Will Bachman: Hello David. Welcome to the show.
David A Fields: Hey Will, it is always delightful to talk with you.
Will Bachman: So David, I’m often… You know, talk to independent consultants who are thinking about… They say, “Well, you know, I’m kind of thinking about partnering up with somebody,” or maybe they’re even thinking about joining a small firm with two or three other partners.
Will Bachman: You deal with a lot of boutique firms as well as independents, so you’ve seen a lot of the high end on this, a lot of observations. What are some things that you think work well in a partnership and what are some things to look for in a potential partner? What are some times that you’ve seen partnership dissolve or not do so well?
David A Fields: Wow. First of all, that is a great question and an interesting topic. By happenstance in some ways yesterday I met with two different firms, one of them is a client, one of them is not yet. The on that’s a client, they’re a longstanding partnership of many, many years, well over a decade, and I’m helping them dissolve that, transition that. But with the other firm I talked to yesterday, they had been a three person partnership and it didn’t work out and now it’s down to two people.
David A Fields: And the day before yesterday I was meeting with another firm… All these firms are up in Toronto, because I happened to be in Toronto. And there is one person who owns it. He’s built a nice little firm. Well, I mean right now it’s around 10 people. He co-founded it. It did not work out.
David A Fields: So partnerships have a tendency to be very unstable, to dissolve, to not work out. You may or may not know that when I created Ascendant Consulting, my consulting firm, I co-founded it, and I often say when I’m on stage and presenting that I co-founded Ascendant and that partnership worked incredibly well for about four weeks. Integrate laugh line, right? That always works. At which point it dissolved, it fell apart.
David A Fields: So I think it’s very difficult, and what I realized is there are some important things to think about in a partnership and important things to look for. Perhaps the most important, Will… What I’ve seen is that if you are going to have a partnership in your consulting practice, if you want someone to share the consulting practice with, share the burden of developing business, share the burden of thinking, have someone to talk to, all of those great benefits of being a partnership, your relationship with the partner has to transcend the business and it really needs to predate the business.
David A Fields: While there may be some partnerships out there that are exceptions to what I’m about to say, as a general rule I have not seen any partnerships that are built solely for the purposes of creating a business, meaning we happened to work together a little bit, we found that we liked working on projects together, and so maybe we’ll be partners. I haven’t found any of those that survive.
David A Fields: The relationship has to be larger than just working together. It has to be larger than just the business. It has to transcend what you’re creating for clients, because the stresses in a partnership are so high that if you don’t have something bigger, if you don’t have this feeling for each other that you… You know, a relationship, not just a business relationship. A relationship where you look out for the other person, where the other person’s interest in your heart, where you have some shared goals or some shared aspirations outside the business. If you don’t have that, it won’t survive the stresses.
David A Fields: So if you’re thinking about… You know, saying who should I partner with… And you’re in a partnership, so it would be interesting to get your perspective on that and whether, you know, your relationship just transcends the business.
David A Fields: But if you’re thinking about well, I want a partner, that might… I may have just thrown some cold water on it because I’ve lowered the… Reduced the pool of potential partners quite dramatically, and yeah, I think that’s true. I think the pool of high potential partners for anyone is actually fairly narrow.
David A Fields: Now over time you can meet people and you can build that relationship and expand that relationship with an idea that you know what, maybe some day we’ll create a partnership. Maybe we’ll go into business together and see if this works. But I would build the relationship first. That’s my initial thoughts. What’s your reaction to that Will?
Will Bachman: I think it makes sense. You’ve seen a lot more repetitions than I have, so I’m… I want to probe this a little bit further. So for someone who… Let’s say for someone who is an independent consultant and kind of thinking of saying hey, it would be useful to kind of pair up with someone so that we can work together on business development and execution and-
David A Fields: Yep.
Will Bachman: What’s your guidance for that person? Would it be hey, why don’t you just try just kind of working together for a while, but you can kind of just have separate LLCs and you can 1099 each other, and if on a particular client you can just agree, okay, this is how we’re going to split any revenues or whatever, but you don’t actually have to be partners in an LLC together. Is that sort of what you suggest for a while? Like do that for a year first?
