If you are a business owner, do you fall into one of these categories: a) Earning too little; b) working too much; or c) struggling to exit? Yes? Greg Alexander is your guy.

He is the founder of Collective 54, a company and a community that  creates a great impact on brilliant founders who may need a piece of advice. Greg is not just doing the talking. He actually proved his expertise and knowledge on exiting a business big time when he sold his first company for $162 million.

In this episode, you’ll get to know how he was able to sell it for such great value as we discuss the following:

• The key difference between earning income and building wealth
• How intellectual capital can greatly increase your business’ value
• Three types of clients he’s providing services for
• How to make your business less founder-dependent

Still want to know more? Listen to the full episode to be in the know of the ins and outs of scaling your business.

Other Resources Mentioned:

• Firm Estimator
• The Boutique: How To Start, Scale, And Sell A Professional Services Firm

More About Our Guest:

Greg Alexander is the founder of Collective 54, the first mastermind community dedicated exclusively to thriving professional services firms with big aspirations. Collective 54 helps members make more money, work less, and get to an exit bigger and faster. Members get access to a network of peers, proprietary content and benchmarking data, coaching, events, and software, all custom-built to serve the unique needs of boutique professional services firms. 

Connect with Greg Alexander:

• Website
• LinkedIn
• Facebook
• Instagram
• Twitter

Connect with Erin and find the resources mentioned in this episode at hourlytoexit.com/podcast.

Erin's LinkedIn Page: https://www.linkedin.com/in/erinaustin/

Think Beyond IP YouTube Page: https://www.youtube.com/channel/UCVztXnDYnZ83oIb-EGX9IGA/videos

Music credit: Yes She Can by Tiny Music

A Team Dklutr production

Hello, ladies.

Welcome to the Hourly to

Exit podcast.

I am very excited about today's guest,

Greg Alexander, who I've been a big fan

of since I first heard him on the

Vito Sell Radio with John Warlow talking

about his exit.

So welcome Greg.

I'm very thrilled to have

you here.

Well, it's a pleasure to be

here and thanks for having me.

Yeah.

Will you introduce yourself to the

audience please?

Sure.

My name is Greg Alexander.

I am the founder of Collective 54.

Collective 54 is a mastermind

community dedicated to boutique

professional services firms.

And, we got about, I think it's

300 members now.

And what we really help them with is

how to grow scale and someday exit

their services firm, which I

know, you are very passionate about.

Yes.

And completing the entrepreneurial

journey in services is a very

nuanced thing.

So that's what we're focused about

and it's, it's wonderful to speak

to y'all today.

Wonderful.

So there is a story behind the name

Collective 50.

Yeah, so the story is, so

the number five, four is the North

American industry classification code

for professional services.

Mm-hmm.

So within that, that is lawyers,

accountants, consultants,

marketing agencies, IT service

providers, pretty much anyone who is

marketing, selling, and delivering

their expertise.

And, it's the second biggest

sector in the US economy, trailing

only oil and gas.

It's about, 2 trillion per year

spent in this sector with a 5% organic

growth rate, employs 10 million people.

so we're very lucky to be in

that sector.

And that's the reason for the

name, or I should say the 54.

The reason for the collective

is because that's what we are,

we're a community or collective

of business.

That

is fantastic.

I did not realize that that sector was

so large, and maybe it explains why I

sometimes struggle, frankly, to define

who I'm talking to because it is such a

large group and very diverse group within

that expertise based business group.

So yeah, I find myself sometimes

talking to the soloists and

sometimes talking to the c e o

and, That's back and forth, but a

lot of the same issues among

them.

yeah.

it's big.

So therefore it's, hard to define,

you know, and I have that problem

sometimes as well.

I mean, I might speak to somebody

who's running a marketing agency and

they'll say, what do I have in common

with a law firm?

And I'll say A lot more than, you know.

Mm-hmm.

Like, you're in the service business,

you're in the people business.

you're marketing your expertise.

the business model is the same.

Yes.

The domain is different.

Mm-hmm.

But the business model is the same.

Yeah.

So you're collective if, a mastermind,

like how are you different from

other masterminds?

