Scaling: How to Build a $65M Recruiting Business That is Sellable, with Mike Kelly

0:00 Our GP per desk, including our research, is over $750,000. Wow, that's insane. You've grown and exited three businesses, and now you're growing Conexus. I want my salespeople and my recruiters spending all day long having real communications, building relationships. They should not be doing data entry.

0:19 They should not be doing Zoom Info. I can have other people do that at a lot lower cost and who are better and faster than these highly compensated, gifted individuals that are really good at building relationships. I'm gonna give some deals away to build them up. Everybody's gotta get fed. And when everyone gets fed, you end up getting fed significantly more and you start to build a brand.

0:38 Right. And you build loyalty and you build camaraderie and then you build velocity. And next thing you know, people feel in the mojo. They're working hard. They're drinking the Kool-Aid. But you have to stick to your playbook. Right. You don't cut corners. You're very transparent with everybody how things need to be done.

0:52 So you have to document what does success look like? What do you think is the trap that keeps most recruitment owners stuck in owning a job instead of a business? Fear. Fear of what? So. Mike, I know you trained as a CPA and you started out at Ernst & Young doing audits and SEC reporting. That's a very different world to running a recruitment firm.

1:14 What pulled you across? Well, you know, it's one of those interesting things. My whole family is big four CPAs, and so I had no idea what I wanted to do or anything. how to do it. But I did know I did not want to end up on my parents' couch after college. So I knew if I got my CPA, I'd be able to get a job.

1:35 Then I'd figure out what I wanted to be after that. So I kind of jumped into public accounting, knew very quickly it was a beautiful profession, but it wasn't necessarily what I wanted to do long term. And so at that point, I was kind of The group I was in within Ernst & Young, I was in the SEC reporting kind of pre-IPO group, which was a really fun group because you're working with very entrepreneurial companies that were rapidly growing like crazy.

2:05 And what happened after they went public, after doing that several times, I didn't really have nearly as much interest as back when they were small and growing and doubling and tripling each time. And I realized I really gravitated towards these guys and girls who, who were a little bit crazy, a lot of fun to hang out with, and were just growing like crazy.

2:24 Had beautiful vision and beautiful energy too. So that's kind of how I knew I wanted to do something more entrepreneurial, but I had no idea what that would be. All right, okay, interesting. And then, but recruiting, like, I get being attracted to entrepreneurship and wanting to start your own business.

2:41 So, but how'd you end up in this crazy profession? It's probably a common story. So I went to, I was reviewing, I was a senior auditor, manager auditor was reviewing cash, uh, for the gazillion time writing review notes for my team. And I'm like, I can't do this. This is like Groundhog's Day. So I applied to a couple of positions, controller roles.

3:02 And when I went to interview for the controller roles at Robert Half, after going on three or four interviews, I said, this is worse than public accounting as far as kind of Groundhog's Day. And I had a little bit of a mental breakdown going, oh, God, what do I do now? And they said, hey, Mike, we're starting this group at Robert Half called Management Resources.

3:19 This is way back when. And it's this project consultant. It's like being an audit partner without having to kind of sell your soul for 12 years to get there. You should give it a try. And Mark, it's one of those crazy things. I was coming off in busy seasons where I worked 36 weekends in a row. And I asked a couple of questions.

3:38 I said, how many weekends do you guys work a year? And they laughed at me. And they said, we don't work weekends. And they said, we'll pay you more than what you're making, Ernst & Young. You get your weekends back. And there's this thing called commission. And I'm like, and I was, I'm super fortunate, married with three kids and had one young kid.

3:56 So I thought I'd give it a try. Went to work with Robert Half, absolutely fell in love with the business. And the rest is kind of history from there. I never knew this whole recruiting thing really even existed. I never knew. I was kind of a big four snob. Never knew you could have so much fun in the workplace.

4:12 And that was just 28 years ago. All right. Amazing. And you've had quite an incredible journey since then. You've grown and exited three businesses, and now you're growing Conexus. You talk about taking a business from being a job to being an actual business. What is the difference in your definition?

4:34 And when did your first firm cross that line? You know, really for me, it was... kind of that whole, was it that, you know, thousand hour, 10,000 hour thing where I literally, when the first time I left, Rob Raff managed to start my own thing. I literally did everything. I mean, everything from, you know, interviewing, cold calling, meetings.

4:59 And then I was running a consulting side of the business. So our model was, my goal was always to have, way back when, to have at least 10 CPAs out on project for me at any given time. And then I closed one perm deal. The perm deal was my vacation money. The interim deal back then was my paid the bills, so to speak.

5:18 Yes. And so I did payroll. I did every single thing for the first five to six years. And I realized, OK, how do I scale this? The interim side of the business is incredibly beautiful. I know so many people talk about the direct hire of the business. The interim side of the business is a beautiful annuity that you can scale and really build a business around.

5:38 So by doing it by myself for so long, and then I started to attract people that were kind of seeing what I was doing and how I was scaling and how I was generating so much revenue as a one-person shop. Because then I said, okay, I'm not going to do payroll anymore. I'm not going to do invoicing. I can outsource that to a bookkeeper.

5:55 And then I said, okay, the recruiting piece, well, I still really love that, but how do I use my time more efficiently? How do I block time? And my highest and best use is interviewing people and being in front of clients. So then I brought in a really young cheap researcher to do kind of top of the funnel type of thing.

6:10 And all of a sudden I started realizing what's the highest and best use of my time. What do my clients and candidates appreciate more? What's the heart largest ROI of my time? And it just kind of built it from there. Then, you know, It's been a wild ride. Fantastic. So you've used that expression a few times, the highest and best use of my time or the highest ROI use of my time.

6:35 And that is such an important concept that a lot of people never really... take the time to work out like how much is my hourly rate based on say if you take your billings if you're a one person shop or your income if you're currently employed by another company divide by how many hours you're working per year you know that's your hourly rate so how could you buy back your time by delegating certain parts of what you do or certain parts of your business to somebody else at less than your hourly rate that would allow you to reinvest that time on those things that either you're really good at, as you say, your clients maybe value most, or that deliver a higher return.

