Ep 465: Making The Sell-Or-Keep Decision When You Hit A $260M AUM Wall with Todd Pisarczyk

Summary

Financial Advisor Success Podcast Ep 465

Making The Sell-Or-Keep Decision When You Hit A $260M AUM Wall

Guest: Todd Pisarczyk, Founder of Momentous Wealth Management
Host: Michael Kitces
Date: November 25, 2025

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Episode Overview

This episode explores the pivotal moment many advisory firm owners face: whether to sell or keep their business after hitting a significant growth and complexity wall. Host Michael Kitces and guest Todd Pisarczyk dive into the reality of managing a fast-growing firm, analyzing both the financial and emotional components of the sell-or-keep conundrum. Todd shares his first-hand experience of crunching the numbers (down to his trademark spreadsheet), grappling with offers from acquirers, reflecting on family legacy and succession, and eventually rebuilding his firm’s operations and sense of purpose to break through the plateau.

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Key Discussion Points & Insights

1. Hitting the Complexity Wall: Peak Earnings, Peak Unhappiness

• By 2022, Todd’s firm had reached $260M in AUM, 350+ clients, six staff, ~$1.2M revenue — a level identified by Kitces’s research (“Advisor Wellbeing study”) as commonly correlated with burnout and unhappy advisors ([02:57]-[07:43]).
• Quote (Todd, 06:31):
  “Peak earnings and peak unhappiness at the same time.”
• Todd describes losing flexibility and time, as every aspect of the business had to run through him or his longtime team members, causing him to feel trapped (“not a lot of freedom and flexibility”).

2. Flattering but Fraught: Navigating Acquisition Offers

• From 2019 onwards, Todd received multiple offers from both traditional RIAs and private equity. He worked with FP Transitions and other consultants to understand market terms ([09:01]-[16:52]).
• The offers often included a sizeable multiple (10–13x earnings) but required staying on as an advisor and meeting certain client retention/firm growth targets ([24:09]-[31:09]).
• Quote (Todd, 10:23):
  “You’re just buying goodwill. Yeah, that I’ve created with my clients.”

3. The Decision Matrix: Building “The Spreadsheet”

• Todd built a detailed spreadsheet to compare the real financial outcome of selling at a high multiple now vs. keeping the firm and selling internally at a lower multiple in the future ([21:53]-[36:42]).
• Key variables:
  • External sale: Upfront and contingent payments, taxes, post-sale salary, portfolio growth.
  • Internal succession: Keeping profits, projected firm growth, lower exit multiple (5x), but more time in the business and legacy value.
• Quote (Todd, 36:42): “The ‘keep and successor’ at 5x still actually adds up to more dollars than the sell at 12x today. That was a game changer for me.”

Notable Spreadsheet Observations ([38:24]-[42:16])

• Holding and growing the business—even with a much lower future sale multiple—often yields a superior financial outcome if the firm can sustain a healthy (10–15%) growth rate.
• The case to sell generally only makes sense if the buyer enables significantly higher growth than the seller could achieve alone.

4. Beyond the Math: Lifestyle, Succession, and Personal Fulfillment

• Family and legacy weighed heavily: Todd’s sons (and possibly his daughter) were entering the business and keen to succeed him, influencing his decision to stay ([16:52]-[21:53]).
• Realization: It wasn’t that he wanted out completely—it was that he needed to change how he worked and operated ([44:58]-[53:18]).
• Quote (Todd, 45:59): “Even at my least happy, I was still overall feeling…very happy and just constantly realizing how blessed we are to be in this industry.”

5. Firm Transformation: Systematization & Delegation

([53:18]-[67:29])

• Hired consultants (including Libby Greiwe/Efficient Advisor) to document and build processes, move workflows into Redtail CRM, and automate tasks.
• Transitioned long-held, founder-centered knowledge into scalable, teachable processes.
• Shifted personal role from “player” to “coach,” focusing on training and empowering the next generation—“like going from a player role to a coach role” ([45:59]-[54:58]).
• Quote (Todd, 53:18): “For the first time in a long time, I feel like I just…know what I’m doing and what we’re working towards… I just have this new excitement every day.”

6. Firm Today and Keys to Growth

• Momentous Wealth now above $400M AUM, $2.7M annual revenue, 9 staff (6 advisors), 450 client households ([67:29]-[68:57]).
• Team expansion, process-driven service, and a deep focus on delivering an exceptional client experience have accelerated client referrals and growth.
• Quote (Todd, 70:50): “Our strategy has not been flashy. It’s just—if we do a better job, then obviously clients are going to talk about us more.”

7. Lessons and Advice

• Process and Documentation: “I wish I would have started to build those processes earlier.” ([78:52])
• Proactive Time Management: Time-blocking (including adoption of surge meetings) and routine are critical for longevity and happiness ([81:19]-[84:42]).
  • Quote (Todd, 83:18):
    “If we have that control over our time, we all feel better about the way things are going.”
• Experience over Service: In today’s world, being truly referable means building a distinctive client experience, not just good service ([86:30]).
• Redefining Success: Evolution from “more clients, more AUM” to enabling the success of the next generation—“It’s building an environment that other people can be successful in and flourish” ([87:03]).

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Notable Quotes & Moments (with Timestamps)

• “Peak earnings and peak unhappiness at the same time.”
  — Todd ([06:31])

• “You’re just buying goodwill…that I’ve created with my clients.”
  — Todd ([10:23])

• “We all talk about 1% fees, but…most of us actually charge something more like 70 to 80 basis points…[which] is somewhere between like $1.5 to $1.7 million of revenue [for $225M AUM].”
  — Michael ([02:57])

• “The ‘keep and successor’ at 5x still actually adds up to more dollars than the sell at 12x today.”
  — Todd ([36:42])

• “For the first time in a long time, I feel like I know what I’m doing and what we’re working towards—I just have this new excitement every day.”
  — Todd ([53:18])

• “Our strategy has not been flashy. It’s just—if we do a better job, then obviously clients are going to talk about us more.”
  — Todd ([70:50])

• On Success:
  “At this stage of my career, success is building an environment that other people can be successful in and other people can flourish in…It’s up to me to build that environment.”
  — Todd ([87:03])

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Timestamps for Important Segments

• [02:57] — The “wellbeing” cliff: Realities of advisor unhappiness at $200M+ AUM
• [09:01] — Hitting growth/complexity wall: Revenue, clients, team size
• [15:45] — The acquisition offer process and consulting
• [21:53] — Spreadsheet approach to the sell/keep decision
• [31:09] — Typical offer structures and payments/taxes
• [36:42] — Financial outcome comparison: external sale vs. internal sale after growth
• [44:58] — Transitioning out of personal burnout (without selling)
• [53:18] — Newfound energy in the “coach” role; succession planning
• [60:49] — Building processes, moving to Redtail, team roles
• [67:39] — Present firm snapshot: staff, AUM, growth stats
• [81:19] — Practically managing time: Time blocking, surge meetings, routines
• [87:03] — Redefining success: From numbers to legacy

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Takeaways

• Growing a firm to $200M, $300M, $400M AUM brings not just financial rewards, but a new level of operational and personal stress.
• The decision to sell or keep is both financial and emotional; spreadsheets matter, but so do lifestyle and legacy.
• Delegation, hiring, systemization, and a shift in self-identity (from “doer” to “coach”) are crucial for breaking through the wall.
• “Peak earnings” can coexist with “peak unhappiness”—but intentional change can recapture both profit and joy.
• Ultimately, success is less about AUM and more about enabling the next generation to thrive.

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[Link to Todd’s “Sell or Keep” spreadsheet referenced in episode]
Find in the show notes for Ep 465 at Kitces.com/465

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For more actionable insights and past episodes, visit Nerd’s Eye View by Kitces.

Transcript

[A]

Welcome to the Financial Advisor Success Podcast where you go behind the scenes with financial planner, speaker and consultant Michael Kitces to hear stories of how leading financial advisors navigated the inevitable challenges that arise on the path to success and get insight from leading industry consultants about how to break through to the next level.

[B]

In your advisory business.

[A]

And now, here's your host, Michael Kitces. Welcome everyone. Welcome to the 465th episode of the Financial Financial Advisor Success Podcast. My guest on today's podcast is Todd Pisarch. Todd is the founder of Momentous Wealth Management, an RIA based in Vancouver, Washington that oversees approximately $400 million in assets under management for 400 client households. What's unique about Todd, though, is how he worked his way through the choice of whether to sell or keep his firm after hitting a complexity wall by analyzing both the numbers creating his own spreadsheet in the process and the lifestyle considerations of this decision. In this episode we talk in depth about how Todd found that as his business grew to around 350 clients, he became frustrated by the increasing lack of freedom and time despite the financial success of the firm itself How Todd started receiving offers to acquire his firm, which led him to consider what he wanted the rest of his career and future ownership of the firm to look like and what would be most financially advantageous for himself and how Todd built a spreadsheet to analyze offers that showed that holding onto the firm, even if it meant eventually selling at a lower multiple to internal successors, could lead to a better financial outcome, particularly given the strong growth his firm was experiencing. We also talk about how Todd, after deciding against selling his firm, brought in newer advisors which both helped to spread out the workload of the growing firm, but also energized him by allowing him to spend more time coaching these new hires How Todd worked with a consultant to document and build out his firm's processes to streamline operations and more efficiently scale and how Todd has found that time blocking, including adopting a surge meeting structure that fits his needs, has allowed him to have more control over his schedule and gives him time to both work in the business and on the business and be certain to listen to the end. Where Todd shares how his forward leaning approach towards technology adoption has not just been about gaining efficiency, but also freeing up time to provide a deeper level of planning for his clients, which has led to an increased pace of client referrals how Todd has prioritized creating an attractive client experience to differentiate his firm at a time when clients have many ways into comprehensive financial advice and how Todd's Idea of success has shifted over time from constantly seeking more in terms of clients, AUM or other factors to creating an environment where the next generation of advisors at his firm can be successful themselves. And so with that introduction, I hope you enjoy this episode of the Financial Advisor Success podcast with Todd Pisarcek. Welcome, Todd Pizarch, to the Financial Advisor Success Podcast.

