Episode 148 – Prompt Engineering: A New Skill That Professional Service Firms Need to Learn – Member Case by Stephen Straus and Numa Dhamani

Generative AI is transforming the professional services industry, lifting productivity levels to heights thought unobtainable. Interacting with large language models has become a required core competency. This is best done via prompt engineering. Attend this session and learn this new skill from a machine learning engineer.


Greg Alexander [00:00:15] Hi, everyone. This is Greg Alexander, the host of the Pro Serv podcast, brought to you by Collective 54, the first community dedicated to the boutique professional services industry. On this episode, we’re going to talk about prompt engineering, prompt and engineering. Hopefully, you’re aware of what that term is now since we’re all living in the air era, but if you’re not aware of what that is, we’re going to talk about that and how to leverage it in today’s economy. And we have a great guest who is going to walk us through the basics and then she’ll participate in our member Q&A later on. Her name is Numa Dhamani. Did I say your last name correctly? 

Numa Dhamani [00:00:59] Yes. 

Greg Alexander [00:01:00] Very good. And she is with Kung Fu AI and is a member of Steven Strauss’s team who is a member of Collective 54. So, Numa, would you please introduce yourself and your firm to the audience? 

Numa Dhamani [00:01:16] Yeah. So, hi, I’m Nima, and thank you so much for having me today. I’m a principal machine learning engineer for a boutique consulting firm that focuses on artificial intelligence. And my personal expertise is the natural language and the largely large language model space. 

Greg Alexander [00:01:34] Okay. And Numa, I was researching your background before the call, and it’s really it’s rather impressive. Would you mind sharing a little with the audience what your background is? 

Numa Dhamani [00:01:47] Yeah. So I have primarily kind of worked in the information worker space. So I’ve done a lot of work around disinformation and misinformation. And then also, like privacy and security. 

Greg Alexander [00:02:01] Okay, very good. All right. Well, let’s start with the basics. So what is prompt engineering? 

Numa Dhamani [00:02:07] So prompt engineering is really just the practice of structuring and refining prompts to get specific responses from a generative A.I. system. So here your system would be something like chat, chip or Bard. And the prompts are really just a way to interact with these systems where you can help guide the model towards achieving certain types of desired outputs. Okay, So. An effective pump engineering would kind of involve formulating prompts that would clearly communicate what your desired task is. And this can include like detailed instructions or providing context or what you want your output to look like. So you can make sure that we are getting out of the model is kind of aligned with the intention. 

Greg Alexander [00:02:55] Okay. Very good. And why is it important to develop the skill of prompt engineering? 

Numa Dhamani [00:03:04] Yeah. So it’s if you understand how to do product engineering, it can really help empower you to take advantage of the capabilities of these models for various applications. So you’re going to be able to communicate really complex tasks and requirements to these models, which can help ensure that the generated content and responses really align closely with what your intended purpose for that task was. So just helps you leverage the capabilities of these systems. 

Greg Alexander [00:03:33] So is it is it true or false that when I use Chad GPT as an example and the response that comes back is inaccurate, it’s not the model’s fault. It was that I wasn’t clear in my request. Is that true or false? 

Numa Dhamani [00:03:51] And so a lot of bit of both. Which which I know is in the best answer. But the model isn’t really designed to be accurate, is designed to be really helpful. You can, however, use strategies to help get more accurate answers so you can give it some factual information. You can do certain things on the back end, or you can hook it up to like sort of databases or something to really get factual information. But you can also ask it to go critique itself sometimes. So if it kind of provides a quote to you and you’re like, I’m not actually sure someone said this, you can be like, Well, can you actually verify that for me? Or can you go double check that response? So it’s a little bit of both where you can craft a prompt to get more accurate responses. So one of the there’s several techniques you can use something with scores of cuts of consistency where you can go ask it the same question like three or four times and see like if it actually gives you like the right answer three or four times, I kind of pick the majority. And and part of it is just the nature of these models, and it’s because they’re probabilistic in nature and aren’t designed to be factual. 

Greg Alexander [00:05:07] When you say probabilistic in nature as it relates to an elm. Explain how that works. 

Numa Dhamani [00:05:14] Yeah, so a language model is really designed to represent natural language and it’s probabilistic. So it basically generates probabilities for a series of words based on the data trained on the models that we see these days are trained on the entire Internet. They’re trained on crazy amounts of data, like billions and trillions of documents. And the way they work is they actually just predict what the next word would be. Hmm. So they kind of assign. So let’s say the sentence is I am a machine learning and we’re trying to predict the word engineer. It might have probabilities assigned for several words that could fit there. It could happen. Engineer, technologist, practitioner, researcher, and the one that would have the highest probability, which would be the words probably kind of seen the most used in that context. That’s what they will assign. 

Greg Alexander [00:06:12] Interesting. You know, I’ll give the listeners an example here on how what I learned from Numa recently has helped me. So there’s a feature in Egypt for called Code Interpreter, and this allows you to load a document. So I loaded a 224 page franchise franchise disclosure document and I asked the. The tool. I said, please summarize this document. And I got back a response and then I said, okay, you are a financial analyst. Please summarize a document. And the summary was so different. You know, it was all around financial matters. And then I said, You are a management consultant specializing in competitive strategy. Summarize the document in a whole different set of things came up. So in that little example, and I just bring the example up to help the listeners who might be new to this. Enriched my experience tremendously, and it made the tool, you know, support the initiative that I was working on that much that much better. So providing context as as Numa likes to say is is very, very helpful. Okay. Who should be using prompt engineering? Is it everybody or is a certain job functions? What are your thoughts on that? 

Numa Dhamani [00:07:30] And it’s really anyone who wants to interact with the journey of the AI system. So like any time you’re interacting with it, you are actually writing your engineering a prompt, right? So business leaders can see that, developers can use that content, creators can use it, researcher or students. It’s really anyone who wants to leverage capabilities of the generative system. 

Greg Alexander [00:07:51] Okay. And is there a particular time, like when should somebody use this as an early in a project? Late in the project. Across the entire spectrum. What are your thoughts on that? 

Numa Dhamani [00:08:01] C I think you can kind of incorporate it into your workflow. Either you can in early, later, kind of throughout. It really depends on what task you want. So you can you can use it for brainstorming purposes. That’s actually a really great tool to kind of go back and forth with to kind of brainstorm, I don’t know, like a blog post or something. So let’s say we’re we’re talking about a blog post. You can use it to kind of brainstorm a blog post. You can ask it to maybe write certain sections of it and you could ask it to refine it for you. You could ask it to, you know, correct certain like word usage kind of throughout as you want. You could ask it for like a title towards the end. You could give it the whole thing and be like, okay, well, now give me a title. What do you think the suitable title would be? So I think there’s ways to kind of be incorporated throughout your workflow. It really just depends on what works best for you. Like if that’s something that is like, useful for you, right? 

Greg Alexander [00:08:56] Interesting. So I guess the advice there would be to to try to use it in the workflow at the task level, you know, beginning, middle and end, kind of see how it works for you. That’s really great advice. Where is it used? I am a novice at this and I spend most of my time on my smartphone and therefore I don’t use it as often. But when I’m on my PC, I use it more often. So is that common? Is that uncommon? Like where? Where is it most often used? 

Numa Dhamani [00:09:25] I think people do kind of maybe most use it on the PC just because it there aren’t like really great apps right now on, you know, like your iOS app. I guess you could pull it up, but it looks great, but you can really just use it for any sort of specific task. I’ve seen it a lot for generating content and kind of a lot of the writing or customer service tasks which actually work really well if you are using it on IPC. A lot of developers that were coding, myself included, sometimes it can be really great to get like just ask it for like the example of a minimal function of doing something like this or like helping it for using with like if you’re using something like copilot, which kind of passes on the back end. And for those who do not get a copilot is basically is a generative system that helps generate concrete. It’s just what it would be, but kind of of tuned for code. Okay. So what it does is what can be useful is like while you’re typing, it will give you sort of like comments or, you know, like variable names and things which can be very easily kind of incorporated while you’re using it. I think we might come to a point where people will be using it on their phones. It might be integrated with like text messaging and kind of functions like that, like I know inflection they are. So there you can text with it. Mm hmm. Which is their version of catch up. And I think we will kind of start seeing a little bit more of that where it’s you can very easily pull it up and talk to it. But in its infancy right now, a lot of it is, I think, Web browser based. 