We're different really in

three ways.

So first is the obvious way.

We're only focused on a

single industry.

Mm-hmm.

most mastermind communities, and I'm

a member of some, I'm a member of Y

P O Tiger 21, and they're wonderful

organizations, but they're not focused

on one industry.

They have literally dozens of industries

and our contention is, Industry

context matters.

So that's the first thing.

The second thing is we're focused on

the segment Within that industry.

We refer to it as the boutique, and we

define that based on number of employees.

So you have to have more than 10, but

fewer than 250.

these are kind of post startup,

but pre-ex exit, the analogy

I use is that they're in their

kind of awkward teenage years.

they're not a kid anymore, but they're

not an adult.

So we're really focused on that.

And then the third thing is we're

laser focused on the founder

or co-founder.

Because a lot of what we do with

our programming is around building

wealth as opposed to generating

an income.

So I would say those are the three,

primary differences.

However, I do encourage everybody

to be in as many communities

as possible.

The limitation there, of course,

is how much time do you have to dedicate

to these things?

But I'm a big believer that

learning from.

Is the best way to learn.

Yeah.

Yeah.

You mentioned the difference

between earning income and building

wealth, which is sometimes hard

for people to wrap their head around.

Can you explain to the audience, like

how you like to look at the difference

between the two?

Sure.

So I mean, in the context

of a services firm, how do you

earn an income?

Well, you run a profitable business,

which means you can charge enough

for your service.

And the cost to deliver the service

can be maintained or reduced over

time and you earn that spread.

And that's the business model

of services.

However, not all revenue is the same.

So the mental model shift is to

get off the income statement and start

thinking about the balance sheet.

And that's where wealth

is determined.

You know, assets minus liabilities.

And say to yourself, if somebody was

to try to buy my firm, how would

they place a value?

For example, if you are running

your firm and you basically are the

firm as the founder, there's no wealth

to be created there because God forbid

something happened to you, the business

would go away.

However, if you built a real robust

team, so much so that you as the

founder, no longer sell work and no

longer deliver work, the team does it.

Then there's real wealth to

be created there.

In addition, you got to generate revenue

from sources other than the billable.

hour and you talk an awful lot about

this, and I'm so pleased to meet you

because we share that in common.

these are assets of various kinds.

sometimes they're protected assets

and intellectual property, and

you can generate royalties or

licensing fees off of that, and that's

a wonderful thing.

Sometimes it's intellectual

capital that might not be protected.

However, you can monetize by charging

a premium for your service because of

some methodology or tool that comes

along with the pair of hands.

So those are the ways that wealth

is created within the professional

services segment.

Yeah, you know, I'd like to say that

I'm my own avatar that I have been,

a soloist since 2006, I believe.

And so someone asked me like, how

long you've been in business, and I have

to say, well, I've been on my own since

2006, but I've been selling my time.

I was selling my time for a good,

10 years, without really thinking

about, building a business.

So I like to say I've been in

business for three years, although

I've been on my own since 2006 cuz

I really was just selling my time and

earning an income, not creating.

Any assets and so to the point of

creating assets and intellectual

property.

so when people are.

Providing their services, they have

their expertise.

They are used to going out to

get clients and fulfilling whatever

the needs are for their clients.

how do they make that shift to, okay,

I'm going to start, thinking about,

creating either methodologies around

that or creating materials that are

protected materials around that.

cuz people get caught up with

things like software and courses and

books, you know, the big shiny.

Intellectual property pieces,

but there's so much more than that

that helps create a well-run business.

Yeah.

Well, you know, I'll share a little bit

about my story prior to Collective 54,

because it might be a good illustration

of that point that you just made.

So I started a firm, a management

consulting firm in 2006, and it

was called Sales Benchmark Index

or SBI for short.

And I sold that business in 2017,

and it was one of the larger exits.

We sold it for 162 million.

And the important thing to keep

in mind there is we only had

30 employees.

So how do you sell a consulting firm

with 30 people for 162 million?

It's because we had these assets.

Mm-hmm.

And the primary asset was what we

called the revenue growth methodology.

