In this session, we delve into the strategic approach of leveraging an anchor account to establish and grow a small service firm. Exploring the real-world example of how an IT Service firm was built with MetLife as the anchor account, we uncover the keys to success in building a thriving business around a single, foundational client. From cultivating strong relationships to diversifying services and expanding clientele, our discussion offers actionable advice for entrepreneurs looking to navigate the journey of entrepreneurship with confidence and purpose. Tune in to learn how to harness the power of an anchor account to propel your service firm to new heights of success.
TRANSCRIPT
Greg Alexander: Hey, everybody. This is Greg Alexander. Welcome to the Pro Serv Podcast brought to you by Collective 54. The first, the first community, excuse me dedicated to the unique needs of firm, owners of boutique professional services firms. On today’s episode. We’re gonna talk about an interesting use case that I think is very common amongst many of our members. And that is when we launch of firms. It’s often on the back of a mega client. And there’s lots of positives of having that mega client in the early days. And then as we grow at scale and some day go to sell our firms, those positives then become disadvantages because now we’re dealing with heavy client revenue and profit concentration which makes a firm difficult to sell. So gonna kick that around a bit. I’ve got a fantastic guess with me today, Michael. It’s good to see you. Would you please introduce yourself and your firm to the audience?
Michael Gibbs: Yeah, thanks very much, Greg. So my name is Mike Gibbs and I’m the Founder and CEO of Sure Step. We are a governance risk and compliance consulting firm. And so we specialize and we started everything from the top of the advisory, the advisory chain, all the way down through consulting implementation of systems and then hosting those systems for our clients and operationalizing them. So we do a little bit of everything in the GRC stack.
Greg Alexander: Okay. Sounds good. So Michael, when you and I were speaking, I should mention Michael is a member of Collected 54. When you and I were speaking during Office Hours, you told me about the early days of your firm and your client MetLife and how at that point, you don’t even consider yourself a firm. You’re kind of a freelancer and you got this big client that led to the creation of a firm. So I’d like you to start just by telling everybody that story.
Michael Gibbs: Sure. So, so in the early days, we had a lot of expertise with a particular IBM product, I call OpenPages which is a governance risk and compliance platform. And we had a lot of expertise in that. In terms of when I say a lot of expertise was Mike and his merry band of, you know, two developers that was about it.
And so we weren’t a very large firm was three people call it four people, if you include my wife, you know, who was doing all the books at the time. And we ran into an opportunity where, you know, where we’re MetLife was having some challenges with IBM and they wanted IBM to essentially host OpenPages for them. They didn’t want to take on the IT management of the platform. They didn’t want to take on that responsibility. And it was a big bar of a platform. So it was a bit awkward to manage.
So, IBM came in pro, proposals together had some fits and starts. And ultimately, it looked like they were going to blow their own deal in terms of like breaking things at the client. And so MetLife said, look, if you want to save this, you’d better find us an option. And so the head of worldwide sales for IBM at the time, for the GRC and the RegTech space knew about us and we know her very well from a few smaller deals that we’ve done with her over in Asia Pacific. And she called us up and said, “Hey, you know, what do you guys think of having MetLife as a client to which?” Of course, I said, “That sounds wonderful. Where do I sign up?” And, you know, and we hadn’t done one of these hosting things before, but, you know, Alison had really great faith that we were gonna be able to pull this off. So I said, okay, let’s give it a go. What could go wrong? Right? Little do we know?
But unfortunately, you know, we didn’t make too many agriegous mistakes. So we essentially had to build out an infrastructure pilot, we, an installation pilot, kind of build out what the platform was going to look like. We had to put in place all of the support mechanisms, people, you know, service desk capabilities, all the things that they were going to expect when this thing was live.
And in the meantime, we had to do it a bit, on a wing in a prayer, right? Like there were no guarantees we were gonna get this right? You know, ultimately, we had somebody at ibm who’s championing us and somebody else at ibm who absolutely didn’t want us to get it and the client not really caring who got it as long. As it worked. And ultimately once we proved everything out, things looked really good.
Client was happy. We’re able to put together a very complete package, tailor, do exactly what they needed. And the rest has been history and, they met a client of ours since the tenth year. They’ve been a client of ours and they’ve just re up for another three years. So we’ve done a pretty good job that we haven’t screwed it up too bad at this point.
Greg Alexander: Okay. So it’s an incredible story. And the best part is that there’s still a client after all these years. I gain, I got several questions to ask you just to extract the learning for our members. So, I mean, metlife is one of the world’s biggest companies. Ibm is one of the world’s greatest service providers. And yet here they are hiring you and, your band of indians. You, you have three people to go do this mission critical project. Yeah. How did you get through metlife procurement department?