[B]

Thanks for having me, Michael. I am very excited and just honored to be here today.

[A]

Well, I appreciate you joining us and looking forward to getting to talk about to me just the challenges that start to crop up when advisory firms start to grow past our individual capacity to handle clients. And basically we hit the wall. And we see this really directly in the Advisor Wellbeing study that we run every other year. Like, it's a very interesting phenomena. The unhappiest advisors have an average of $225 million under management, 225 million of AUM. And it's not like a, just a random number data point if you break that down further. I mean we all talk about 1% fees, but most of us have some, some householding, some discounting, some break points. Most of us actually charge something more like 70 to 80 basis points of actual like revenue yield relative to assets. Which means 225 million of AUM is usually somewhere between like 1.5 to 1.7 million of revenue. Most of us at that size have about one team member every 250,000 to 300,000 of revenue. So we usually have about five or six people on the team. And as the firm owner, that means essentially like I've got half a dozen people to manage because usually at this point they all report to me. Oh, oh, and I have like 200 something clients. And you hit this point, you had this wall of, of. And I've heard this over and over again through the years. Something effect of I'm making more money than I thought I'd make and I'm working too many hours and I'm burning out. I feel miserable and I've never been less happy in my business. It's never been bigger and I've never been less happy. And, and then especially in today's environment, and then someone calls and says they'll offer you like 6, 7, 8, 9, 10, 11, 12 times your earnings. Yeah, you just walk away or at least to like tuck into them, let them figure out all the scaling challenges and just go back to serving your clients and becomes a really hard like really high stakes question of like do I, do I keep it or do I sell? And if you look at industry data overall, and the, the sheer amount of M and A out there would tell you a lot of advisors are making the decision to sell at that point. And, And Todd, I know you have. You have hit this similar threshold. You. You did the analysis. There's a spreadsheet which we're going to talk about later. Warms my heart. And, and, you know, and did the math and decided to keep the firm despite the amazing multiples that seem to be out there. And so I'm just, I'm excited to talk about, I guess, both this, like, the journey hitting the wall. What happens when you hit the wall and end up with this business or like, I'm. I'm doing well financially, and I've never been less happy. And then how you, you know, evaluated and came to the decision, despite the offers coming in, I think I actually want to hold this thing and keep going.

[B]

Sure, sure.

[A]

Analysis.

[B]

It's like you had somebody stationed in my office. Michael. I mean, all the stuff you described, we do.

[A]

I mean, we try not to tell advisors.

[B]

I mean, in listening to the show, I kind of assume that was the case. But, no, we were, I mean, almost exactly experiencing the numbers that you just described. I mean, to a T with regards to staff count, clients, you know, everything else about three years ago. And I would say that, yeah, when I just think about the career and everything that I've been through and, and seen over the years, I do feel like 3 years ago I was kind of looking around, just realizing all the things you just said where, you know, on one hand, the company's doing well, clients are doing well, we're. We're earning as much money as we ever have. But as. As far as happiness, I mean, I, Yeah, I would say I was probably at peak unhappiness a few years ago in the practice.

[A]

It was like peak. Peak earnings and peak unhappiness at the same time.

[B]

Yeah. Yeah. And, you know, I think the exciting thing is, and for all the listeners, like, we've worked through it, you know, and part of what we're going to be talking about today are some of the decisions we made around the firm. But, you know, I can just say that where we've gotten to today, I feel like we've kind of officially gotten through that period. And, you know, life is just a lot better these days. And there were a few significant things that happened over the last few years that, That I think helped us kind of work through that. So.

[A]

Talk to us a little bit more about really what the state of the firm was three or four years ago. We'll fast forward in a little bit to kind of where we are today and where it's come. But as you were living this peak earnings plus peak unhappiness phenomena at the time, can you paint a little bit more of a picture, if you recall, of just really where the firm was then? I know, like, revenue and clients and staff count and just literally what was going on day to day that made it not so happy.

[B]

Yeah. Yeah. So three years ago. So I started my career in 1999 and, you know, basically just started right out of college, was working for wad, Ellen Reed for a bit, and then Edward Jones. And then in 2004, I went independent. And so the firm really has just grown just kind of from, you know, from me doing the thing. And we've just experienced slow, steady growth over those years. But, you know, to Fast forward to three years ago, you know, we were about 260 million in assets, and we had a staff count of between five to six. Then we added our sixth person right around that time period. So we had experienced really good growth. I mean, I remember the first time we hit 100 million, and it was really exciting. And it seems like we went from that 100 million to 200 million really quickly.

[A]

Compounding is an amazing thing.

[B]

Yeah, love it. Love it. And. But, yeah, things were just. Things got really crazy. We're just. Sorry. Go ahead, Michael.

[A]

Yeah, I'm sorry. Do you recall, like, where was client count? Where was revenue?

[B]

Yeah, so revenue was around 1.2 million roughly at that time. And our client count was around 350.

[A]

Okay.

[B]

Yeah. And so that's also the time that we started to get several, you know, inquisitions about firms wanting to buy us. So our first. The first time we actually looked at a potential acquisition was actually back in 2019. I just remember because it was pre Covid. So I remember the day because I remember we hadn't experienced Covid yet. And then we. We actually had another firm that we talked to pretty seriously during COVID Okay. So it was about 2019 that we, you know, again, like, started to just get offers from other firms. And obviously, like, being a, you know, kind of where we were at the time, you start to get these offers and they look really good. And then also, you know, there's also that element of just feeling very, you know, like, I was honored that we even got the offers. Right. I mean, the fact that somebody looked enough into the firm and liked what we were doing to the point where they wanted to acquire us is really exciting.

[A]

It's phenomenally flattering. Like, I've, I worked my backside off building this thing over the years and like, you want to offer me millions of dollars because clients like me.

[B]

Yeah.

[A]

Kind of fascinating. Like, yeah, we don't, we don't have factories and equipment. Like, I mean, in the tax and literal sense, like you're just buying goodwill. Yeah, that I've created with my clients.

[B]

Yeah, yeah, exactly. And to just think, like, you know, it's like, okay, you know, and I went through all this stuff, like I remember when I was working for the brokerage firms, you know, you have these thoughts of, man, it'd be really cool if I, if I went off on my own because I want to have a different looking website or man, it'd be really cool if we had this, that or the other thing. And you kind of get in this mindset where you want to create those things and then you do it all and then you're kind of like, oh, wow, this is just a lot of work to maintain the website and the payroll and the this and the that. So when some of these other firms start coming along and talking to you about being acquired, you know, with, with the proposition too of like, hey, we're going to take all that, all that work off you and you don't have to worry about that anymore. You can just work with your clients. I mean, that also can be attractive. So. Yep. So.

[A]

So I guess just fill us in a little bit more. Like what, what was making it unhappy? Like what, why was this peak unhappiness as your, you know, a million plus revenue with a full team of supports? Like what, what was making it so not good despite peak earnings, Peak size.

[B]

Yeah. Yeah. So, you know, I think the biggest thing for me was just time. So I would, I would often think back to when I had fewer clients and was making good money. You know, I mean, obviously life was good and the income was good and you're feeling pretty happy about things, but also just realizing there was a time in my career where I feel like it was like that perfect mix of had plenty of money to do the things I needed to do, but also had all the time in the world because you just, you know, weren't as busy. And then the nature of it is the business is successful, you get more clients, but you know, there's more work that goes along with that. So I think for me, the biggest thing that just made me realize that there was a problem was the time aspect when before I would realize you know, hey, someone, a friend called and said, hey, do you want to go hit the mountain today or go golfing today? And I'm like, oh, yeah, like, I'll be there in an hour. Like, I realized I couldn't do that anymore. It's like, oh, no, actually, I have meeting all week. You know, I can't even get away for another three weeks. And so that's. That's when I started to get a little, I don't know, I guess just kind of frustrated by it was just that, you know, increasing lack of freedom and time. But what I've realized over the last several years, because one of the things that we've done that I think has helped us kind of get through it and get to a really good spot is the fact that we just did not have very good systems and processes and things like that. So one of the things we did a couple years ago is we hired a consultant to really start building out and helping us build out really great processes for things. And so just realizing that everything that we were doing to that point required either me or one of my two associates that had been with me for a long time. We knew how to do everything. But as we brought more people to the firm, we were realizing more and more that, you know, like, if anything was going to get done, we would have to be involved with explaining it or doing part of it. And we realized that was a function of just really not building out the right systems.