Greg Alexander [00:11:11] Got it. So for those that are listening that haven’t developed a skill of prompt engineering and after listening to you have been inspired to do so, what advice would you give them? 

Numa Dhamani [00:11:23] The best way is just by practicing. You can start with really simple tasks and problems and then gradually move on to more complex ones, which maybe require logic or reasoning or brainstorming or critiquing. And it’s just don’t be afraid to try different problems. Fine with it. Like it’s actually really fun to do. 

Greg Alexander [00:11:44] Yeah, I’m surprisingly enjoying myself after I was in Austin spending time with you. 

Numa Dhamani [00:11:49] When. 

Greg Alexander [00:11:50] I went back and said, All right, you know that it’s okay to to make mistakes and try it. And I found it to be. I had your PowerPoint deck up in front of me and with all the instructions on how to do it, which we’ll go over with the members in a later session. And I was using it like that, and I was really pleased with how intuitive it was. 

Numa Dhamani [00:12:10] Yeah, I’m so glad. 

Greg Alexander [00:12:12] So, Noomi, you have a book coming out soon. Can you tell us the title of the book? What’s What’s it about? And by the time this airs, it probably will be available. So where, where can people find it? 

Numa Dhamani [00:12:23] Yeah. So the work is called Introduction to Generative A.I., and it’ll be published by Manning Publications, and it talks about how you can use large language models up to their potential. And so things like this, but at the same time also tries to build an awareness of the risks and limitations that come with using generative AI technologies. So it kind of outlines the broader economic, social, ethical and legal considerations that you need to think about when you’re using generative A.I.. And it will be out this fall. Right now, you can preorder just on man income, but closer to the release date, it will be on Amazon, Target, Barnes and Noble and some other resellers. 

Greg Alexander [00:13:08] Well, congratulations on it. I I’ll be buying a copy and will read it. And thank you for contributing to the body of knowledge by going through the hard work of writing a book. I’ve done that myself. I know how difficult that is. I have to ask, did you use A.I. to write the book? 

Numa Dhamani [00:13:26] I did not. There are so there are some examples from JP and Bard and Claude in the book, but that is that is kind of the extent of it. 

Greg Alexander [00:13:40] Okay, good, good. So it’s original. All right. Fantastic. 

Numa Dhamani [00:13:43] Yeah. Yeah. Original piece. 

Greg Alexander [00:13:45] Great. Well, Numa, on behalf of the membership, I really want to thank you for supporting Steven and helping us understand prompt engineering. Really looking forward to the member session. And congratulations again on your book. And thanks for being here. 

Numa Dhamani [00:14:01] Thank you. Thank you for having me. This is fun. 

Greg Alexander [00:14:03] All right. So a few calls to action for the audience. So if you’re a member, please attend the Q&A session that we’ll have with Numa. Look out for that invitation. If you’re a candidate for membership, go to Collective 54 ICOM and apply and the membership committee will consider your application and get back to you. And if you’re not ready for either of those things, you just want to learn more. I would direct you to my book. It’s called The Boutique How to Start Scale and sell a professional services firm, which you can find on Amazon. So with that, thanks again, Numa and thanks for the audience for listening and we’ll talk to you soon.

Episode 101 – Chief of Staff: A Role You Can Leverage Today To Find The Time To Work On The Firm – Member Case with Bryon Morrison

Scaling a boutique professional services firm requires effective replication of the founder and a focus on delegation. On this episode, Bryon Morrison, Co-Founder & CEO at Proxxy, talks about the power of replication to remove the founder bottleneck so they can work on this business.


Greg Alexander [00:00:15] Welcome to the Pro Serve podcast 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 entirely to helping you grow, scale and someday exit your boutique processor firm. My name’s Greg Alexander. I have the pleasure of leading this group and I will be your host today. And on this episode, I’m going to talk to you about how to scale yourself, how to replicate yourself and others, how to delegate, determine who to delegate to when to delegate, how to delegate, etc.. And what I hope to accomplish on this call with my esteemed guest, who I’ll introduce in a moment, is to first just draw awareness to this issue that when we run a professional services firm, sometimes the founder or co-founders can get in the way. They they continue to do things the same way they’ve always done them. However, their firm has progressed beyond a practice. They have a real firm, large numbers of employees, etc. And in order for them to continue to scale and maybe someday exit their firm, they have to get to the point where the firm can run without them. They’re not the firm is not entirely, completely dependent on the founder. So that’s the goal of today. We’ve got a great role model with us. He’s going to share his experiences. His name is Bryon Morris and he’s a member of Collective 54 and the founder of proxy. Brian, great to see you. Welcome to the show. Please introduce yourself. 

Byron Morrison [00:02:01] Thank you, Professor Alexander. Good to be on the podcast and I appreciate you letting me talk through the bottleneck with everybody. So, yeah, I am the co-founder and CEO of proxy and you know, it was just like you said, I spent enough time working in large Fortune 500 companies watching these executives. And what I learned was they have this support system around them that makes it impossible for them to fail. And I always looked at them and I said, why? Why isn’t that available to the entrepreneurs of the world, the small to medium sized businesses that are in high growth mode that really, really need it. And so I you know, a few years ago, I stepped back and and said, you know, I’m going to see if I can solve that problem. And so met up with a couple of other my other co-founders and we developed a proxy. And I’ll tell you, it’s been an amazing ride for we’re entering our third year and, you know, it’s just natural for us to be able to help these companies because we just have this servant leadership mindset and we believe in entrepreneurs and we believe that they’re capable. So we’re excited to be able to help anywhere we can. 

Greg Alexander [00:03:25] Okay. I was really excited to see that you were on the show today because you provide something that I think our members would benefit greatly from. And this is not just a blatant sales pitch. I really believe this and that’s something is a professionally trained, remote chief of staff. And first, I want you to explain what that is. And then I’m going to offer the audience my opinion as to why they should care. So would you explain what a professionally trained remote chief of staff is? 

Byron Morrison [00:04:00] Yeah, we’re essentially an executive multiplier. You know, there’s such an important need for an executive to be able to, as you said, replicate yourself. And so it’s what we provide is a solution to automate some of the routine tasks that you see. But the reason we do that is because it frees up the executive to listen to and work with the strategic counsel that we can provide. And so will help drive strategic initiatives, help them identify where and how to prioritize those. But the chief of staff role is something that, you know, you see it coming up more and more. And it’s often misunderstood. Some people think of it as, you know, an executive admin or a support role that is really more task oriented, but it’s a really strategic role. And the thing that’s a little bit unique about how we do it is, and I would argue it should be a third party most of the time because we trying to grow budgets, we aren’t trying to build a fiefdom and get more hires. We are only focused on helping that executive. And so that’s why we built this as a remote model, so that we could keep somewhat separated from the rest of staff and really stay focused on that executive that we’re working with. 

Greg Alexander [00:05:33] Someone to tell the audience a little story, and it’s somewhat comical and embarrassing, but those are usually the best ones. So when I had my boutique firm called SBI, my wife and I were really into a television show called The West Wing. And we would we’ve been this thing I’ve probably seen every episode, I don’t know, five times. And what I learned through that show, which is crazy, that this is how I learned this, is that the way the presidents of the United States and the White House operates is the president has a chief of staff and the chief of staff is a senior person, maybe the most senior other than, you know, the president’s direct reports. And the contribution that that chief of staff made to the president was enormous. So I said to myself, with that inspiration, maybe I need one of those people. So I had one. And what I what I started with, which is what I would recommend everybody here is I did a time on it and I said to myself, Where is all my time going? And if I hold myself to a standard and the standard that I came up with was what was called a key contribution. A key contribution was the things that I did for the firm that significantly moved the needle. And if I stripped everything else out of my life and my work life, how much more time would I have to invest in key contributions? And as a result of that, could I scale myself and then by default, my firm? And really, that’s what the chief of staff did. So I, I said and I would use that word, shed all kinds of habits and things I was doing that I thought I needed to do, but I really didn’t need to do. And I had to take a leap of faith. The chief of staff had to prove to me that she, in this case, was capable of doing it. But I got to tell you, you know, today we’re talking about how to scale yourself. And that was a major moment for me. And what I love, Brian, about what you’re doing is that a lot of our members don’t have that person internally. They might not be 100% convinced that they should do this or they could do this. And by engaging with proxy, it’s a flexible model. It’s a variable model. And it’s a way to get started and see kind of what the return is. So that personal story that I just share with you, do you see that story in your other clients and do you have a couple stories that you are examples you might want to share with the audience? 