Michael Gibbs: So that was actually surprisingly easy. I think there’s a lot of artificial barriers and a lot of fun around that process. Ultimately, we’ve always been very good historically like from the very beginning, we were always very good at keeping our books in order. We never, you know, we never did a, I always said to my accountant. Hey, anything we do make sure it’s perfectly defensible by anyone, you know, it was always my golden rule and, you know, so our books were in very good order. We had demonstrable expertise and we did have some clients before that too, right? And, they weren’t opportunities nearly as big as this one. But some of them were like blue chip type companies, right? You know, in Berkeley and Mastercard, we’ve done some smaller projects in each of them and established ourselves like, hey, these guys are incredible. They know what they’re doing the hardest part really for us because we were a private company. They could just simply just go and look us up and, you know, get a pull our numbers from the stock market or from any kind of research firm, you know?
So what I did with them as I said, look, I’m not just gonna give you my books. I refused to do that. I’m not going to just give it over to some procurement wag, who’s not gonna have any idea what they’re really looking at, you know, just kind of having it picked over by some procurement person. So what I insisted on was like, look, put me together with, your VP of finance, right? Or whoever ultimately is responsible for this, let me sit down and talk to them. I’ll present my books. I’ll present what we’ve done. I’ll present our numbers and then you guys can make an informed decision at that point is to like, hey, are these guys risky to work with or are they not? Because at that time, I mean our revenues, I mean, like at the time we got this deal probably about one and a half 1,000,000 a year and this project was going to almost double the right, you know, right out of the gate. So, so they were taking a big risk by going with us to an extent, but we also showed that we had, the credit worthiness and the financial worthiness that we probably weren’t gonna be a bad bet. We weren’t gonna go under our next week or anything.
Greg Alexander: Okay. So next question, and we’ll just use those round numbers for illustrated purposes. So at the time of winning the contract in one and a half 1,000,000, you win the contract 93,000,000. So you double the business overnight off of one contract? Yeah.
Michael Gibbs: Yeah.
Greg Alexander: So that added cash flow, right? That came from that anchor account. And that’s what we refer to this as an anchor account. How did that help you propel your firm to become the firm that it is today?
Michael Gibbs: It allowed me to invest in people that I didn’t have the ability to invest in before. So I had some good developers. I had some very good systems people. I was a good systems person. I actually did most of the design of the system myself at the time, but obviously, if you’re trying to look, I mean rule number one is a CEO, or a founder, your job is to grow your business. And I was in a position where I was also doing the BA role. I was doing the senior PM role. I was kind of checking in the qa stuff, you know, like most founders, right? I was doing a little bit of everything, wearing many body, many hats. What I was able to do, was able to go and hire a proper Pan. I was able to go hire a proper BA. I was able to get a proper qa person to come in and start looking at this stuff and make sure that, you know, the proper checks and balances were in place and not just using, you know, going by my gut which, you know, can only get you so far before you hit a wall, right? So, what it allowed me to do is really good vest in people. And the other thing it allowed me to invest in was a proper service desk systems like, to ensure that we could automate.
Because obviously, it’s a, very small company, you know, everything was manual up to that point, you know, and, you know, we wanted to be in a position we’re like, hey, if a client wants to log a ticket, we can manage the ticket, they can see it. We can see it and march it all the way through its life cycle. So, it allowed me to invest in the systems I needed that would position us to double that again if we wanted to, right? And that was really what I was looking for. Give me the freedom to grow the business, invest in the people, in systems that would allow me to do that.
Greg Alexander: Awesome. So for those that are listening to this that are small growth firms, the lesson there to put an exclamation point around it is that when you land the anchor account, you now have a steady cash flow stream that allows you to invest in firm, building things in michael’s case. That was additional people in additional systems that set him up for scale.
Michael Gibbs: Yeah. It certainly didn’t go on my garage in the form of a four or anything that’s for sure.
Greg Alexander: Right. I mean, it’s to put all of that benefit back into the business, to create the business. Okay? So now that takes us to kind of the next stage which is now you’ve got this business and now you really want to scale it, your client is being served exceptionally well. So, metlife is loving you guys because they’re the big fish in the small pond. When you started to expand outside of them, did they want to, you know, prevent you from doing that? Did they want to hog all of your resources? I mean, how did that get handled?
Michael Gibbs: Yes to all of the above. Yeah. So, so there were two areas where it was challenging one. They really didn’t want to share us internally, right? There’s. A lot more capabilities that we could have done. We could have got more into the data side of things. We could have gotten more into the cloud side of things. We could have done a lot more at that life. However, the group that we were working with absolutely didn’t want to share us. They were very concerned about a while, if you expand out, we might lose access to these people or those people or whatever. And we’re like, you know, that’s not the way it works. I mean, like, you know, we get more revenue by get more people, I get more expertise, but they don’t see it though, right?
