GROW B2B FASTER

Ep 09 - Greg Alexander - How Greg sold his 30 person consultancy for a whopping $ 162 million

March 01, 2021 Sammy Gebele / Greg Alexander Season 1 Episode 9
GROW B2B FASTER
Ep 09 - Greg Alexander - How Greg sold his 30 person consultancy for a whopping $ 162 million
Chapters
GROW B2B FASTER
Ep 09 - Greg Alexander - How Greg sold his 30 person consultancy for a whopping $ 162 million
Mar 01, 2021 Season 1 Episode 9
Sammy Gebele / Greg Alexander

In today's GROW B2B FASTER episode, our host Sammy, Managing Partner and founder for SAWOO catches up with Greg Alexander, Chief Investment Officer for Capital 54.

Greg sold his 30 person consultancy for a whopping $162m and now has the goal to help other founders to scale and exit their professional service firms as succuessfull as he did.

That's in it for you:
1. How Greg built and sold his 30 person consultancy for $162m 

2. Why the hero complex holds most consultancies back from scaling

3. How to decouple revenue growth from employee growth

4. Why you should explore offshoring and the freelance workforce and how that reduces risk and increases profit

5. How to get to over 50% margins with your consultancy

6. Bye Bye to the "only partners sell projects" logic - why you should invest into a sales engine with dedicated business development staff or hire external power to help you grow

7. 2 things that make your sales people successful

8. How to hire the perfect sales person for your company

9. How to leverage podcasting to demonstrate thought leadership that increases your brand awareness

10. Why you need to deliver apps instead of PowerPoints and how to do so


Shownotes:
- Greg mentioned the book "Topgrading for Sales: World-Class Methods to Interview, Hire, and Coach Top SalesRepresentatives" a great resource for how to hire salespeople

- Greg recommends his favorite book at the moment about the science behind decision making: "Thinking, Fast and Slow"

- Greg's own Book about "How to make your professional service company ready to sell"

- Greg's initiative to help and connect professional service companies: www.collective54.com

- Greg's company that invests into professional service companies: www.capital54.com

- Greg's Podcast with learnings on how to build a sellable professional service company: https://capital54.com/podcasts/

- Sammy's book tip on how to optimize your hiring process: "Who: The A Method For Hiring" by Geoff Smart

- Get in touch with Greg: galexander@capital54.com 

Show Notes Transcript

In today's GROW B2B FASTER episode, our host Sammy, Managing Partner and founder for SAWOO catches up with Greg Alexander, Chief Investment Officer for Capital 54.

Greg sold his 30 person consultancy for a whopping $162m and now has the goal to help other founders to scale and exit their professional service firms as succuessfull as he did.

That's in it for you:
1. How Greg built and sold his 30 person consultancy for $162m 

2. Why the hero complex holds most consultancies back from scaling

3. How to decouple revenue growth from employee growth

4. Why you should explore offshoring and the freelance workforce and how that reduces risk and increases profit

5. How to get to over 50% margins with your consultancy

6. Bye Bye to the "only partners sell projects" logic - why you should invest into a sales engine with dedicated business development staff or hire external power to help you grow

7. 2 things that make your sales people successful

8. How to hire the perfect sales person for your company

9. How to leverage podcasting to demonstrate thought leadership that increases your brand awareness

10. Why you need to deliver apps instead of PowerPoints and how to do so


Shownotes:
- Greg mentioned the book "Topgrading for Sales: World-Class Methods to Interview, Hire, and Coach Top SalesRepresentatives" a great resource for how to hire salespeople

- Greg recommends his favorite book at the moment about the science behind decision making: "Thinking, Fast and Slow"

- Greg's own Book about "How to make your professional service company ready to sell"

- Greg's initiative to help and connect professional service companies: www.collective54.com

- Greg's company that invests into professional service companies: www.capital54.com

- Greg's Podcast with learnings on how to build a sellable professional service company: https://capital54.com/podcasts/

- Sammy's book tip on how to optimize your hiring process: "Who: The A Method For Hiring" by Geoff Smart

- Get in touch with Greg: galexander@capital54.com 

Sammy: So today I have Greg Alexander as our guest on our show. He's Chief Investment Officer at Capital 54. Greg, welcome to the show. #00:00:11-374# 


Greg: Man. It’s great to be with you. Thanks for having me. #00:00:14-025#


Sammy: So, short story on why I invited Greg. So last Sunday, I was jogging at 9 p.m. in the evening and listened to the Bid to Sell radio and you were a guest there and the catchy title was: How to sell a 30-person business, again. How to sell a 30-person Consultancy for 160 Million. And I mean that was, you lived up to the expectation in this podcast. And I thought, we have many of our listeners with Professional Services and Consultancies. And you would be super interesting to have as a guest and it worked out super-fast. So, thank you so much that you are here now. #00:00:57-002#


Greg: Yeah, that podcast was a lot of fun. That's with John Warrilow and he has a company called Built to Sell. And I've been a listener of his for a long time and then through a friend of a friend, it was suggested that I be on that show. And I'm glad that I did it and I'm glad you liked it. And this is the power of the world we live in, you're in Germany, correct? #00:01:17-272# 


Sammy: Yes. I'm in Germany, Munich. #00:01:19-074#


Greg: And I'm in Texas and as a result of podcasting, you and I now know each other. Isn't that an amazing thing? #00:01:24-342#


Sammy: Yeah, the world becomes so small now, so it’s really amazing. People should tap into this, it’s powerful. #00:01:30-376#


Greg: Yeah, I agree. #00:01:30-999#


Sammy: It’s powerful. Before we deep dive into the topic that you are an expert in, I would like to ask one, two first personal questions. So, you already said where you are living. What do you love to do outside of work? #00:01:44-421# 