7:27 And if we can keep replacing yourself in those different you know, areas, then you become more and more valuable and you start having a business instead of a job, right? Absolutely. It goes back to... Tell a quick story. So I was in public accounting. I worked tons of overtime, but I think I worked, say, 350 hours of overtime.

7:49 I was sitting with 12 other people at Ernst & Young. We're all in the same start group, and the girl next to me named Jill, 20 times smarter than me, better accountant, IQ through the roof, she worked 580 hours of overtime. And what I realized when we sat back and we got our annual raise, we sat next to each other, I got a 3% raise, and she got a 5% raise.

8:08 Yeah. And I believe like, oh my God, this world is not a meritocracy, right? She's 20 times smarter, works 30 times more than me. I'm like, I need to get into a profession that you truly values your skill set, values what you bring to the table. And also how do you spend your time in the areas? Because I got higher ratings than her because I used to chat with the clients 24 seven and really get involved where she was a significantly better accountant, but she was knee deep in journal entries and white papers and whole nine yards.

8:36 So maybe you start thinking about like, How do I get people like her working for me because she's 20 times smarter and I could be more in the sales and business development front? Net-net. We all – high tide lifts all those type of things. Yeah, yeah. No, definitely. So coming back to the idea of a job versus a business, in your mind, what is the – like what's the distinction and – You know, when do you feel like you actually finally had a proper business?

9:02 You told me like you hired the researcher. Well, let's start with the definition first. Like, what is the difference? Because a lot of people may believe that they've run a business when they're really just a self-employed recruiter, kind of like a plumber or a taxi driver. You know, you get paid money.

9:20 but you get paid for working, but if you don't work, you don't get paid. So I think really it's building business processes around everything you do. So not to be over an accountant, but it's building on a flow chart the client and candidate experience from very beginning to the end and breaking it down into very small tasks, finding out what you're really best at and what really generates the harsh ROI for your time and not outsourcing, but bringing people in that can do other things that you can do as good as you or better.

9:54 So for instance, right now, just to tell you fast forward. So this is my third company. We are, we're 65 million in revenue. We, um, 230 people as of this morning out doing project consulting work, MBA CPAs. Last year we did over 800 consulting projects and over 350 searches. I have 50 people, uh, working with me and each one of these guys and girls knows exactly what they're supposed to do when they're supposed to do it.

10:25 Where are they, are they in this process? And you start at one end and you can really know where you hand things off. What is it? What does good look like? What does great look like? What do I need to do to make sure the next person picks off what I leave off? And so it starts at the researcher on the recruiting side.

10:45 Then it goes to a full-blown recruiter. And then it goes through the presentation of the sales rep. The sales rep side, it starts with the researcher or marketer who's helping building a call list for you. And then it goes through the whole process. So everyone knows exactly what they're supposed to do.

10:59 We have super tight rules of engagement around marketing. Unfortunately, like how everything has to look. I'm a complete control freak, Mark. I'm a prima donna about everything has to be done consistently a certain way with a certain level of quality as a bare minimum. And because I'm an accountant, everything is documented 20 ways from straight.

11:17 We do references on everybody. We do background checks on everybody. We meet everybody, at least virtually. And we push everybody to try to admit, actually, this is old school, Mark, meet people for a cup of coffee. Love it. And it helps differentiate. So it's kind of, we mix the news school, the AI and all this other stuff to automate as much as you can.

11:40 But we also, in the day, this is a relationship business. Yeah, that is our that is our asset is relationships and a database. The database is only as good. We also to your point, the database is huge. So I have two people working for me all year round. And all they do is work on our database. So cleaning things up, updating things, making sure everything's current.

12:02 And the reason why, Mark, is that your database is living and breathing. Every single second people are moving and having things. So it's kind of like the Golden Gate Bridge. Once you start painting one end of it, by the time you get to the other end, you gotta start over again. Because I want my sales people and my recruiters spending all day long having real communications, building relationships.

12:22 They should not be doing data entry. They should not be doing Zoom info. I can have other people do that at a lot lower cost and who are better and faster than these highly compensated, gifted individuals that are really good at building relationships. So it goes kind of trying to get people to do what the highest and best use of every part of it.

12:42 If you take a look at the... gross profit. Now you got me excited. Gross profit for our desk, our desk, an average finance and accounting group does like 275 per desk. Our GP per desk, including our research is over $750,000. Wow, that's insane. Yeah. So that's your per desk average for all of your fee earners.

13:05 All of our fee owners, including researchers, exactly, pulling out, obviously, our accounting back office stuff. It was over $750,000 per desk. And I'm super excited about that. That's incredibly high. It is. It is. But also, once again, we do interim and direct hire. One of the things that people don't realize, and I've proven this out many times over, a good individual on the interim side of the world can work 40 hours a week and make 30% to 35% more in GP than a direct hire recruiter.

13:39 You can scale and add velocity so much better. And so that's, I think, one of the reasons why, because our revenue, 85% of our business is project consulting interim advisory. So that's really our main focus. We wake up every day, and we're an interim project consulting group that does very thoughtful direct hire searches.

14:00 75% of our business is retained or exclusive. Okay. Okay. I love the business model and we'll definitely talk about that as well, but I'd love to hear more about how you build companies. What do you think is the trap that keeps most recruitment owners stuck in owning a job instead of a business? Fear.

14:22 Fear of what? Fear of letting go. Fear of no one could do this as good as me. Fear of if we hit one bump in the cycle, will I be able to afford that guy or girl? Investing in them, committing to them, putting money aside and saying, hey, I'm going to make sure I have money to take care of this person in good times and bad.

14:45 And you have to make that commitment to them. And also you have to be okay. Hey, sometimes... I'm going to give some deals away to build them up. Hey, sometimes I'm going to get up a little control, little part of deal. So I keep them busy. Everybody's got to get fed. And when everyone gets fed, you end up getting fed significantly more and you start to build a brand, right?

15:04 And you build loyalty and you build camaraderie and then you build velocity. And next thing you know, you're, Everyone's working together and it's super exciting. People feel in the mojo. They're working hard. They're drinking the Kool-Aid and it's, it's, I don't get me all excited, but it's really, really fun.