David A Fields: Yeah. That’s 100% what I suggest. The question comes up around branding, right, and around well who do we present ourselves as? Are we going to present ourselves as a company or not?
David A Fields: I actually think there’s too much emphasis place on that. That question, which feels very important to the consultants, is not important at all to the client. They actually… They don’t really care. They’re hiring you, or one of you, because they trust you, and in all likelihood there’s a leader. There’s someone who’s winging this piece of business and they’re bringing the other person in. Maybe they brought them in as part of the pitch, but still there’s a leader. There’s someone who owns that relationship, so just go in under the leader’s banner. Put your ego aside if it doesn’t happen to be your banner and go in there, and that’s fine.
David A Fields: So I would absolutely recommend doing that. When you jump into a partnership it’s like a marriage, all right? It’s very much like a marriage without some of the benefits. What can go wrong though, and almost what invariably does go wrong, there are a couple of things.
David A Fields: One is usually the visions are not 100% aligned, because no two people’s visions are 100% aligned, so where you want to take the company can be a bit different. It’s just like when you’re shining a light or picking a point on a compass or on a map. If you’re one or two degrees different at the start that doesn’t matter, because one or two degrees different for a few steps or a few yards or a few hundred yards or half a mile doesn’t get you that very far apart.
David A Fields: But as you go further and further out, you know, on the map, as you’re getting into miles and leagues and some other unit of measurement that’s even further, all of a sudden you’re quite a distance apart. So if you don’t have a really well-aligned vision that can be problematic, and that’s why one of the partnerships… Matter of fact, in some ways that’s why both partnerships I talked to yesterday broke up.
David A Fields: The other thing that very often happens, especially if you’re saying let’s share the load on business development and let’s share the load on delivery, is… As you know, this is a very [inaudible] business, right? Business development is quite difficult and sometimes you’re succeeding and sometimes you’re not, and sometimes you’re hitting the ball and sometimes you’re not.
David A Fields: Some of that has to do with you, and some of it just has to do with the vagaries of the market. And when one person is succeeding and the other person is not, unless that relationship is incredibly powerful and unless you’ve really talked this stuff through in advance, it’s highly likely that the one who’s producing revenue will start to resent the one whom… And I’ll put air quotes around this, the [inaudible 00:08:25].
David A Fields: And once resentment starts creeping into a relationship, any kind of relationship, that relationship is in for some tough times and a lot of trouble surviving. So I would recommend exactly what you said. I would recommend kind of a light partnership, not a legal partnership. Does that make sense at all?
Will Bachman: It does. And on that piece, do you have any suggestions of what you’ve seen work well on how to split up the revenue? Again, some firms might just be completely even Steven or 50/50 partners, but then other places might, you know, more… Okay, if you bring in a lead and you get 20%, the person who delivered gets 80%, and I did half the delivery. You know, some kind of formula, right?
Will Bachman: So what have you seen in firms that really have partnerships that survive and work well over time in terms of how to split the pot?
David A Fields: So compensation is a whole podcast in and of itself, or probably a whole podcast series. It seems to me if there are 100,000 firms out there there’s probably 300,000 comp approaches, because they’ve all tried a couple. The array of compensation approaches is pretty extraordinary.
David A Fields: Again, it so happens this morning I was talking with a firm about their comp approach and something they were doing and how I would adjust it. You know, what works best? Well it kind of depends on the people involved. Generally I’m not in favor of a just eat what you kill approach, you know, meaning if I get the revenue and I work the revenue I get the money, because that’s not actually a partnership.
David A Fields: So if you’re going to try and create a partnership, then you have to share and you have to be collaborative. Now could you take award either on a points basis or on a percentage bases, the revenue based on what’s been sold and what’s been worked? Yes, and I think it’s wise to do that.
David A Fields: But if you are going to create a partnership in reality as opposed to just working with someone, if you’re going to create a legal partnership, then you need to find some sharing at sort of the gross performance level, so as a firm how did we do and are we going to share… We can share that 50/50, or how are you going to determine your equity?