You know, in the corporate world, you know, that, the rule is to thin own as be true and they were like, hey, I don’t care about anybody else in the organization, getting some of this great service as long as I am. I’m not gonna share it. And, and then the other part of it. So, so that was one challenge and honestly, we still kind of deal with, to an extent there. But, but the other challenge was that I, because they knew they were in anchor accounts, they felt that they had priority to all of our resources, right? They kind of felt like, hey, we know you built your back on us. We want all of it and they were extremely demanding and honestly the last few years have been on whole exercise and training them that know you can’t have this and, you know, we heard all the arguments before like, hey, we’re a fortune 500 company. You know, you should be doing anything we ask. And I’m like, well, all of my clients are fortune 500 companies. So you’re not that’s special, right? So, how do you say that to them without saying it that way? Right? So, so it was very challenging and continues to be challenging sometimes because, you know, they’re big, they’re noisy, they still provide a lot of our revenue. And, you know, the, you know, squeaky wheels that they are the more grease they get. So trying to pull my people out who have at this point all been trained in, hey provide the best customer service you can, right? And we teaching them to say no when it was appropriate. Has honestly been one of the biggest challenges that we’ve had as an organization, our people have been like, hey, how can I serve you more? And I’m saying, hey stop that. You can’t, just give everything away to them anymore, right? So, that’s been the call. So two fold internally then wanting to hop is all of themselves. And then for ourselves on our side of the of defence trying to get our people to understand that, hey, this is still paying clients. They got to pay us, giving them everything for free, and the journey to trying to give them the best possible service experience. Is it helping the company that’s paying your paycheck been a twofold problem?
Greg Alexander: Okay. All right. And then my last question because we try to keep these to 15 minutes in length and we’ll double click on this when Michael is our weekly roll model for the private member Q and a session which will be an hour in length. Is, so now you’re almost 20 years in, you know, it’s time to retire or do something else with your life. I know you have other passions. You’re a hockey fanatic, since you’re in canadian and this other things you want to do. The anchor account was a wonderful thing stage, a wonderful thing in the scale stage and the exit stage, it gets painted as a negative. Now, you have this risk with this big anchor account. If they were ever to go away, you know, your firm isn’t as valuable. So how do you deal with it now?
Michael Gibbs: So right now, it’s in a very steady state place. As I mentioned earlier on, they’ve just resigned for another three years. That gives a certain amount of stability that if somebody in an exit position is gonna come in and say that’s great. I got three years to make hay on this account, right? And they’re good contracts. They’ve got no reason to go anywhere else. It would be frankly, very difficult for them to go elsewhere. It’s a very sticky service that we provide, you know. So there’s a lot of value in that. So at this point, we’ve turned it into a win. Now, you know, for the
purposes of answering the question fully if this was still the only large account we had, we’d be in trouble, right? You, know, people will be saying, well, great. I’m buying a client, you know, thank you very much. Thanks for the msa. And here’s a couple of 1,000,000 bucks, have a nice day. See you later. We’ve been very fortunate in that, you know, they’ve been very great at being references for us, right? So they’ve O, so even though they’re still try to be a little selfish with us and everything else like that, there’s a few people in there that we can trust, always give us a great reference and they have all around the world to all kinds of clients, right? Over the years. So that’s been very fortunate. So, you know, I mean if they were still the only client that we had the only one of those, then yeah, we’d be in deep trouble. I wouldn’t want to be trying to sell my company on the back of just that that’s for sure.
Greg Alexander: It’s it’s a great story and listen on behalf of the members. I really appreciate you coming on and talking to us about it and how it’s morphed over time because many of the members in collected 54 that are now in your shoes with thriving successful boutique pro serve firms that people want to buy. They built their firms on the back of an anchor account. And it’s important for those to understand that, that’s a path. You don’t always have to go to the bank and borrow money, but you don’t always have to go to equity investors and dilute yourself. You can build your business on the back of an anchor account if you’re smart and, you know, how to do it. So, Michael, on behalf of all the members next, for being here today, but.
Michael Gibbs: No worries. Thank you very much, Greg. And anytime.
Greg Alexander: Okay. All right. And for those are listening, just a couple of calls to action. So if you’re a member and you want to hear more of this story that there is a lot more to it, I can tell you that, look for the meeting invite that you’ll get and attend Michael’s Friday roll model Q and a session and ask your questions directly of him. If you’re not a member and you want to become one, go to collective 54 dot com and fill out an application and we’ll get in contact with you. And if you’re not ready for either of those two things, you just want some more content. I would point you to my book it’s called the boutique, how to start scale and sell a professional services firm, which was authored by yours truly, Greg Alexander, and you can find it on amazon. But until next time, I wish you the best of luck as you try to grow scale and someday exit your business… awesome.