Join John Sherk as he shares a compelling story of navigating leadership transitions in a boutique business. Over the course of a decade, John mentored a young founder who, at 33, has built a remarkable company but struggles with the challenges of scaling up. Now, at 55, John has stepped into the role of interim COO, not only to guide the company’s growth but to develop the next generation of leadership. John will discuss how he’s strategically planning for a 5 to 10-year transition, preparing the company for an eventual exit while ensuring its current and future leaders are equipped to sustain success. Learn how this model of “mentorship in action” is filling crucial leadership gaps, aligning with long-term business goals, and creating a roadmap for both personal and organizational growth.
TRANSCRIPT
Greg Alexander:
Hey, everybody. This is Greg Alexander, founder of Collective 54. You’re listening to the ProServe podcast, a show dedicated to helping founders of boutique professional services firms grow, scale, and one day exit their firm. And with me today, I have a long-standing, well-respected, well-liked member, John Sherk. John has a very interesting story about his journey and a recent strategic change he made. I wanted to capture that because I think what he did might be applicable to everybody else. But before we jump into that, John, for those that might not know you, would you introduce yourself and your firm, please?
John Sherk:
Sure. I’m John Sherk. I am a business coach and consultant, mostly in human capital. I have my own brand as John P. Sherk, but I also have Operations Laboratory, which focuses specifically on air conditioning.
Greg Alexander:
Okay, sounds good. So we were on a session, and you chimed in and you told everybody about a change you made fairly recently. That prompted us to dedicate a whole episode to just that. So why don’t I just have you explain to the audience what that was, and then I’ve got a bunch of questions regarding it.
John Sherk:
Well, I’ll give you the 40,000-foot version first. As a guy in my mid-fifties trying to decide where I want to go in the last sprint, I thought, do I really want to go from being a solo coach with two virtual assistants to building a real firm, growing it, scaling it, selling it? Do I have the energy for it? Where do I want to go with it? Literally, I was sitting on a beach in the Caribbean, thinking about life and work, and what I really love and want to do more of. It came down to two things. One was I needed to fully fund my retirement. I’m not going to Thelma and Louise my way into it right now, but I need to do something more. The other part was, there’s this company that I just love doing business with. I’ve been working with the owner, a young guy, for 10 years. I’ve been coaching him, and I just love his team. He’s got like 35 people. He’s 33 and just about the oldest person in the company. They’re a blast to work with. For me, I’m sort of like the dad when I’m there. It just dawned on me, what if I buy a minority stake in his company? He’s just at the end of the grow phase, which aligns with me really well. What if I attach my car to his train for the next 10 years? I come in, create value toward an exit, and 10 years from now, we exit together. I probably do better than I would have on my own. He gets a lot from me that he probably wouldn’t get otherwise. It’s a win-win scenario.
Greg Alexander:
Yep. Well, I have so many questions regarding that. Thanks for that 40,000-foot summary because I think that tees it up really well. This concept of buy or build is very interesting. Previously, you were on the build journey, and you know how long that takes, how much money it costs, the hours you have to put into it, the probability of success, etc. You hit an age, 55, sitting on a beach with two virtual assistants. Retirement’s breathing down your neck. You’re like, how the heck am I going to pull this off? When comparing the two options, staying on the current path versus buying into or attaching your car to his train, that was a better path for you. We have several members in Collective 54 that are your peers, similar stage in life. They have the same exact decision to make. I don’t think they’re considering buying into another firm, and they should be. So questions regarding that. This 33-year-old guy, what does he need your minority investment for? How did you get him to agree to it?
John Sherk:
Well, first of all, we’ve known each other for years and have great chemistry together. I hope at some point you’ll get to meet this guy. I’m trying to drag him with me to the in-person event in October. He started his company at 13. He’s pure energy. His dad bought him a camera, and he started doing wedding videos in high school, then practice and scouting videos for LSU football. A moment of silence for that great institution. Then he started his company. He was just so much energy; nothing was going to stop him. He made plenty of mistakes along the way, and I was there to help him and watch him develop. There was a time when he was only a prodigy. Now he’s legit, like get out of his way. But he needed a CEO and didn’t know where to go with that. He didn’t feel like he had anybody inside the company who was ready. I’m his go-to develop people guy. We talked it through and decided it would work for me to come in as the CEO, but not the one who stays through the liquidation event ultimately. I can come in, he can be more external, do more founder stuff. We’re using the language CEO and COO as opposed to founder and CEO. I can be the day-to-day operator of the business. He can go out, be external, do what he needs to do for himself and the business. I can develop the person we have in mind, get them ready, hand it off to them. Then I become the person who takes care of all the collective stuff we talk about every session, pushes us through all the checklists, all the grids, gets everybody ready for a sale.
