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Julie Littlechild:       
Welcome to another episode of Becoming Referable, the podcast that helps you be the kind of advisor people can’t stop talking about. I’m Julie Littlechild, and on this week’s show, Steve and I speak with Randy Gerber. Randy’s someone I reference a lot in my work, so I was really excited to talk to him about his work. Randy is the founder of Gerber LLC, which works exclusively with first-generation entrepreneurs just like him, and their offer extends beyond financial advice to really look at the issues that connect life, business and finance.

Now, one thing you’ll notice is that Randy gets two things very right, among other things, of course. First, he has a very clear understanding of why he works with this target group, and second, he’s built his entire business around their unique needs. None of this happened overnight, so we talked to Randy about transitioning to a business with this level of focus, and of course, we talked to him about the impact on referrals.

Randy is a member of the Raymond James Financial Services Leaders Council, has been a part of their executive council, and is a two-year member of the Chairman’s Council. With that, let’s get on with the show.

Well, Randy, thank you so much for taking the time today. Very excited to talk to you.

Randy Gerber:
Happy to be here. I enjoy this.

Julie Littlechild:
You know, I have been stalking you, as I’ve told you, for some time, since I discovered what you were doing around niche markets. It’s been, to me, such a great example of how this can be done well, and I’d love to talk to you in detail about that, and of course, the impact that that has on making you referable, as well. But maybe we can just start and tell us a little bit about your business.

Randy Gerber:
Sure. We’re a professional service firm exclusively advising first-generation entrepreneurs. We got our start in what I would call traditional financial planning and evolved into wealth management, and realized over time that the clients that we can serve the best and we enjoy serving the most are first-generation entrepreneurs. So, we’ve really redesigned our firm around dispensing advice and services specifically to that group of people. We are pretty disciplined about exclusively advising only that group of people. We went through the process in 2004, again in 2007, of politely and professionally moving folks off our books that weren’t ever going to be first-generation entrepreneurs, or were not. Since about 2008 we’ve been very careful, only taking that population as clients.

Steve Wershing:
Can I jump in and ask a question about that, because you bring up something really important, it’s a question I get all the time. That is, if I focus on a target market and develop a niche, will I lose the clients, will I alienate the clients who are not in that niche. But you took affirmative action to move them off. Can you tell us a little bit about how you did that and how it affected the business, and what that was like to go through?

Randy Gerber:
Well, actually, the first wave was really easy. The clients that we didn’t find very respectful to us, we asked them to leave first. And that was about $20 million at a time that we had about $280 million assets under management, so it was a pretty big chunk of change. Through that process, we started the process, it was interesting to watch my staff, how relieved they were to see me take action against people who were most problematic for them. It actually had this very counterintuitive sense of relief to it. Once we went through that first wave of people, the second cut was harder, because the people that we liked a lot, and people that had bet on us when I was starting out. But at the end of the day, it was a fairly easy message saying hey, we’re making this shift, and I’m not sure we’re the right firm to serve you going forward. We had identified a couple of other firms that could easily pick up where we left off, and with the exception of really, one client, everybody understood and they were fine and gracious about it. We got a lot of thank-you’s and not much blowback at all.

Steve Wershing:
Where did they go? What did you do with them?

Randy Gerber:
We had identified three other advisors in the Central Ohio marketplace that we literally talked to them in advance and said would you be willing to take these type clients, and of course the answers were yes, so they all moved on.

Julie Littlechild:
Randy, there’s a couple of things in almost the first sort of sentence and how you described your business was we’re a professional services firm. That’s a little different, obviously, than the way a lot of advisors are going to describe themselves as financial planners or financial advisors. Can you describe what you mean when you use that term?

Randy Gerber:
Yes. We do so much more than financial advising or wealth management. We get involved with companies, helping them understand their cash flow, their capitalization, their leadership team compensation systems, developing strategic plans, understanding the product mix, understanding how their finances relate to their personal situation, so, it’s so much more than simply when one says financial advisor or wealth management. It’s so much more, and our experience was a couple-fold. Number one, we kept getting, our clients themselves were telling us this is way more than financial planning or wealth management. This is business consulting, this is life coaching. We knew that because we’d been doing it for so long, but we were a little lazy, possibly, about changing the wording of what we do. At the same time, we also found ourselves in situations that, you know, you’re out and about and you meet somebody who says what do you do for a living? I could say we’re a wealth management firm exclusively advising first-generation entrepreneurs, I can see that I would lose them at the term wealth management. They just would stop. If I reverse it and say something to the effect of we exclusively advise first-generation entrepreneurs, they’re all attentive, and then say around wealth management matters, I’d lose them again.

