Episode 100 – How A Communications Agency Is Beating The Recession Today By Focusing On Key Clients – Member Case with Todd Rapp

Have you defined your growth strategy to build a sustainable firm? On this episode, Todd Rapp, Owner and CEO at Rapp Strategies, Inc., speaks on how the firm continues to grow and flourish by focusing on their key clients.

TRANSCRIPT

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 exclusively to helping you grow, scale and someday exit your professional services firm. My name is Greg Alexander. I’m the founder of this wonderful group and I’ll be your host today. And on this episode, I’m going to talk to you about strategy. And I’m careful with that word because it’s the most often used word in the business lexicon, I guess. But at the time of this recording, it’s early November and we’re getting ourselves ready for 2023, which by all measures looks to be like an interesting time. So it’s a good it’s a good time for us to have this conversation and we’ll define it, and we’ll discuss what to do with it, how to build it, etc.. And we’re very lucky that we have an exceptional role model with us. We have Todd Rapp with us and he’s going to share about things about his firm and and how he has built his strategy and how he uses it to achieve the success that he’s had recently. So, Todd, welcome to the show and please introduce yourself. 

Todd Rapp [00:01:33] Well, thanks, Greg, and I appreciate the kind words. I’m Todd Rapp. I own a public affairs firm, which is really a specialized public relations company in Minneapolis. We are it’s been a company that’s been in existence for 40 years. But in in my case, I’ve been an owner of this only since 2008 and the sole owner since 2017. Our focus is on helping clients basically in two different areas. The first area is that we help clients with a significant number of either public issues or maybe they’re involved in, say, public construction projects and we help them with strategic communications. And then the second type of client, or those who who also are fairly public facing and they’re really focused on reputation management and risk mitigation. And so we provide strategic counsel and communications services for them. 

Greg Alexander [00:02:27] Okay, fantastic. You know, one part of your journey that I really love and I’d like to spend a moment on, it’s slightly off topic, but we don’t get a chance to speak as often. So I want to put this out there. You know, we have members of Collective 54 that have done what you have done, meaning that there is an original founder, a group of founders, and they start the firm and that’s kind of the first generation. And then somebody takes over for them initially, partially, and then eventually in totality becomes the founder. That’s generation to to use the academic terminology, and then they carry the firm forward. I’d love to hear from you just briefly kind of how that happened with with your company. And if you have any advice for people like you maybe a few years ago that are working for a firm, want to own it someday. 

Todd Rapp [00:03:16] Well, first of all, Greg, how long do you have? Because this is I mean, you know, I think, you know, for for me, I mean, this was a firm that was really highly successful in the marketplace. But I think you could also argue that the reputation maybe exceeded the footprint, if you know what I mean. That is that it was a lifestyle firm for the two owners, and they brought me in 20 years ago to be the managing director. And one of the first things I decided was that I better learn pretty quickly about how the financials work, how we drive revenue, how we build efficiencies inside the office and and try to capitalize on those. And that may have been more of a lucky choice than it was a strategic choice, but it really helped as I got to the position where I became president. And then, you know, eventually I was in a place where I could succeed. Each of the owners at different times. Yeah. It was also really a siloed business and all that stuff. Something we talked about, Mark Collective 54, that you really have to owners who have their own business operations, but then they shared a staff, administrative services account, team, things like that. And the and it worked really well for them. But as I took over the firm and started thinking about things, I decided we needed more of an integrated strategy, that if it was okay to have people become part of the firm who have their own book of business, obviously, but we still needed the firm to be well connected in terms of the mission and in terms of everybody’s alignment on what the financial success would look like. 