David A Fields: Sometimes that equity changes over time based on performance. Will, this is such a complex topic, I’m not… I’m sure I can’t actually do it justice quickly. There are a lot of ways at it. The best ways seem to reward collaboration and recognize that partners have to recognize that different partners have different strengths and different partners will perform better or worse at different times, and you have to have a long view. If you have a short view, again the partnership won’t survive because this business is just to variable for any one person.
Will Bachman: Yeah.
David A Fields: Did that help at all?
Will Bachman: No, that’s helpful. So if a couple listeners out there are thinking about getting together as a partnership with two or three partners what are the things that they should think… So I guess the first advice is is before you create your own LLC work together for several projects, work together for a year.
David A Fields: Yeah.
Will Bachman: What’s the next piece of advice in terms of… What are the considerations when you set up a partnership?
David A Fields: So you’re better off with four or five partners than with two.
Will Bachman: Interesting.
David A Fields: Okay? Four or five partners are actually much more stable than two. If you have four or five partners one of them are going to leave, maybe two of them will leave. You know, they’ll be disgruntled. But you can still survive. You can still be an entity and have some shared vision.
David A Fields: So just a one plus one partnership tends to be the least stable. If you really want to be successful at this, so you want to create a partnership that’s going to thrive and that you can build into a company that’s going to reward you, you have to have a shared vision and you can’t leave that kind of well, yeah, we just want to grow. It has to be a more defined vision.
David A Fields: Grow to what? What does success look like? Let’s put ourselves as a partnership two years from now and look back. What has to have happened for us to be successful, for us to feel happy about the progress? So that conversation has to take place.
David A Fields: I would say if you’re going to build any kind of firm, which if you’re talking about three or four partners you might be talking about a firm also, you’re talking now about having junior people beneath you possibly, other folks to help you out possibly.
David A Fields: Whether you are or not, I would have a conversation about culture. It’s kind of like before you get married having a conversation about religion. I would have a conversation about culture. What do we want our culture to be?
David A Fields: My sense on culture is culture is what you decide when your values are in conflict, meaning if we value having family time and one of the reasons we want to have a partnership and we love being independent consultants, small consultants, it’s because we can spend more time with our families, but at the same time we value client delight.
David A Fields: What happens if a client needs something, has to be delivered, and delivering that is going to conflict with a planned family vacation? What will we decide as a firm? What will be our guide? That defines your culture, and different partnerships will have different answers to that question. But I would talk about that in advance.
David A Fields: You actually need to understand how to bring on new partners, what to do if partners are going to leave, and have those kinds of discussions in advance. So all this stuff that you know you’re supposed to do in your personal life also, right, have a will and have things planned out and all that kind of stuff, you really should do in a partnership too.
David A Fields: And the last thing I would say is the best partnerships seem to consciously seek diversity, and I mean cognitive diversity. So to me it doesn’t matter whether they’re male or female or young or old or all of that, but the way they think should be diverse, because if you’re going to have a partnership and make it valuable and everybody thinks the exact same way, you’re missing out. There’s no one filling in the gaps. So you need that diversity and you need the ability to live in a diverse state.
Will Bachman: Any other kind of culture questions? Like I love your example about, you know, when something conflicts with the family vacation. What are the other kind of culture type, key diagnostic type things that you’d say are we this or are we that?
David A Fields: Well, I’ll give you a process instead.
Will Bachman: All right.
David A Fields: Okay? So when I’m doing culture work with clients what I first do is say let’s… You know, what are your core values? So what you should do is each of you and your potential partners, you should just put down what do you think your core values are? Those can and should be anything… Anything and everything.
David A Fields: Then you should prioritize those values and come up with scenarios where those values could be in conflict, which is why since having some flexibility and delighting clients tend to be core high priority values for most firms, coming up with a scenario where those are in conflict is pretty top of mind.
David A Fields: But you don’t want to just do it in a hypothetical… Or you don’t want to do it in sort of this abstract, well family versus delighting clients. You have to create a scenario. You have to create a situation, because that’s where the actual decisions are made.
David A Fields: If we believe that we’re going to be a supportive family friendly environment and one of our employees gets sick, but we also said we’re going to run a high profit firm and we’re going to make sure our margins are at least 30%, how do we deal with that? I mean how will we deal with that situation where we’re going to have a completely unproductive employee but we want to retain margin, you know, legal questions aside?