Byron Morrison [00:08:13] Yeah, yeah. It’s everybody needs a Leo. I actually wrote an article on that because everybody needs Leo McGarry. But, you know, you’re right, Greg. I think one of the challenges that people have with this is they think of it as an all or nothing role where I’m going to make this hire and man, I’m going to invest a lot in that hire. And, you know, I feel like a better place to invest that time is in the long term hire that comes up that you’re going to invest and you’re going to grow your firm around. And so that’s that whole point of succession. But you always need somebody there who you can talk to. And, you know, we have a. Every rational promise that we make to everybody, and that is that we focus on giving back or reclaiming at least 8 hours a week. Now, if I just do the math here, your point about going through your personal efficiencies and identifying where your hours going and your key contributions, you’re probably burning some time in areas that are really helping the firm. So we recognize that. And and frankly, that’s why we don’t have long term agreements, because we really don’t. All we’re focused on is helping you succeed. And each week we come back and say, did you feel it? Did you feel the impact of what we worked on? Because if not, we should change the focus. And so sometimes that’s a collaborative process where we’re working together to identify that. Sometimes we bring that to our clients and say, you really ought to reprioritize and focus on something else. And they know that it’s coming from a good place. So the rational promise is you get some time back, you know, change what you’re doing. The emotional promise that we focus on is. Being that confidant. That you can talk to and you can say anything to because, you know, if you’re working with somebody, you say something to a staff member. There’s a ripple effect no matter what because of personal biases, concerns. So we actually, you know, one of my friends and clients told us I love what she said. She goes, you know. In business as a CEO, I have speed bumps all the time and so I’ll look at lots of different lanes I could drive down and some speed bumps are higher than others, and I don’t even want to get near it. She goes. You guys just shape the speed bumps. It’s just gone. Like we just execute. We keep moving forward. And so I thought that was a great metaphor. But yeah, we see that. We see tons of issues around succession planning. We see issues around management methodologies. You know, do we have the discipline and consistency in that, the wrong people in the wrong roles, people being mismanaged because of their site makeup or their natural strengths, just poor initiative management. And sometimes it just comes down to like that hero, the CEO. You know, we see that all the time where it’s hard for us to see that. And you know, your point about funny stories. I was that guy. Yeah. I’ve absolutely been in that role where I was like, I didn’t know I was doing it, but I would set it up so I could come in and save the day. Mm hmm. And so once you’ve done that, you’ve realized it. You go, don’t let anybody else pay that dumb tax. Yeah. Then, you know, we’re. We see it all the time. So. 

Greg Alexander [00:11:46] So part of scaling yourself to the listeners is the distinction between kind of cost of doing business items and strategic mission critical key contributions. So the hard part is once you understand what your personal key contributions are and you say to yourself, okay, I’ve got to teach somebody else how to do this as well as I do it. And I talk at length in my book, The Founder Bottleneck How to Scale Yourself and How to Do That. And that is the long term multiyear process of succession planning. And it is absolutely, positively mission critical. And you can’t go cradle to grave as a founder of a boutique process firm unless you master that. What Brian is talking about and what his firm offers is a different type of service. And I would argue equally important, because it is a multiplier to use his terminology, and that is there are cost of doing business items. There’s things that we all have to do that we do not want to do, but they have to get done. If they don’t get done, the firm doesn’t operate the way the way that it should operate. And when I suggest to founders that they need to scale themselves, they always come back to me and they say, Hey, I can’t just stop sending out invoices. I can’t just stop automating this or automating that. Like, all this stuff has to get done and I’ve got to give it to somebody in my staff. They’re early, they’re already 80, 90% utilized right now. So I can’t load this stuff on top of them. I need somebody else. And that’s where I think a chief of staff can come in. Not that they’re just relegated to mundane, boring task work. These are cost of doing business items. So they’re critical that they get done. But that’s the stuff that I think can go to a chief of staff. And this is a you know, this is a new idea for many of our founders, is the idea of having this person on staff, you know, a real right hand. The objection that comes up when I suggest this, Brian, I want to give you a chance to address it is I don’t have the money. It’s I’m not going to invest in doing this. I know what I say, but I’d love to hear what you say to that objection. 

Byron Morrison [00:14:04] Yeah. I just it kind of comes back to the old argument of, hey, I’m the CEO, but I’m also the chief model washer. Well, when I hear that, I’m like, then you’re really doing a poor job for your stakeholders in that business because you should not be the chief bottle washer. I get the point of what you’re trying to get across, but you’re using your time ineffectively and that time is worth a lot. You know, we do an ROI calculation. When we start working with a client, we start the same thing. We look at personal efficiencies. Where can we save that individual time? A lot of those times they might be administrative functions like that. We identify how to automate those and make them go away, or we identify how to make those routine so that you can hire to it a less expensive resource. Then you move on to the next thing. And those tend to become more and more strategic as we eliminate the tactical issues that you’re dealing with. So you’re right. I mean, you know, a lot of people I came up in consulting and advertising and marketing and, you know, some people were like, oh, I don’t like doing that kind of work, you know, because it’s, you know, that’s for somebody else. We believe that those are the things that stop you from becoming great. So we eliminate those things. We work, focus first on the personal efficiencies, but then we move in to team assessment. What’s your team look like? Are they capable of taking on those roles? Are there spaces where we can improve upon the processes that you’re currently doing? Then we get them to the stage of growth. So where is that company at? Should we introduce, you know, like you do a great job in the boutique of laying out what you should be thinking about in each of the stages? We go through a similar process. We just break that down a little bit more granularly so that we can actually focus on what should be prioritized first and where do you spend your time. So I agree with you the little things that when people say I can’t afford to do that, that’s because they don’t really understand the role of the CEO yet. Yeah. And so most of the companies that are larger, they’re like, I have I want to have an Office of the Executive because they know exactly what that amplification or that multiplier effect is. 

Greg Alexander [00:16:25] What I say to people say, listen, I don’t have the money for this. I say, you’re missing out on the most important cost and that’s opportunity cost. So Bryan says it gives you back 8 hours a week. So what’s that worth? So let’s say you build a client, I don’t know, $250 an hour. Right. So, I mean, right there. What’s that? 2000 bucks per week. That’s eight grand a month right there. So I don’t when I hear that, I’m I don’t know, I just call B.S. on it because very often people think they think about the cash. They don’t think about the opportunity cost. What would you do with those extra 8 hours? You know, pull open your to do list. Stack, rank the things top to bottom based on the areas that you want to dove into that you’re not getting to because you don’t have the time. And if you had a chief of staff, you’d be able to get to those things. And if you pull them off, one of those worth. So the opportunity cost is just astounding. It’s it’s a real big issue. So. 

Byron Morrison [00:17:19] Yeah. You know what we also see, Greg, is just this. They get into it and they go, Well, I don’t have that many other things on my list. So a lot of times they aren’t just they just aren’t aware of what else could be done. Or when they implement something, they go, No, no, no, I did that well, they did it in their head or they did it half way and they haven’t made sure. Are they tracking it over time as a longitudinal value? Am I working through the communications that are necessary to get that out? Is there an ongoing effort to make sure that it sticks? So there’s this difference in entrepreneurs from people who are doing work because it matters and they know it. And then the individuals who are doing checkboxes. 

Greg Alexander [00:18:04] Yeah, for sure. 

Byron Morrison [00:18:05] And they go, Well, I finish that. I’m on to the next. Yeah. 