Greg Alexander:
OK, so this approach. So why now? You mentioned I really want to talk about the age dimension, which I know is probably non-woke these days. But it’s real. I mean, our primes are only so much, and retirement is there, and we have to get it funded before retirement hits, etc. So, if this was 10 years ago and you were 45 or 20 years ago and you were 35, would you have done this?
John Sherk:
I don’t think so. Maybe. I don’t know. It’s hard to say. 10 years ago, I was a consultant, but I was single and living in the French Quarter in New Orleans. So, unlikely I would have done this then. I had other things on my mind. But I don’t think I would have because I don’t feel the need to be the main character in my life anymore. I’ve started several things. I’ve got four master’s degrees and a Ph.D. I’ve got four great kids. I have physical energy, but I don’t have that kind of emotional need to take something on. I feel much more at peace being Yoda than Luke Skywalker.
Greg Alexander:
Yeah, that’s a great way to say it. You’ve got a lot at stake here. You just bought into a highly illiquid, small private company. It’s not like you bought stock in Google. Without asking you to reveal anything sensitive, how did you guys structure the deal, and how did that help you get over the risk?
John Sherk:
Well, let me back up because the transaction has not happened yet. Let me explain the process we’re using. I’ve done a lot of small business succession work over the years. One of the main principles I’ve found as a consultant with third parties is the sooner the whole deal is done, the greater the risk of failure goes up. In other words, if I’m bringing in somebody to be a new president, if there are 1,000 steps, step 1,000 is now you’re the president. We knew the transaction was the point of risk. I’m coming in now as the CEO because there’s such a threat of losing continuity in the business. If people feel a jolt, they don’t know what to make of it. We’ve agreed to terms and price, but we’re working on a timeline that says we’re not going to execute the transaction until both of us feel comfortable that I’m in place. We’re doing the whole thing and then we’ll do the transaction.
Greg Alexander:
OK, so kind of a trial period, so to speak. Correct. And you guys needed to do that, even though this person has been your client for 10 years.
John Sherk:
Oh, yes. This was my experience coming in. I’ve seen bad transitions and really good ones. I’ve never seen a good one in a small business. It gets different when you’re dealing with corporate America because there’s so much structure existing already. In a small business and a boutique firm, you can completely destabilize that firm overnight if you install a new person and they go, now we’re doing it my way. There has to be a long, slower process for everybody to get used to the idea, slowly installing everything. At the end of that, we’ll very quietly finish the transaction and probably not even make it public.
Greg Alexander:
Interesting. I’m going to go a little out of scope here, but something you said is really intriguing to me because succession in a small boutique, as you know, John, is a big topic for us at Collective. We talked about the founder bottleneck, etc. So more broadly, outside of this one use case, your own personal use case with the work that you do with clients, what are two or three things that people should watch out for when they’re handling succession in a small business?
John Sherk:
The number one most important risk is loss of continuity by far, not even close. You bring in a new person. It’s true if you’re promoting them from inside, and the higher they are, the more true this is, but it’s 10x if you’re bringing them in from the outside. They come in, and I’m doing it right now, and I feel it. Sometimes I’m in a meeting and I feel like I’m going to jump out of my skin because I’m like, we’re not doing it this way anymore. But I can’t. I have to allow the thing to unfold at its proper pace. So I would say that’s the number one thing. If you’re bringing someone in from the outside and they’re going to be CEO, don’t bring them in as CEO. Bring them in as vice president of something. Let them be there. Let them find their sea legs. Let them prove themselves to everybody else. Then everybody feels like, oh, thank God he’s the guy, instead of everybody wondering why I’m not the guy.