Will Bachman: Yeah. So my takeaways are the day before you get married try just working together, just pick one of the other person’s LLC and work through that. Look for fortified partners, not just two, to have a more stable firm. Talk about what if someone leaves, what if we want to bring in someone new, and get a really clear alignment on vision and culture.
David A Fields: Yeah. That’s a good start. There are other pieces, but yeah, that will certainly get you headed in the right direction.
Will Bachman: Let’s turn to a separate topic.
David A Fields: Okay.
Will Bachman: Let’s talk a little bit about boards of advisors. I know some consulting firms have done a nice job at this. You’ve probably worked boutique firms that have done this.
David A Fields: Yep.
Will Bachman: Not board of directors, it’s like a public company, but a board of advisors that gives advice. I’ve heard people asking about this, to say I’m thinking about doing this. Do you have any advice? I don’t, so I’d love to hear kind of your thoughts on it. I guess typically they might be paid something or maybe they get… Tell me a little bit about boards of advisors, how that works, why people do it, what are the benefits, how to do it right.
David A Fields: Again, a fascinating topic, not one I was expecting. So first of all most firms do not have a board of advisors. It’s a standard question in my firm growth diagnostic, I ask about the board of advisors, and I don’t know how many firms I’ve done, right? Tons. And almost all of them have a board of advisors. There are a couple who do, but they’re the exception.
David A Fields: So if you don’t have a board of advisors I wouldn’t feel like oh, my gosh, I’m missing something huge and vitally important, because I’ve seen firms go from, you know, zero to $25 and $50 million without any board of advisors.
David A Fields: I think the real reason for a board of advisors are folks who can make introductions. So the real purpose of the board of advisors is not just to give you strategic advice, which they possibly could. It’s to open doors for you. So they become people who understand your firm, who get your firm, who are not only being a part of your firm, but probably have connections inside the industry.
David A Fields: They can give feedback. They can give general advice. They might be able to give advice on industry trends also. But what they can really do is open doors, and those are the best advisory boards in my opinion.
Will Bachman: And how does that-
David A Fields: Which is quite different from perhaps what you were thinking in terms of well, what about the people that can just help me, tell me a better direction?
Will Bachman: No, that’s kind of was what I was thinking actually.
David A Fields: Okay.
Will Bachman: That was sort of… My intuition is that, you know, that’s the main reason that these boutique firms would do it.
David A Fields: Yeah.
Will Bachman: And have you… It sounds like you’ve… Most firms that you see don’t, but the few that you’ve worked with that do, how does that typically work? So you get someone relatively senior, you know, maybe it’s a former CEO or a former director of a consulting firm, like what’s in it for them? Are you giving them like a referral fee on the stuff or do they-
David A Fields: Yeah. So yeah, it can be… Usually you want someone with a big name, or I’ve seen it also work well, is you have on your board of advisors someone who is connected in a prominent way to a university, especially at a university where executives are going for continuing ed.
David A Fields: So I don’t care so much… No offense meant to my own sons, but I don’t care too much about kids who are in school from a professional standpoint. However, executives who are paying 30 grand to go to a one-week program at Harvard or who are going… You know, paying a large amount of money to go to the innovation program at Northwestern or something like, right, or Stanford, those folks are great prospects.
David A Fields: So having one of the professors who participates in that program on my board of advisors can be quite useful, right, because that can be a channel in. And what they get in return is… Sometimes they just like to help, believe it or not, but they can either get a stipend or they can get a referral fee.
David A Fields: Sometimes they’ll feel like that’s a conflict so they won’t want that. They might get a platform in some cases to test out their own ideas. So that university affiliation I’ve seen work really well. And as you said, sort of an industry star or standout or someone who is famous in their own right can be helpful for opening doors, and yeah, generally they’ll expect a piece.
Will Bachman: Okay. All right. What have you seen as kind of the range of typical referral fees?
David A Fields: Across the industry in general the most common referral fee for all the time seems to be 10%, 10% of first project. I’ve seen much higher. I’ve seen it lower. I’ve seen people try to base it on profit rather than revenue. Generally speaking, as long as… It’s usually just… The most common will be 10% for the first project they get with that client. If that first project is obviously just like a little diagnostic or a pilot that quickly leads to a follow on, we’ll give you a piece of the follow on also, but otherwise it’s just 10%.