Greg Alexander [00:18:08] All right. Well, we’re out of time here. I’m really looking forward to the Friday Q&A session that we’ll have with members I this is a hot topic. Our members are time starved. I hear it all the time. And they’re going to really probe into this as a possible solution for that. So thanks a bunch for being on the show. I really appreciate it. 

Byron Morrison [00:18:25] It was my pleasure. Thank you. 

Greg Alexander [00:18:27] All right. So if you’re a founder of a boutique processor firm and you want to belong to a community of peers and meet great people like Bryon, consider joining Collective 54 and you can apply for membership at Collective 54 icon. And if you’re not ready to join, but you just want to educate yourself some more on topics like this and others. Subscribe to Collective 54 for insights, which you can also find on the website. This gives you benchmarking data, a weekly podcast, a leading blog. We actually have a bestselling book called The Boutique – How to Start Scaling, so a professional services firm. So that might be a place to start as well and until the next episode. Thanks for listening and I look forward to the next time we get together. Take care.

Episode 95 – How the Founder of a Customer Experience Design Firm Scaled Himself by Building a Team – Member Case with Jeff Pruitt & Ed Borromeo

Profits take a big hit as a result of under-delegation. Many leaders of boutiques would rather do something themselves than delegate it. This destroys morale and leads to high turnover. On this episode, Jeff Pruitt, CEO & Ed Borromeo, President of Tallwave share how they built a powerful leadership team by focusing on replication.


Greg Alexander [00:00:15] Welcome to the Boutique with Collective 54 podcasts for founders and leaders of boutique professional services firms. For those that are familiar with us, Collective 54 is the first mastermind community dedicated exclusively to helping you grow, scale and exit your pro search firm. My name is Greg Alexander. I’m the founder and I’ll be your host. And today we’re going to talk about building an executive leadership team around a founder and a CEO and the impact that can have on the scale of a firm. And we’re really lucky today because we have two guests. We have Jeffrey Pruitt and we have Ed, and I always mispronounce your last name, but let me give it a shot. Borromeo. How’d I do? 

Ed Borromeo [00:01:02] You did great. Great. Thank you. 

Greg Alexander [00:01:04] All right. Very good. And Jeff is the CEO and founder. Ed is a high potential employee that has been grown up in the organization. He started off, as I understand, as the EVP of Ops, and he got promoted, the CEO and then the president, and he’s the president of the firm now, which he’s been doing that for the last for the last almost two years. And that’s what we advocate for. We have a case for a grow your own approach to scaling executive leadership, because in pro serve, we’re a collection of people. Culture matters and success. Probability of success goes up when you grow your own. And that’s the role model that we have today. So I can’t wait to jump into it. But before I get into my questions, which I have many, I thought, Jeffrey, I would throw it over to you and have you do a proper introduction of yourself in your firm and then added love for you to do the same. 

Jeffrey Pruitt [00:01:57] Ed, thank you. So, Jeff Pruitt, founder of of Tall Wave Customer Experience Design firm, and we’ll get into a little bit of what that company is. But background was Arthur Andersen, Big Six, accounting to CFO and then president of a pro sort of digital marketing firm that that grew into a, you know, from 15 people to about 600 people and then started tall wave. As a customer experience design firm, we’re focused on helping brands increase net retention revenue through looking at the experience that they deliver, deep journey mapping of that experience, but also looking at the people process and system to deliver that experience. We’ll go in and do deep assessments and mapping of how you can transform that experience over a period of time. And then usually we’re part of product design, product management, product strategy, potentially program management of those workstreams and driving outcomes, which also include the digital acquisition or digital marketing side as well. 

Greg Alexander [00:03:01] Okay, great. Ed, how about you want don’t you tell us a little bit about yourself. 

Ed Borromeo [00:03:06] Yeah, thanks, Greg. So I’m an engineer by training and ex-military officer doing a lot of operations while I was in the service. And then I went into the utility space where we ran operations for utilities, but then started off spun out a technology company that did both SAS work as well as managed service work and sort of my skin into my beginnings of stint into professional services. Today I’m the president of Paul, where I oversee our day to day in the business, namely the growth side of the business as well as our practice areas. 

Greg Alexander [00:03:41] Okay, very good. So Jeff has been a member for a while and I’m happy to report that he’s one of our ten featured role models in my upcoming book, The Founder Bottleneck How to Scale Yourself. And the subject of that book is it’s how somebody like Jeff understands who is high potentials, are high potential employees, how to delegate them, delegate to them, what to delegate, which allows the founder to reimagine what it is that he’s working on and amplify his contributions to the business. Jeff, let me start there. How did you identify Ed as a high potential employee? 

Jeffrey Pruitt [00:04:21] And he identified that to me personally. He would come in when we were a little bit different of an organization that we are today. At the time, we’re an innovation consulting firm that said, in a holding company that also was spinning out some of our own companies. So we’d spun out four companies, separate C Corp and and some of those companies were growing well, some has since sold. And in the meantime, he came in as a contributor as he was looking at wanting to get into the innovation technology space different from where he was a little bit prior. And so you’d come in and he was working for a direct report of mine and I noticed his potential. But he also came in and said, Hey, I recognize you’re struggling with some stuff in and around operations. I can help you. And needing the help, I said, Well, let’s sit down and talk about it. And so at the time I had flattened the organization and had everybody reporting to me as I felt I needed to get closer to what some of the issues were. When Ed came in and and took on some initiatives for me, I immediately realized that he could he could probably take on a lot of the reports and run the operations of that business. He he did come in. He did so he got us to profitability. And then we had an opportunity to merge that business innovation consulting firm with a customer experience digital marketing firm. When we combine those two, it made a ton of sense to me to move him to CEO of that merger and of us both ride together in this journey of building tall wave as a customer experience design firm. 

Greg Alexander [00:06:09] Very good. So, Jeff, let me stay with you and ask a follow up to that. And then I got a couple of questions for you with bear with me. Sometimes when I work with founders and they’re struggling with this concept of kind of delegating and replicating themselves and others, there’s a trust issue. They are self-described control freaks and maybe perfectionists. Sometimes they they they don’t think about progress. They think about perfection. And they’re reluctant to delegating and give up key strategic components of running the business. You clearly did that with Ed. So did you ever struggle with that and how did you get over it? 

Jeffrey Pruitt [00:06:51] Well, I think from large part, I have an idea of where I want the company to go, and I have an idea of how I want to enter the organization. And I always look like 12 months out, and I ask myself, how do I want to enter the organization when I walk through the doors? What are the things I’m doing? And part of that is a progression of how does the company progress beyond where it is today. So getting a little bit of that vision of understanding where the company is going and then what is my role in it? How do I show up and and progress the business more? The conclusion of that is you’ve got to give up what you’re doing and rely on individuals like Ed to be able to to manage a good portion of the organization. We’ve had iterations of that, and I think we’re stepping into our next iteration right now and it feels great. I can tell you that I’m not perfect, and I would say I don’t know if I’m a control freak from an ego perspective, but but I have an idea of what works sometimes and I feel like, Hey, I know what works and I need to inject or insert myself in that process. And I hope Ed would say in the last 18 months, I’ve gotten better at staying out of that process. And he’s doing better also commanding, controlling and reporting up to me on those things where he might need me. 

Greg Alexander [00:08:16] Okay, very good. So let me come to you and look at it from your perspective. So, you know, it sounds like you’re an execution machine as a lot of ex-military are, and you’re the perfect partner with Jeff, who is probably more visionary. And that’s me commenting on that, having had the pleasure of getting to know Jeff. So you guys are really good match and you could work anywhere. Why did you decide to partner up with Jeff and and take on this role of president? 