[A]

Okay. And so as I'm hearing, like, just time commitment is going up. Everything kind of has to run through you, so you end out feeling very little freedom. Like, don't literally don't have a lot of time and just don't have a lot of freedom and flexibility because it's like all this growing volume of things all runs through you, routes through you, or is stuff you're really not energized to solve. Like payroll.

[B]

Yeah, exactly. Payroll, benefits. Again, all that stuff that was fun in the beginning, like building out a cool website. Now it's like, oh, we have to maintain the website and, oh, we. We're supposed to be doing social media, so you're having to come up with social media posts. And I mean, really, like you said, I mean, no matter what's happening at the firm, being the owner, it all kind of runs through you. And so you just realize that day to day, you're just in touch with so many different things. And so even as you're adding team members and. And that, you know, the work comes down. But, yeah, And I think, like you said, a lot of people, it's just been very interesting for me to kind of hear a lot of advisors talk about it, hear you talk about it over the years, and to be in the phase of like, oh, I'm glad that's not me all of a sudden waking up one day and being like, oh, that's me. Yeah, yeah, exactly.

[A]

So you're living this environment, and it's not a lot of time, not a lot of freedom system, process stuff that I guess is not your. Not fun to build anymore or outright run the business. Things that you don't enjoy, like payroll. And then the offers start to show up.

[B]

Sure, yeah. Yeah.

[A]

So I don't want to get you, like, in trouble with any NDAs or anything, but, like, tell me about the offers. So what's started to show up? And like, whose call? Or like, what. What kind of firm's call did you decide to take and why? Like, yeah, what made it interesting to start entertaining these.

[B]

Yeah, so, you know, I'm sure again, like. And I've talked to a lot of advisors that experience the same thing, but, you know, the, the first person that reached out to us, the first firm was back in 2019, and then, you know, another. Another firm reached out in 2020.

[A]

And.

[B]

And, you know, I noticed that the amount of emails and things like that and inquiries that I was getting really started to ramp up. But different, different firms offering to acquire us in different methods. So, you know, some firms effectively just wanting to kind of buy in. We did talk to some consultants as well. So at one point when I started to get offers, I actually reached out and spoke to a couple consultants as well that help with these things, and I feel like I might even have heard one of them on your show, let's say.

[A]

Do you, do you recall who you worked with that had good experiences? Just nice to shout out for folks if you recall who you're getting support from.

[B]

Yeah, I spoke to. I mean, I, I did some work with FP transitions, so I think that they were one of the places that helped me quite a bit just realize that there were more options because I think for me, when I started to get these offers, I didn't realize that there was actually more to it. So the, the primary people that we were talking to were firms that wanted to acquire us and, you know, effectively have me stay on and keep working as an advisor, but then also realizing that there's the opportunity to have, like, PE firms buy parts of your firm and things of that nature as well. I actually had no idea that that was even an option. And so, you know, I started to talk to a lot of places because that's just how I am. It's like when I get, I guess, an offer like that, I mean, my nature is always to say, okay, well, I got to do the research and, and figure out, like, what's the best thing, right? So, you know, I'm not the kind of person that generally just talks to one person. So I'm, you know, talking to friends. I have a lot of friends and other advisors in the industry that have gone through similar things. And so, you know, really what I did is I. I always go right to the numbers, right? What was a complicating factor for me is that, you know, the idea of selling the firm and being able to continue to work with clients because I'm, you know, I'm 49, I'm not, like, ready to retire. I love what we do. I'm super energized by it. So I was not in this mindset that I wanted to be done, but I was in the mindset of just thinking, like, man, it would really be nice to work differently, you know, like to, to either, you know, I was thinking about things like, should I, you know, which again, a lot of people go down this road of like, is it time for me to just be full time CEO of the firm, run the firm and have other advisors here to work with all the clients, or is it time for me to just effectively, like, you know, sell and have someone take over that CEO stuff and allow me to just work directly with clients? I was just realizing that I couldn't keep doing it all, you know, I needed to get rid of some part of what I was doing. And so the complicating factor for me was the fact that, you know, I have. I have three kids, so two sons. One of them's working here now. I have another son who's getting ready to graduate. He's going through the financial planning program at Grand Canyon University. He'll be done in a year or two. I have a daughter in high school who I'm, you know, trying to convince that she should get into the industry. But currently she's not yet interested, but we'll keep working on her. But that was kind of the other factor for me is the fact that a lot of these offers sounded really, really great. But I just, like, I was also getting to the time where my two sons were like, really committed to wanting to get into the industry. And so not only did I Have this element of man. I, you know, it's something that we kind of talked about, like, our whole lives, like, having them come work in the business, but, you know, when they're 10 years old, obviously they don't know what they want to do. But as they grew and started college, both of them gravitated towards financial planning. So my older son, Aiden, who's working here now, you know, there was a time where he knew he wanted to major in business, but he wasn't exactly sure if this is what he wanted to do. But then his last couple years at school, he really got very interested in the financial planning area. In fact, one year, I had the opportunity to take him to Impact, and he kind of points to that is when he really saw what the industry was about. And also, you know, his whole experience with it is me, you know, like. But to actually, like, meet and interact with other people also closer to his age, I think got him excited. And so, you know, I was really, like, struggling because, you know, I'm like, okay, on one hand, this sounds really great to like, you know, one, obviously these firms offer you quite a bit of money. So, you know, on one hand, I'm like, man, I've been working my tail off all these years, and finally I could. I could realize a good amount of money for it. I could continue to work with my clients, you know, because that's obviously for all of us. We deeply care about our clients, and we have all these really deep relationships with them that you don't want to let go. Again, knowing that I wasn't ready to be done, I just need. I just knew I needed to do something different, you know, and so. And then complicated by the fact that, oh, you know, if. If I just sell the firm, then, you know, what have I done to the boys? Like, you know, this is something that they've, at this point in their life, they're really invested in and actually doing the work to become part of the firm. And so all of that was kind of going in my head to, like, what do I do? And so for me, you know, I, I, you know, we're. We're numbers people. I'm, I'm. I love building spreadsheets, right? So I'm like, I'm going to solve this with a spreadsheet.

[A]

I love this.

[B]

Yeah. And looking at the numbers, actually, just really. And there's other factors I'll go into about just kind of some of the emotional stuff behind the decision. But I think that when you can, like, when you can have the Emotions, but also the emotions are backed up by the fact that the numbers make sense. Right. Like that's was what I was able to find out is that, you know, because there's all these factors around. Okay, so let's say that I do have the boys come to work here and then, and then eventually like I'm not going to give it to them. I mean, I, I, this is part of my retirement plan. Like eventually I still need to sell this thing to them, but there's no way that, that they're gonna be able to pay me what some of these other firms are offering. Right? So then there's that factor as well. So I feel like I was able to kind of solve that for myself and say, okay, here's why it actually makes sense for me to keep running the business, sell to them eventually. But actually I found that in my, in my, you know, and again, not going to obviously say that this is right for everyone, but for me personally it just made a lot more sense both financially and emotionally to just keep doing what I was doing. Most firms, I feel like when you hit a certain level, you are offered a certain amount of money based on the earnings of your company. So you know, I remember back in the day, everything was you're going to get two times revenue, right? I mean that was like at the end of the day it's always two times revenue. And then there was a time where it's like, oh, maybe now we can get three times. You know, like things are getting. And I found that with a firm our size, everything was kind of more based on earnings and what I found through my research and you know, you can tell me if this is wrong, but it just seems like, and I will say like a lot of these numbers come from just not specific offers we got, but just people that I talk to that were like, hey, kind of, it seems like this 10 to 13 times earnings kind of tends to be what people are seeing. I don't know if you agree with that.

[A]

We see some similar numbers. There is a size premium out there. So like the, the bigger the firm, the higher the multiple. So I mean I overgeneralizing, like some, some solo practices might end out at 4 to 6 times earnings. By the time you've got a couple of people on board, you might get to 7 and 9. By the time you get a couple of advisors on board, you might get 10 to 12. The multi billion dollar firms sometimes are going as high as 13 to 15. So that's, that's a little rough. But yeah, I mean, by the time you're, I think I said that you said, then you're like a million something revenue firm cruising towards 2 million. You probably have seen anything from as low as 6 or 7 to as high as 11 or 12. And usually at the, at the upper end there's some contingencies, right? Yeah. You'll get this if all your clients retain and you hit certain growth numbers after you come on board. So there, there may be contingencies. I mean, the old joke is, is you, you, you know, you can, you, you tell me the multiple you want and I'll just tell you the terms that, that you have to give me. Like, hey, I'll give you 30 times earnings today. Yeah, you have to, you have to grow at 70% a year. I'm going to take all the money back. But like, hey, you can tell your friends you have 30 times earnings. You just need a ridonkulous growth rate on it that you're probably not realistically ever going to achieve. So the, you know, the super big numbers usually have some super high contingencies on them. The more moderate numbers usually don't have a lot more than some modest growth. And just like you actually have to retain the revenue and keep the clients. If you sell and transition and the clients don't come, that, that will still get adjusted.