15:20 It's empowering to see people, but you have to stick to your playbook, right? You don't cut corners. They enough, you know, so you have to document what does success look like? So it's very clear. You're very transparent with everybody, how things need to be done. You're not cutting corners and occasionally I have to put my auditor hat on.

15:37 I do a lot of different things, but occasionally I put on my internal audit ad on, make sure, hey, how are things going? Are we skipping a course? Are references done here? Are you documenting things? Things of that nature. So just to enforce what we do. I love it. So there's a couple of things that occur to me as you're talking here, Mike.

15:54 One is... Your business model of being 75% contract interim lends itself to more scalability because you have that forecastable revenue. You know roughly what you're going to be billing over the next few months. So it's not as scary to hire someone who's maybe not going to bill for two or three months, right?

16:20 Because... or you don't think we're one bad quarter away from having to let people go, right? You've got that, it feels more secure. Is that fair? It feels very secure, but today, but it didn't start that way, Mark. You know, when we started the business, I started this business with two guys and girls that I worked with before, and they were really good.

16:47 They've seen that I've done this two times before, And I knew how good they were. And we said, okay, we're all going to write a check. And this check is to fund the team, not to fund the business. We're not taking a paycheck for a significant period of time until we feel comfortable. And so my point is, it was writing that money up front.

17:06 And the money was to fund the business, not to fund you, right? And to build out the team and build things out. And then I would say, whatever number you think it's going to be, times a times two, right? Okay. And then, you know, we didn't get paid for nine months. But we were okay because we were building up AR, building up cash flow, hiring another really good person.

17:26 And then it becomes, to your point, self-sustaining, if that makes sense, Mark. But the first six to nine months, it's heads down. You're freaking out. Your spouses are going, are you really sure about this? Come on. But it also builds an enormous amount of camaraderie. Every single win is so exciting, right?

17:44 Every single person you can come on. When people come interview with us at the beginning, they're like, you guys are crazy. I want to do what you're doing because you're so focused on winning. You're so focused on David versus Goliath. And I think we were able to attract some really good talent very early on by our success in the past, but also our focus, our discipline.

18:07 And our just commitment to the business, we are not going to lose. I want to dive into that, like the culture and the sort of environment that you've built and how we get people to 750 average GP per desk. But first, there's a second piece that I think is really powerful that you mentioned, which is.

18:28 The fear that people have about scaling is they don't want to give up control. But you have overcome that because you have very strong processes and high standards that you're able to make sure that as you scale, you maintain and even continue improving the quality, right? Yes, sir. Yes, sir. Back to that goofy story I told you, I'm consistently hiring jills from Ernst & Young at different parts of the business.

19:00 Yeah. And they make me stronger and I make them stronger. And you put the Jills together. It's an amazingly powerful elite group of people. Let's talk about this process then. Could you explain like how you've broken things down and you have different people in different roles and they hand off at certain points.

19:19 Could you walk me through how that works? Because it sounds like you've built a machine. Very much so. So, yeah. There is, you know, from the recruiting perspective, so first of all, we have people doing updating through LinkedIn, Zoom Info, and every other AI tool known to man, updating records. And the records we update on the candidate side, we start with everyone who we've labeled an A player.

19:43 So we label it A, A minus B, and those are the ones we want to keep track of because those are fee-worthy people, right? We want to know exactly where they are, whole nine yards. So we're constantly making sure... Our researchers are also consistently looking for CPAs. If you take a look at what we place, 85% of the candidates we place are CPAs, right?

20:01 So that's our strike zone. We have an extremely disciplined strike zone, and that's what it starts with. The biggest problem I see with so many firms is they're all things, they're all people, they're generalists. At the end of the day, what we said is within the office of the CFO, the area we focus in, Where's the friction?

20:19 Where are clients, where do they feel the most need and the hardest thing to find? Big four CPAs or CPAs in general. So we try to own the CPA market. The other 15% roughly of what we place our MBAs, right? So the average guy or girl we work with on a consulting basis, you know, is making 150 to $300,000 a year, whether we are in direct hire or consulting basis.

20:44 So that's our strike zone. And so what I tell my team is, I wanna own that. Every single CPA, They need to know our name, either from a client perspective or a candidate perspective. Treat them with amazing amounts of respect and build that brand because today's candidates, tomorrow's client. Tomorrow's client, 100%.

21:01 And then we get that flywheel going back and forth. And so not only does our interim team and our direct hire team cross sell like crazy. If you take a look at the GP per desk, 37% of the gross profit a guy or girl makes is through cross selling. And when I say cross selling, that's not going, oh, you're placing CPAs.

21:20 go play go go refer in a light industrial no you're placing cpas on an interim basis and your client calls you and says i have a direct hire need you introduce them to the direct hire group you get paid or you interview a great candidate on an interim basis and he goes mike my company just got bought by private equity i'm not working right now but I do, I'm open to consulting, but I also, you know, if a great direct hire opportunity comes along, then you do direct.

21:45 So there's an amazing amount. And what happens, we really take care of the client. The groups do not fight against each other. It is one team. We take care of it, make sure the experience on the client and the candidate side is seamless behind the scenes. Everyone, you know, has, it gets paid, but the feeling is very, very united and congenial, if that makes sense.

22:04 And I'm very fortunate. Half the, Half of the folks I have working with me have an accounting and finance background or a CPA background. So they're able to speak to these guys and girls at a very high level. Been there, done that type of thing. So I guess my point is focusing on our strike zone in our niche and owning that niche, which is a very lucrative niche, where supply and demand are way out of whack.

22:25 It creates opportunity. And it's been very resilient. You know, have things slowed down here and there? Absolutely. But the office of the CFO is incredibly resilient. incredibly short on talent. And you have 75% of CPAs retiring in the next 10 years. Think about that dynamic. And the demands in the office of CF, everyone's like, oh, AI.

22:45 AI is just another tool. At the manager level and above, we're 28% above where we were last year. Wow, that's phenomenal growth. And this growth is just coming from our current desks. So it's more yield per desk, if that makes sense. You start to describe the recruiting team and starts with, you've got researchers who are constantly mapping the market, finding those big four CPAs, updating, tracking where they are.