So, we finally said let’s drop the whole wealth management piece and just say professional services firm. My opinion, it’s inclusive of what we do, of course, but it’s also other things. And what happens when you articulate it that way, there’s always a second, third, fourth, fifth question.

And the truth of the matter is, when you look at what we do, and that’s interesting, the asset management piece of it and the financial planning piece is critical and crucial and I would argue it’s the cornerstone of what we do, but in terms of, you look at the amount of time that we spend with the client and the amount of time the client wants to spend on that topic, it’s a smidgen compared to everything else that we do. I felt like, why emphasize that in our title when the reality is, when you look at the broad range of services we provide, it really is, in terms of time spent, a fairly small part of what we do.

Steve Wershing:
I’m so happy to hear you say that, because so many firms cling onto that wealth management term, and partly because there is no generally agreed upon definition of what that means, but it comes with a lot of baggage in terms of the client’s point of view. It’s so great to hear that you figured that out and you’ve figured out how to describe yourself in a way that’s more meaningful for the client.

Randy Gerber:
Yes, I think so.

Julie Littlechild:
And I just wanted to clarify, in terms of how you charge, is that an entirely asset-based fee, or how do you ensure that you’re compensated for the work that you do?

Randy Gerber:
I’m my own registered investment advisor, and we have our contract with our clients that we charge a flat annual fee for services rendered, which includes what we call a traditional financial planning review, then we get into the business review of the company, and also an annual, your tax relationship with your business. And that generally is a minimum fee of $12,000 a year, regardless if you invest any money with us or not. And so, we have a separate asset management fee, as well, but we actually have something along the lines of 15 or 20 clients who have no money invested with us at all, who are simply paying that fee.

If you look at our clients, it’s interesting. Our new clients last year, I think we brought in 16 new clients last year. Half had net worths of over, I’d say $15 million and investable assets certainly over $5 million. We had one at, I think, $25 million. And then the other half had net worths probably in the $2-3 million but no investable assets at all. So, it was a very extreme new client acquisition for us. We didn’t have many people right in the middle. It was either nothing to invest but they were paying the fee for the business, or they had substantial assets and we’re working on a different set of matters for them.

Our process is the same for all the clients we have. We emphasize different points depending upon where they are in their business life cycle.

Julie Littlechild:
Some of our listeners may have noticed that you’ve referred to first-generation business owners. Can you talk to us a bit about that very specific definition? Not entrepreneurs generally.

Randy Gerber:
Can you repeat that question? We refer to them as first-generation entrepreneurs.

Julie Littlechild:
Okay, so as opposed to second-generation. You’ve been very specific in who you work with.

Randy Gerber:
Yes. We have learned, over time, that first-generation entrepreneurs really do view the world differently than most. They make similar mistakes, they have the same anxieties, pretty similar fears, pretty similar motivations, and those are very different than second- and third-generation. In fact, in my opinion, I wouldn’t consider myself a subject matter expert on this, but my perception is, many times, the second generation, you don’t know what you’re going to get in terms of what their motivations are, and are not necessarily consistent from one second-generation person to the other to the other to the other. And so much of that has to do with family dynamics, birth order, size of the business, who all economically is benefitting from the business. Where the first generation is very simple, very straightforward. So, we’ve developed a lot of content and a lot of insight around what motivates a first-generation entrepreneur, and also what their concerns are and the mistakes they make over and over again, that, generally speaking, we can help them get ahead of those mistakes.

The other interesting thing about it is that, first-generation entrepreneurs are pretty lonely folks. They don’t have many people to turn to for advice. Let me rephrase that. They don’t have the right people to turn to for advice. A very, very common mistake they make is they turn to the people they care about and care about them for advice, but those folks typically don’t understand what they’re talking about. They’re not first-generation entrepreneurs, they haven’t been there, done that. So, they’re giving advice to people they care about, but it’s generally the wrong advice. So, there’s no natural ecosystem for these people, and we really will envelop them into our process. And number one, our clients are a community of first-generation entrepreneurs. Number two, we’ve developed relationships with all kinds of different professional service firms who understand how first-generation entrepreneurs work, so we can immediately surround our clients with an ecosystem of people who understand what they’re going through and can help them make the right decisions.

Julie Littlechild:
I don’t know if the answer to this is obvious, but let me ask how you think about it. We were talking about becoming referable, and I want to dig into exactly how your business is different, for this audience. But how do you think this approach makes you more referable?