Ed Borromeo [00:08:47] Gosh, that’s a good question. So first of all, just a notion of this space, I was pretty intentional in getting into the innovation and experience space, having sort of gotten a taste of that my prior life. So I felt like, like Jeff, Jeff is the kind of founder that also likes to surround himself with a team and doesn’t want to go it alone. And I think that’s a big part of his persona. And that was really welcoming for a guy like me to come from the outside and to be part of that. And I think I’m super grateful for that opportunity. And so I think that sort of sets the stage in terms of just just a partner. I think you said it. You know, it’s a good it’s a good compliment, I think, to your point of how to how do we make it work? It’s not without a lot of communication, sometimes healthy tension, sometimes, you know, the how versus the what and struggling between that. But it’s about wanting to desiring to grow a business and knowing that it takes different perspectives and complements. And I think Jeff adds that. He adds that he has a clairvoyance and a vision that, you know, it’s not like I wake up with that. I think that’s innate. But, you know, getting getting stuff done and really understanding how to spread that through the organization while bringing people along is something that I bring to the table. And so us working through that in partnership has been has been really beneficial for us. And it takes it takes the good hard work of talking about it and talking about it and, and and then holding one another accountable. 

Greg Alexander [00:10:14] Something that struck me regarding the way that Jeff talked about your story and how you came to him proactively saying, hey, I see these particular challenges. I think I can help you with them. I can contribute more. It was really enlightening to hear that from you. And I think many of our members who join is a team that are power members with the founder and his or her team. Sometimes they’re they’re hoping that their right hand or left hand, so to speak, would be proactive with that type of guidance. So what would you say to members of Collective 54 that aren’t the founder but are on the executive leadership team? What advice would you give them to inspire them to raise their hand and say, Please give me some more to do? I think I can solve this problem or that problem. 

Ed Borromeo [00:11:08] Yeah, that’s a good question. First of all, that struggle is real, right? Because as a growing business, you go through these, as I’ve mentioned, these iterations of having to evolve the version of the business, but then the version of oneself as you get to sort of the next level of leadership. And I think that if we’re all line of what we’re trying to do here, I think I think just having that sort of holding one another accountable for the next leg up to to evolve to the next stage, I think also causes that, you know, for us, we’re wanting to grow and we know we sort of innately believe and inherently believe that we have to evolve ourselves as individuals. And that means having a vision for where we want to individually go as professionals, as partners in the business, which means by definition having to let go of some things. And so you have to believe that these things can’t be roadblocks, that it’s necessary to evolve. And then, you know, talking about those things very deliberately. So I think Jeff and I always talk about a year ago, Hey, as president, this is where I want you to go. And as a result of that is what you need to let go of and where you need to be thinking. And and that is always a North Star that we revisit. When or are we at least, I mean, monthly, but certainly quarterly to every four months we sort of reset and we say, where are we on our journey of, you know, you coming to fruition as a president and coming to fruition as a CEO in this next stage of our business. So it’s a very intentional and deliberate move that keeps us accountable to to to having to reach and grab more. 

Greg Alexander [00:12:40] Now, you know, it’s just exhibit A on how to do this correctly. We’re so lucky to have top wave in our membership, but it’s not surprising that your firm has scaled the way it has and its button up on 100 people now, which is really a great success story. I could go on and on and on, but I’m going to save some of my questions for the live Q&A session we have upcoming on Friday. So let me let me conclude it there and just say, on behalf of the membership, the two of you are role models, inspirations for everybody else, and it’s represents how to do it in this particular area. So thanks for being here today and for contributing. 

Jeffrey Pruitt [00:13:15] Thank you, Greg. 

Ed Borromeo [00:13:16] Thanks, Greg. 

Jeffrey Pruitt [00:13:18] Talk to you soon.

Greg Alexander [00:13:19] Okay. So for those that are in professional services, who want to belong to a community like this and learn from really bright people like Jeff and Ed, continue to instruct. So you should consider applying to Collective 54 and being a member and you can do so at collective54.com if you want to read about this subject to replicate yourself and others, there’s a whole chapter on that in the book. The book is titled The Boutique How to Start Scaling Solo Professional Services Firm. You can see that on our website to pick it up on an m on Amazon. So listeners, thanks for listening and I look forward to our next episode. 

Episode 84 – A Marketing Agency’s Approach to Sharing Equity with Key Employees – Member Case with Kelsey Raymond

There are many ways to split up a partnership. And the equity split needs to evolve over time. On this episode, Kelsey Raymond, Co-Founder & Chief Executive Officer at Influence & Co., shares how she successfully replicated herself by developing a key employee into her COO, so she can run the business on her own terms.


Greg Alexander [00:00:15] Welcome to the Boutique with Collective 54, a podcast for founders and leaders of boutique professional services firms. For those that aren’t familiar with us, Collective 54 is the first mastermind community to help you grow, scale and exit your firm bigger and faster. My name is Greg Alexander and I’m the founder and I’ll be your host today. And on this episode, we’re going to talk about ownership, structure, the right one, how to split up equity and all of the associated challenges with that. And the reason why members should care about this topic is because converting income into wealth is how boutique founders realize their dreams. Generating a high W2 or K-1 is easy. Most of our founders are exceptional people, and generating high incomes has not been a challenge for them. However, building a large balance sheet is hard. Net worth Trump’s net income and net worth is generated from ownership. We want to make sure that our scaling activities are producing lots of personal, net worth and wealth for our founders. And sometimes that requires sharing equity with others that can help grow the pie, so to speak. So therefore, the right ownership structure is so important. So we have a role model today, Kelsey Raymond. And Kelsey is an expert on this. And she’s someone who has created wealth for herself and converted income into wealth. It’s built an amazing business. And she’s going to tell us a little bit about her journey and how she pulled this off because so many of us are trying to do it. So. Kelsey, welcome to the show and please introduce yourself. 

Kelsey Raymond [00:01:58] Thank you. Thank you for having me here. As you said, my name is Kelsey Raymond. I’m the CEO and founder of Influence and CO, which is a content marketing agency. And yeah, I have been doing it for about ten years and have learned a lot and made a lot of mistakes along the way. So hopefully others can learn from some of those. 

Various Speakers [00:02:21] Okay, great. And I wanted to talk a little bit about equity and equity splits. And as I understand it, but I’m sure there’s more to the story that you have a CEO, I believe her name is Alyssa, and she’s been pretty important to you. And and you have shared some wealth with her. As I understand it, she’s an equity owner in your firm. Tell us a little bit about how that evolved over time and and why you decided to go that route. 

Kelsey Raymond [00:02:53] Absolutely. So the first iteration of this, from the beginning of the company, since we started turning a profit, my former co-founder and I decided that it was important to align incentives with the whole team. So we from the day that we started turning a profit, we allocated 10% of the company’s profit for a profit sharing pool to pay back to the rest of the team. This was always, you know, communicated as this is at our discretion. If we have a really bad quarter, it’s not going to happen. You know, don’t count on it. Don’t go plan to, you know, put a pool in the ground or anything like that. But but so from there, that was a way that, you know, even as a small team of 12 people, we had this profit sharing pool and everyone got different amounts determined by their role, their seniority, their performance. And it was paid out on a quarterly basis. Mm hmm. Alyssa was our first ever full time employee. So she’s been here since day one. I very much consider her, you know, an unofficial co-founder from the beginning. So as that her profit sharing amount was always the highest or on the higher end of everyone else on the team. And over time, we saw that one way to really show her how much we valued her was to give her a guaranteed amount for that. So it changed from, hey, you’re going to get some percentage to, you know, we’re allocating 10% for the whole team. 2% is just for you. So, you know, every quarter you’re going to be getting 2% of the profits. But at that time, it wasn’t equity. It was really I think most people would call it phantom stock. So if she chose to leave the company, that was going to go away. So I share this is kind of a an evolution over time of both Alice’s role changing in the organization and really, you know, her stepping up more and more. I wanted to tie her in more and more as her role changed. So once she became the CEO, I really, you know, and my co-founder left. So that’s a whole other story there. But I really, really saw that it would make sense for her to have some true equity. And one of the reasons for that is that we were having conversations that we were open to the idea of selling the business at some point. And based on her, the profit sharing structure that she had, she wouldn’t have been included in any exit, any sale. And so went to her and said, you know, I really would like for you to come in as an equity partner. You know, up until this point, we’ve just we’ve given you this 2%. If you want to buy in at, you know, up to 5%. I’d like to welcome you to do that. And the way that we structured it is that we only asked her to pay 20% of that purchase price for the equity that she was buying upfront. And then the rest was paid out of the proceeds of her distributions. So that really allowed for. Her to have true equity in the company without having to come up with a bunch of money upfront, but still having some skin in the game since, you know, I had brought a lot to the table when we had got the loan and everything like that. So that’s kind of the evolution over time. And then we actually did end up selling February 4th. Melissa and I are still running the company, so it’s an interesting structure. But with that, you know, her her return on what she invested to become a true equity partner, she said, is, you know, the best investment she’s ever made. Times 1000. So it all it’s all worked out really well. And it made me really happy that, you know, that opportunity that made me more wealth worth selling that business, that she was really included in that because she’s been so key and so integral to the organization. Yeah. 