23:18 What happens after that? So then the research was handed off to the screeners, so to speak. The screeners are constantly reaching out to these guys and girls and saying, I have this opportunity. I'd like to get to know you. and setting up meetings. And they're setting up meetings for my recruiters. My recruiters are the guys and girls that step in and build an enormous amount of relationships.

23:38 They're in charge of really digging deep, building a great rapport, making you, you know, talking about all this stuff we have going on, hopefully finding a reason to go get a cup of coffee with you, right? And representing you, you're representing you through this entire journey. One of the biggest things people don't realize is that when you're looking for a job, you're very vulnerable, right?

23:59 You're very uncomfortable. I want you to come to us and say, these guys and girls are experts in my area. They know exactly what I'm going through. They know the market and we can truly be advisors. The name of our business is Connectors Advisors. The reason why is because we really want to be advocates of what the client and the client side, that we're experts in what we do.

24:21 and that it's a long-term relationship. We're not going anywhere. If we can help you directly today, great. If we can help you, we help so many people negotiate their employment contracts that we don't even place. Hey, Mike, this is a good raise. This is the right amount of stock for what I'm doing, stuff like that.

24:38 And it turns into a beautiful long-term relationship. And so then we go through the recruiting process and then The recruiter basically presents this candidate to, i.e. the sales rep or the client executive, so to speak, and represents them through the entire process all the way through offer. Got it.

24:54 So it's very much a split desk model where you've got the candidate side and the client side. Obviously, they have to work closely together. What does the process look like on the client side of the desk? Client side. So once again, we have kind of the researchers help building out. By the way, is it the same researchers building both the client and the candidate lists?

25:20 No, separate. Okay. Because they have to think differently. The attention to detail you need to have on each one of them is different. Please understand these researchers are young kids who are super bright, who are right out of college, who want to get into recruiting. And this is kind of the first step for them to kind of understand the process.

25:38 And they work themselves up. So they're building out, cleaning up the database. They're helping build call lists together for different searches we're on, things of that nature. They're updating, you know, is the company public, is it private? What industry is it in? What ERP package is? What's their technology stack?

25:57 Things of that nature. And then each one of our sales reps or cloud executives, you know, they have 200 companies that they are accounted are in charge of. And their job is basically to be out in front of every one of these clients, letting them know the talent we have available, letting them know what we could do on a project consulting interview, staying in contact with these guys and girls.

26:18 So we do, I think 62% of our revenue comes from private equity portfolio companies. We do tons of private equity work. And that's this building more and more in that area. And once they use you and you do really good work for them, they're pretty good sized snobs, which is okay. But then they'll use you over and over again.

26:36 But you have to deliver quality consistently. And you do that by understanding their needs, understanding what they like, what they don't like, what their preferences and things of that nature. So the sales reps are working with their private equity groups and then their Fortune 1000 clients. And really take a look at most of our clients.

26:52 We're really middle market organizations. Our client base is 200 in revenue to a billion dollars of revenue. That's where we love to play. That's where I think we add tons of value. You're up above the mom and pops who don't want to pay a fee. And by 200 million, you're serious about accounting because you kind of have to be.

27:10 But under a billion, you don't have enormous amounts of TA groups. You're fighting against the whole nine yards. And usually these groups are growing quite rapidly. And most importantly, we can get access to line managers, decision makers. Yes. We very rarely ever, we do anything and everything we can to avoid HR.

27:30 I wanna talk about that, but just one quick question, Mike, you've mentioned things like going for coffee and you wanna be known by every single client and candidate. So are you, is this a local business? Like what's the geography that you're working in? So, so great question. Originally, we were in Southern California, so San Diego, Orange County, two offices in LA.

27:53 We took a 75% investment from a great private equity called Mid-Ocean Capital. They're focused in the human capital area. And we said, we want to grow this thing organically. We took that about 18 months ago. Nine months ago, I started this journey of us opening up office organically. And in the last nine months, we've opened up five offices, Connecticut, New York, Florida, Chicago, Salt Lake City, and most recently, San Francisco.

28:23 So now my job, Mark, is I had to give up my book for the first time in 28 years, and focus specifically on replicating everything we're talking about in these five new markets. And so it's like having five startups or five children, each, you know, having a different path, a different background, different market.

28:49 all this stuff that I learned and put together and made a lot of mistakes over the years in Southern California and testing it in new markets. And it's been, it's been a wild ride so far. All right. Wow. So you must be on the road a lot. I just got back from San Francisco yesterday. Yeah. So I spent one week in the market with my team in Southern California.

29:09 And then I spent a week on the road at one of the offices. And I call it windshield management, meaning that I just got back from San Francisco, spent three days there and went on 12 meetings and meeting with clients, meeting with prospects, meeting with private equity groups and then meeting with potentially internal hires and just hearing how the story goes.

29:32 You can't learn sitting you know, sitting in an office, you got to get out in front of clients, tell the story, you know what I mean? And feel the passion, get the feedback. Why should I go with you versus so-and-so? What makes you so special? I'm really happy with my current recruiting team. Why should, you know what I mean?

29:47 And it's really, it's exciting to do. And that's usually where I spend my time. And then when I'm in Southern California, I go from office to office and they let me stay for about a day. And then they say, Oh man, Kelly, it was good to see you. I'm glad you bought us lunch. Go back, go away. Cause I'm always going, Hey, we could have done something here.

30:05 I try to be poly, but I'm always critiquing how we could do things a little bit better, if that makes sense. So I want to talk about how you bypass HR in a second. But first of all, I just want to really nail down this business model and how you have this seamless handoff between team members so that from the client account experience point of view and the quality point of view, everything is dialed in.

30:30 Because I think the split desk has a lot of advantages in terms of, Everyone's a specialist and they are able to focus a hundred percent of their time on, on one particular area or a limited range of, of activities. And they're not like constantly juggling and, um, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're not, they're

30:49 The potential downside is communication is like with a 360 model, the person knows everything about the client and the candidate. There's no communication like barrier, right? And so how do you manage that in your firm? So there's very clear lines where each person knows where they're responsible, but also nothing gets missed.