Randy Gerber:
Well, first and foremost, our client base understands what we do, so as they see other first-generation entrepreneurs, they tend to be a little more passionate about referring us to them, to their friends. So, again, I’ve been doing this since 1991, and in the beginning, we did financial planning for anybody and everybody, and so I’ve experienced referrals from a whole variety of folks. There’s a degree of difference, for sure, around getting referrals today than what I did 20 years ago, around, these people know what they’re doing. We can get access to people who we couldn’t get to before.

Number two, and probably more important than that, is the professional service firm referrals, the lawyers and the accountants and the insurance agents. We continue to work hard at educating them to what we do, because they are far more passionate now about referring us than they were before. It used to be that a lawyer might refer two or three advisors. That’s not the case anymore. If they have a first-generation entrepreneur client, they say you’ve got to talk to this firm. For a while there, I was positioning it to the lawyers that, look, if you have a first-generation entrepreneur client, you’re being reckless by not having them at least talk to us. Because we know much more about what that person needs than the average person does.

Julie Littlechild:
It’s an interesting turn of phrase there, because I don’t know that I’ve heard that where it’s, you’ve got people who are passionate about referring. You don’t usually hear that with professionals, right? It’s more, I’ve got somebody who’s got this need, but now it’s almost like they’re out there looking to help their clients. That’s really cool.

Steve Wershing:
And I think that goes back to something, Julie, that you and I talk about, which is, you know, people refer because it helps their friend. People refer because it’s an opportunity to solve a friend’s problem. And if they see somebody as potentially useful and maybe a good contact, then they’ll mention somebody. But if they really believe that this is the person who will solve their friend’s problem then they’re going to be more passionate about it. I think that’s excellent proof, and Randy, it’s a great way to have positioned yourself for that.

Randy Gerber:

A simple analogy is this. If you’re friends with the best cardiologist in the country and you’ve got a friend who’s got a heart problem, you’re going to be really passionate about referring to that cardiologist. I mean, it’s the same thing. It feels different because one’s a medical need versus a life need, but it’s really quite the same thing.

Julie Littlechild:
Yes, absolutely. So, let’s talk a little bit about what this means to your business. You’ve got this focus on first-generation entrepreneurs, how does that then manifest itself in terms of your offer, your infrastructure, your team, I know that’s a lot, but maybe you can walk us through that.

Randy Gerber:
Well, the fundamental, I could spend three hours answering that question for you. (laughing)

Julie Littlechild:
And in three minutes—(laughing)

Randy Gerber:
The fundamental issue is that our whole service offering is rooted around helping the first-generation entrepreneur understand what does the business mean to them today, and what does it mean to them tomorrow. So, when you think about today, there’s the simple functions of what does a business need to do cash flow-wise to support all of your goals, what’s your emotional relationship to the business and how does that compete with your marriage and your children and your investment and your personal time. And so often, the first-generation entrepreneur just can’t see the forest for the trees. We help them really understand what that means today.

The second piece is, what does it need to look like tomorrow. So, as you get older, as you have, maybe, less energy, or said another way, more distractions, the stakes with your children are higher, the stakes with your marriage are probably higher, and you have a need for this business to provide a permanent monetary value that supports your life, at some point in time, independent of the business. They just don’t understand the relationship between those two data points, those two time zones. So, we really help crystallize for them, hey, here’s where you are today, here’s what needs to change immediately, and then secondly, here’s where we need to go in order to support everything you want to do. So much of it is rooted, and I think there’s a lot of great advisors out there who do a great job, but what I’m going to say next, is so much is rooted in what are your life goals.

I think we do a great job extracting, at a rudimentary level, what are your life goals, and what are the entrepreneur and then the spouse, and make sure they’re on the same page. And then how does the business align with that. So, we’ve been there, done that, we’ve seen it a zillion times, and so we can see how usually this stuff plays out. Anyway, our service offering is rooted around helping people accomplish that understanding of where they are today and where they’ll be tomorrow, and then also playing defense. So often, first generation entrepreneurs are pushing so hard on moving forward, they’re not looking at some obvious speed bumps they have in front of them today. So, we help identify what those are and then fix them, and every year, we evaluate now what are your risks you have, and help eliminate those risks, or eliminate them for the client, and keep playing offense, too, keep growing the business in the fashion that they’re still being a great parent and still being a great spouse.

Steve Wershing:
How do you make the bridge between the business goals and the personal goals? How do you bring those together in your process?