And it wasn't a software tool.

it wasn't a training course.

It was a consulting methodology.

And it was used by our clients,

which were largely software companies

that had very large sales.

And even a modest improvement in the

productivity or effectiveness of

10,000 salespeople could have a really

large impact on their share price

and their own profitability.

And it was the methodology that

they wanted.

Now.

Yes.

with the methodology came people and we

helped them get it implemented in their

shop, but it was a methodology and

what that allowed us to do is to do

standardized work.

So instead of going from shop

to shop and every project is a custom

project, that's a non-scalable

business.

Mm-hmm.

And when we went from shop to

shop and we were starting with

this methodology and then it was

just a question of customizing it,

maybe 20, 25% for that particular

client situation that allowed for

scalable work and how that shows up

in the financials and therefore it

creates wealth, is that when you have

standardized work, you can hire really

bright people maybe with not a ton of

experience, but a lot of potential

and teach them how to deliver

for the client.

So in that case, you're selling to

the client something that's very, very

valuable, but you can deliver that

service with maybe less experienced

people and therefore a less cost.

The best example that I've seen of

this, and maybe this could be inspiration

for your audience, is Goldman Sachs.

Everybody knows Goldman Sachs.

Mm-hmm.

They're one of the largest professional

services firms in the world.

And they have 40,000 employees, but

only 400 partners.

So there's 400 people keeping

40,000 people busy.

Now how can you do that?

And 73% of their employee base are

in their twenties.

Wow.

And people hear that and they say,

are you kidding me?

Like, Goldman Sachs is in every

boardroom, in every company

in the world.

And you would think, cuz.

So sometimes I hear from people,

well, I can't hire junior inexpensive.

Because the clients won't tolerate that.

Well, that's not true.

If you have intellectual

property or your intellectual

capital, they're not just buying

the pair of hands, they're buying all

the expertise that comes with that

pair of hands.

So it's, these models are

out there.

Goldman Sachs is one of many, and,

that's what we all the smaller

firms, all of us on this call, we

should be shooting to replicate.

Yeah.

I like to say like instead of

being an expert based business,

be an expertise based business.

Yeah, you're an extra based business

then it's just, you and another, an

expensive expert If you get more experts

or you can have that expertise that can

be, utilized and delivered by less

expensive resources.

So, yeah.

I love that.

So I love this what you have on

your website, stop running Shin first

into these, three common problems.

Earning too little, working too

much, struggling.

The exit.

I love the imagery of running

Shin first.

Cause we've all had the pain of, Running

into something with our shins.

when people come to Collective 54,

are they struggling with something

or are they just looking for

community or both?

why do they.

It's a great question, and I

would say that there's three types

of people that come to Collective

54 to answer this succinctly.

So, and I would classify these

kind of as three problems that

they're focused on.

So the first group is that group

that's not making enough money.

these tend to be smaller firms, maybe

younger firms, and.

What happens to them is they get to

the point when they launch their firms.

What they say to themselves is, my

ambition is this.

I want to be able to make a living

and work for myself and not have to work

for a corporation.

And then they have the courage and they

start their firms.

They have a lot of respect for

'em, and they get to that point.

But then maybe two or three, four years

into the journey, they say, okay,

well my ambition has expanded.

That's no longer enough and I want to

earn an exceptional.

And then they struggle with, how

to go from just, billing out their

time or maybe billing out the

time of a couple of other people and

growing enough to, have a substantial

income coming in.

So that's one group that comes

in and we have a whole programming

set associated with that, cuz

our membership is tiered across

these three tiers.

The second use case, Somebody

enters collective and they're

past that point.

They're making a great living, but

they're working 70 hours a week and

they're killing themselves.

And their approach is largely brute

force at that point.

And they say, listen, I gotta get

some scalability into this business.

I've gotta get some repeatability.

how do I do this?

So we call that the working less group

or the scale group to be funny with it.

And we got a whole set of

programming on that.

And And then the third group are

folks that wanna sell their business.

And usually they've tried to sell

it and they were unable to because

maybe they have an unsellable business

or they were able to sell it, but the

purchase price of the terms weren't

attractive to them.