31:11 I'll tell you that some things we do is before I, Mark, if you're going to go out for a role, Before you went out for that role, the client executive sales rep meets with you before and personally preps you. So they get to know you and they'll spend probably 30 minutes just talking about the role, role playing with you questions, telling you all those little things that so that you could set you up for success.

31:34 So they build that rapport. Then they also confirm some things. Hey, this, you know, comps is what you're looking for. So they feel comfortable that they can speak to the client on your behalf. taking the time to prep a candidate before they go out is everything. It's a quality control. It helps you potentially handle objections later.

31:53 It helps you lean in when you need to lean in on the client in the right areas. And also makes the client go like, hey, this guy or girl, knows it's part of the entire process. So there is challenges. You have to take that extra step to prep somebody before. By the way, it significantly enhances their chances of having a good interview.

32:12 So in your firm, that's done by the account exec rather than the recruiter. Yes, sir. because they know the client better, presumably. But the other advantage, which makes sense, is they're getting to know the candidate early. They're not just coming at the end to close the deal, right? So, which can feel a bit weird if I've never spoken to this person before.

32:32 Why am I talking to this person? So, they're starting to build a relationship. So, the candidate knows both their recruiter and the account exec. Exactly. And the recruiter's a really good job, but sometimes... A couple of people have gone out before you go out and I can give you real life feedback on, boy, we thought X, but this is a couple of questions.

32:51 They're going to specifically ask. Let's role play it together, right? I'm really huge. I'm role play. Let's go through, how would you ask this question? Right? Cause these people are not professionals. They're accountants and what's in their head. Doesn't always come out of their mouth that way. So we'll really go over the questions live and you become their advocate.

33:06 You become their cheerleader. You get them fired up. They're ready to go. They see the opportunity and you know, it really helps them feel like once again, you're, You're an advisor. You're an advocate, Mark. You care about their journey. You care about their journey. You want them to show well, right?

33:21 You want to support them. And so it works out really well. Your concern is a very valid one, but that's why our GP predestas is significant more than anyone else in the business. So what else goes into that GP per desk then? Why do you feel that you're above the industry average by such a large gap? A couple of things.

33:45 One is I think it's discipline, focus on the strike zone, knowing your role and sticking to it. Really focusing on quality clients and quality candidates. I can't tell you how many... organizations are working contingents desks where they're one of three or four people on an order. Once again, 75% of what we do is retained or exclusive.

34:07 If I'm gonna work with you and I'm gonna have to compete, I'll say, Mark, listen, you know we're really good in this area. I'm willing to work on this one role for you. but I'm going to match and move on. But I'm able to match and move on at a very high level because this is what we do all day. I think you'll see the quality of our cancer is significantly better than what's out there.

34:25 Otherwise, why would you have four people on this? But after this, I'm going to want to be your first call. But I'm going to earn it today And I want you to understand it. So I want them to, I take what I do very seriously. I do not like to work for free. I'm an accountant by nature, right? And, but building that rapport and then really making sure we send over one or two candidates and they're perfect to what we do, but you have to be a good company.

34:46 I need to take care of my candidates as well. If you're working with B or C companies, you can't attract the best talent, whether it be comp or opportunity and things of that nature. So this is making sure you're mirroring everything, everything the right way, if that makes sense. Yeah, you just gave a really nice little nugget there, which is you're selling the exclusivity on the next engagement in advance, which is a nice touch.

35:11 I've not heard that very often. So on the rare occasion, when you do take a contingent search, you're already paving the way for the next one being exclusive. Absolutely. I'm only taking on that role too, where I've got, They're looking for a big four CPA. This is what I do all day long. So it's team match and move on, send over to your best people, and then let's keep going.

35:39 So really just take us any extra time. We're still focused within this area, if that makes sense. You said focus on the strike zone, only work with quality clients and quality candidates. You said discipline. What do you mean by that? It's so easy to take on work that isn't in your strike zone. A client calls you and says, Mike, you're the best ever at XYZ PDQ.

36:02 I need something else. You'll be the only guy or girl on it. Can you do it? And the answer is no, but it's so hard to say no, right? Because you don't want, you don't want to let someone else in. You're right. So it's really hard staying focused on that strike zone in the short term. It's very painful, but in the longterm, you really will get a velocity if you pick the right niche.

36:23 Now accounting and finance, you know, it's a pretty broad niche. It's, it's a big one, but if you focus in your niche, you can scale, you can build a name, you build a brand around that. And clients, actually respect you when you say, listen, I would love to help you with whatever, but that's not really our highest and biggest use of what we do.

36:40 And we don't do that every day. Let me refer you to so-and-so. All right. I like it. So when you say discipline, you're not talking about time management. You're talking about discipline around staying in that strike zone and focusing on what you guys do best rather than getting distracted and diluting your ability to to be the best at what you do?

37:03 Twofold, Mark. So yes, but also beneath that layer of discipline strikes on, there's an enormous amount of metrics that we run the business by that keep you really, really focused on where you're spending your time. Let's talk about that. What are the critical metrics for you? Well, some of the basic things, if 85% of the people we place are CPAs, why would my recruiting team be recruiting anything less than 85% of people they meet should be CPAs.

37:32 So, you know, early recruiters will come in and like, Mike, we did 40 interviews this month. Great, great. Let's take a look at them. And they're all not fee worthy or they're not CPAs. So you're recruiting people under the accounting umbrella, but that's not what my clients are paying for. So you get to pat yourself on the back and you get this quote unquote macro metric.

37:50 But the quality of what you're bringing in isn't fee worthy. So really focusing on, am I spending my time on where the burn is for my client, where they really feel that I'm doing stuff that they can't do? Are these, you know, are these people that they can get on their own? Or am I really finding that person?

38:06 No, it takes longer. It's harder. But you end up generating a lot more fee worthiness from these candidates. So that type of discipline. Fantastic. Yeah, makes total sense. What about the measurables? What are the metrics that you're running that your desk's by? We have a lot, but there's very few we measure by because a few things.

38:28 So on the candidate side, it's once again – on the recruiting side, how many interviews did you have and how many of them fit within our strike zone? Okay. Second thing is... Now, these are internal interviews. These are client interviews. I'm sorry. We start with internal. What are you bringing into the pool?