Greg Alexander [00:04:56] Interesting. You know, we people ask me sometimes, what does Collective 54 do? And if I’m at a cocktail party, I give them a single sentence. And that is the business of expertize. And what I mean by that is, is that our members are all experts in their domain and they’re brilliant, but sometimes they could use help on the business side of that. You know, for example, today we’re going to talk about strategy. You mentioned understanding the financials. There was an equity event that that happened. There’s all these business components that are just as important as the expertize. So and it was maybe a topic for another day, but I just I knew that about your journey, and I just wanted to ask you about it. Okay, let me frame up our conversation regarding strategy, and I’m going to use an old kind of framework to position this. So the literature on strategy would say that a company or firm of any size has four options of a strategy. So the first is they can choose product differentiation. So in our case, that would be service differentiation. And therefore all their resources, their time, money and people are dedicated to towards being different, maybe, maybe not even bigger, but just different. So that’s one strategy. The second strategy is I’m going to win on price. So I’m able to operate my firm at a cost structure that’s lower than my competitors and therefore I can charge less to my clients. And I went on pricing. There’s lots of examples of great companies that do that. For example, Wal-Mart in the retail industry. The third one is service. So I’m going to overinvest in the client experience, and that’s how I’m going to differentiate, you know, a company that comes to mind. There would be maybe the Four Seasons hotel chain. They they sell a commodity product, a 500 square foot hotel room. But because of the the guest experience that differentiate it and in the fourth one is called the focus strategy. And this is where a firm picks a an industry and a segment within that industry. And they understand the needs of those customers better than anybody else. And they tailor their entire. Company and value chain, if you will, to meeting the unique needs of that particular customer segment. And because of that, they win. So put you on the spot here a little bit. What of those four? If I forced you to choose one, which is an unfair thing, but I’m going to do it today anyways. If I forced you to pick one, which one does your firm embrace? 

Todd Rapp [00:07:32] I would say more likely the fourth. And that is that we provide a very what I think the market understands is is a pretty clear value to our clients. And we work through a lot of different industries. We’re fortunate to work for the the largest health system in the Twin Cities, the largest health insurance company in the state, several of the largest electric utilities of the upper Midwest. I mean, we we’re fortunate to be in that space with the market for that type of customer where they really value what we provide in terms of strategic advice and and communication paths. It’s interesting you talked about that. You know, starting off, I immediately thought about, well, how can we use price as a better differentiator? And what I learned was it’s about value, right? People will make an investment in a partnership with a firm if they if they know that that you’re focused on their business results, first and foremost. And we’ve been really lucky in that way. I would say that a majority of the revenue that we receive, probably a substantial majority, is from relationships that we’ve had more than ten years. And and those are those with organizations who will consistently need to be in the public space, in some cases at smaller firms, so that they were on a growth path. And they needed somebody like us to come in and just and be good counselors and advisors for them. And, you know, one of the relationships I’m proudest of, there’s a small engineering firm that grew up to be large enough that they attracted the interest of Blackstone and and ended up being acquired. Yeah, I know. We played at least a modest role in that as we helped them position themselves in the marketplace. That’s what’s kind of fun, but I think it ends up therefore being the last category that we’ve differentiated ourselves and the services we provide is different than, say, pure public relations and really focused on reputation and also our business growth in a highly public setting. 

Greg Alexander [00:09:37] So tell me about reputation, and I’m interested in that as an area of your focus, because professional services are what is what known as Credence Goods. And what I mean by that is when clients hire a professional services provider, they they have to make a leap of faith. They can’t test out the service usually before they buy it. You know, sometimes when you buy a product, maybe you can have a sample. You know, you go to a restaurant, you look at the wine list, you order a bottle of wine and the waiter pours you before you commit to the entire bottle. With services, you don’t really have an opportunity to do that. And so it’s called the credence good. So therefore it’s largely bought on reputation. And the reputation of your firm is what moves through the word of mouth channel and leads to the growth. So since you’re an expert on reputation for our listeners, your peers, founders, leaders of boutique professional services firms, what should their what should the basics of their reputation management approach be? 

Todd Rapp [00:10:45] For their own firms. Obviously, number one, I think above all, the rest is integrity towards client goals. I mean, I think that’s the if you understand the what your client needs and understands the uniqueness of them, then you can apply your experiences and your knowledge in ways that help them out. And that’s really that’s what we do. It’s value add. I think a second thing that’s that’s really important is is a level of honesty. We’ve told our clients that we are we are passionate advocates, but we’re dispassionate advisors. And by that, I mean we have to be able to tell the clients when they’re going down a path that that’s not going to be successful. And we have to have their trust that the that the advice that we’re giving is based on what their needs are and not necessarily what the financial needs are of my firm. I think the one other issue about reputation is that you have to know what it is you’re trying to do. I, I do a lot of information, interviews with students, and I tell them that we’re not here in this market because we can help target sell stocks or we can help them open stores. But we’ve been fortunate enough that at times when a company like a Target has had some significant reputation challenges, they call us and say, Let’s talk through them and let’s figure out the best path. I think if you’re going to have a solid reputation, you better know exactly what you do well and be willing to accept. There’s other things out there that you don’t do well and don’t just chase contracts because you want to you want to grow immediate revenue. That’s not going to help you, I don’t think grow long term orbit. 