And they know what their issues

are and they have to fix them.

And they come to us and we try to help

them kind of knock those warts off, so

to speak, so they can go back out

into the market and get a great exit.

those are the three reasons why

people come to.

Okay.

Very nice.

And so those who are struggling to

exit, do you kind of like a pre-ex

exit planning type?

Or how do you work with

Yeah, yeah.

So maybe I should have started

with this.

our point of view is that the life

cycle from launch to exit for a

boutique pro serv firm is 15 years.

This three stages grow, scale,

exit, and there's about five years

in each stage.

So why does it take five years

to exit your firm?

Well, it doesn't, once your firm's

ready to sell, that might take a year.

But leading up to that, it's quite

a bit of work.

For example, a lot of these small

firms have a lot of client and revenue

concentration.

maybe their top five clients are

half their book of business, that's

an unsellable business, right?

So it's gonna take some time

to diversify your revenue stream,

or some of these business are

founder-dependent.

And yes, they can sell their firm, but

the person that's buying 'em says, you

gotta stick around after the sale.

Well then what's the point?

So then we help them develop a

succession plan and replace themselves

over time.

Well, you don't just flick the

switch on that.

Right.

Replacing a founder is a really hard

thing to do because these founders are

brilliant people.

So ready for the exit is a big piece

of what we focus on.

The actual exit itself, there's

investment bankers and m and

a advisors, and they're really

good at that.

And that's not our area of e.

Got it.

All right, so going back to the

diversifying their revenue stream by

that, if they have too much client

concentration, by that, do you

mean getting more clients with the

same business model or diversifying the

way that they serve

clients?

Well, the inflection point is usually

this, you get to a point where word of

mouth and referrals is no longer

sufficient, and you have to get good.

Selling to people who don't know you.

Mm-hmm.

Which usually means expanding outside

of your own little circle of influence.

And because up to this point

the founder hasn't done that.

There's a lot of concentration

because it's concentrated in

that founder's kind of personal

network or their, personal reach.

So this requires building a

commercial sales and marketing engine.

That can do this on a regular basis,

like a real funnel.

Mm-hmm.

Other people in the firm, can bring in

work other than the founder and really

expanding out.

So it's a wonderful thing to have

longstanding client relationships with,

high quality fees.

But if three or four clients are

the whole show, one of two bad things

happens and you're in real trouble.

So you gotta, develop that next

set of clients.

Mm-hmm.

So that's how you diversify it.

Gotcha.

And the other thing I think certainly

that solos will come up against is

when you're fully.

occupy, like you can't do another

hour of work.

Like why would you do any business

development?

Like how do you even do that?

And then you lose that client, then

you're starting from scratch, to fill

that slot again.

And I think that is one of the main,

pain point for a lot of people.

So that's a tough one.

something that you might enjoy

and maybe your listeners, is that

we have a tool on our website, which

is collective54.com, and it's called

the Firm Estimator.

And it's a 10 question estimator

and you can ask the questions

and it tells you an estimate of

what your firm might be worth.

What made me think about that tool is

something that you just brought up

because two of the 10 questions have to

do with that issue.

One question is, do you as the

founder of sell work, To answer that

question is yes.

Then your evaluation goes down.

The second question is you as the

founder, you delivering work.

The answer that question is yes,

your evaluation goes down.

Now why is that?

Well, you should have grown your firm

to the point where you personally are

not constrained.

By what you just mentioned, I

just literally can't take on any

more capacity.

You know, you've built a system

underneath you that you can

bring in more and more work and it

can be serviced.

Mm-hmm.

Because you have this proper capacity

planning process, so you might play

around with that tool a little bit.

it's a fun tool to use.

It takes 10 minutes and gets you

thinking about those types of issues.

Yeah.

I think what you've described is.

Is commonly referred to as, being the c e

o by working on your business and what,

instead of working in your business

and getting there.

that's great.

Thank you for that.

So what are you seeing in 2023

and beyond, like as we come out of

the pandemic and, maybe people who

were, just kind of making it as well

as they can and now they're looking

to grow, what was happening out?