38:44 So we, on average, we interview over 100 CPAs a month. And then the second thing is, okay, how many of these people did you submit on open job orders, right? Which is obvious because if you want to make sure what you're recruiting in matches the job orders. Next thing is... Typical. On how many people you submitted, how many people got sendouts?

39:04 And then from sendouts to close. So your submittal to sendout ratio, right, should be, your interview to submittal ratio should be 70%. Your submittal to sendout ratio should be 70%. And then your send out ratio to close deal should be at least 25%. And then on the sales rep side, we can flip over to that.

39:26 I could tell you on the sales side. Yeah, let's do that. Sure. So on the sales side, you should be bringing in at least five deals a month. On those five deals you bring in, you should be closing three. Right. And then also taking a look at how many client meetings did you have? How many, how many new clients did you bring in?

39:46 How many job orders did you bring in? Also, how many people did you get in front of? I track how many on your target list. Great. How many in-person meetings did you get with AB so that you really have built relationship with those clients? So really tracking the activity. And then macro, this sounds crazy, but everyone, this is going to blow your mind a little bit.

40:04 Maybe it feels like micromanaging. We have a call report, Mark, that goes out to everybody in the firm every single day at seven o'clock. And it tracks- 7 a.m.? 7 p.m. 7 p.m., okay. And it tracks how many calls everybody, it's a scoreboard every day. Because what happens if you think about this, bad metaphor, if you go to the gym and you're doing bench press and you're not counting the number, how do you know whether you did 10 or 20?

40:29 How do you measure your success for the day? So when you're on your call days, you really want to say, hey, did- Did I come in focused? Did I have a call list of 50 people I wanted to call? And if I didn't, why didn't I get there? So it really gives you kind of a macro perspective to look at yourself and say, did I have a good day of production?

40:46 Did I show up ready and engaged in the process? Now, some days you're out meeting clients, some days you're in interviews, but you also have your call days, right? So our goal for our team is 500 outbound calls for everybody a month. And if you didn't hit the 500, okay, well, I spent so much time doing interviews.

41:04 I spent so much time out in front of clients and stuff like that. So that's kind of one of the metrics we kind of use. But as you know, you've got to call a lot of people until you get someone on the phone who's really good. You know what I mean? So it just shows a certain level of activity and focus, if that makes sense.

41:18 Yes. Can I clarify, what counts as a call? Is that an attempt? Is that a connect? Is that a conversation? Is a voicemail count? What's the definition? So absolutely an attempt. But boy, this is the difference. Every single, let me define an attempt, because in recruiting, everyone plays so many games.

41:36 An attempt always is the same thing for us. You're picking up the phone and you're leaving a message about a candidate. So we're very MPC driven or about an opportunity. calling and hanging up or not leaving. And then also after every single quote, quote, attempt, there has to be a followup email, very obvious stuff, describing the person, describing the opportunity.

41:59 Right. And then also what we've seen enormous amount of our folks do, do really successfully. Sometimes they won't do the email. They'll follow up with a text. Right. And we've seen the text be dramatically effective. Just on the text. Yeah. Is that through your ATS or is it they're individually sending it from their own phone?

42:23 No, everything is automated. So we run Crelate and then we run RingCentral, which is fully integrated to the process. The great thing is... You're on a headset looking like me, looking goofy, but everything's fully integrated and documented. So you can do like four things at once, if that makes sense.

42:39 Perfect. And so are they clicking to dial and it's this dialing through the through the system and then, so with RingCentral, I'm going to get a little bit nerdy here, but with the texting, I've had clients tell me that they've run into challenges because, um, You know, legally RingCentral is very cautious about what they allow you to do and what they don't.

43:05 Like if this person hasn't opted in to receive, you know, promotional texts or whatever, how do you navigate that? We haven't come across that. We obviously are super respectful if anyone ever opts out of emails or calls or things of that nature. And we follow that religiously. But on a texting perspective, we have not come across that.

43:23 Okay, good. So you're using that on both the client and the candidate side? Yes. Yes. Okay. But the one thing I want to say, Mark, is that I am calling you and having a personal conversation with you or leaving a very personal. And then I'm following with a very personal text. Okay. Yes. We are not doing this crazy spamming thing where you send out 8,000 texts and that type of thing.

43:46 So I want to be very clear. So it's not a broadcast. It's an individual text. Everything's personalized. How do you build a relationship with someone if you're not, you know, I mean, in this today world of spamming across everything. And that's how you build the brand. You know, we reach the market, every candidate, every client, we're going to touch you 12 times a year.

44:04 So you're going to know who we are, if that makes sense. And then we're waiting for either we're going to build a relationship or waiting for you to have a bad day at a job or waiting for your controller to leave you or waiting for you to go public or waiting for you to do an ERP implementation. It's like, oh, I remember those guys.

44:18 They talked to me. I mean, so we're constantly marketing in that way. When you say 12 touches, does the call and the text count as one touch or two? One. Oh, that's only one? Even though it's two different... Channels, but it's happening at the same time. It's part of the same attempt. Yes, sir. Yes, sir.

44:37 Got it. Okay. Makes sense. So 500, I'm getting really detailed here, Mike, because you've, what you've built is extraordinary and I'm trying to sort of dissect it to figure out what are the factors that are contributing to the success here. So 500 outbound per month is like 125 a week. So that's like...

44:58 25 a day. Do you use like multi-dialers so people can make more than one phone call at a time? No, sir. Nope. So they've got a list prepared. The only way you could do that is you're planned in advance, right? So they have your list of 50 people or whatever. And are they using a dialer so it rings and then they leave a message and then it dials the next one?

45:20 Yes. Okay. And are they pre-recording a voicemail that just drops if they don't get through? Or are they leaving a custom message for each person? Leaving a custom message. And Mark, I would love for that to work. The guys and girls that we're speaking with, are buried in the belly of the whale in the office of CFO.

45:43 They're already kind of introverted people and they're being, they're CPAs and they're used to a certain level of customer service. The second they feel that you're spamming them and it's not intimate, you're blacklisted. You know what I mean? So really giving them that, Mark, I thought specifically of you today.