Greg Alexander [00:12:31] Interesting. Okay. One more question. My team, in preparation for this interview, told me that you’ve had a banner year here in 2022 and congratulations on that. And in your already prepared for 2023, with two months left in the year to go and you’ve got your strategy laid out. So a lot of firms right now, given the uncertainty of the economic environment that we’re in, aren’t doing as well as you’re doing. And in they’re reacting to what their strategy is going to be in 2023 and making lots of changes to their original assumptions, which strategies are filled with assumptions? So what were the drivers around your success for 22? And and what is the source of optimism for 23? 

Todd Rapp [00:13:18] Well, Greg, honestly, I don’t know if I started 2022 with the right plan. I was thinking I was focused on geographic expansion and I started down that path. And after a few months and a couple of failures in doing that, I stopped for a second and I just said, you know, the market that we’re in right now still has a lot of room for growth. And coming out of COVID, there’s going to be client demand for services just because know the nature of public issues, the client demand was going to grow. And so I rethought how, both in terms of my staff and in terms of my time, how we should spend that time. And it worked out. It’s been it’s been a successful last, say, eight or nine months of the year. And I now see I’ve got a pretty clear vision as to the client work we have going into 2022 and where I think the growth is now in saying that I haven’t put away that geographic strategy in any way, that’s still going to be part of the growth in 2020 324. But I think what I concluded was that our firm was in a position where we needed to make sure the home base was as strong as possible before we started looking at either partnerships or acquisitions or that are outside of our direct market and it’s been working. 

Greg Alexander [00:14:40] It’s interesting. Congrats on being able to pivot. You know, that’s a key component of strategy formulation. You know, in Todd’s example, he went into the I think in geographic expansion, that was probably a lot of energy and effort around that and passion around that. And then, you know, the market reacted differently and there was an opportunity to stay closer to home and double down on that. And the strategy has to be flexible enough to be able to make those changes. So I could talk to you about this forever. Thank God. We’re going to have our member Q&A on Friday on an upcoming Friday. So we try to keep these short. So unfortunately, we’re out of time here and I’m going to have to bring this to a close. But on behalf of the membership, you know, the way these things work is we we make deposits in the knowledge bank. That’s why it’s called the collective. And then and then therefore, we were able to do kind of withdrawals from the knowledge bank because the knowledge bank is so robust from all the partners. And you made a huge contribution today and it was wonderful to hear your story and and congratulations on all your success. And I wish you the best in 2023. 

Todd Rapp [00:15:43] Greg thank you. Thank you. Not just for this opportunity to thank you for the support that you give entrepreneurs and professional service firms and the great work of your staff. This has been one of the better decisions I’ve made in the last few years as joining the collective. 

Greg Alexander [00:15:57] Well, thanks for saying that. I appreciate it. My staff and I love to hear those those feedback. Okay. So if you’re a founder of or a leader of a boutique professional services firm and you would like to belong to a community of peers and meet great people like Todd, consider joining Collective 54 and you can apply for membership at Collective 54. Com And if you want to educate yourself some more on topics like this and others, think about subscribing to Collective 54 Insights, which you can find at Collective 54 dot com. And this provides a chart of the week which is our expression of benchmarking data, a weekly podcast like this one, a leading blog in the industry, and lots of other things. Like I’ve got an Amazon eBook that was a bestseller on Amazon called The Boutique – How to Start Scale and Sell Professional Services Firm. So if you want to educate yourself what’s great resources out there and consider, consider subscribing to Collective 54 INSIGHT. So to the audience, thanks for listening and I look forward to the next episode.