Greg: And in the wintertime, I love to ski. Although this year, given the situation we're dealing with, that hasn't been easy to do. And I do live in the United States. I like to go to Jackson Hole, Wyoming. That's my favourite place. And in the summertime, I am a struggling golfer, although I love being in nature with my friends and enjoying myself, and I keep trying to get better. But those are the two things that I do for enjoyment. #00:02:10-822# 


Sammy: Okay, cool. Yeah, I tried myself golfing as well. But I struggled so much that I stopped it again. (Laughs). Yeah, so tell me about your company Capital 54. And your initiative Connected 54. What are you doing there? #00:02:27-648#


Greg: So, Capital 54 is my family office. And for those that might not be familiar with the term family office, think of a family office as a Private Equity Firm. But instead of investing other people's money, I'm investing my own money. And Capital 54 invests in a very specific thing that's extremely tightly focused, we invest in what we call a Boutique Professional Services Firm. So, what does that mean? That means anybody in Industry Code 54. That's the reason for the 54 in the name. That's the North American Industry Classification System. And within that industry category, you might find Attorneys, Accountants, Consultants, Designers, IT Service Providers, pretty much anybody that sells and delivers their expertise. And as it relates to the definition of the word boutique, we invest in companies that are post-start-up, but pre-scale. And the easiest way to think about that is more than five employees, but fewer than 250. So, the past the stage of wondering if they're going to make it and they're there. Now, you know, they have a successful Firm, happy clients, happy employees. But you know, they want to reach their full potential, which means scaling the Firm and then eventually exiting the Firm. So, we provide two things to entrepreneurs in that category. We provide growth capital because it does take money to make money. And we also provide management know-how, we have a codified playbook that has recently been documented and made available in my book, which is called The Boutique: How to start scale and sell a Professional Services Firm. So that's what we invest in, that's what Capital 54 does. Now one of the investments that we made to answer the second part of your question was in Collective 54. And that can be confusing because they have a similar nomenclature, but Collective 54 is a membership organization. So, the category that it's in, you might be familiar with, like YPO, or EO or Vistage and things of that nature. We're a similar business, but we're different in three ways we’re narrow, and that we only focus on a single industry, which is Professional Services. We're deep in that we serve the owner. We're completely focused on helping the owner create wealth. And we're right in that where we're built in the cloud on-demand anywhere. So, we have members all over the world, and we're able to you know, through the power of technology, things like we're doing today. Be super time efficient in the way that we engage with members. That's what Collective 54 is they meet once a month, virtually, we drop them into peer groups of ten. And, you know, they work together to try to overcome the obstacles that are standing in the way of growing, scaling, and selling their Firms. #00:05:15-238#


Sammy: I love what you're saying here because I mean, I saw it as a Management Consultant. It was my first career. And I saw that these owners, usually they stick to themselves, they think they have a magic wand, and they don't want to share anything with anyone. And so, they don't speak to anyone, and they don't learn anything. And that's why they usually they go after a certain size, and then they stop growing. And that's it. #00:05:39-418#


Greg: Yeah, that's exactly right, and to give you some data to support that. So as of the end of 2020. Now, this is United States data, forgive me. But there were 1.47 million Professional Services Firms in the United States. And only 4116 of them have reached scale. Scale defined as those with more than 250 billable employees. That's one quarter of 1%. So, the other 99 plus percent of the people they want to scale and someday, they want to sell their Firms, but they're not doing it. And when you ask them why they'll say two things, I don't have the growth capital to do it, which is a little bit of an excuse, in my opinion because the world is flushing capital right now. The real issue is the management no-how. And what I find is, is that most of these people are brilliant. I mean, they truly are their domain experts, they know their space, just incredibly well. But they might be lacking general business skills, meaning the items of working on the business, how to scale a Firm, how to how to run it at scale, as opposed to kind of a small lifestyle business. This is the area that they struggle with. And that's the area that we help them with. #00:06:58-422#


Sammy: I have two case studies that, like people I know and real cases that happened. And I think it would be super interesting to go through them. And you can give your expert input on what they could have done differently or could do differently. #00:07:12-310#


Greg: I love the case studies. #00:07:15-166#


Sammy: (Laughs). So, one company they basically started out with 30 Consultants. A Management Consulting company, they scaled up to 300 people and then they fell back to 200. Because they had a cluster problem of having like just one or two clients. What's important to note, they scaled because the two owners are experts in networking, they are amazing. And I would have thought that they’re never going to reach, like 300 employees and a lot of revenue. So, they did a great job. But they never let go of the network. So, they said, “I don't want anyone to get in touch with these high-profile people. I'm the owner. And if I like if I shared, I'm afraid that they're going to take that, that relationship, and I'm going to lose it.” And they never taught so to say a second layer of partners on how to sell. So, I thought they were really bad at selling, to be honest, because I had to do some pitch decks and so on. But they did like, their classic was putting a lot of effort into a white paper. And then trying to send it to some of the folks that would be interested trying to get a meeting and usually never worked out. So, this was one typical case that I see pretty often to be honest. #00:08:34-358#