Greg Alexander [00:07:04] Well, so first off, congratulations on your sale. We’re very proud of you. And I hope it was everything you dreamed it to be. But I will say I’m glad you’re still running the shop. And and it sounds like you’re going to go on a journey. Did you sell to a private equity firm? 

Kelsey Raymond [00:07:18] We did. We did. It’s an interesting, interesting structure, which I think is probably pretty standard. But, you know, part of the value was in cash up front, but then part of it’s in over an hour now and part of it is enrolled equity. And so that’s where, you know, Alicia is still included in that as well. So that’s, you know, rolling that into hopefully something a bigger pie in the future. 

Greg Alexander [00:07:39] Yeah. So your incentives remain to be aligned and hopefully the second bite of the apple is even bigger than the first bite of the apple, as they like to say. Okay, so I loved the story on how it evolved over time and the vision that you had from the get go of aligning incentives and setting aside this profit sharing pool. And then when you decided that this one individual was worth buying in and having real equity coming up with a creative, creative financial structure to make that happen, because sometimes when when members try to do that, they go to people and they make the offer, but the people don’t have the money. And it. Exactly. It’s prohibitive. Right. So and I did that with my firm and it worked out really well. There are some challenges with that. I’m sure you uncovered, for example, you probably had to have a partnership agreement at that point that that, you know, governed what you can and cannot do because you now have a fiduciary responsibility to it, to another party. So you had to weigh all the headache of doing this with the benefit. So what was kind of your pros and cons analysis there? 

Kelsey Raymond [00:08:43] Yeah, that’s a great question. I think the the biggest pros and cons analysis was. Replacing a. Like. I know. I think that she is absolutely capable to go out and start something of her own. Not even if it would just be a competitor. She could start any company. Yeah, she’s incredible. And so knowing that she’s going, she. She knows her value enough that even if she loves working with me and we love, you know, everything that we’re doing together, she knows that she could do something on her own. And so that was, you know, the biggest thing in the pro column is what can I do to make sure that she knows she’s valued and that, you know, she’s going to stick around for the long term. So that was the biggest thing I will share, that I had an instance with an employee that was leaving who also had a guaranteed portion of profit. This was our former CMO and she had asked when she was leaving, Hey, can I can I buy that portion like I’m leaving? And I know that that goes away, but I think the company is going to continue to do really well. So can I buy in and get that percentage? And the answer to that was no, because there wasn’t value there to me, because she wasn’t remaining on. Right. And so with Alissa, I really was looking at is this going to keep this person motivated and incentivized to stay with the company? And looking at, you know, if I knew that if we were going to sell someday, I needed her in my court on that. I needed it to be something that she was excited about as well. And so having those incentives aligned for her on a potential sale was really, really important to that as well. Yeah. 

Greg Alexander [00:10:29] What’s so great about the story is that her investment and the equity she got as a result of that materialized. Exactly. Yeah. Sometimes I hear, unfortunately with other members when investments made and you’re making an investment in illiquid private company. So everything has to go right in order for that to get liquidated and in it turn into real money, which it did in this case, which is such a great example of that. Sometimes when private equity makes an investment in a firm like yours, they want meaning the new investors want a broader set of owners. They sometimes they set aside, for example, I don’t know, maybe 10 to 20% of the equity in stock options. And they want to spread ownership across instead of just you and Alissa, maybe you, Alissa, and three or four others that that happened in this case. 

Kelsey Raymond [00:11:21] It didn’t. The conversation that we did have is that they are creating a liquidity pool, liquidity bonus pool for when the that second bite of the apple when it the entity as a whole because we’re rolled up with a few other agencies now sells again they’ve asked me to identify a few other people in the organization that I think are other other people that we really want to make sure are incentivized to stay, that they see that same vision and that they would be included in that liquidity bonus pool. That, though, is different than equity because they would have to be remaining at the organization during that time frame for that to materialize for them. 

Greg Alexander [00:12:07] Okay, I see. So they are aligning incentives and doing it with a liquidity bonus pool as opposed to the stock option, which sometimes happens. But I’m glad to hear that they did that. You know, you mentioned something about your CMO and her wanting to buy her phantom stock, but then leave and you had the wisdom not to do that. When I see people doing that, they create this thing called debt equity. And debt equity is when somebody owns a piece of your firm, but they don’t work there. So they’re really not creating an equity. And when you go to sell the firm down the road, it becomes a real problem because somebody says, okay, I’m paying this amount of money for this piece of equity, but there’s not there’s no one behind it. Yep. Did you get lucky there? Did somebody give you that advice? Have you you know, how did you know enough not to do that? 

Kelsey Raymond [00:12:55] Yeah. I’m trying to think. I think the biggest thing for me because this I respect the heck out of this for this woman that asked. The biggest thing for me, though, was also kind of creating a precedent for if I said yes to that, we had other people that were involved in profit sharing that may also want to buy in. I’d have to have a really good reason to tell them no if they were still with the company. And I let someone buy in who’s not with the company. So I think that was a big case of it is thinking through, you know, doing this for one person on our leadership team, anything that has anything to do around compensation, equity ownership, I assume that everyone else knows everyone else’s business. Yeah, because I think that’s the only way you can make smart decisions is if I assume that if I tell her yes, she’s going. You go tell every single other person on the team, which she wouldn’t have. But if I make that assumption, then I can make the decision through that framework of what I be willing to do this for every person that asks. And if the answer is no, then I need to be really careful about setting that precedent. Where was Alyssa? She was the first employee on the team. I think many people probably assumed she was an owner even when she wasn’t. And so telling the team the why behind Alyssa is the only one that was given that opportunity was a very easy explanation and something that I knew I could stand behind. 

Greg Alexander [00:14:22] Yeah. And they were probably happy for. 

Kelsey Raymond [00:14:25] Absolutely. They were excited because I think, you know, they also saw that as great a loss is not going anywhere. We don’t want her to. 

Greg Alexander [00:14:31] Yeah, exactly. When you weren’t selling the equity to Alyssa, how did you put a price on it? 

Kelsey Raymond [00:14:38] Yeah. So this is going to be I’m going to try to sell the short version, but interest. What made this even more interesting is that I started the company with two founders back in 2011. Two other co-founders. One of the co-founders owned a. Basically what turned into a private equity firm. It wasn’t a private equity firm at the time. It was kind of like an incubator. It was very unique model. And so he brought all of the money to the table. And myself and the other cofounder were the ones executing. That was in 2011. I had a very, very small percentage of the company over time, seeing that this other co-founder brought the money to the table, wasn’t involved in operations at all. My other co-founder wanted to do something different. It seemed like the timing was right for me to buy both of them out. So I bought both of them out in 2018. Alissa bought in in 2020. So what we were able to do is I said, you know, I would feel comfortable giving you the same deal that I got. So let’s look at the multiple that I bought it on of EBITA and apply that to our last trailing 12 months EBITA and use that same multiple. So we both agreed that was a fair way to do it because it was basically the same that I bought in at as far as the multiple. And she thought it was a really fair deal as well. 

Greg Alexander [00:16:02] Yeah, very good. So you had the good fortune there of having precedent, you know, and you were generous enough to give her the deal that you got instead of trying to mark up her deal. Yeah. Which is fantastic. And the proper way to handle that. So. Well, listen, I could talk to you about this forever, but we’re. We’re at our time limit here. I do look forward to the member Q&A, which we’ll do here in a few weeks. But, you know, the way that these collectives work is people like you deposit knowledge into the collective body of wisdom, and we all benefit from that. And every time a smart person does that, the whole membership benefits. So. So Kelsey, I literally on behalf of the membership, your story is fantastic. It’s inspirational, it’s educational. And I just wanted to thank you for contributing today. 