Episode 47: The Boutique: THE DOS AND DON’TS OF STRATEGY DEVELOPMENT FOR BOUTIQUES

Scaling a boutique professional services firm requires a strategy. Yet many owners have a collection of tactics and call it a strategy. Learn about how firms should approach creating their strategy.   

TRANSCRIPT

Sean Magennis [00:00:15] Welcome to The Boutique with Capital 54, a podcast for owners of professional services firms. My goal with this show is to help you grow scale and sell your firm at the right time for the right price and on the right terms. I’m Sean Magennis, CEO of Capital 54 and your host. On this episode, I will make the case that to scale the boutique requires a strategy and that a collection of tactics is not a strategy. I’ll try to prove this theory by interviewing Greg Alexander, Capital 54’s chief investment officer, Greg is considered by some as a master strategist and has a lot to share on this topic. Greg, great to see you. Welcome.

Greg Alexander [00:01:08] Thanks, Sean. This is very timely. I was looking at it from the other day who was trying to raise capital, and I asked them for their strategy doc. They sent me a spreadsheet populated with business plan assumptions. And as you know, that’s not a strategy. And this reminded me of how much work we must do in this area.

Sean Magennis [00:01:24] Yes. You know, for some reasons, there’s a knowledge gap in this area. Why do you think that is?

Greg Alexander [00:01:30] I think founders of boutiques know they need a strategy, and I feel as if they want one, yet when they look for help, all they run into is how to materials for product companies. And this leads them down the wrong path. Strategy for a professional services firm is very different. And unfortunately, there’s just not a lot out there on this topic.

Sean Magennis [00:01:50] Well, Greg, that’s what we are here for. And maybe this podcast will help. Heck, maybe there’s a new book in this for you.

Greg Alexander [00:01:57] I’m still recovering from the heavy lift of writing my last one, so maybe someone else can take that on.

Sean Magennis [00:02:03] Well, the boutique is fantastic, so let’s hope. OK, pick up on the thread on how strategy for product companies is different than strategies for services firms.

Greg Alexander [00:02:14] Sure. So here’s our strategy. And a product company gets built. The executive team builds a list of attributes that make a market attractive. These are items such as organic growth rates, number of companies, target trends and so on. This produces a list of vertical industries to pursue. This list of industries gets further segmented into a list of companies to pursue. And ultimately the data gets cut to names and accounts who might want to buy the products, including an estimate on spend potential. A debt gets created that says some version of the following. Our strategy is to target this list of clients in these industries. With these products, everybody nods in agreement. The Excel formulas are double checked and the and the goals get cascaded down to the department heads. This is a what exercise as in what are we going to do? This does not work for a professional services firm.

Sean Magennis [00:03:08] Why not Greg?

Greg Alexander [00:03:10] A strategy for professional services firms must be a how exercise. It starts with, how are we going to become more valuable to clients? Pro serve firms are better served with a how based strategy because of the nature of competition. Pro serve firms do not have the advantages present in product businesses which allow product businesses to get away with what based strategies. For instance, does Google have to ask how questions? No. How come? They have huge barriers to entry by controlling 60 percent of the search traffic. Pro serve firms do not have these types of advantages. For example, McKinsey is a top consulting firm in the world and they only have three percent market share. If they stop becoming more valuable to their clients, they are easily replaced. They do not have an install base locked into their firm. Does this make sense?

Greg Alexander [00:04:02] It does. Professional services firms need a different strategy development process built on how questions with the ultimate how question being how do I become more valuable to my clients? Can you give me some other How strategy questions that should be addressed in a boutique strategy?

Greg Alexander [00:04:23] So here are a few big ones that probably you could really think through and write many sophisticated answers to. So, for example, how do I raise client satisfaction? That’s a big macro question, huh? How can I elevate the skills in my team so I can raise prices? You know, oftentimes boutique owners don’t realize is a relationship between skill and price. Next, how can I redesign the work to improve utilization rates, you know, when’s the last time you broke out your work breakdown structure and reengineered the way you deliver the service?

Sean Magennis [00:04:57] Yes.

Greg Alexander [00:04:59] Or let’s say, how can I specialize in new ways of further differentiating us from the competitors? Because if you’re a boutique, you’re competing with generalist. So the more specialized you are, the more likely you’re going to win. So these are just a few. And they link back to the key macro question. How do I become more valuable to my clients?