Greg Alexander:
Yeah. So let’s come back to your story. So that was, so loss of continuity in the sense of, you know, somebody comes in from outside of the company and they want to do it their way. So you’re disrupting the way things have been done and that can really destabilize a firm. That’s a good reminder. The last part of the story that I want to talk to, and we’ll save the rest of it for the private member Q&A session, is it’s going in, it’s a two-step process. So you’re coming in as COO, yet you’re going to be training your replacement. It sounds like almost from the beginning because, and you already have somebody identified for that. So it’s a step to a step to the ultimate step, which is the exit. That’s very interesting. In fact, unique in my mind. I haven’t heard that just yet in the five years we’ve been doing this at Collective. Does that add a layer of complexity or, and like, what’s the schedule? I mean, are you gonzo in three years, 10 years?
John Sherk:
We’re talking, I’ll add one more piece to it, is that person doesn’t know they’re the person. Oh, wow. So John and I know, I’m John and my partner’s John. We know who the person is. And so we’re at that phase, right? So I think we’re probably looking at five years of bringing them up in that way. And then, you know, the way these things go that maybe three years from now, they’re not the person. Yeah. It is what it is. So we’re going to, we’re going down this path together, but at three years, maybe we’re like, no, we’re going to have to change the plan, and go a different direction. But, and in that case, I’ll just stay longer. But clearly I’m at my age, if we liquidate in 10 years, I’m not going to be the guy who stays with the company. Yeah. So we have to sell.
Greg Alexander:
Now, at 33 years old, this is a highly self-aware human being. When I was 33, if someone had told me this, I would have said, you’re crazy, I’m king of the hill, get out of my way. Yet this guy recognizes that he needs a right hand, that he needs a COO, that he needs the step to the step. I mean, is this just an anomaly or like did, you know, did something happen to make him so self-aware?
John Sherk:
Well, he’s got a lot of good advisors besides me. He’s got a lot of good advisors besides me. And they have been saying to him, John, you’re not wired to run a business day to day.
Greg Alexander:
Got it.
John Sherk:
I hope you get to meet him. He’s extremely charismatic and extremely high energy, but he’s also the guy who’s going to just kind of get a wild hair and you’re going to come in on Monday and the entire office is rearranged.
Greg Alexander:
Right. So he’s the classic founder.
John Sherk:
Yeah. And so he’s aware of that. He knows he needs someone who isn’t wired that way. And I’m not to just kind of stabilize everything. You know, we, this is our process, you know, keep to, you know, that whole thing, that a good day-to-day manager does.
Greg Alexander:
Yeah. Okay. Very good. All right. So let me just put a bow on this and we’ll wrap up here and then we’ll save the rest for the member session. So if you’re somebody like John, where you’ve been at it for a while, maybe you’re getting up there in years. And I say that with all respect, you’re thinking about the next chapter in your life and you’re faced with a decision, a fork in the road. Do I keep plugging away at it? And maybe at the end of the rainbow, I fund my retirement or is it a better risk-reward cost-benefit trade-off scenario for me to hook my car to somebody else’s train? If that’s you and you’re wondering how to do it, then you should attend the session that we’re going to have with John and think about how to pull that off because this is a way to exit and it’s not one that’s often discussed and it’s a very rich conversation. So John, on behalf of the members, I really appreciate your willingness to come on and share your story. It’s so unique and so fascinating. And we look forward to the member session.
John Sherk:
Yeah. Thanks so much, Greg. I get so much from the collective. I’m more than happy to do it.
Greg Alexander:
We appreciate you always giving back. Okay. Some calls to action for listeners. So if you’re a member, again, attend John’s Q&A session. Look for the Outlook meeting invite. If you’re not a member and want to become one, go to collectivefiftyfour.com and fill out an application. We’ll get in contact with you. If you’re not ready for either of those two things, you just want to consume more content, I would push you towards my book. You can find it on Amazon. It’s called The Boutique, How to Start, Scale, and Sell a Professional Services Firm, written by yours truly. So until next time, I wish you the best of luck as you try to grow, scale, and exit your firm.
Note: This transcript was generated by Gong.