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.