[B]

Yeah. Yeah. So, yeah. And that, that's kind of what I, what I was thinking in the back of my head is I thought, okay, like on one hand I could, you know, I could sell the firm. I could get a multiple of earnings and, and on in the spreadsheet I built. You know, we'll share it with the listeners. It's, I just, I just put a million bucks in there just to make the math easy, you know, I mean.

[A]

Okay. A million dollars of earnings.

[B]

Yeah. Yeah.

[A]

So I guess just so for folks who are listening, if, Todd, if you're okay to share. So this is episode 465. So if you go to kitsas.com 465 and just scroll to the scroll show notes section, just tiny bit down the page, we'll have a link to the, you know, the, the, the keep or sell seller stay spreadsheet. So we'll maybe we'll talk about this a little bit as best we can because it's always fun to do a spreadsheet.

[B]

Yeah.

[A]

Live in an audio format.

[B]

Yeah.

[A]

But we'll, we'll, we'll talk about this a little. I guess for folks who want to even follow along. You know, you can pause kitas.com 465. You can pull it up and, and look along if you want.

[B]

Yeah, yeah.

[A]

Or just listen as we, as we talk some numbers.

[B]

Yeah, Michael, I thought it'd be fun if we just went through each cell individually. So let's go ahead and start with the cell.

[A]

The formulas. That sounds fantastic. This is a reference cell anchored to B2.

[B]

On a side note, there is nothing more satisfying, I feel like, than just building a really good spreadsheet. I've done these for should I buy or lease a car? It's just so satisfying.

[A]

Well, and look, I guess to set this up a little because you were kind of to send a copy along, so I've got something to look at as well. I mean, it really is just kind of the spreadsheet to set this out. Right. We got a series of columns for, you know, how does this project out if I, you know, sell the firm to an external buyer and then I just stay on and they, you know, they pay me a salary. And then what happens if I hold on to this for the next 10 years? Because as you said, like, you're. You're 49, you're not. You've got energy, you're not. Actually, this isn't the walk away.

[B]

Yeah.

[A]

Scenario because those are a little bit different. This is like, I'm still going, but, you know, this building stuff and the payroll is getting tedious, and other people say they'll do that for me. So do I want to sell and stay with them, or do I just want to hold on to this and. And keep going? So you basically got a column of what happens if I sell and they pay me a salary while I get my check and then I grow my money. Because if you got cash, you can put in the market. Or what happens if I hold on my firm and keep chugging along? So we'll talk about these more detail. Like that's. It's essentially two sets of columns that we now start looking at is sell, get the check that you can grow plus a salary, or hold onto this business and see what you can get in profits plus future business value.

[B]

Yes, exactly. And if I look at our firm, I think growth is a factor as well. We've roughly doubled in size over the last five years. And, you know, in the last three years, we've been growing pretty well. Also around 14 and a half percent's been our average growth rate. So, you know, that's a factor as well. And so, you know, just, just like when we're doing planning for clients, you Know, I tried to plug some more conservative numbers in there. So I also factored in like, different growth rates. So, hey, I keep doing what I'm doing. The business grows at 10%, you know, so that's in there as well. So.

[A]

So I'm just kind of following through. So you at least for sort of default assumptions here and blessed spreadsheets, they're all formulas. So anyone who wants to play with this, you can change all the numbers in column M, which will make sense when you see the spreadsheet. You can change all the numbers in column M. They're inputs that calculate through. But it's fine that we start with a million dollars of earnings. Just kind of makes the math easy. You know, you. You've got like the full value multiple in here. Let's say we get a whole 12x that someone's willing to offer us. Sweet. You know?

[B]

Yeah, yeah.

[A]

So. So I'm just kind of following along. It looks like payments kind of break out. It's one of those, like, you get half at closing and the other half over the next few years, assuming clients stay.

[B]

Exactly.

[A]

And again, I want to get. I want to get you in trouble with any NDAs that firm signed. Like, was. Was that pretty typical for what you were finding of, like, you get part up front and then you get part of it over a couple of years and you have to retain and grow a little bit to earn that.

[B]

Yeah. Over the years, what I found is that, you know, most of the firms that I talked to, kind of the same idea where it just like you spelled it out, you know, there's a certain amount that you get at closing, and then over the next several years, assuming you continue to hit certain growth rates, then the remaining payments are paid out. So. Yeah. And so I, you know, I don't know that there was a lot of. It's just like what you said. I mean, you describe it so well. Like the amounts that you get down the road are so variable based on what the, I guess, like required growth rate is. Right. I mean, if you can get a higher multiple if you hit certain growth numbers. Right. So, yeah, So I, I just set that in a way that people could kind of play with whatever scenarios they're being offered.

[A]

So then you pull some taxes out. Ostensibly, this is. Most are all goodwill. So we're like, you know, 20% cap gains plus, plus state that kicks in. So the gross value might be 12 million, but you're going to get it over several years with contingencies, minus taxes. So I think in the sheet here, like you actually net eight, eight point something.

[B]

Yes. Yeah. And you know, being in the state of Washington, we did not, I didn't have to add the capital gains tax until recently. So you know that, that's a fun new thing we're dealing with over here.

[A]

Unfortunate, unfortunate timing on that.

[B]

Yeah. So that might not apply to everyone, but. Yeah, exactly. So that would be like the net amount that you would actually have to go and then invest in a portfolio. Okay. So because that's obviously the kicker that we're all looking at is I get to take this 8 million, go invest it somewhere and earn a return on that and then keep working and, and obviously keep getting income and good old.

[A]

Time value of money. Yep.

[B]

Yeah. So the column, basically when I, when I put the portfolio, that's effectively the value that you would have in an investment portfolio.

[A]

Okay.

[B]

And it comes in, you know, the first three years, it ramps up quickly.

[A]

Because, because you're getting the tranches of payments as they, as they come through. So it takes you, it takes you four years just to get all the payments in and then you just get to grow the dollars on the back end.

[B]

Exactly, yeah.

[A]

Which I see, like you've got a, you've got a market growth assumption here. It's pegged at 7% to each their own about what you want to plug in for your, for your growth rate. And then, and then I see there's in addition to like, okay, now I've basically got a portfolio of the proceeds that are growing. I'm also getting salary checks. Right. I'm getting paid out from the, from the firm. Because if I'm selling and staying, I still get salary for, at the end of the day, a pretty sizable practice. But I only get the salary in the business. I don't get the profits from the business because I sold that. So You've got a $350,000 lead advisor salary in here that then grows as the client base grows. So it looks like you've got conservative 10% growth on the, the, the revenue of the practice itself. So basically your income grows at 10% and that gets taxed and we get down to a, you know, a net net all in number. God bless. Ten years from now, with compound growth, it's like somewhere between 19 and 20 million dollars after tax, before or after tax of a portfolio of the proceeds that's now like $15 million and 4 to 5 million dollars worth of salary that you got out along the way as well.

[B]

Exactly. And for the tax numbers, you know, just for The. For the listeners, the reason I put a gross and net column is because, you know, frankly, I kind of. When I was building this, I had no idea I was going to be building it for anyone but myself. And so I just put an average federal income tax rate in there. You know, that could be off, but in reality, that's why I put kind of both gross and net. Because in reality, at the end of the day, the most important thing is to kind of compare the two columns. So I just kind of figured it's going to, you know, it. If taxes go up, then it would go up on both sides of the spreadsheet.

[A]

And so then on the other side, we've got a. What happens if we just hold on to the firm? We keep getting our profits gets netted down for taxes, we've got an RA value to stay. That again, is like we can plague a multiple on our earnings. Although I'm noting your. The multiple you're assuming here, this is labeled as keep the firm and sell internally. Assuming kind of like sell, sell the boys and. Or all the kids if the third one comes in.

[B]

Yeah, yeah. Thank you. Thank you for recognizing Macy. She'll be happy. Yeah.

[A]

Yes. So, so much lower earnings multiple here. Now you're only assuming, like, okay, if I'm selling internally, am I bought and my internal successors have less buying capacity. I'm only air quotes. I'm only selling at five times earnings instead of 12.

[B]

Exactly.

[A]

I'm taking a big, you know, I'm getting the profits, but I'm taking a big step back in the multiple.

[B]

Yes. And that. That was the key for me is I was initially really trying to think about if I keep this thing, what is a. And again, that's what started me down this road of building this in the first place was if I keep it, how much do I need to sell it for internally to feel like, you know, I got what it was worth, you know, because obviously if you're selling to family members, it's different. You know, maybe you're going to be more willing to take a bigger discount. But even selling internally, you know, and frankly, this is just something that I've heard from a lot of places. But just, you know, hey, if you sell internally, it's more than likely that you're not going to get the same types of multiples. You're. There are a lot of benefits that come with it, but, you know, you are going to have to take. Take a little bit less money. And so what I was trying to figure out at the end of the day was like, how much less could I sell it for internally and still get out of it what I felt like it was worth? And this is frankly the part that shocked me the most was, yeah, you.

[A]

You go through all of this and like, the keep, the keep. And an internal successor at 5x still actually adds up to more dollars than the sell at 12x today.

