded in the business, the operations of it, she didn’t really need to be there. And so we did form a strategic relationship but it became more of a mentor and a coach to me versus anything, in the business really. 

 Greg Alexander: Yeah. I think that’s the best way to structure it because sometimes letting go is hard for the founder. And, and even though they have sold the business either partially or in total or maybe, you know, some progression along the way, they can stick their nose where it doesn’t belong from time to time, which can create some problems for the successor. So it sounds like you all didn’t experience with that, which is great. So just two more questions, you know, speak to those that are listening that, are you meaning the successor who’s taking over? You know, now with the power of retrospection, you know, if you were to look back on it and you were just say, you know, here’s one, two, maybe three things to watch out for. What lessons can you share with us? 

 Jessica Knox: I did learn a lot through it. I think that if you are not used to it once you involve lawyers and accountants and everything, it can become a much different type of conversation. So I think you just have to be ready. Things feel really big and everything can feel big in the moment. But just taking some distance and stepping back and say, okay, what’s really important to me? You know, what am I willing to negotiate on? You know, where are my boundaries? I think that was a big learning for me for sure. I think as well. I mean, really understanding the financials of your business is really import important. And so for somebody like me who did not come from a business background but was much more of a, you know, a technical expert, I would say contributor just really getting comfortable with the financials, was important, and thinking through what’s your risk tolerance, especially if you have some sort of payout after the sale goes through. Yeah. So that’s at the top two that come to mind. And then just patience if you’re in a situation where it is a founder that’s been in the business for many years, because again, it is a, it’s a psychological letting go process as much as anything. And so recognizing that, but then also recognizing, how long you’re willing to be patient for? 

 Greg Alexander: Yeah. Exactly. All right. Then my last question is, so, so now you’re the CEO, the owner, right? So how is life change for you? 

 Jessica Knox: Well, I always laugh and when I tell this story and I think it did put a bit of a deadline on us. We transferred ownership to the day that I went to the hospital to give birth to, what of my children? And so I’m pretty sure that deadline helped. And so I told the staff on the way over to the hospital, to get induced, I said, hey, by the way this is happening, but I’m telling you it’s gonna be a change of ownership with probably the least amount of actual change for you you’ll ever see because I’ve been, you know, I know this business so well. I had an amazing leadership team then that was able to really step up which is great. And then COVID happened a few about eight months later. So that was a real leadership challenge for me and I really felt the weight. It’s really funny because even though I was acting as CEO, you always psychologically had that extra layer of the owner, right? But the cycle psychological, it’s all really on your shoulders to make it succeed or fail. Was was probably one of the biggest shifts. And really, I think finding my strangely enough again I was in the leadership roles but because we still have this extra voice, it was finding my own leadership voice really through all of that was probably the biggest challenge. And then for me we ended up adopting eos, that was hugely helpful for me in terms of just running the business and figuring out what our plans were and everything like that. So, you know, that definitely helped more from the strategy and operations side, but yeah, it was the psychological and the leadership stuff that was probably the biggest shift. 

 Greg Alexander: Let me tell you Jessica, you are one tough cookie. Only person I’ve ever spoken to that on the same day signed a deal to buy a company and had a baby. My goodness. That’s an unbelievable story. And then eight months later you get hit in the face with COVID. I mean, gosh so hats off to you for a tremendous amount of resiliency. 

 Jessica Knox: Thanks. It was a roller coaster and I always remember how long I’ve owned the company because it’s to the date of my, one of my children. So yeah, I had two babies that day. So pretty, yeah unusual, but, we pulled it off. 

 Greg Alexander: Well, that’s great. All right. Well, listen, I can talk to you forever about this particularly finding your leadership voice, but I’m gonna save that for the member Q and a session that will have an upcoming week. We try to keep these podcast short. One thing we’ve learned about podcasting is our attention span is about 15 minutes in length. So today was just sharing of the big idea for lack of a better term. You did an excellent job with that. Thanks for the contribution. And we look forward to having our member Q and a coming up in the subsequent weeks. 

 Jessica Knox: Thanks Greg, as do I. 

 Greg Alexander: All right, fantastic. So to close out for those that are listening. A couple of things. If you remember, watch for the meeting invitation that will come out where Jessica will be our weekly role model and you’ll have a chance, ask questions to her directly if you’re not a member and you want to become one, go to collect 54 com and fill out an application and we’ll get in contact with you. And if you don’t want to do either of those two things and want a more passive approach, I point you to my book. It’s called the boutique, how to start scale and sell a professional services firm, written by yours truly, and you can find it on amazon. But until then, Jessica, thanks again. And I wish you all the best of luck as you try to go scale and exit your firms. Thanks Jessica.