46:02 And the reason why I'm calling you is because of, you know, and then insert, whatever it might be. Okay, that's very interesting. So, Coming back to the main question that we kind of, we took a wild tangent, but that was interesting. So the question was, how do we build a business where the average GP per desk is 750?

46:25 And we've got focus on the strike zone, discipline, working only with quality clients and candidates. And then you've got a formula around metrics that you're following for both roles, whether it's the sales side or it's the recruiting side. Are there any other kind of key factors that you feel are, have been critical to like making that a success?

46:49 So one of the things I would think it's worth mentioning as well, is if you take a look at the guys and girls that we're super fortunate to have on our team, what I hear from them is they, they are coming from our top competitors and they come on board and they're And their GP within 18 months goes up over 150%.

47:11 Wow. And so I say, guys, that's a great thing, right? Because it's real. Yeah. Sometimes a lot more than that, to be honest with you. And I said, why do you guys think it is? And because the focus, the discipline, and we block out the noise. So there's so much noise that goes on in recruiting when you're not focused on a strike zone.

47:30 There's so much noise in recruiting when you're not, you didn't plan out your day. There's so many distractions. I try to eliminate all distractions, such as having to do research, having to update a database, all these different things, and knowing exactly what you're doing over and over again and being really, really good at it.

47:49 And everything else, I'm trying to support them. So if you want to come work with us, I'm going to help you. I'm going to coach you. I'm going to do everything you can. But I'm going to build this platform, or you're going to be part of this platform, which is going to push you to do what you do best and what you enjoy most.

48:05 and pushing everything else down. And so that's what's exciting part. You're spending so much time in front of clients. You're spending so much time in front of good candidates and you're doing so many deals and every recruiter loves to do deals, right? Of course, yeah. That's like the high that you get, right?

48:19 That's why we do it. And they're working with clients they never could have gotten into before because rather than doing seven things, they're really good at three and they're part of a team that's really good at three. So then it just becomes self-perpetuating and these guys and girls have been phenomenal and they're the reason, I coach, I train, but between my partners who run the practice now and the people that we're bringing in to build it, it's a snowball that's growing more and more speed.

48:46 It's really exciting. And then they're training other people they're bringing in, right? So it's really fun, great culture, wonderful group of people. Mike, you've scaled and sold a couple of businesses already. What makes a recruitment firm sellable? Everything we just spoke about. A culture, a management team that knows how to scale, a management team that can stay true to their business model and stay focused on their business model.

49:13 A management team that's not afraid of growth, right? A management team that can replace itself. I mean, I'm out here starting these new stuff, but like this business can run without me. So I have such great partners, such great lieutenants. They're drinking the Kool-Aid. They're making it better. They're coming to me with ideas on how we can improve things.

49:32 So the great news is the current business is just going to grow on its own. And I'm not here with these startups, hopefully trying to replicate the success we've had in the past, but I can do that because I have such great partners behind the scene. executing every day with these teams. And we're just fired up.

49:48 We like to win, you know? Well, okay, let's talk about that because I think the culture that you've built is part of the, like the DNA of your business is part of the success. So what's it like to, you know, if I walked into your office, what's it like to work there? It's like being on Wall Street, the old school Wall Street.

50:11 Okay. Everyone's on headphones. Everyone's, I got, you know, it's very, very, it's a bullpen. I don't have an office. Nobody has an office. We're all in a bullpen environment so we can communicate so we can lead by example. Right. And we can hear each other's conversations. It's seamless. I don't know how recruiting guys and girls sit in an office all day.

50:31 You're so disconnected to what's going on. Right. It's very energetic. It's aggressive. It's aggressive and it's energetic. And when you're on, you're on. There's not a lot of water cooler talk. People are walking around with headsets, having coffee. Some people are in conference rooms trying to close deals.

50:54 People are running people in the interview rooms saying, you got to meet this guy or this girl. They're so good. They're perfect for your client, right? It's a little bit frantic, but I love it. Are you guys in office or do people work from home ever? How does that work? Three days a week in office is what we shoot for.

51:11 Is it the same days for everyone? Tuesday, Wednesday, Thursday, we ask you to be in the office. Wednesday, we buy you lunch. We understand you have client meetings, you have interviews, because we do things in person so much that you may only be half day. But having that chance, Mark, for you and I to talk about a candidate or to work together or make calls, It just reminds you why you're there and it gives you energy.

51:35 Working by yourself, it's really, really difficult, I've always found, to bring that game, bring that energy and stay focused, if that makes sense. So you've said one of the keys is you have that senior leadership team who essentially means that whether you're there or not, the business is going to continue performing and even growing.

51:58 How have you built that team? When I started, so real quick, I started one firm and I sold that firm to Tatum CFO. I started a second firm and I sold that to Addison Group. Then I started a, I had to sit out for two years because I'd come out to compete. And I started a cloud accounting firm, grew at the largest Southern California.

52:19 And I sold that to Ide Bailey, a large CPA firm. Then I started Connexus. And originally when I started Connexus, it was like, I love people. I love accounting, love the office of CFO. And I had learned that. between working with Tatum about private equity. When I worked with Beacon, I learned a lot about advisory, consulting.

52:43 And then when I started Tactical Cloud, I learned this beautiful thing called cloud accounting. Not to geek out on you, but it's such a huge part of accounting nowadays and so many business processes and issues. So really... For me, Conexus is really bringing all that together, private equity, advisory consulting, advisory relationships, and also the use of technology.

53:03 So when we parachute one of our CPAs in to a client, because they call us on a Friday, and 72 hours later, I have someone parachuting or three people for the candidate to meet, and then they parachute in directly. It's like, perfect example, client will call and say, Mike, we have a $100 million SaaS-based company.

53:21 We can't get the reporting out. I need a big four CPA to come in with revenue recognition skills who preferably has a SaaS background and also has implemented NetSuite. I got 20 of those people, right? So my point is we're very specific, very prescriptive. Our average consulting project is four months.

53:41 Our average consulting project goes nine months. They say it's four, but once we get out there – Okay. I was going to say four months is – Not as long as you'd like it to be. You want it six months plus, right? Because they think they have X issue. But once we get in, we realize, hey, guys, you have systems issues, not just business process issues, which affect your technical issues.