Greg: That is very, very typical. And there's some thoughts that are flooding into my head right now that I'll share with you. So, if you think about a Professional Services Firms lifecycle, I like to think that falls into three categories. Now, sometimes it's not always as neat as this. But generally speaking, this is correct. So, you get a couple of great, guys, like in this case study. And they start there for me because they truly are experts at whatever it is, they do. And they have great, really good personal networks, they get off to a really good start and they grow their Firms. And they have a heck of a lifestyle business. Also, what happens in that moment in time is human nature kicks in. What I mean by that is, humans need to be needed. They love to feel important. And they use their job as a way to get validation, particularly self-validation. So, they eventually grow, and they become kings are heroes. And they really like being heroes. But at some point, they become the bottleneck. And they need to stop being the hero and they need to make other heroes in their Firm. And it's till they're able to do that defeat the Hero Syndrome, that they're able to scale. I mean, does anybody remember who started Accenture no? They have 505,000 employees right now. Now whatever your opinion is of Accenture and mine's not particularly good. You can't argue with the fact. You can argue with the fact that they scaled to 505,000 employees, right? Because they made other heroes and so on and so on. Right. So that's the first thing is defeating the Hero Syndrome. And recognizing that Professional Services Firms are collections of people and human nature, and how you manage human nature is a really important thing. Second thing that happens as you go through your evolutionary career, which is sound like it happened there is that at some point in time, the partners need to transition from a Partner-led Sales Model to a Professional Commercial Sales Engine. So, if all roads lead through the partners and the partners have to be in every sales call, or the partners have to generate every lead, then by definition, you're limited in terms of how big you can become, and how successful you can become based on the effectiveness of that small group of partners. Those that crack the code here and make it out of the growth phase into the scale phase. And eventually, a very successful exit, is they invest non billable time and discretionary budget into building out a Commercial Sales Organization. This means a proper marketing team that can generate leads and sufficient supply and quality. And Business Development Professionals. They can go on sales calls and represent the firm as good if not better than the partners and close at a high rate. And that that transitionary point, which is not easy in professional services for a variety of reasons that I'm sure we'll get into. But that's a very, very important moment in order to make that happen. And then the third thing that I would suggest to you regarding a case study of swelling up to 300. And coming back to 200. It's a mistake to equate success with number of employees. That used to be the ultimate measure in Consulting, in particular, because everything was driven off of the revenue per head model. However, we're living in a new world now. It's a global world. I mean, you and I are role modelling that today. And technology is changing everything. So, I don't think number of employees is the ultimate measure. In fact, the greatest business in the world would have no employees. Because in the professional services world, your biggest expense item on your income statement is headcount. So, if you if you're focused on profits, which is these are for profit businesses, so they are the fewer the people that better. And there's really kind of three things that allow owners of professional services firms to engage in that might have helped that case study. So, first what can you automate? What digital tools can you license or build on your own, that can do things that previously required human involvement? And if you can do that you can scale exponentially because you're decoupling the revenue growth with a headcount growth? That's a key item. Second is where can you offshore? So, work that you're doing today? You know, is there a way to tap into a global workforce of people that can do it as well as you can do it, but for much less, which increases profits. And then third, which is fairly new, but coming on, like gangbusters, I think driven partly because of the COVID-19 pandemic, is the gig economy. So, it used to be difficult to find and leverage freelancers, successfully. But these days with these marketplaces like Catalent, as an example, now, you can post a job and hire on a temporary basis, you know, former McKinsey and Bain people that are incredibly talented, or former, you know, world class Software Engineers, you pick your function. And you now can tap into this global workforce, which brings incredible capability to your Firm, but also does so in a way that allows you to flex up and flex down based on demand. And so those three things, digital transformation, and technology adoption, the building of a Commercial Sales Organization, and the leveraging of the gig economy. And also, I should say, the global workforce is a way to really scale organizations and many of those things didn't exist. You know, back in the day, if you read case studies of the great Marvin Bower, you know, who created McKinsey as an example, what was very different after World War II, then it isn't 2021, right? So, the tools that we have available to us, it's so different. So therefore, some of the ways that we look at Firms, you know, number of employees as an example, just no longer apply. It used to be a belief that if you had greater than 20% margins in the world of professional services, you're doing really good. I mean, as you heard in my Built to Sell podcast, we ran a 52% margins, right. I mean, that's a 250%. And it was just because we love it. So, snacks you know that there really wasn't any, anything special about it. It's just we took advantage of the new resources. #00:15:00-498#


Sammy: Well, it’s special that you implemented it, you did it. And, and I think, I don't know, any company that that looked at the things that that you described right now. So, they still caught in their old belief systems, they, they look for prestige. A lot of the times it's, it's really the hero syndrome, you know, I have a bigger company than you. So, I'm more important. Sometimes it's not maybe conscious, but subconscious. Because they are smart people. So, I would say they don't do it on purpose. But I mean… #00:15:32-857#


Greg: That’s the human nature element of it right? #00:15:35-613#


Sammy: Yeah, that's, that's a tough one. So maybe a first step is to get outside help and have an Advisor who can look at your company from the outside, because you don't see it by yourself most of the times, I would say. So that's maybe a first one. So, I have some follow up questions, let's do them step by step about the professional sales team, I would say that the first, like, fighting back would come. Or the first feedback would be, “I can’t do that because our partners have to have the relationship with our clients. And they are the only ones who can talk to the same C level that we sell into, for example, so I cannot build a sales team that builds that relationship. And that doesn't even have the knowhow to talk to those people.” #00:16:25-103# 


Greg: Yeah. So, my response back to that would be is you're living in another era, that's just not true. I mean, to make the claim that only partners and professional services organizations can speak intelligently to C level executives and logical operations is just false. I mean, it's been proven otherwise. I mean, look, look to other industries, for proof points, for example, look at the software industry. I mean, there's world class software companies like salesforce.com, that have 28-year-old kids doing $10 million deals with CFOs of Fortune 50 companies, right? It's just not true. So, when I would tell a partner who thinks like that, they should look in the mirror, the reason why that problem exists is because of them. You know, they have been unable to teach others what they can do. And if you give me somebody with a reasonable level of intelligence, and a fantastic work ethic, and you can teach them, what it is that you do, and if you have patience with them, and you're willing to develop them, and hold their hand for a period of time, they can get there for sure. I will tell you in my own personal experience for what it's worth. It was one point I was down I was the rainmaker. And then I wasn't in the people that eventually became the rainmakers, you know, the great world class Business Development people, they were better at it than I ever was. And the reason for that was, is that was their sole job. You know, as the owner of the firm, I had to wear multiple hats. So, I was effective as a salesperson, but only so effective, because again, it was one of many jobs. Once you hire this Commercial Sales Organization, and they live and breathe, you know, opening new accounts and selling more to existing accounts, every single day three of specialization, they become a true specialist, and they'll become better than the partners. #00:18:06-599#