Randy Gerber:
Well, it’s so funny you say that. You know, that’s one of the things that first-generation entrepreneurs have in common. They can’t differentiate them in their life, either. So, it’s not very hard to identify them. Years ago, I heard Marcus Buckingham speak, and he talked about the idea of you should only do those things that you’re best in the world at doing. That’s at least the message I heard. And it clicked with me that we keep hearing about this work-life balance thing, and the reality is that, balance, if you think about a teeter-totter, balance means one’s up, one’s down, something always has to give. And the reality is, it’s really about integration of all those things that are important to you in your life and things that you’re great at doing.

The first of which is identifying what are those things that the entrepreneur is great at doing, what are those things that they want to be great at doing, and then, more importantly, what are those things that they’re not very good at doing and getting them off their plate, whether it’s in the business, at home, it’s other. And help them integrate their life together. A simple example would be look, if you need to go to a conference in wherever, and it’s coming at the expense of missing some family time, take your family with you. Don’t fight it, integrate it. Rearrange your schedule so you can go to your kid’s lunch at school on Tuesday’s, or whatever the case may be. We spend a lot of time around helping the entrepreneur and the spouse, getting them on the same page with what are those most important things they want to do, and integrate them so that there’s no competition. And the second piece is, eliminate those things that need to go.

Julie Littlechild:
This is such an—I mean, we’re all entrepreneurs here, so I’m sure we can all, and everyone listening can relate to how important, and just even, frankly surfacing these conversations, which very few people do when you’re just talking about money. And yet, this gets to the heart, in my mind, of what matters to so many entrepreneurs. But let me pick up, because you’re talking about your offer, which extend, all of these conversations, I think, are part of your offer, but you’re going beyond that as well. You mentioned to me earlier about this emerging entrepreneur program. Can you tell us a bit about what you’re doing there? I think it’s really very cool.

Randy Gerber:
Sure. You now, we recognized that we still have, occasionally, a perception problem out there with what is it exactly we do, and so sometimes, when it was appropriate for a company to hire us, they maybe hired Merrill Lynch or somebody else because they didn’t fully understand what we did. We decided to change the game and really provide an offering for businesses that would ordinarily be a little small to hire us. It’s a $300,000 to $2 million business, and it’s got nothing to do with securities, nothing to do with insurance, and it’s all rooted in helping—you know, four in five businesses fail within five years, and we don’t have proof yet around the changes. But we’re trying to say that if you go through this program, your odds change that one in five will fail. So, it’s rooted in business topics and more importantly, sequencing.

As an example, the first session, which all sessions are once a month and they last four and a half, five hours, and they’re in a classroom-based environment. The first session, you walk away with a written, executable business plan. The second session and really fundamental to entrepreneurs and this growth phase is, understand the difference between cash flow and profit. They just don’t get that. They look at their financials and say, “Well, we’re profitable, but where’s the cash.”

Steve Wershing:
We’re profitable, but we can’t pay our bills, correct.

Randy Gerber:
The third session is developing good financial habits and financial reporting. Fourth session is capitalization and financial modeling, fifth session is deliberate culture development. The sixth is marketing and pricing of your product and service. Seventh is operations, and etc., etc.

So, it’s a program that you go through, and really, we clean up the issues first, clean up the problem areas first, take away the biggest risks. And, by the end of it you’re able to play offense and really try to focus on scalability and growth. By the end of that year, it’s a real simple experience. It’s what’s next, how do we hire, what do we do now? So, there’s zero resistance into joining us as a normal client, what we call our established entrepreneur.

Julie Littlechild:
Very interesting. Is this just something that’s available to any entrepreneur who fits into that revenue range?

Randy Gerber:
It really is. We have deliberately not said first generation only, because we feel that there’s a universe of folks that, if you’re that small of a business and you’re second generation, you actually might be thinking like a first-generation. But, yes, any entrepreneur who’s in that revenue range is welcome to join.

Julie Littlechild:
One of the things that’s very tactical and specific that I’ve noticed about your business is, the website that you’ve built. You know, Steve, we always talk about this notion that the website really is that welcome mat and you need to arrive there and know that this is exactly the right advisor for you. And I would say that you have done that, and we’ll make sure we put links up so people can see what you’ve done, but in a very specific way. Can you talk us a little through the strategy around what you’ve got on the site, how you think about your messaging?