54:00 So let's fix all that. Then we train your team on how to use the system, how to use NetSuite, how to do RevRec, all the stuff, and then we parachute out. So the value, the operational advisory, the value we bring, is immense because we have all the technical background, the systems background, and the industry experience.

54:18 So those are kind of three legs of the stool. And that's where I think our secret sauce is and how we differentiate. But I need world-class recruiting team to find these guys and girls because these guys and girls, they could go work anywhere at any time. So we really need to make sure that we take care of them, we give them great projects, and they're working with guys and girls that appreciate what they do and understand what they do.

54:39 That all makes sense. But then how are you developing your leaders of the future so that you have that succession planning and you are replacing yourselves within the business? It's a lot of work at the beginning. Because, so real quick, we do, I do, monthly coaching coaching. with everybody. Now, it's not as much as you used to.

55:01 It used to be literally every single person in the firm would sit down with me at the end of the month in person and go over your monthly goals. What'd you do, Ryan? You can't do that with 50 people though, right? No, no, no. I still have 10. 10. But the rest of them now, the lieutenants are doing monthly metric meetings with each individual person, giving them coaching goals.

55:21 How were your goals? What'd you hit? What'd you didn't hit? Let's role play. What can we do different? And really investing in that guy and that girl over and over again, based off the playbook myself and my partners put together, which is very prescriptive. And over a period of time, it really becomes part of your DNA.

55:37 How do you judge how you're doing? How are you doing things? And then all of a sudden the lieutenant, they own it now. And they're driving it down at the desk level. And the partners are overseeing the lieutenants, right? And then they're also parachuting in at desk level to help people out who are struggling, handling difficult conversations that always pop up.

55:56 And so, you know, it's a very lateral team as far as everyone helps each other out, if that makes sense. And then I come in. And right now I'm helping the five startups, but I still do a bunch of metrics review with my lieutenants to see how their teams are doing, if that makes sense. It does, but you're describing something that is almost a finished article.

56:16 Like if you think back to when you were scaling your first firm, how are you replacing yourself at a management level there? Because you've got a couple of things I've seen. One is, um, reluctance from the owner to, you said, let go and sort of give up the reins a little bit, but then there's can also be reluctance from the team member.

56:42 Like maybe they're, if they're going to take on board more leadership responsibility, then that means they're, like that's going to take away potentially from what they're doing at running a book of business. And so that's not for everybody either because they're like the person running desk might actually make more than the manager in some cases.

57:05 How do you orchestrate this so that you're building an organization rather than just have a bunch of individual contributors? So the guys and girls that are top performers are rarely the best managers. I totally agree with you, Mark. So our lieutenants run a team of five to six people, right? Okay. They get an override on that team.

57:26 Okay. So they are financially incentivized to do that. And we're not talking like at Robert Half. It's like you manage a team of 12, you get like $30,000. Right. I mean, if you break it down an hourly rate and the stress you have to go over in the coaching, these guys get a material override. So they have a vested interest in taking care.

57:45 The more these individuals bill, the more the override they get. Also, there's an enormous amount of pride. If you're a market leader, that's a big deal in our firm. And not only this is going to be crazy, these people have equity. So once you get to a certain point and you get brought up to a certain level, you're getting – you have a vested interest in the override.

58:10 Second of all, you have a vested interest in the mothership. So that – Got it. Think of like a stock option plan. So everybody really is thinking the same way and they're thinking like business owners, right? So – It's not for everybody. I have promoted top producers where it didn't work out. And they decided to, but they said, you know what, Mike?

58:30 Thank you so much for giving this opportunity. I just want to go back and run a desk, which is great. And they're still with us and they're doing great. But they also respect the management team so much more. Boy, it's really hard to be a player coach. It's very hard to find those folks. Certain level of maturity, a lot of EQ.

58:47 And most importantly, you got to check your ego, man. You got to, it's so humbling. Absolutely. What is the career ladder look like then at Conexus Advisory? What's like, you mentioned you bring people in from university and they start as a researcher, assuming that they have the right mindset, the right attitude and they work hard.

59:07 Where can they go from there? So they come in as a researcher and then they go, once they prove themselves to a recruiter. And then from a recruiter, They can go from a full-blown account executive where you actually get to speak with a client after you show a certain amount of subject matter expertise.

59:27 Because what happens if you place, let's just say, 15 people a year. And let's say you place 15 and you meet 100 studs. A lot of these 100 studs are decision makers within companies. So when I know a recruiter is ready to move on, it's when all of a sudden they're bringing in their own business. Not from doing marketing.

59:44 Because their candidates are also giving them jobs. And this shows you built that level of rapport and that level of respect, and they want to work with you. That's the best way to know that when someone's ready to take that next step. Okay, great. So then the account exec, but then what happens after that?

1:00:01 Then they obviously, if they... As the business continues to grow and grow, if they show a certain level of EQ and IQ and maturity to manage a team, they get to build a team. We promote them up and they'll run a team. We've been growing like crazy over the last five years. So there hasn't been a shortness of opportunity to run a team, if that makes sense.

1:00:23 Yeah, it does. Wow. I feel like we could talk for another hour, Mike, but that was brilliant. Thank you so much. It was a lot of fun. I enjoyed learning from you and I appreciate you sharing what you've learned over your career to date. And yeah, thank you. Mark, it's been a true pleasure to spend time with you.

1:00:44 I very much appreciate what you do for our profession. The questions you ask, you're a very curious guy and ask really great questions. And we've had a blast at Conexus growing this thing. We'll see where it goes. And I appreciate you giving me the opportunity just to kind of share the journey that we're on.

1:00:59 Yeah, let's do it again. And because you're opening all these other offices, I'm sure I'll have even more things we can talk about next time. Sounds good, sir. Have a great weekend. Thank you for your time. Have a great weekend. Take care. What stood out the most for you in this one? Let me know your biggest takeaway on LinkedIn or in the YouTube comments.

1:01:19 And more importantly, what are the one or two things that you're going to put in practice this week? If you're getting value from these conversations, do me a favor and hit subscribe so you never miss an episode. I really appreciate you listening. Make it a great day and I'll see you next time.