[B]

Yes. And that just, I mean, it was a game changer for me because I think I had this relief that was like, okay, I can, you know, obviously, and, you know, we can kind of get into this too. But I did, after seeing this, I did some things that, you know, I mean, I built this spreadsheet. I mean, it's been a few years now that I built this thing. And I've, you know, plugged in several other offers into it along the way, but it really just kind of gave me the freedom to say, based on the numbers, it makes sense to keep it. But then also, I can make decisions around what's going to make me happy. Because this didn't really just initially solve the problem of like, okay, like, oh, this makes me happy now. Like, I still was struggling with a lot of that stuff, but it made me realize that from a financial standpoint, I could solve those problems in other ways. And I thought the other big takeaway from this is because, you know, not everybody listening is maybe considering an internal sale or a sale to family or anything like that. But we also, like, hear this phrase all the time, like, hey, you know, we should take some chips off the table. Right? Like, but again, what this made me feel better about, even with regards to that, is to think, okay, let's just say hypothetically that over the next 10 years, like, multiples drop in half, you know, and, and 10 years from now, we're only able to sell firms for half of what we can get for them today. Again, even if that's the case, you. You find by looking at this that at the end of the day, you might, you might still end up making more money by just continuing to run your firm and sell for a low multiple down the road.

[A]

Well, and to me, it's wild what happens when you just sort of use this spreadsheet and start adjusting some of the assumptions. So I mean, as is head to head, you're like 20 to 30% higher in the just keep the firm and successor internally than sell for the big multiple today. I mean, it's a 20% gap and that's at the, like, the very conservative growth and multiple numbers you have in Here it's like if you, if you just grow closer to the 15% you have been growing now it's like a 60% difference if you, if you just sell for 7x internally instead of 5x internally, it's literally twice the value of holding onto it versus selling but staying internally. Let me just. It. It's so striking on the, on the difference and granted you know, this is a scenario that is all. You know the, the acquirer gets all of the equity and you are only riding along with salary as you continue to stay. Just to be fair for like some of the acquirers out there, like some will allow you to have some level of equity or roll some equity. You don't get necessarily grow on your book but you grow on their whole thing and their trying to grow it fast. So maybe if that grows really well, that that math will work out for you. So there are, there are different iterations of this. But you know, at its core like the. Just to me it's, it's very striking how you know that the keep scenario so be keep with internal succession scenario so wins even when the valuation multiple is half at the end and then it wins dramatically more with anything higher than 10% growth rates and any internal succession multiple higher than 5x.

[B]

Yeah.

[A]

Double the dollars or more.

[B]

Yeah, yeah, exactly. And again, I think all of us would probably agree that like hey, obviously keep the firm, keep running it, make it bigger. If we knew the multiples were going to be the same at the end. Well that's an easy decision, right? It's like well if I knew the multiple was always going to be what it is today, then I'll just keep it as long as I can. Right. But again there's these fears that we have of like well what about AI and it's going to take everything over and multiples are going to crash and all this stuff. And again, this just kind of gave me the sense of just what you said, Michael. It's like well okay, let's say they fall in half. I'm still okay. Like I will still look back and say it was still a good idea for me to keep this thing. Again, all of that assuming that you're in my situation where you want to keep working, right? You're still feeling good about things, you still want to keep working. I mean, you know, obviously like you alluded to earlier, if you're trying to be done and retire this, this isn't probably the right numbers to look at.

[A]

So yeah, to me it, it does highlight. I mean at least or especially in those scenarios where we're in the, the, you know, I've still got time H. Like I'm not actually looking to be out. It's just not fun to run it anymore. Like that, that context that, I mean, look, just if you're miserable and your alternative is I'm just going to be out anyways, then yeah, may as well take a thing that lets you stay in the game instead of being out of the game. So to sure. But assuming you've got some, some desire to stay in, then to me just, it very quickly comes down to like it's hard for the math to work in the favor of the sell and stay with the buyer unless just simply put, like unless you think the whole thing can grow more with them than you do on your own. Right. If you, if you give them a higher growth rate than yours, it, it at least you can get the scenarios a little bit closer to each other.

[B]

Yes.

[A]

But you know, they truly have to enable a growth rate that you couldn't have achieved on your own. And even then it may be difficult to make the scenarios in parallel because you don't benefit from all of that growth because you don't have the equity. Yeah, you got the cash. You don't necessarily get all the extra growth of the good growth rate. You get the market return on the cash that they, that they paid you. And I have seen versions of that even for some of the folks that got, you know, like really eye popping high multiples. I mean I joked earlier like I'll, I'll give you 30x earnings, you just have to grow at 70%. But I mean I have seen some deals for you know, multiples that get into the teens where everyone's astonished at the multiple. And then when you get in the fine print it's like, well yeah, we really have to do like 20 to 30% growth rates to get that number which is a pretty hefty growth rate for most of us. And you know, maybe the buyer lets us grow more. But if, if we actually are at all capable of achieving a 20 or 30% growth rate, the math is still dominatingly better to hold onto the thing and grow it like that yourself. Which just gets back to you. Like you, you for better, worse, you truly have to find a partner where you feel like you're going to grow, grow more than you could have grown or last longer than you were going to last.

[B]

Yeah, yeah. And that's a really great point, you know, in looking for a potential partner. Yeah. Obviously if there's Someone who can come along and infuse a much higher growth rate into your firm. That would certainly be a factor to consider.

[A]

So it sounds like. So you went through this spreadsheet exercise, the math said, huh, Actually not even better to necessarily to sell even and including if I want to eventually sell internally the kids at a more favorable number and I get to hold on to it for the kids, which was already a complicating factor for you. But then we get back to kind of my next question that the point where this all started, which is, but you're still in a firm in peak unhappiness where you have to do the frickin payroll that you don't like doing. So I'm very curious that. No. So, so what happens next in this journey for you where you build the spreadsheet, you run the numbers, all of a sudden it's not so compelling math to do the transaction after all. But you're still stuck with the thing that made you unhappy enough to take the phone call and go through this exercise in the first place.

[B]

Yeah, yeah, yeah. So. So what changed? Right? Yeah.

[A]

So like what did you do?

[B]

Yeah, so you know, again, for me it's just like everything I think, like for me personally, just some timing, things really lined up quite well. So you know, in fact, when I look back at the first offer that I looked seriously at, like back in 2019, I would say that I don't even know that I necessarily had all these same thoughts at that point. I actually was looking at that more along the lines of frankly, I was so unhappy. And again, I shouldn't say unhappy, I'll back up a little and just say that my peak unhappiness, I was still happy for me, it's still a good.

[A]

Business and making a good income. Yeah, we can keep that in inappropriate.

[B]

Yeah. And I, I think that's a really good, good point for us to discuss is, I mean even at my like, you know, I, I would say least happy point, I would still say overall I was very happy and just constantly realizing like how blessed we are to be in this industry. And when I think about how I got into it, like it was just, you know, like I graduated college, I didn't really, really know what I wanted to do and I started interviewing for jobs and this financial advisor thing sounded pretty cool, you know. And then it got to a point where I'm like, hey, this is all I've ever done. Like I'm not even qualified to do anything else. You know, I can't build Anything or make anything. So I got to stick with it. And I just love what we do. So I will say, like, for me, when I get to the peak unhappiness component, I was still overall feeling, like, very happy with a great team that we work with here. I mean, and I love our clients and I love what we do. So, I mean, I just. I'll just put that out there. And so for me, it allowed me to, you know, as I alluded to earlier, to say, okay, I realized that the idea of me doing everything did need to change. So me trying to run the firm, be the CEO, do the payroll, do the website, do the social media, meet with all the clients, that just wasn't working. And so, and I will say, like, this is still a. Still in process. So this is what we're working on now. But we hired a consultant, so started working with the Efficient Advisor. I know you've had Libby on your podcast, a really great program, so that the timing of that was. Was great because we had started that, and it just really allowed me to kind of see how I was going to make this happen, you know, so to actually have a roadmap of. Because I really did identify that one of our, I think, biggest issues was the fact that myself and Linda Carroll is her name. She's my business partner. She's part owner of our firm as well. Like, and then we have a longtime staff member, Mara. Like, you know, we were thinking back to, like, when we. When the three of us effectively started the firm, we just knew how to do everything, and everything lived in our head. And so we kind of started this process of, like, we have to really. We're all roughly the same age, and we really need to start to build things in a way that the next generation can take over. And so what started off as, like, I think a process that seemed pretty overwhelming actually became pretty exciting and gave me a lot of energy. And so, like, when I think about what we've been working on and what my goals are moving forward, it's like, for the first time in a long time, I feel like I just, like, I know what I'm doing and I know what we're working towards, you know, And I think that also has allowed me to just be kind of re. Energized in. In this whole thing because, like, all of us get, you know, I think the type of people that are in this business. I think we all love working with clients, and we get a ton of energy from working with clients, and it's great. But I'VE also now gotten just a lot more excited about mentoring and kind of teaching the next generation. So we have six advisors at our firm now, and three of them are younger. And it's just so fun to kind of, like, I guess, show up every day and realize, like, hey, my goal is to teach them how to do all this stuff so that, you know, eventually when I'm just too old to do it, like, they'll know what to do. And I also. So one of the things I do outside of the office is I coach a high school baseball team. And I almost had this thought of, like, it's kind of like going from that player role to coach role. Like, if you're someone that grew up in sports and you were a player all those years, I mean, you know, like, you know, how many times do you watch, whatever, football, baseball, whatever, and see that a lot of these coaches are former players, you know, and they went from being energized by making the great play to, like, now they're energized by teaching and coaching and mentoring the next. You know, so that has helped me because I. I just. It's almost like I've kind of started over, you know, and I just have this new excitement every day. Obviously, one of those young advisors being my son is amazing. He just started in May, so he hasn't been here too long. But just to show up every day and be able to work with him is amazing. We have a great young staff here. That's just. Again, it's just different because I really look at my role differently, and I actually think having that direction is what has made it fun again and helped us get through the unhappiness. For me, I would say that it wasn't a number thing. It wasn't like, hey, we were at 200 and whatever, millions. But, oh, once we hit 400 million, everything just got better because we were at 400 million. Like, it really had nothing to do with the numbers, because we work. We do this with clients all the time, right? I mean, you do retirement planning for clients, and how many times do you meet with clients and you're showing them the numbers and you're like, it makes no sense to you why they're still working? Because you're like, you could retire, you know, I mean, yeah, you don't need to work. But they keep working because they just. There's no direction. It's like, well, yeah, I don't know what I will do in my next phase of life, right? So they just keep working because it's like, I like it, it's fine, I don't mind it. But as soon as they find that next thing they're passionate about, that's when they really enjoy their retirement. Right? And so I think for me it wasn't retirement, but just like officially saying, hey, my role now here is different. Like, my role is now to coach the next generation. Because our long term goal is to build this firm that's going to be around. So, you know, looking at the numbers and you know, again, we're all numbers people. So you look at these numbers and you're like, you wouldn't tell somebody, hey, you, if you can find that next thing that you're fulfilled by, you should retire just because you're fulfilled. Like the numbers have to back it up too. It's like, well, you also have to be able to afford it. And that's kind of the process I went through is in looking at the numbers in the spreadsheet we just went over, it's like, well, hey, the numbers are there. So that's like the whole, you can afford to keep this thing and keep growing it and doing what you're doing. So the numbers back it up and then you put that on top of. Oh, and also I have now found my passion and what I really want to do in this next phase. So those two things together I think are what really gave me the energy to just be really excited about the next however long.