Sammy: Yeah, I absolutely believe in what you're saying. And in the end, it's Yeah, building the machine and not being the machine, if you will, at some point. And that's also the purpose of your, the organization that you mentioned. And also, you went ahead company on a set of business for multiple. That is really, really good. You have to make your company independent of yourself. So that's one crucial step. And if you don't do that, you will never be able to sell at a decent price. At least, #00:18:36-369#


Greg: That's correct. I mean, the truth, for all of you, for all of those owners and Professional Services Firms that are listening right now who may want to sell their Firms at one point. This issue that Sammy just brought up about the firm being dependent upon you is a crucial issue, there's two things that you need to do to make yourself obsolete. So, number one never bring in any work. So, 100% of the revenue generation, so what should happen for from people other than you, and number two, never deliver any work. So, 100% of the work that gets delivered to your clients should be delivered by other people. If you're in either of those work streams, generation of revenue, or the generation of client satisfaction, when somebody buys you, they're not going to let you leave. Because you're in the mission critical workflows. If you're not in those workflows, and you're still growing as a Firm, then you've proven that you're obsolete, no longer needed. And you can sell your Firm and the dollars you're pulling, out of the firm now get added back into the budget statement and everybody wins as a result of that. So, none of that is a multiple go up. But that the total even a number goes up because you're replacing yourself. You've worked yourself out of a job, but again, that goes against human nature, right? I mean, the idea of making yourself obsolete scares a lot of people. But that's the goal. You know, somebody once said, The Devil's greatest trick was he convinced the world he didn't exist right? That's the same thing we need to do here as owners of Firms, convinced the world you don't exist. And then you'll be able to sell your Firm at some point. #00:20:07-348#


Sammy: That's a simple formula. It's a one sentence, mantra, and a lot of things you have to do to manage to get there. But yeah, it's love it. So, there are some things that people I have a few people in mind, and I already know what they would say. So, I've just playing them basically Devil's advocate, and you can answer what you would tell them. “So, first of all I don't believe that other people can tell as good as I do would be one thing. And, and or maybe they even tried it. And those people were not as efficient as I was. So, I stopped it immediately.” #00:20:38-637#


Greg: Yeah. Okay. So, what makes a Salesperson effective is really two things. So, number one, it's the environment that they're selling in. Okay, so if you're the owner of your firm, and you're hiring Salespeople, and now they're not doing as good as you are doing, that's because you haven't built the system in place. So, what does that mean? You know, maybe you haven't systematized your value proposition. Maybe you haven't figured out who to hire what that right hiring profile is, maybe you're not pointing that salesperson at the right accounts, you know, those with the greatest potential and the highest propensity to buy, maybe you’re not training the person effectively, maybe you're not your incentive system is out of whack. You know, there's a lot of environmental factors that come into play, to make a Salesperson successful or unsuccessful. The only thing that I would tell people in terms of the second item is, you know, don't underestimate the ability to make a hiring mistake. Okay? The world is filled with very, very talented people. And to say, if I'm an owner of a firm, and I say that no one can sell as good as me, what I'm basically saying is, I'm the greatest Salesperson on the planet, that's a pretty arrogant statement, right? There's a lot of really, really capable people that could sell as well as you. And maybe you just haven't figured out your hiring profile just right. And the other thing is, is this is optional. I mean, if you want to scale your Firm and sell at one point, you have to do this, or you're never going to accomplish the goal of exiting. So even if you make a mistake, one, two, three, ten times keep at it. Because every time you make a mistake, you're going to learn something, and just keep iterating until you get it right. I mean, I didn't get it right the first few times I tried to do it. And I just had to keep iterating. And finally, we landed on it, I mean, strategy is where do you play? And how do you win? Okay, so if you're going to hire a sales team, and you can't answer those two questions, where do you play? And how do you win, then maybe you're not setting the Salesperson up for success. #00:22:42-978#


Sammy: I love what you're saying. And I can absolutely relate to that one. I mean, I have a small business running, and I have this mantra of building a machine and not being the machine. So even though I was selling okay, and good, I would say I took an hour, like very young employees 24 each both, (unclear #00:23:03-366#) And we had a playbook, and it was working. And so, I thought, okay, let's give it a try. And they didn't perform the first course I was with them. Then I gave them some feedback. They got better; we improved our sales deck together. And now they're selling, and I don't even have to be like, I didn't do anything anymore. You know they’re doing the sales course, they’re closing the deal, they're writing the contract. I love it. #00:23:24-843#


Greg: It's wonderful, isn't it? #00:23:27-705# 


Sammy: Yeah, no, it's great. And I mean, of course, it would hurt if one of them leaves. But it doesn't matter because I have a playbook. And I know what kind of people I need. So, I’ll just hire another person. And I can build a machine, it's replicable. I can do it. We tried it out in different countries now, not only in the German speaking region. So, this gives you a totally different leverage on how to scale a company in terms of sales. Yeah, #00:23:51-910#


Greg: That's exactly right. And you mentioned the word playbook there. And that's a great way to think about it. It's a playbook. Meaning there's multiple plays, depending on the situation that you're in, and codifying it into a book. So, an average human can learn it is, is the task at hand? #00:24:10-267#


Sammy: Yeah, absolutely. And, I mean, if we can do that, I'm not a Salesperson by trade. I come from a totally different background, I'm a Mathematician. So, if I can do it on a basic level and succeed on some level. Now, I think everybody can do it honestly. #00:24:25-522#


Greg: I'm not surprised that you were an effective Salesperson with your background being in Math. Because what is Math? Math is solving problems. I tell people all the time. I wrote a bestselling book in 2008, called Top Grading for sales, which was how to hire Salespeople. And me and my co-author, Dr Brad Smart, wrote this book together. And it did really well for a number of years. And it was about competencies to look for in a Salesperson. And I would tell you, that's statistically the causality of someone's ability to be an effective problem solver and someone's ability to be a fantastic Salesperson is very, very, very high. It's the number one competency in my opinion, can a Salesperson when engaging with a prospect, help the prospect understand their problem and help them solve their problem? Excuse me, we're working from home here in the Amazon guy just showed up on my front door and my dog is barking. So, I apologize for that. #00:25:23-050#