David A Fields: Again, we’re assuming a normal project, gross margins 50%ish. If your gross margins are 10%, we can’t give you 10%, you know, but most of those arrangements are done, you know, you and me talking on the phone and you saying, “What do you think? Is 10% fair,” and I go, “Yeah, 10% is fair.” So I would actually tend to stay away from formal written stuff on that.
Will Bachman: Can I bounce another one off you David that you’re totally unprepared for?
David A Fields: Yeah. Sure. Yeah. Of course. That makes it fun.
Will Bachman: Let’s talk about gifts.
David A Fields: About gifts?
Will Bachman: Gifts. Yeah, gifts. Like gifts can really I think strengthen a relationship if they’re done really right, but they can also really be taken the wrong way and actually kind of alienate someone. Do you have any thoughts-
David A Fields: Can you give me examples of those?
Will Bachman: Yeah. I can give you an example. I mean one that stands in mind is once I spent an hour with someone like who was thinking about setting up their own independent consulting practice. You know, spent an hour of my time, and then they sent me an iTunes gift certificate for $10. It would have been much better off to just say thanks, you know?
Will Bachman: Like I mean it… I mean I understand the gesture in appreciation, but really it was like it would have been much better to send me like a thank you note and say, “I appreciated your advice,” than that, you know? So I mean that-
David A Fields: Do you think that it sort of implied some devaluation of your time though?
Will Bachman: You know, it’s like… You know, you wouldn’t tip… You know, if you tip a waiter like one penny, you know, it like says that was not very good service. Better to just not leave a tip at all.
David A Fields: Exactly.
Will Bachman: I mean my time might be worth more value to me than $10 an hour, so it just… It came across as like… Maybe just a little odd, right? And I wouldn’t have… I’m not saying that I would have been more appreciative if they sent me one worth $100, that would have just been weird as well.
Will Bachman: So I think it’s nice to receive a gift, like my friend Josh Dick at [Earnex 00:24:47], who is the president of Earnex, would send out… It was like this unique kind of small boutique bakery in New York City that makes these massive cookies, so he would… One year he would send out like Godiva chocolates, and like no clients responded to thank them.
Will Bachman: Then another year he spent less money sending out these like big honking, you know, one pound cookies, these massive fist sized cookies, and you’d only get like four or five of them in a box, but they were packaged nicely and it was kind of a unique thing, and he got like all these thank you notes for his gift.
David A Fields: Right. Right.
Will Bachman: So I think some things can come off well and some things can really rub people the wrong way. Just sending out swag or gifts, I was wondering if you have experience with maybe, you know, just seeing a lot of consulting firms, what some firms do that seems to works really well and what kind of gifts maybe just people ignore or don’t get any thanks at all.
David A Fields: So I’ll be able to speak more from personal experience than from firms, because most firms don’t do this at all, or if they do it they do it poorly.
David A Fields: The situation that you is actually quite funny. I mean… And I’m sorry that happened. What it’s showing is I suppose a lack of understanding and a lack of thinking right side up on many, many fronts. The… Sorry there’s a dinging in the background. All my alarms are going off.
David A Fields: What I would say about gifts, and this is something that you, yourself, do well Will, that you understand that a personal statement is more important than a transactional statement. A $10 iTunes card, unless during your conversations you were saying how much you really wanted to like get these couple of songs on iTunes or something like that, it’s just transactional. There’s nothing personal about it.
David A Fields: Interestingly, I think you can make a gift personal on either side, meaning all of my clients… When I sign a new client… This will be like a little incentive people to sign up as clients if you’re listening. All of my clients when they sign get a box of chocolate in the mail. Now that chocolate is local, it’s high end chocolate, and it’s nicely packaged, and it comes with a note from me that makes some humorous statement around it.
Will Bachman: On very nice stationery I might add.
David A Fields: Exactly right, on very nice stationery. Thanks to you, Will Bachman, for pointing out the right place to get that stationery.
Will Bachman: MOO.com. I love the correspondence cards on MOO.com. You sent me one a while ago that was very nicely done. Thank you.