[A]

I'm also trying to understand. So like what, what changed to find the new passion. It was this reorientation to say, now my goal is to have this firm stick around for the long term, therefore I need to be the coach for the next generation, therefore I'm going to get into the coaching part like I do with, with the sports teams.

[B]

Yeah, yeah. Just, just to, you know, and it, I don't know that there was a specific moment I can even point to. I really feel like for us it was just this progression in, you know, looking at numbers again, working at just making our processes better here at the firm. And then you just kind of hit a certain point where you're like, oh yeah. And I do think that when, when a couple of our young advisors started, that helped a ton because just to see the energy that they bring and you just, you know, it's almost like again in coaching when you have a player that you can tell just really wants to get better, right? They're really coachable, they listen to what you say. They, they just really want to learn. It just makes coaching much More fun. So I think a lot of that was just the energy that we have at the firm also with the people that are here. You know, you can tell that, you know, the people that we have here, we just have the fortune of like, they're all in, you know, I mean they, they just, you can tell when somebody kind of has that ownership mentality and that they really care about what we're doing and the people that we serve here. So when you have a group like that too, it just makes you much more excited to, you know, to be involved in that.

[A]

So was this like a, a new round of hiring you did to bring in more young people after you had the revelation of I'm staying, therefore I need to bring in more people to do this? Like, I mean, were there like staffing and headcount shifts that went with this transition?

[B]

Yeah, so we went from, we went, we now have nine people here. So yes, we, my business partner Linda and I, you know, we both realized, you know, we're around 50. And so just thinking down the road of like, okay, and again, I know that advisors will often say, and I hear advisors all the time talk about the fact that like, you're maybe more disposable than you think you are. I don't know that that's fully sunk in with me yet. I do believe it will. But I think for us it was realizing we can't just hire someone and then a year later, like, say, okay, you're working with all the clients now. You know, we just decided that we needed to get some good young people in here now so that we could start training them and mentoring them and having them get to know clients. So by the time we're ready to be done, it'll just be a no brainer, right? I mean it's like, oh yeah, we've known this person for 10 years. Like it's, it's great, you know, so just trying to really get ahead of it. And so yeah, we specifically, you know, we, we knew Aiden was coming, but we specifically decided to hire another advisor. And then we potentially have my, my other son Isaac coming to work here in another year or two and then we have another younger advisor coming to work here in another eight months or so. So yeah, but that was by design to just realize if we're going to do this, it's going to be based on the fact that we need to get the next generation of people in here that are, you know, want to do the work and make it last.

[A]

And then what, what happened to all the other stuff that you were not relishing, the, the, the payroll, the website, the social.

[B]

Yeah, yeah. So what I realized about myself is, and again this is me. I fully, fully could be a lot of people out here that don't think about it the same way I do. But what I realized about myself is that I don't actually mind doing a lot of that stuff. It was just all of it combined with also having to do all the client work. So when you are the one that's having to get ready for the meetings and do the meetings and do the follow up from the meetings and then also at the same time trying to do payroll and websites and whatnot, that's where it gets to be overwhelming. So like even when we went through the process of building out some, some better processes, there's parts of it that I really love. And that whole visionary integrator exercise that a lot of people have gone through, I really love that role of being the visionary and that's exciting to me. And so I don't mind doing a lot of that work. It was just that I couldn't do all of it. I needed to get help. And so even just, you know, at this point we, I still have a pretty large client load. But even just having advisors here now that can help me with the prep work and help me in the meetings and help with the follow up that I don't have to be involved in every single aspect of, of the client service has really helped. And again I, I enjoy a lot of the running the firm work. Like I'm excited to go to conferences and learn things and figure out how we can implement it. And I just realized I needed to, to work differently and not try to take on everything on my own.

[A]

Interesting. So, so if I'm understanding the. You ended up keeping some of the payroll, website social other, other stuff. What changed was when you got more associate advisors to support on the client activity, you just, you freed up time and capacity on the client admin client support related task work which then actually made the other handle the business things not such a big deal anymore to continue to do.

[B]

Exactly. Yeah. And I also realized that I, I love doing a lot of that stuff. So it really wasn't, you know, it's exciting to me. And again all this kind of goes back to realizing I'm not ready to be done. You know, for me this wasn't a situation where I'm just done with all of it and I want to retire and you know, go sit on a beach somewhere. I love Our industry. I love what we do. I just realized I needed to kind of figure out a way to operate differently.

[A]

And I guess I'm curious to hear a little bit more about what it was like going down the road of getting the things. I think I said it was in your head and Linda's head and Mara's head and trying to create more process. I'm going to assume you weren't anti process before, but obviously you didn't have process things, and now you have process things. So what changed? It's like, what did you do? Would you actually do to start getting to the point of having process? Historically, you hadn't had as much process.

[B]

Yeah, you know, I might say that we were anti process before Michael.

[A]

Okay, then all the more like, so what.

[B]

As an.

[A]

As a historically anti process firm, like, how do you, how do you actually change yourselves to be more on the process band?

[B]

Yeah, no, it's.

[A]

It's a hard change.

[B]

Yeah, it was. It was very hard. And you know, again, I would say that something that we're definitely still working on, you know, one of the, one of the big things that happened right in the middle there is this whole, like, AI thing, you know, so it's like, yeah, so also now it's been really exciting to say, okay, what part of our processes can we automate? And so, yeah, so what we started doing really was just documenting everything that we do. So for a while, what we would do, especially with a new staff member, is, you know, we went from the point of a client would come in and obviously we knew what to do, and we just kind of naturally did it and figured it out to the point where we hired. We hired people. And it was effectively just kind of saying, hey, watch us do what we do. Right? Like, and we, for a long time we felt that was okay. But now what we're realizing as the firm grows is, you know, that's not really good enough to just say, hey, we know how to do it. Just watch us do it enough times and then it'll be in your head and you'll know how to do it. We went through an exercise where we, we took, you know, like every part of our business and took every step of what we did and literally just started to document it. And so at first we just started documented on spreadsheets because I didn't, you know, frankly, know another way. And so it was just a matter of, you know, take something like, for example, a new client calls you up on the phone, you know, hey, I was referred to, you I want to work with you. Before, it was just me emailing the client, like, oh, yeah, great. Like, come on in for a meeting. And to where? Now it's like, okay, like, what's the. Like, so there's no point in me writing the same email a million times. So it's like, oh, well, let's take that email. And now we save that into a spreadsheet. And so for the. For a year, what we did is we basically just started putting every step of everything we do into these different spreadsheets. What we're doing now, we actually switched our CRM to Redtail. And so in that switch, we are also building all of our processes into Redtail using workflows. We have someone here, his name's Taran. He's in charge of doing that. So again, that's a good example of I spent the time to create the processes and say, okay, like, here's what I want our client experience to look like. You know, from the minute that somebody contacts us, what do I want this whole thing to look like to them? It was also really important for us to make it consistent because as we grow in our number of advisors, we wanted to make sure that if somebody's contacting one advisor, they're getting the same experiences if they contact another. And so I spent a long time kind of creating these things and then working really closely with Taran to actually help me put them in a form where it can be used by the team. And so again, a lot of that right now is taking these spreadsheets and building these processes into workflow in Redtail. And then also now trying to figure out, oh, like, well, hey, are there any parts of these processes that we can use automations for? So.