Sammy: (Laughs). All good, all good. We're all living in the same times right now. #00:25:26-059#


Greg: (Laughs). Yeah. So, problem solving as a competency is a fantastic one. And if you just think about that, if you think of the fields that you might hire from, you might pull from the hired Salespeople. I don't think Entrepreneurs, owners of Firms think about that, like, most people would never think about hiring a Mathematician as a Salesperson. But the core skill of solving a problem, a complex problem, that is the skill and it's highly transferable to sales, because you're sitting down with a customer, sometimes the customer doesn't even really know what their problem is, they have a hard time articulating it, and through effective framing of the problem, you can help the customer think about what the problem is. And then by presenting solution options, ABC and helping them walk through a pros and cons based on an established evaluation criteria. It's almost formulaic if you think about it. So, something like Math background is a great background for sales. #00:26:22-212#


Sammy: Yeah, absolutely. And I think I mean, I can relate to it, because I'm a Mathematician. But I think there are different kinds of backgrounds that have different traits that are positive. But I'm now, I'm super curious to see where the whole book on how to hire the perfect Salespeople. And I'm hiring Salespeople. So of course, I'm going to look into your book, but can you give me a high-level tips on how to do it in a good way? Or how to structure pauses what to look for, so that it's fitting your own company? #00:26:47-950#


Greg: Yeah. Well, I mean, the science that I learned from my co-author, Dr Bradford Smart who created the terminology and the methodology of Top Grading, I'm going to dramatically summarize here, but his belief was past behaviour is the best predictor of future behaviour. So, if you can look at somebody's work history, and personal history chronologically, starting from today, and moving all the way back to the time that they were in university, you can start to spot patterns. And in his belief is that everybody can be an A player at something. Okay, we're all born with certain God given talents. And when we have our moments of great success, and our moments of great fulfilment, is when what we're asked to do are the things, we're naturally gifted at doing. And when we're struggling in life, and in our jobs, it's because we're being asked to do things that aren't, we're not gifted at doing it's just it's a stretch for us. And believe it or not, hiring Salespeople has more to do with job design, than it does with picking the right person. It's truly understanding the job all the way down to the task level, what am I going to ask this person to do and really understanding it. So then when you're interviewing somebody, and you do something like a case study, or etc., you can test for the actual job. And I have found that most often when people make hiring mistakes, which in the sales profession are very costly, sometimes five to ten times salary. And that's not even including the opportunity cost about, you know, blowing the next big deal or destroying, destroying the brand reputation or what have you. Most hiring mistakes are because the jobs not well understood. It's not necessarily because I hired the wrong person. #00:28:31-698#


Sammy: We have one advice on my company (Andreas? #00:28:36-977#). He’s a start-up founder in the United States, originally from Germany, and he gave me exactly the same tip from a different person, though, but it's exactly the same logic. And I will also be the same as Joffe, but I don't know his last name, but I will also link it with your book into the show notes. And it's exactly the same, you first have to describe, he said, he added one thing, you have to have KPIs and numbers in there. So, the things that you will evaluate the person when they when you hire them, and what I loved about it, once you have that, everything else falls into place. So, as you said, in the interview process, we so to say go into the past of that person and ask questions, and it's a really nice conversation. But you look for those things and you're like, investigating, you know, and the thing that they added is, and maybe you did to them, is you asked for reference so you say what would your former boss, say? You asked about the name of the boss what you asked how they spell /. How you spell them. And then for the on the one hand, they're pretty honest them because you know, Mike, maybe you can, you cannot call it person and you can call that person. So, so that gives you a really good insight. And then it's all just matching. What did I hear? Is it matching my job profile? And boom. #00:29:54-524


Greg: Yeah. A little twist on that and I agree with everything that you just said, reference tracking. It's such a powerful tool for sure. When hiring salespeople, I recommend normally reference checking with former bosses, but I would reference check customers. #00:30:08-08#


Sammy: That’s a good one. #00:30:09-51#


Greg: You call the customers and you say “Can you tell me about your sales experience when you were having a conversation with Sammy?” They’ll tell you from the perspective of the customer or the prospect, which, if you think about it, if you’re hiring a salesperson, that’s a highly relevant reference check, right? You’re going to put that salesperson in front of your prospects and your customers, and you want to get a feel for what that experience was like. #00:30:33-98#


Sammy: How do you get to that customer? Do you ask in the interview? #00:30:37-28#


Greg: The same thing, yeah. You ask the salesperson, “Listen, I’m going to do some reference checking. I’d like to speak to three current or former clients.” In the context of top grading, that’s known as TORC. Threat of reference check. TORC. If they can’t come up with three clients for you to speak to, then that tells you something right there, right? They don’t do a good job of maintaining relations. That’s a competency that you want in your salesperson. Those that can give you 30 of them, that will tell you that, “Wow, this is somebody who really does a good job.” What you find is salespeople that can’t give you references of former clients, the main reason for that is that they were hit and run specialists. What I mean by that is that they sold them something and then they took off. Maybe they over-promised and under-delivered. They get out of dodge, so to speak, before that got revealed. Of course, you don’t want that. The threat of reference check, the TORC, include their former clients. That will be very helpful. #00:31:42-95#


Sammy: Thanks a lot. I will use it from now on. One other question I have in mind is what I see in those consultancies. Generally, they are a immature sales organization. That means they don’t even have a sales team, but also their marketing team is reduced to/. They call them marketing, but in fact, they are doing some PR, they are writing some articles and it has nothing to do with what marketing in other companies usually does. What would be the steps if you have that kind of rudimentary, or even no marketing team? What would you do? #00:32:22-15#