David A Fields: Yeah. Well, I learned from you. I learn everything, right, from others, and that one directly from you. Getting chocolate, I almost always… Probably 95% of the time clients will give a reaction which is pretty positive. But it’s… A lot of my brand is tied up in chocolate and I talk about chocolate a lot because I eat a lot of chocolate and I receive a lot of chocolate from folks.
David A Fields: So if I talk to someone for a half an hour or an hour, rather than getting a $10 iTunes card they might send me a box of chocolate, and I don’t take it as wow, you really just… You know, that’s all you valued my time at, was a $15 box of chocolate or whatever it was? I think of it very much as that was thoughtful, because they know that’s what my brand is about.
David A Fields: So the gift can be about your own brand. If you have a strong brand that makes sense. But the gift also may be about the other person and making it a little bit more… Seeing it as more thoughtful is everything, right? I don’t think it was the $10 value on the iTunes card that alienated you. I think it was the lack of personalization.
Will Bachman: Oh, yeah. No, that’s right. I mean like I wasn’t expecting anything, right, so it wasn’t the dollar value. It was just weird. It was just, like I said, they just sort of dropped a $10 bill on the table, like here you go. It was just-
David A Fields: Right. Exactly, which is what they did in a manner of speaking, right? So there’s no personalization. So I think gifts work well when they’re not over the top by and large. I did receive $150 box of truffles once from France I think, and that was appreciated. It wasn’t necessary, but it was appreciated. But they don’t have to be large. In fact, I think that can sometimes go astray. They just need to be thoughtful, and if we’re being thoughtful in a gift I think that’s fine.
David A Fields: Then the other watch out, of course, is when you’re dealing with corporate people. Quite often you can get you and them into hot water by sending a gift. You do have to be quite aware of that.
Will Bachman: If it’s too valuable or whatever, like more than 10 bucks or 25 bucks or something.
David A Fields: Exactly. Exactly. So rather than sending a $10 gift card send them a nice note on MOO stationery. A handwritten thank you or a handwritten appreciation card goes miles. Or send what we call… We have… In side our client experience we do actually have a place where we try to do a gag gift. We’ve got one coming up for one of my clients who’s up in upstate New York, and I know he’s a big hockey person.
David A Fields: And so we’re probably going to send him… You know, we’ll just send him some hockey related paraphernalia. It’ll be a few bucks, it won’t matter, but I know it’s about him. He’ll get it that it’s about him.
Will Bachman: What about… I mean so it’s… If you’re doing something maybe at the holiday time it could be pretty hard… Impossible to do some customized thing. What about sending out company branded swag or something? Is there anything that you’ve seen kind of work actually pretty well, and things you would say avoid that?
David A Fields: Well, we send out chocolate, and that seems to work reasonably well. But I think it… You know, I don’t think it has a huge impact, to be honest. I think some people get so much swag, whether it’s branded or not. When you send out branded swag it’s obviously self-serving, so I don’t typically see that works terribly well.
David A Fields: Hopefully some listener will say here’s the exception, this is what I’ve seen. I would love to see that, but in general I haven’t seen branded swag do much.
Will Bachman: Okay. Cool. So, David, another great episode. Thanks for joining me. We talked about partnerships, we talked about advisory boards, we talked about gifts. It’s always great having you on the show.
David A Fields: Will, it is so much fun talking with you. I always learn when we’re doing this, and I hope that your listeners learned. It is just always a delight. It’s always fun.
Will Bachman: And let’s make sure we mention your website, Davidafields.com, where you can find… What? You can find your blog, which I love. Every Wednesday morning it’s the first thing I read. And links to your books, and what else can people find there?
David A Fields: Yeah. Well, I would say that the articles are there. You can get at least a little description on some of the ways I work with different consultants and consulting firms. And if you sign up, on occasion… On pretty rare occasions there are special things that happen, whether it’s an event or, you know, some sort of program that I’m offering.
David A Fields: But yeah, I would go for the content, or at least for the cartoons. They amuse me.
Will Bachman: People come for the content, they stay for the cartoons.
David A Fields: Exactly.
Will Bachman: All right. David, thanks a lot for joining.
David A Fields: Thanks so much Will.