Sean Magennis [00:05:19] Greg, is that it? Just switch from what to how?

Greg Alexander [00:05:25] I wish it were that easy. Each how question needs an answer and the answer must include another how. This is the how to part of the strategy, the action plans. This means a goal timeline, budget project team and accountability owners, deliverables and key milestones. This cuts through all the bullshit and gets to the action to be taken. And it is this style of strategy that that takes a pretty scale firm and scales them to a dominant player and their niche.

Sean Magennis [00:05:58] Greg, this is so different and and so clear. This is not a budgeting exercise. I love it. And now a word from our sponsor, Collective 54, Collective 54 is a membership organization for owners of professional services firms. Members joined to work with their industry peers to grow scale and someday sell their firms at the right time for the right price and on the right terms. Let us meet one of the collective 54 members.

GQ Fu [00:06:33] Hi, my name is GQ co-founder and CEO of LTV Plus, we serve E Commerce and SAS businesses mainly based in North America and Europe, with some based in other parts of the world. When e-commerce and customer experience executives and directors have issues recruiting agents, training agents and expanding their coverage to meet the demands of their customers, they turn to LTV Plus to help them scale their customer service teams through world class customer service outsourcing. We solve this problem by providing highly trained, dedicated customer service agents that are selected based on the brands and industries they serve. We also provide recovery services to help generate more sales and full payment recovery services to recover lost revenue for subscriptions based online businesses. If you need help with scaling your customer service team to meet the demands of your customers, reach out to me at [email protected] or check out our website at ltvplus.com.

Sean Magennis [00:07:34] If you are trying to grow scale or sell your firm and feel you would benefit from being a part of a community of peers, visit Collective54.com. OK, this takes us to the end of the episode, let’s try to help listeners apply this. We end each show with a tool. We do so because this allows a listener to apply the lessons to his or her firm. Our preferred tool is a checklist and our style of checklist is a yes-no questionnaire. We aim to keep it simple by asking only 10 questions. In this instance, if you answer yes to eight or more of these questions, your strategy is working for you. If you answer no, too many times, your strategy is more than likely getting in the way of your attempts to scale. So let’s begin.

Sean Magennis [00:08:36] Number one, does your strategy outline how the firm will develop new capabilities that the competitors do not have?

Greg Alexander [00:08:45] And of course, this assumes, you know, what the competitors have.

Sean Magennis [00:08:48] Precisely. Number two, does your strategy detail why the competitors cannot match them?

Greg Alexander [00:08:55] Yeah, an often overlooked is because you develop something. If it’s easily copied, that’s a tactic. It’s not a strategy.

Sean Magennis [00:09:01] Right. Number three, does your strategy specify how these capabilities will be pushed into the market? Number four, does the strategy, explain how your resources are going to be deployed? For example, money, people and time. Number five, does the strategy specify how this resource deployment is different than your competitors? Number six is the strategy supported by enough clients sourced evidence?

Greg Alexander [00:09:36] This is a big one. So oftentimes, you know, our founders who we love envision themselves as master strategists and they say the clients don’t know what they need. Let me tell them. That’s a big mistake.

Sean Magennis [00:09:49] Number seven, does the strategy specify who oversees each program?

Greg Alexander [00:09:54] Got to have an owner for everything.

Sean Magennis [00:09:56] Number eight, has the team been properly incented to execute the plan? Number nine, does the strategy detail how the competitors plan to beat you?

Greg Alexander [00:10:07] Yeah, so a good tool there is a SWAT. Understand, where you’re weak and how you might get attacked.

Sean Magennis [00:10:15] And number 10, does the strategy specify how to respond to competitor attacks? So in summary, a collection of tactics is not a strategy, nor is a financial model or an annual budget, a strategy outlining what is not as useful as a strategy that outlines how. Scaling does require a strategy, and it should be focused on making you more valuable to your clients.

If you enjoyed the show and want to learn more, pick up a copy of Greg Alexander’s book titled The Boutique How to Start Scale and Sell a Professional Services Firm. Thank you, Greg.

I’m Sean Magennis and thank you to our audience for listening.

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

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

TRANSCRIPT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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