Greg: The first thing that I would suggest to you is there is investment needed. If you’re running a consultancy, let’s just use that as a case study, you have to invest in sales and marketing. There’s two types of investment. You can invest dollars or you can invest non-billable hours. For those that aren’t bullish on this idea and might be unwilling to write a check, I would say is go back to your utilization reports. Take a look at the time that’s not billed. For typical management consultancy, let’s say utilization averages 80%. You’ve got 20% of non-billable time available per employee. Let’s say, an employee works 50 hours a week. That’s 10 hours a week times 50 weeks. There’s roughly 500 hours of available non-billable time. Now, I’m sure that those 500 hours are already being accounted for. They’re being spent on something else, but if sales and business development is important to you, take some portion of those 500 non-billable hours and dedicate them to sales. Go to that person and say, “Okay. Of those 10 hours of non-billable time per week, I want you to spend 5 of them on sales activity.” Then tell them exactly what it is that you want them to do. The easiest place to start is by focusing on you existing clients. Existing clients are approximately seven times easier to sell than a new client. That’s a stat that comes from many different sources. It’s highly reliable and it’s been dependable for years and years and years. If you’re deployed on a project right now, you have a wonderful moment of trust that the client is giving you. If you look a little to the left and a little to the right, out of scope, so to speak, you can probably notice the problems that your client is having that you may be able to solve for them. That’s a good use of those five hours in our little use-case here. You can bring it up to the client. It is brought up in such a context that it doesn’t feel salesy. You might say, let’s say Sammy you were my client, “Hey Sammy, while I was working on your project this week, I noticed something. I noticed X, Y and Z. I think that if that’s not addressed, this is going to create a real problem for you. The consequences of that problem are this. Do you acknowledge that you have that problem? Am I looking at this correctly?” and the client says. “Yeah, it’s funny you should bring that up, Greg. I am dealing with that.” The client almost always says “What do you suggest we do?” Then you can say. “Well, here’s how we solve that problem for our other clients. Would you like to meet our subject matter experts that deal with that?” “Yeah, why don’t we do that?” Next thing you know, there’s a cup of coffee being shared, and you’re having a conversation about how you may solve that problem for the client. What I have found, when I look at investing and consulting firms in particular through my role as Chief Investment Officer at Capital 54, I have found that it’d be 30% to 50% upside just there. #00:35:24-69#


Sammy: That’s amazing. #00:35:27-46#


Greg: Just by looking at the existing accounts. And that can be done with no investment, because you already have the staff on board. You’re focusing on non-billable time. That’s a trick where you can grow revenue without having to spend any dollars. As it relates to new logos, new business and a proper marketing function that you mentioned. When you’re selling services, it’s all about demonstrating your thought leadership. If you think about what you’re doing here today, Sammy, is that you’ve identified an expert, in this case me, and you ask that expert to come on your podcast. We’re recording a show. That show is going to attract an audience and you’re going to be the thought leader that leads that audience. Over time, your listeners will develop a brand affinity for you, and they’ll hire you and your firm over time, because that’s the way you did it. That type of marketing, which takes time and effort and thought, is much better than the way you market a product, which you might do on a paper click ad. Yesterday was the Super Bowl here in the United States. Maybe you spend $5 million on a 30-second spot. That doesn’t work very well in the services sector. Services are intangible. They’re tough to understand. When a client is getting ready to spend a million dollars with you on a huge project, they want you to know one thing, what do I get? The way that you demonstrate in services is that you thought lead them. You discuss it with them, your expertise. That’s how you demonstrate. That would be my immediate advice. Thought leadership, content marketing, as a way to invest in marketing dollars to open up new accounts in a services business. #00:37:16-15#


Greg: Love what you’re saying. One remark about the upselling for existing clients. I think an easy way to get the fear out of this selling term, because some people don’t want to be salesy. That (unclear #00:37:33-68#) for our company. We are not selling, we are helping clients to solve their problems. Sometimes our solution is the right fit. Sometimes we know someone who is the right fit. Maybe it’s outside the company, but if you have the mindset and the gut feeling of, “Hey, I want to help you and I see some things where you can get better.” The non-salesy people can do it more naturally somehow. For me, it worked pretty well because I am not salesperson, so that might help, yeah? And for the second one, I must say I am a super big fan of podcasting now in the end. Because on the one hand, I learn a lot, so I can ask all the questions where I want to have an answer. Amazing from experts like you, that’s for free. That’s crazy. The second one, I build a relationship with really interesting people who know if I can help them, or they can help me at some point of time. And the third one is you get a lot of comfort out of one piece. You can repurpose it. You can cut out snippets of videos or blog posts or a quote and post it or send it in a monthly update to your potential clients and existing clients. That’s not salesy. That’s providing value. That’s really good. #00:38:49-22#


Greg: Let me add to that long list of benefits of podcasting. For those that are watching the video, I’m holding up my book right now called The Boutique: How to start, Scale, And Sell Professional Service Firms. Now, if you think about reading a book and listening to a podcast, what’s a more intimate experience? #00:39:07-04#


Sammy: Definitely the podcast. #00:39:10-75#


Greg: Hearing someone, yeah. My point in saying that is that when you invest in content, you should invest in multiple forms. Written text, versus audio versus video, etc. The minute somebody puts those earbuds in their ear and they hit play and they can hear, the level of intimacy goes up dramatically. For example, you listened to John Warrilow’s podcast and you heard about me and you reached out and said “Hey that might be a guy I want to talk to.” You got a feel for what kind of guy I was by listening to me. It’s hard to do that when you read a book. Podcasting is just so much more intimate and therefore, I think, more productive. It converts at a much higher rate because of the level of intimacy. #00:39:59-23#


Sammy: Yeah. It basically builds a human-to-human connection to you potential clients without you having to talk to each one of them. I have a feeling that I already knew you because/. When you start talking, I know the voice. It’s totally different. It’s amazing. #00:40:114-22#