Kelsey Raymond [00:16:44] Absolutely. It’s fun to get to talk about these things. And like I said, I’ve learned a lot. So anytime other people can learn from the things I’ve learned along the way, I appreciate it. 

Greg Alexander [00:16:52] Okay. Fair. Fantastic. Okay. And for those that are listening, if you want to know more about this subject and others like it, pick up a copy of the book, The Boutique How to Start Scale and Sell a Pro Serv Firm. And if you’re not a member and you’re listening to this and you want to meet brilliant people like Kelsey and hear these types of stories, consider joining our mastermind community as you can find out, collective54.com. Thanks again. Have a good rest of your day.

Episode 76 – How an IT Services Firm Built an Executive Leadership Team – Member Case with Matt Rosen

Matt Rosen

The quality of the executive leadership team is paramount as professional services firms grow, scale, and exit. In this episode, we speak with Matt Rosen, founder, and CEO of Allata. He shares how he structured his executive team to replicate himself, developed a succession plan, and spent time working on the vision of the future.  


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 don’t know us, Collective 54 is the first mastermind community to help you grow, scale and exit your firm bigger and faster. 

My name is Greg Alexander. I’m the founder, and I’ll be your host today. And on this episode, we have the privilege of talking to Matt Rosen and the leader of a company called Allata, which I’ll introduce in a moment. We’re going to talk about building a quality management team, and how he’s done that at his firm and hopefully learn a few things along the way. So, Matt, it’s good to see you. Would you introduce yourself to the audience, please? 

Matt Rosen [00:00:54] Yeah. Thanks for having me on the show, Greg. So my name is Matt Rosen, and I’m the founder and CEO of Allata. Allata is a tech consulting firm based in Dallas with offices in Pheonix, Boise, and Provo. And what we do is we help companies with their most complex technology initiatives from a strategy, architecture, development, and data standpoint. 

Greg Alexander [00:01:14] Okay, awesome. And Matt, when did you find the firm to grow? 

Matt Rosen [00:01:18] I founded the firm back in 2006. It was just myself and a developer. And now we’re over 220 people and growing quickly. 

Greg Alexander [00:01:25] It’s an incredible story. It really is. Congratulations on all that. So let me set up the topic because I asked you that question about when you founded it and where you are today because you’ve scaled so fast. And I think one of the reasons why you’ve done that is because you’ve been able to build a quality management team, and I’ve had the privilege of meeting a few of them. 

And it’s a big subject because sometimes, founders that are growing like that hit a bottleneck eventually. And that is, they’re kind of the hero within a group of helpers. It doesn’t work, you know. There’s just too much work for one person. And you got to hire senior people or develop senior people. You have to give them enough autonomy to make the contributions that they need to make, empower them to be successful. And I think you’ve done a really good job with that. 

So I’d like to start with an opening question, which is at a high level, explain to the audience kind of the organizational structure of your leadership team that reports to you by role. Maybe, I don’t know if you need to mention names, what by role? And tell me how you came to that conclusion and why you built it the way you built it. 

The Structure of an Executive Leadership Team Matters

Matt Rosen [00:02:35] So where we’re at today is I really have three direct reports. I have a chief strategy officer and she owns sales,marketing,go to market offerings as well as our partnerships. I have a chief technology officer and he’s really looking forward to the technology direction, what new trends d we should be jumping on. He’s also my personal helpdesk when I run into issues. And then I’ve got a chief operating officer, so the Office Leadership Report is sent to him. 

So I have leaders for four different groups in the company. There’s Dallas, Pheonix, Virtual and Boise, and then he’s got all our back office functions from recruiting, H.R to finance. And so really everything falls to the three of them. And underneath them they’ve got leadership structures and sales and marketing, especially at a delivery level. There’s four group leaders that almost all the consulting resources roll into. 

And then we’ve got practice lead. So for strategy, for architecture, for product and design, for technology solutions and for data, we’ve got vice presidents that head up each of those service lines, if you will, and people are really matrixed across the organization into their office leaders, as well as the practice leaders. 

Greg Alexander [00:03:51] What I find remarkable about your story is you’ve been around five or six years. You’ve grown like crazy, and yet you personally only have three direct reports. Now, I know underneath those three, they have their teams, but that’s pretty remarkable. 

Sometimes I see guys and gals like you with eight to ten , and they’re living almost miserable lives because there are not enough hours in the day. So how did you get it so tight to only three? 

A Professional Services Firm Needs Great Leaders

Matt Rosen [00:04:18] Well, you have to have really good leaders. I mean, that’s really what it comes down to. You’ve got to have people that you can set goals for. You know, I’m not a micromanager. I’m not even really a macro manager. I said high level goals, and I get the heck out of the way. I hire bright people, you know, I do have one-on-ones with the three of them. 

And I probably talk to the layer below them at least every other week. But, you know, we’ve got a real structured way in which we do a sales meeting every Monday. We do an operations meeting every Tuesday. I’m always in on those, or people are sending me a synopsis of them. So it gives me just enough information really to run the firm. And it took a while to really trust folks and hand things off, especially in the sales arena. 

That was based on one of the recommendations you made when I was early on in the Collective was, “You’ve got to stop being the hero sales guy.” That was really hard for me to let go of, but I finally have found a leader who came from a large firm, and she brought a lot of process with her and is now leading the sales team and is a very effective seller herself. 

A lot of it comes down to finding people that are great at doing the things that you don’t or can’t do well, empowering them to do their job, and staying out of their way unless they’re just not meeting their goals. They know that people are going to do things the way you do them. And that’s okay. 

Greg Alexander [00:05:27] Yep. Okay. So, awesome story. I’m really proud of you for what you did on the sale side, and it was hard for you to let go because you enjoyed it. I remember talking just. 

Matt Rosen [00:05:37] I still get involved. I still get pulled in from time to time, but I’m not actively leading sales cycles. I’m spinning them up from time to time but I’m handing them off. 

Greg Alexander [00:05:44] Yeah. And it’s tough to let go of the things that you really like to do. So that’s a great story to hear that you’re doing that. I know that your company is not for sale, but given your growth, I imagine the phone rings. And one of the things that potential acquirers are always looking at as part of their diligence is the quality of the management team. 

So if someone came to you with an offer you couldn’t refuse, you know, some crazy number that you’d be ridiculous if you didn’t take it. Do you know who your successor is and who you would hand the firm over to? Or would you plan on staying after the sale? And then if you were to hand it off, does everybody get pulled up the org chart, so to speak, so that the thing doesn’t fall apart post-sale? 

Matt Rosen [00:06:28] That’s a great question. You know, we’re not for sale. If some crazy offer came along, I would foresee myself sticking around for a couple of years to make sure that there was a smooth transition integration. Ultimately, I built this firm because I didn’t want to work for others, and know I wanted to build a firm that was sustainable and successful with or without me. 

So, you know, there definitely is a succession plan in place that we’re executing on. There’s definitely a couple of folks that could, with some training and tenure, probably step into my shoes. Nobody’s replaceable. It takes time for them to grow into the role. 

And what we’ve got is a really good mix of people that were career consultants and a mix of people that were in the industry. I had a lot of clients that were VPs about those that I was going to work for me. You’ve got this really nice group of leaders that have either consulted their whole careers or sat on the side of the desk of those that we’re selling to. That adds a lot of credibility when working with clients. 

How Professional Services Firm Owners Can Leverage Executive Leadership Teams to Their Advantage

Greg Alexander [00:07:25] Awesome. Glad to hear that. Sometimes when I talk to members and I suggest that they do what you’ve done, I hear particularly from maybe the younger firms, those that haven’t reached the scale that you’ve reached. They say, “Well if I have all these people that are going to do all this stuff, what am I going to do?” Which I tell them, “Hold on, you know, you’ll have plenty. If things go well, you’ll never ask that question again. There’s going to be too much to do.” 