Yeah.

So, I have this wonderful study

group called Collective 54,

and I can tell you our members

are thriving.

they're doing extremely well.

we do a, quarterly benchmarking

survey and we collect financial,

operational and human

capital metrics.

And I can tell you that our members

are growing on average, about 25%,

year over year.

And when you double click on

that and you say what's driving

it, when economic conditions sour,

it's really good for professional

services firms, which is

counterintuitive, but here's why.

Large corporations start laying

people off.

However, the work still needs

to get done.

10,000 people leave a company, all

that work's gotta land somewhere.

So what they say to themselves is, okay,

I'm gonna rent it instead of owning

it, and they turn to professional

services.

To kind of have that variable

workforce, and we're seeing that happen

a lot right now.

So a lot of our members are catching

that work and they're thriving.

They do have a different problem.

The problem is finding enough

talented employees to be able to

do the work on a consistent basis.

Unemployment's still in the threes.

Mm-hmm.

the labor market's really tight

right now, but that's a good

problem to have.

I'd rather be supply constrained.

Demand constraint.

Right.

That's excellent.

So unlike most of my clients,

you are someone who's already been

through an exit.

So usually I ask if they have a

plan to exit their business someday.

but you have a new business

collective 54.

What is your long-term plan

for Collective 54?

Yeah, so I'm very blessed that I sold

my company and I was 47 years old.

and I sold it for more money than I

could ever imagine.

So my motive is no longer financial.

I read a very impactful book that

was given to me by a mentor called

Halftime, how to Move From Success

to Significance.

And what I learned by reading that book

is that the second half of my life,

I'm now 52 years old, I get more

fulfillment out of making an impact

on others than I do putting more zeros

in the bank account.

So I don't plan on selling

collective 54.

Mm-hmm.

Now, I may live to regret that

statement down the road cuz some

of my employees might want to sell

down the road.

But right now, we're only

three years old.

we launched in January of 2020

I, I get so.

Fulfillment out of being in the

community and working with

entrepreneurs.

So my plan is we, we want to try to

get to 5,000 members and we're at 300

right now, so we got a long way to go.

But, that would be a wonderful

thing to accomplish because, I get

to meet all these fascinating, brave,

courageous founders that are trying to

change their lives and I, coaching

them and helping them, even in a

small way is very,

That's wonderful.

I love to hear that.

part of the mission with Hourly to Exit

is to help people, create that wealth

so that they have a legacy so that

they can do have another half another

chapter that is more impactful and

more meaningful.

one thing I would say to you, Aaron,

is I know you're passionate about

helping women and something

that happened by accident, but

I'm very proud of is that 41%

of our membership is female.

Oh, that's wonderful.

I know.

And, it wasn't intentional.

Mm-hmm.

It just happened.

And there's certain, industry segments

that are dominated by females.

For example, marketing agencies.

there's some brilliant

female leaders, entrepreneurs that

are running these marketing agencies.

I've learned a ton from them.

HR consulting is also another great

field where a lot of, females are in.

I think it's great.

I think, this field of professional

services might not have some of

the barriers that other fields do it.

It still has some for sure, and I'm

aware of that, but it's a little

bit less of an old boys network.

Mm-hmm.

and that's been great, to have that

level of diversity in the group.

That's wonderful.

So I know people will want to keep

in touch with you and follow up.

So where can people find.

I'd say a couple things.

So first obviously is collective

50 four.com, and that's the

number five four.

And, we offer a newsletter you might

subscribe to that.

It comes out once a week.

It delivers, three things in it.

a blog on Mondays, a video on Wednesdays,

and a chart of the week, which

is benchmarking data on Friday.

So you might check that.

And then I am a published author.

I, I have a book out called The

Boutique, how to Start Scale and

Sell a Professional Services Firm

by yours truly, Greg Alexander.

And you can find that on Amazon

and that might be useful as well.

Fantastic.

Thank you so much for joining

us today.

And all that information will

be in the show notes so everyone

can find you.

Thank you so much,

Greg.

Okay, my pleasure.

Thanks for having me.