Greg: I agree. #00:40:15-42#


Sammy: Let’s go into one other point that you mentioned. That’s automating and licensing products, so to say. You said it in a nice way in the podcast. In your own podcast. We have to talk about it in a second. You said you’re not producing PowerPoint slides anymore. That’s not the future and you would not survive, or your company would not survive the next 10 years if you are still producing PowerPoints. Can you deep dive into that one please? #00:40:45-63#


Greg: There’s an app for everything now, right? If you’re producing a PowerPoint deck or an Excel spreadsheet, or whatever, you’re only so valuable to your clients. When you’re representing a professional services firm, the most important thing to think about in terms of growing your firm is, “How am I becoming more valuable to my clients?” That is the question. If my value to my clients is going up every year, then the amount of money that my clients are going to spend with me is going to go up every year. Because every time they spend a dollar with me, if they make five, they’re going to keep spending dollars with me. How do you increase the value? What’s wonderful about digital transformation, in this case replacing PowerPoint decks with an app, is the value never ends. I’ll give you an example. I shared this with John on the podcast, but I’m assuming that you have a different listenership, so they’ll be hearing this for the first time. We used to do what we call segmentation work. A large consulting firm, let’s say Bain, would come into a big company and they would segment a market. They would say to their client, “Okay, you should focus on financial service firms in the New York City metroplex area, and here’s why.” And that tool would get thrown over the fence to sales and say, “Go get them.” Sales would say, “I can’t sell to a market. I have to sell to an account. I have to sell to an individual or a group of individuals inside of that account.” We would take the segmentation exercise from a market down to an account and down to a buyer. We would produce things like buyer maps. So if you were going to call on Citibank knowing who you were and what you sold and the problem you solved for clients, we would identify the eleven people in Citibank that you would sell to and the reasons why. If I handed that to somebody in a spreadsheet, the moment I give it to them, the value of that spreadsheet starts to decrease. Why is that? Things change. Those eleven people, people quit jobs. They move on. Maybe they change their email address or mobile telephone numbers, and you can’t reach them. It starts to deteriorate. Whereas, if you deliver that via an application that was constantly updated almost in real time, the value of that solution you provided to the client remains in perpetuity. If it remains in perpetuity, you now can change the way you charge for it. So instead of charging a project fee to complete a deliverable and disappearing, you could charge a licensing fee for the right to access your intellectual property in perpetuity over time. That’s the difference and I think we are still in the early stages of this. The professional services firms are thriving right now. They’re delivering apps. Those that are still struggling with the feast or famine, or boom or bust associated with project-based consulting companies, they haven’t done that yet. They are still delivering the old way. That represents growth opportunity. #00:43:50-63#


Sammy: How would you have to change your organization if you wanted to deliver apps? #00:43:56-00#


Greg: Obviously, your delivery team and the skills of your delivery team change. You’re going to need people who know how to write apps. You’re going to need software coders. Many of you that are listening now might say, “Oh my God, how am I going to do that?” This goes back to an earlier point. The world is flat. There is global workforces all over the place. Software engineering talent is in plenty supply. It’s surprisingly inexpensive because most of it comes from countries like India, etc. and you can rent that capability for pennies on the dollar. If you think about that from a businessperson’s perspective/. So I get this new capability for pennies on the dollar, but because I’ve made myself more attractive to my clients, I can charge more. So, now my margin is increasing dramatically. Instead of spending maybe a few hundred thousand dollars on some expensive well-educated first world people, I’m spending hundreds of dollars on some extremely well-educated third world people, and by the way, what they’re giving me is even better than what the first world people can give me. So, that’s how to do it. #00:45:09-94#


Sammy: Got it. To put it simply, you’re basically/. You call it app, others would call it software as a service. You see it in the valuations of the stock market. $1 of revenue of software as a service, product is 10X.  So, you get, for $1 of revenue, 10X valuation, at least at the stock market right now. And probably for a service company it’s maybe 1X, 1.5X for normal revenue, so that shows you the power of subscription and productized revenue. #00:45:43-35#


Greg: Here’s what’s different between the two though, because I’m not advocating that services companies become software service companies. Software as a service companies, they’re a software company. They make a product, and they have millions of users, okay? What I’m suggesting as a service company, they’re going to make a software product, but it’s only going to have one company that’s using it. That’s the distinction. They’re still a services company. They’re not a software company. They’re going to write code for the use for that one client. They’re now not going to write code for the whole universe, that’s the big difference. They’re still a consulting firm, so to speak, but they’re deliverable is an app as opposed to a power point deck, but the people that have the right to use that app is that single client. #00:46:29-46#


Sammy: Understood. But let me ask you this question. At your company when you created those apps, did you have to wipe them from scratch every time or did you have a big chunk that you could repurpose, and you had like a little tweak of costs so that’s its individualised and you know what I mean. #00:46:45-05#


Greg: We were even more basic than that. We didn’t write any custom code at all. There were third-party software tools in the market that did what it is that we needed to do. For example, we did a lot of surveys. So we used Qualtrics as our survey tool. It made no sense for us to build a custom server tool. And we struck a deal with Qualtrics that allowed us a certain use of that tool and allowed us a certain customization of that tool. And that got us to where we went. So that’s another I guess a helpful hand and I guess that was a great question, Sammy, because I was forgetting about that. There’s all kind of available third-party software tools already built that you can tap into and leverage in the service delivery element. #00:47:34-35#


Sammy: I bet a lot of people/. I know the story, so I know it is a really good story. A lot of people would like to know how did you build your company and how did you pull it off? How did you build a third person company with 30 million revenues, such a high margin of 50% and then sell it for almost six times revenue? #00:47:57-21#