[A]

And. And what is Taran's role in context here?

[B]

Taran is our. So he actually started off here as our portfolio administrator. Okay. And I would say that, you know, one of the things I've just been really surprised about in this industry is how I don't think we ever could have imagined, like, the role that technology would play. I mean, it's like, I feel like more and more I'm just running a tech firm, you know, and. And so Taran's role has really changed quite a bit. And that, you know, when he first came on, he was really going down the road of trying to get his CFA and be the one that was going to effectively just be managing the portfolios. And what we realized by just going through some, you know, some work internally was that. And I just, you know, One of the. One of the things that I just learned so much from is that the book Rocket Fuel that a lot of people talked about, and I will admit I don't read. I listen to books, so that's why. Yeah, I just.

[A]

I don't know if Gino Wickman Audio narrates it now, but, yes, it's a fantastic book.

[B]

Yeah, it's a great listen. But just learning that we had everybody in the firm take that assessment that they give. And Terrence background, I just love his background. I mean, he went from high school into the military and, you know, served in the military for a number of years, was in Iraq, and then when he got done, he decided that he wanted to go to college. And he graduated from University of Portland out here in the Northwest in finance, got his mba and really was wanting to go down that track of being a cfa. And so we were supporting him in that and helping him study and go down that road. But I think one of the big things that's changed is we kind of woke up one day and we're like, do you really still want to get your cfa? And it's like he really realized that his strength and his interest and his passion was kind of more in operations. And so he and I both agree that it would be really great for him to just focus not just on, you know, managing the portfolios, but really helping oversee the operations of the whole firm. Yeah, it's been really fun. And, you know, part of that was we, we use Orion. And realizing that in his role in doing all of our trading and portfolio management, he was just in Orion, like, all day, every day. And not just in the trading part, but whenever anybody had an Orion question, they're going to Taran. And so, you know, we just kind of officially said, hey, like, let's just. Let's just change your role. And it's really great because he. He was excited about that. And, you know, seeing him again, for one, he's the kind of guy that will just do whatever needs to be done for the firm. But that really is more in line, I think, with what his passions are as well. And so that. That's kind of how we arrived at that, is just realizing that things have changed in our world. I mean, we. We used to spend so much time on portfolio management and trading and all that. And, you know, as we all know, one of the. One of the things that technology has aided in the most is making all that trading and portfolio management quite, quite a lot less time consuming.

[A]

So. So then catch us up to present. So what, just what does the firm look like overall today in terms of, I guess like assets, revenue, clients, staff?

[B]

Yeah. So where we sit today, we have nine total staff. Uh, we're fairly heavy on the advisor account. So of our nine staff, we have six advisors. Uh, we have, right now we have three senior advisors. We have one lead advisor and two associates. Our two younger advisors, we have been implementing that diamond teams model. So when we hired the two new advisors, Aiden and Savannah is her name. Um, they're starting off as associates and kind of working their way up that diamond. We have three support staff. So Mara's still here, Kylie's been with us for a while, and Taryn that we talked about. We have a total now of around 450 households. As of our most recent billing, our annual revenue is around 2.7 million and we're around 400, 410 million in assets under management. Yeah, so the growth has been, you know, like I said, three years ago, we were about 260 million. So it's been, been, it's been quite a ramp up over the last three years, which has been exciting to see and also kind of fun because if I look at like our five year growth rate, it's been around 14 and it's been fun to see that go up. I mean, our growth rate in the last three years is closer to 17. So, you know, it's always nice to see those numbers increasing.

[A]

And to what do you attribute the uptick in growth activity?

[B]

I think, you know, it's, it's, it's the same story. I think one of the things that I feel like is, I don't know, somewhat interesting about our firm is the fact that we are just the prototypical story of, you know, like I started out of college, just started doing the thing and knocking on doors at Edward Jones, and it just grew referrals. I do. One thing I've noticed in the last three years is I would attribute it to the fact that just having more advisors has allowed us to do more. So one of the things that we've really tried to focus on is what you had kind of just alluded to is the fact that with all this technology, our mindset has not been to use that to just do less, but it's like, how can we use that to be more present for clients and do more? So when I think about the fact that now we have two advisors in most of our meetings, it's just really great because whereas it used to be me or Linda doing our client meetings, but again, being responsible for all the prep and all the follow up is like, you know, frankly, you kind of just ran out of time. And so I just feel like the level we've been able to go to has been so much deeper with adding more advisors to our team because there's just more people helping do the work. And I think that's allowing us to do better work for the customers, clients.

[A]

And so then better work for the clients just, I guess practically is more, more. More clients who consolidate assets, more clients who expand relationship, more referrals of clients coming over like that, that kind of stuff adding up.

[B]

Yeah, I get really excited about creating just an exceptional client experience. I mean, that's the other thing that kind of excites me. And I feel like for us, when I think about our growth, we're not a firm that's really grown through social media and that kind of stuff. We don't have some crazy campaign that's been super successful. It's really just been growing through referrals. And so I've kind of doubled down on this idea of in order to get more referrals, you have to be referable. And in order to do that, you just have to do a really, really, really good job. And so that's what I attribute to is I think our, our strategy has been very specific, but it's not flashy. It's just if we do a better job, then obviously clients are going to talk about us more. And for us, I've just not been able to solve the algorithms or whatever. I mean, we have a podcast that we do that our clients love. We don't get a ton of new clients from it or anything. We do get the occasional client finding us on Google and things like that. That is something that we are trying to get better at. And one of the things that I hope to do as they get more time is just trying to make sure that we're maximizing all the different channels of growth. But for the last several years, it's really just been client referrals.

[A]

So as you reflect on this journey now, what's surprised you the most about just the. I know, I mean, like the 20 year arc of building the advisory business.

[B]

I think the number one thing that surprises me is that technology component that we talked about. I just could have never imagined. Imagine that. When I think about back in the day, like what we all thought we were getting into is just completely different. You know, technology is just, like I said, I feel like we're mostly a technology firm at the End of the day, you know, trying to figure out how to use these things to our advantage and to better our client experience. But I think that's the number one thing that just surprises me when I look back over that 20 year arc is all the things you mentioned about just the number of people and the head counts and just all the stuff we're able to do for people now is fascinating. I mean, just the fact that technology has allowed us to have the time to, you know, when I started back in the day, it was just, you know, talking to people about a certain stock or a certain bond that had a good interest rate to planning. You know, it's like we thought we were different because we did financial planning, right. And it's like, well, now everybody does financial planning, but now it's like you're involved in estate planning and tax planning and everything else and it's really exciting.

[A]

So what was the low point on this journey for you?

[B]

Yeah, we've had, I think for us, one of the things when I think back and I think this is a potentially good lesson for people listening is, you know, we talked a lot today about being acquired. Right. But there was, there was a point in my career where we were and we've actually done a couple of acquisitions along the way as well. And one thing for us that occurred was that we were, you know, I was in the, in the process of building my firm. You know, I left, I left the brokerage world back in. It was 2014 or sorry, 2004 is when I went independent and worked with a group of advisors in town and just really loved it. You know, great group of people there and some really good friends that I'm still great friends with today, but had the opportunity to potentially acquire another firm. But in order to do that, just given the size of my practice, it was not a situation where I, I could stay where I was. In order to do this, I was going to effectively have to kind of leave the firm I was at and go to work for this other firm and you know, kind of be the junior advisor. Right.

[A]

And so like you an opportunity to acquire, if you moved your clients there, became his next generation and then you can like successor into his practice.

[B]

Exactly.

[A]

That kind of structure.

[B]

Structure, yeah, yeah. So I had this like, really just again, I, that, that I, I still just, I, I just owe so much of where we're at today to, you know, the firm that took me in after leaving the brokerage world. Right. And it, it was, when I left, it was good. We left on Good terms, you know, the owner's still a great friend of mine. And, um, we kind of. I remember him looking at me one day, you know, because we're just kind of struggling over this decision. It's like, man, I just, like, we had all these plans and directions we wanted to go, and he's just like, you got to do this, you know, like, this is a huge opportunity. You got to do it. And. And so, yeah, I just went a totally different direction and did that for a while and, you know, like, happens, you know, again. At the time, I didn't really think anything of it. But, you know, now in hindsight, I realize that, you know, go to work for someone who's intending to retire someday and then maybe things change in their life to the point where they, they, they go a different path. And so it turned out that I wasn't going to take over what I thought I was going to. And so after doing that for a number of years, it was like, okay, like, gotta go start over. And, um, in hindsight, it was actually just like a huge blessing in my life because when I think of at the time, I just really didn't understand why it was happening. But it was actually the, the first time in my life that I had to effectively kind of go set my own thing up. Because when I left the brokerage firm, I went to work with this other group of advisors and they kind of had everything set up. And then when I went to acquire this other practice, same kind of thing, like they had everything set up for the first time. It was like, okay, you gotta go put your own sign out and figure out your own technology and your own email and website and all that stuff. And at the time it was, again, I look back on that and I'm like, man, I'm really glad that happened, because if that wouldn't have happened, I would have never been kind of pushed to do that. And then a few years down the road, we actually ended up with the opportunity to acquire another practice, which. That went really, really well. And then when I think of the group of people and the friends that I have here to work with, again, none of that would have happened if that's not the direction that it would have went. So at the time it was, you know, you're, you're kind of just sitting around going, man, I, I had no idea. Like, it's just not what I envisioned, right? I mean, we're all planners, right? And we're just like, everything's planned out and then when it goes a different Direction, you kind of just don't know what to do for a while. So, you know, yeah, it was good, but again, got through it and we're in a better place for it now, so.