So now that you have put this great team in place and you’ve elevated yourself, what do you personally spend your time on? 

Matt Rosen [00:08:01] You know, I spend my time thinking about where we need to head next. From a company’s perspective, what geos we might want to go into, what offerings we might want to have. I spend time visiting with a lot of our larger clients and spending time with them just understanding what’s important to them. Like a lot of them are my close personal friends. I spend time talking with leaders as they need, you know, strategic advice. 

You know, they might call me and say, “Hey, we’ve got this situation. What do you think?” And they run things by me, you know. By putting this great leadership team in place, it allows me to actually get out and, you know, play a round of golf every now and again, which I hadn’t done in about 20 years. 

So that’s kind of nice fun that, you know, folks like you or, you know, clients that like to get out there as well and enjoy a walk ruined by golf. But, you know, there’s always things you can be working on, looking for ways to make the firm better or, you know, taking leadership courses. 

Um, you know, doing interviews such as this, and really being a thought leader in your space as well as looking for how can you grow the firm maybe through M&A. So we’re actively talking to a couple of companies that might be accretive and be good partners for us as we grow. 

The Importance of Letting Go When Building a Leadership Team

Greg Alexander [00:09:10] Yeah. So listeners what we just heard there is that Matt spends his time on the business, not in the business, spends a little time in the business in the right spots, but he has a team that’s doing that for him. So he’s pursuing the vision, the future. And unless somebody is dedicated to that vision, the future, it never happens. You are just constantly in reaction mode. 

Matt is being proactive now and he’s leading. He’s not managing. There’s a difference between managing and leading. And what we’re hearing from Matt today is he’s leading, which is a great role model for all of us to follow. Got one more question regarding the management team and the structure in particular. 

I know when I went through this process that you have gone through the thing that I was less willing to give up and I clung to the most, which was a flaw, and I didn’t do it the right way. This was a mistake. It came to investment decisions when money was going to get spent. I held on to this money like it was my first communion money. I was unwilling to let anybody, you know, make those decisions other than me. How is that handled in your firm? Do you approve all expenses or do people have authority to do these types of things? 

Matt Rosen [00:10:23] So in this, I would say over the last twelve to eighteen months, we’ve moved to a budget. As long as people are spending what’s in that budget, there is not a problem with it. In fact, they put the budget in, in some respects, to control me from spending too much on different things. 

Greg Alexander [00:10:36] But the budget was for you. 

Matt Rosen [00:10:38] So that was actually from a year ago. But we’re doing a good job and you know, we’re performing ahead of plan as a result of it. So, no, you know, again, that comes back to empowering people. I mean, the only thing I’ve not given up is, you know, I’m the only one that sends wires. 

But other than that, people have corporate cards, they have budgets they can spend on what they need, we have a good controller, you know, authorizes money to go out. And so most of that I’ve given up and people make a lot of decisions where we spend that budget that’s been allocated without my involvement. 

How Does Allata Create a Budget for its Professional Services Firm?

Greg Alexander [00:11:10] Yeah. Interesting. That’s really inspiring. In the budget process,  it sounds like this is a relatively new thing, let’s say, in the last couple of years. So how do you guys create the budget? Is it done once a year? Is it done at the beginning of the year, or the end of the year? How does all that work? 

Matt Rosen [00:11:26] Yeah, it gets done, you know, as the year is wrapping up. So towards the end of 2021, we set the budget for 2022. You know, we reviewed it with the group leaders. You know, we had them put in things that they wanted. We were meeting with sales and marketing and the, you know, the practice leads and everyone kind of put in their wish list, and we kind of whittle it down to what we thought we could spend in addition to where we think we could achieve from a revenue top-line standpoint. 

And so we review it monthly, we do at the end of each month kind of a financial review, see how we’re tracking. And you know, if we’re doing ahead of plan, we might spend more on certain things or make more investments in certain areas. But the big you know, the big thing for 2022 is making sure we’re focused on EBITDA, building a sustainable organization and, you know, spending where we need to and not spending where we shouldn’t. Yeah. 

Greg Alexander [00:12:17] It’s great that you review it monthly. It’s kind of like a variance-to-plan type meeting. 

Matt Rosen [00:12:22] Absolutely. We go through line by line in the major categories, see where we are under, and see where we are over. And you know, we adjust as necessary as we go into the next month, and at least for January, we’re on track. We’ll see how we’re doing for February next week. Yeah. 

Greg Alexander [00:12:36] You know, the hardest part about budgeting for me was the forecasting part of it. You know, it’s easy to look at what’s happened and you can do the variance to plan on that. But then if someone says, “Hey, what’s going to happen in six months?” 

It’s tough because professional services can be a little lumpy. And, you know, it’s not as much forward visibility as we might like. Have you implemented any type of forecasting system that sits on top of the budget that predicts the future? And if so, how’s that going so far? 

Matt Rosen [00:13:02] You know, it’s really a combination of two tools. You know, we’ve got a CRM tool, as most organizations do, and we try and put it in as much as we know. We’ve got, you know, kind of a four-stage sales process and just waited. So, we’ve got that, kind of that weighted pipeline. And we’re always trying to have 2 to 3 X or revenue plan and we do pipeline. It never turns out to be that much because we tend to be a little bit conservative, but we have that weighted forecast of all the deals that are in the pipeline, what’s coming as well as our forecast of what we think clients are going to do between now and the end of the calendar year. 

And then we invest in a professional services automation tool that allows us to see weekly how we’re tracking a plan, making sure hours are up to date. We also have some modeling scenarios where we can figure out, you know, based on the people we have available, you know, what type of team can we put together, what’s their profitability? Because for the longest time we only understood margin at a company level. We didn’t understand it at a project or client level. 

And now we have that visibility and that visibility is allowing us to make smarter decisions. You know, I think about consulting hours. It’s like bananas. They spoil at the end of each month. So you’ve really got to manage them tightly and ensure that you’re watching them and leveraging them and try not to leave anything behind. Yeah. 

Greg Alexander [00:14:15] Question on the PSA platform, which I’m so glad to hear that you’ve installed. I’m a big advocate and I think it really helps, particularly on those two items, project and client level profitability and managing that inventory. What advice would you have for younger, smaller firms on when it’s appropriate to progress to the point where you would install a professional services automation tool? 

Matt Rosen [00:14:41] When the Excel spreadsheet starts breaking. 

Greg Alexander [00:14:44] Which happens early. Yeah. 

Matt Rosen [00:14:48] It was probably better. My team had to push me for years and I don’t mind mentioning the tool. We were able to cut a pretty good deal with them and they had professional services that helped us implement it. The challenge is you do have to take someone senior and have them help line your  implementation. 

So it is an investment, one that I had to be pushed on for a while. I should have done  that sooner. We probably would have actually been a bit more profitable. I probably waited a year or two too long. But now that we have it and we are seeing returns from it, we are capturing time that we weren’t previously. 

It’s allowing us to model up skill sets and understand where we need to be investing. You know, it probably is something we should have done two years prior and my team pushed me for it, but I held off because I wasn’t ready to make the investment. But I’m glad they finally pushed me to do that. That mix of harvest and spreadsheets was no longer getting the job done for 200 plus people. 

Greg Alexander [00:15:44] Yeah, exactly. Well, listen, man, you’re absolutely knocking it out of the park. I mean, every single thing you’re supposed to be doing to be on the business and scaling the business is working really great. And your results back it up.

And I want to, on behalf of the membership, just thank you publicly. This is a big contribution. You’re a role model for many. And hearing your story and how quickly you’ve gotten to this point is an inspiration. So thanks for being on the show. 

Matt Rosen [00:16:10] Yeah, thanks for having me on the show, Greg. Appreciate it. 

Greg Alexander [00:16:13] All right. And for those that are interested in learning more about this subject, building a quality management team, and others like it, pick up the book. It’s called The Boutique: How to Start, Scale, and Sell a Professional Services Firm. You can find it on Amazon. And for those that are listening that want to meet really bright professional services owners like Matt, consider joining our community. You can find it at collective54.com. Thanks again, Matt. Take care. Matt Rosen [00:16:36] Thanks. Take it easy.