Greg: Yeah. How did I do that? That’s a good question. We had exceptional margins and that drove a certain buyer type that was willing to consider us. That’s a lesson for the audience is that there is different pools of buyers or universe of buyers. Given the type of business that we were and the probability of it, we attracted institutional buyers that had large amounts of capital that they needed to deploy, and the attributes of our business attracted them. So, that’s the first thing. We were very specific as to who we marketed our business to. The next thing is that we hired a world class investment banking firm, at the time it was called MHC partners. Now it is called Cowen. There are two gentlemen over there Shawn Terry and Alex Hicks. And their expertise on going to certain group of buyers and telling them our story was just invaluable. I would credit them with much of the success. I am guessing now, but I think if I used somebody else, maybe I would have got half that value. That’s how talent they were. The other thing is that I mean it was very clear that our business was a very low risk business because we had a very high repeat purchase rate from our clients. We had a very low employee turnover. We had productized most of our offerings. That was validated in our exceptional growth rates and profitability rates. I mean that’s how we did it. All the things we talk about you know in terms of growing, scaling, and exiting a firm. That playbook, so to speak. We lived it. And it worked and it was validated. #00:49:53-14#


Sammy: Can you quickly summarize what your company was doing? #00:49:56-48#


Greg: Oh sure, sorry. So we were in management consultancy but were niched. We focused on business-to-business sale effectiveness. We competed really wit three types of firms. So they were the big firms, which were most often for us Bain, McKinsey, and Boston Consulting Group. There was a group of boutiques that was similar to us. ZS Associates, the Alexander Group, and a few others. The name of our firm was SBI or Sales Benchmark Index. And then there was a whole/. I mean there were literally hundreds of kind of smaller one-man shops, mom-and-pops, whatever and we competed with them. In our value proposition, the problem that we solved was the riveting growth rate, wasn’t where the client wanted to be. They weren’t growing faster than their industry, and they weren’t growing faster than their competitors. And the solution that we provided to them is we applied this science of benchmarking to the art of sales. So our ability to diagnose the problem was surgical. And that was the unique value-add. Most of our clients knew they had our problem, but they weren’t sure why, and we were able to find and solve that problem. And then because of the value proposition their willingness to pay was very high. We had $1 million dollars per head in revenue, which was exceptional. That was driven more from what the clients are willing to pay than it was the number of people we had. If you think about that there’s revenue in the numerator and the number of employees on the denominator. We optimize for the numerator. And in our results, there was a very clear client return on investment. They knew if they spent X with us, they were going to get Y +/- 5%. So we were willing to charge a lot because the benefits were so great. What we asked them to share with us in terms of the value created, somewhere between 10% and 20%. So if I created a $100 million in value for somebody, you know them paying me $10 million to $20 million over one, two, three years or something like that is reasonable in their mind, and it was.  And we would guarantee our work. So, that’s how we did it.  #00:52:05#


Sammy: So basically if I were a customer of your company at that time you guarantee me that I get a X% of ROI and if I didn’t get it, I wouldn’t have to pay as much to you. #00:52:16-52#


Greg: Yeah, there was downside protection, and every contract was a little different. It wasn’t a typical 100% money back guarantee but there was definitely a penalty for underperformance. There was also an upside and we participated in above average performance. So if we promised a certain level of performance and we exceeded that, then we participated in that upside. #00:52:38-55#

Sammy: I love it. So we are almost done with our time. I could talk for hours with you because I have so many more questions, but we have to wrap it up now, Greg with five questions. What do you do to keep body and mind fit and sharp? #00:52:55-75#


Greg: I am sorry, one more time? #00:52:57-49#


Sammy: What do you do to keep body and mind fit and sharp? #00:53:01-43#


Greg: I meditate and I read. And I make that a daily practice. I read and meditate probably for I don’t know/. I meditate for maybe 20 minutes a day and I read for maybe an hour and a half a day. Everyday. #00:53:15-87#


Sammy: What is your favourite business book? #00:53:19-42#


Greg: Well right now it is my book. But I would say, other than that, my favourite business book is Think Fast and Slow which is the science behind decision making. #00:53:30


Sammy: Love it. But you really have to take your time to read that book. Favourite business leader you follow? #00:53:40-25#


Greg: Oh that’s easy, Jeff Bezos. Yeah, I think he is a once in a generation leader and he’s taught us all how obsessing over the customer is what creates wealth.  #00:53:51-14#


Sammy: Who should be our next podcast guest and why? #00:53:55-29#


Greg: Oh boy, that’s an interesting question. I am thinking about your audience. There’s a member of Collector 54, his name is Carter Hopkins. And Carter Hopkins is a recruiter that specialises in hiring sales (town? #00:54:16-14#). He’s truly an expert. Given the questions that you asked me today on how difficult it can be to hire salespeople, he might be a good person to interview. I’m not sure if he is open for it, I don’t want to speak for him. But if interested I can make the introduction.  #00:54:32-34#


Sammy: That will be amazing. I would love to try. And now you can directly address our audience. Anything they can help you with? #00:54:40-36#


Greg: You know I would just direct people to a few websites. So, if you’re an owner of a professional services firm and you trying to grow scales and someday sell your business. I would direct you to www.collective54.com. If you’re somebody who has a business and wants to sell, either in total or a part, and you in that industry vertical, I would send you to www.capital54.com. And then, if you’re into podcasts, I would go to collective54.com and click on resources. You can read our podcasts. And if you are a reader, I would go to Amazon and buy the book, which is titled The Boutique: How to Start, Scale, And Sell A Professional Firm by yours truly, Greg Alexander. #00:55:31-46#


Sammy: I have put all of those links in the short notes. And if people would like to get in touch with you. What is the easiest way? #00:55:40-11#


Greg: Yeah, probably my email address which is galexander@capital54.com. #00:55:51-36#


Sammy: Amazing. Thank you so much. We learned a lot. It was a pleasure. Time flew. Honestly, thank you, Greg. #00:55:59-50#


Greg: Sammy, it was my pleasure. I appreciate you reaching out to me and best of luck to you in the future. #00:56:04-11#


Sammy: Thanks for that. To you too. Bye. #00:56:06-26#


Greg: Okay. Take care. #00:56:06-84#