[A]

And ultimately it just came down to the, the person you were supposed to success or didn't want to actually sell and get out of the way when the time came.

[B]

Yeah, yeah, things changed. And, you know, he just informed me one day that that was the plan. And, you know, that's. I have no, you know, being a business owner and being where I'm at, it's like, yeah, I get. At the time I didn't get it, but now I totally get it. And, you know, it's. Yeah, it was just kind of that, that same story that you might often hear of, you know, hey, I think this is going to happen, or I'm coming to work here with the intention of buying out these clients and then, you know, owner changes his mind and they're within their right to do that. So. Yeah.

[A]

So what else do you know? Now you wish you could just go back and tell you 10, 15 years ago as you were early in this growth journey.

[B]

Yeah, I think. And again, this. I would think that the answer to that question probably changes based on where your business is at at the time. But I would say for me, given everything we talked about today, boy, I wish I would have started to build those processes earlier. You know, I just think that, you know, if I were, if I were like talking to a new advisor today, I would say from day one, like, just do that work, you know, especially in the beginning when you're not quite as busy. I, I really wish I would have just documented things much sooner, you know, looked at things in a way that, like, operated as if I knew someday we were going to have eight or nine people here, because at the time when it was just a few of us, it would be really hard to imagine the growth and just realizing you're going to have, you know, because, you know, when you're smaller and yeah, it's. You're just working with clients and that's what you're doing and you're putting all your effort into that, not realizing that, hey, someday this is going to be like a real official business, you know, and you got to have things documented. So I, I really, really wish I would have done that. And I really. The other thing I would say that kind of goes along with that is, is just routines and schedules. Just this notion of trying to build out a like, like an actual, like time blocking and just being more proactive than reactive, that, that took me quite a long time to figure out. And I think that's also one of the things I feel like that has helped me move through that period of, you know, I'll call it being less happy is as actually just taking more control of my time and saying, okay, these are the things that I know I need to do every day to be successful. And if I can do those things, I'll be much happier and be able to show up better for my clients and also allowing me to be proactive and take time to work on the business and all that kind of stuff. So both creating processes for the team, but also for myself, because that has also given me a lot more control over my time, which I think that if we have that control over our time, we all feel better about the way things are going. Going.

[A]

So can you share a little bit more detail there? Just, I find like time blocking as a label kind of means slightly different things to different people. Just what, what did you do? Or like, what are you doing now to manage and structure your time differently?

[B]

Yeah, so. Well, for one thing, one thing I'm doing now well, so I'll kind of start like on a more calendar year basis is, you know, mapping out the way we want the year to go. And so we. I actually implemented the surge meeting model.

[A]

Okay.

[B]

That's been huge for me because it's allowed me to have a block of time where I just know I'm doing client meetings. Okay. And then the rest of the year I can fully embrace that CEO role. And so for me, it takes about four to six weeks to get through all of our client meetings. I'm not the kind of person that can do six or seven meetings in a day. Usually, you know, during that time period, I'm doing three to four meetings a day for four days a week roughly. So it's, it's not overwhelming. It still gives me time to make sure that I'm doing other things. But we, we map out like every. Every spring is when we focus really intently on doing planning for clients. And then every fall is when we focus intently on kind of doing that tax stuff and portfolio reviews and things like that. So having all of our clients also on a consistent service calendar, all of these are things that we learned during our coaching program with Libby. So it was really helpful. And then even on a day to day basis, I've realized for me, getting certain things done throughout the day. So every day for me, like I get up, you know, I, I get my exercise in. I have just realized, and especially, you know, if I'm telling my 30 year old self like, hey, this stuff's really important, you gotta, you gotta take care of your body. So. But I've also realized that, you know, if I can get up and exercise and get that out of the way the first thing every day, I just, I just show up so much better for the team and for my clients. And I'm in just such a better mood frankly. And so, you know, to me, like taking the things that are important to you and just not sacrificing, I mean I, I block out that time every morning and like it is, I'm not gonna schedule anything during that time and I say no to a lot of things to just make sure. And I think that when you get to a certain stage, whatever that is for you, you have to block that out and you cannot, like, you can't cave. You know, it's like, yeah, I, I have to do that. I also make sure that once a week, at the end of every week, I'm spending purposeful time working on the business instead of in the business. So I make sure that I have Fridays is that day for me. So even in the midst of my client meetings, when we're in our meeting surge, I still have that Friday to just make sure I'm taking care of, you know, the stuff. Usually when we're in the middle of meetings that, that work on the business thing, that tends to be when I do the payroll and the business, the stuff. Right. But then outside of our meeting surges, it's great because now I have all sorts of time that I can spend on all these projects. So what I'll do is I'll kind of keep like a running list of projects I want to get done for the firm. But it takes the stress off because I'm like, hey, I, it's not like, oh, I'll get to that someday. Like I know when I'll get to it. It's like, okay, as soon as this meeting block is over, here's all the cool things I'm going to be able to work on in between meetings. So.

[A]

So any other advice you would give younger, newer professionals coming into the business today?

[B]

You know, I think a lot of it kind of wraps into what we spoke about. But you know, just that whole idea of time blocking and, and, and making sure that you're, you know, just really being tent about your day because I think that if you start that when you're less busy, it's Just going to get easier to do when you're busy. But I also think, you know, the. Another thing that I would, I guess, really tell young advisors today would just be. And again, this is. I could be totally wrong on this, Michael, but this is just me. I think that right now we have to look at things, you know, and again, I. Another book that I really, really love is Unreasonable Hospitality. And again, that was something also that kind of clicked in this journey over the last few years is just the fact that, you know, as we spoke before, when we first started, like, no one was doing planning, and then everyone was doing planning and, you know, and now, like, even the levels of planning everybody's doing is great. I've kind of flipped the switch to realize that, like, we're. We're not really in the service business, we're in the experience business, you know, And I think that really trying to give your clients a really great experience is what's going to set you apart. Because everybody gives great customer service, or at least everybody says they do. Right. And I do think, I think in our industry in general, you know, when I'm around other advisors, it's like, yeah, the group of people that are in this industry are people that truly care and want to do the best for clients. So everybody's given great customer service. Right. But I think if you can kind of go the next level and give your clients that great experience is going to help set you apart.

[A]

So as we wrap up, this is a podcast about success. And just one of the themes that comes up is that that word success means different things to different people. Sometimes it changes for us as we go through the journey. And so you've had this wonderful growth journey with the firm now, as I think you highlighted kind of a new inflection point of growth as you're crossing 400 million of Aum and the team has expanded. And so the. The business seems to be in a wonderful place now. How do you define success for yourself at this point?

[B]

Yeah, I think for me at this point, and it's really shifted because for the longest time, success was just watching those numbers. Right. Because I think that for a lot of us, we just have these notions of, or what is ingrained in this is like what's quote unquote successful, you know, and it's like especially being in a firm and, and what you're doing for people's investing their money and. Right. Like you're supposed to make them money. That's what you're hired for, is to do planning and Invest well, so the clients earn money. And it's just that's what is ingrained in us from when we start our career. So it's really hard for us to not envision success just being growing, right? Like more clients, more aum, more this and that. Again, I do think that is one of the things that has shifted for me greatly and just allowed me to be much happier is to realize that at this stage of my career, success is building an environment that other people can be successful in and other people can flourish in. So it's kind of back to that coaching notion is the success for me anymore is not getting a hit on the baseball field. It's creating a really good environment so that my players can be successful and they can get a lot of hits, you know, and it's the same thing that I've tried to implement here, where what makes me happy and feel great is watching our young advisors do well and do great in client meetings and bring on new clients and watching them kind of build the businesses they want to build. And so, you know, for me, when you ask, like, what's success to me? It's up to me to build that environment, you know, so as the owner of the firm, I have to create an environment and build a team and give them the right training to allow them to do those things.

[A]

I love it. I love it. Todd. Well, thank you so much for joining us on the Financial Advisor Success podcast.

[B]

Thanks for having me, Michael.

[A]

Want even more ideas, tools and resources on how to break through to the next level of success as a financial advisor? Check out the leading financial planning industry blog, Nerd's eye view at www.kitces.com, where Michael covers the latest practice management trends and financial planning strategies. And by joining the members section, you can earn IMCA and CFP continuing education credits along with exclusive member content. Get it all now at www.www.kitsis.com.