Randy Gerber:
Yeah, so, we want it to be clear that our focus is first-generation entrepreneurs, and just at a minimum, that when there’s somebody who’s thinking about hiring somebody like us, they land on our site, they recognize that we are, in fact, different, and that we do understand what they’re going through. The second thing, which we’re getting better at doing is putting out content to—it’s one thing to say that you focus on first-generation entrepreneurs, it’s a second thing to prove it. Because they do need a lot of proof around that you know what you’re talking about. That population, specifically, is they really do need proof around I understand, they believe you can help them. So, we’re putting more and more content out there around certain topics that we’re doing that really prove we are experts. And lastly, we’ve been doing more and more public speaking, and more and more public workshops. We’re using the website as a tool to promote those, as well, and reinforce that again, we know what we’re doing.

Julie Littlechild:
One of the things, I’ll ask you if this was intentional or not, but something that really struck me is that when you go to your website, it seems clear why you work with this target. I feel like you have a passion for it and it comes through. And the other thing I would say, now correct me if I’m wrong, I don’t think there’s a single photo of you and your team standing in front of your office as a group, looking highly uncomfortable. There’s sort of a, I wouldn’t say casual, but it’s almost like your personality comes through in the photography and whatnot. Did you work with somebody who helped you with that? Did you have a vision for that?

Randy Gerber:
You broke up about a third of the way through what you were saying. I really didn’t hear the question. The last thing I heard you say was that we don’t have any photos of us in a group standing, looking at—

Steve Wershing:
You know, stiffly in suits, looking at the camera.

Randy Gerber:
We’re casual, and we try to be, I’d say we’re ourselves and we don’t believe in a lot of that pomp and circumstance. We did have a picture at one point up there of us building a pyramid and I think somebody said, maybe that’s a little too casual.

(Laughter)

Julie Littlechild:
You found the line. That’s good.

Steve Wershing:
Although I can think of one firm in specific that might do something like that. But it strikes me that the pictures on your site look to me like you dress and you’re posed the way I would expect to see your clients when I walked into where they work.

Randy Gerber:
For sure. That was a very deliberate choice. We look and feel like our clients look and feel. So, when they walk in our office, and our office is very different, the physical structure of it is very different, they know that this is home. They feel at home. We hear this 100% of the time. When somebody walks in here for the first time and says, “Wow this feels great,” or “This feels great.” Or “This is cool.” We dress the way our clients dress, and we do the same things they do. That’s part of the beauty of working with that population of folks, they’re fun people, they like to have fun, they like to push life, and we’ve designed our complete service offering around that. I think there was a question around did we get help to do that, professionally. I mean, I knew, intuitively that we needed to look and feel like our clients. We did have somebody help us with the colors and some of the specifics. But the notion of—one of the things that when you walk in here, first thing you notice is that we don’t have any drawers anywhere. Literally. It’s very open, very transparent, you see everything. That was very deliberate. I wanted out clients to come in and say this place is transparent, nothing is hidden. It’s all out in the open.

Julie Littlechild:
Awesome. So, I know we’re getting close to time, although frankly, Steve, you probably agree, we could probably go on for hours on this. I just, there’s some conversations, which I just love where you can see the strategy really coming to life. And it strikes me that doing that just takes a good dose of courage and confidence to say, yeah, we’re not going to work with everyone and we’re going to make changes that are for this group. Absent of making those tough decisions, you just don’t get the same kind of result, so really appreciate that about your business.

Randy Gerber:
Let me add something about that. I think that you have to be sincere about working with the people you work with. So, for me this whole thing started with a very simple question that happened in March 2000 when the Market was crashing, it was really my first big market crash in the business. I was paying attention to my emotional reaction to it, and our clients’ emotional reaction, and I really asked myself the question. At the time I was, I don’t know, 30 years-old or something, not even that, and I said gosh, if I’m going to be doing this the rest of my life, who do I like working for? And I spent a year really studying who was it I enjoy working for, and the second obvious question was who don’t I enjoy working for. And so, for me, this was a very selfish choice. This was about me being happy in my life first and foremost. I’d love to tell you that it was brilliant, strategic and I figured out the economics and we went with it. That wasn’t it at all. It was strictly rooted in who do I like working for, who makes me happy, who gives me less stress. And that was the population that, for me, worked.

So, any advice that I would give anybody listening to this podcast would be, be sincere. Who do you like working for? Who do you identify with the most? Who gives you the most happiness and joy? And then, when you think about it in those terms, there really isn’t much courage or bravery any more. It becomes natural. But you’ve got to start from a fundamental place, versus who can I make the most money from. That’s poor grammar there, but, you know.

Julie Littlechild:
Look, I couldn’t agree more. It’s part of the premise of the book I just wrote that it starts with personal engagement. And then, the irony, of course, is it does tend to have a financial impact that’s positive when you do that.

Randy Gerber:
Sure. Because you love it.

Julie Littlechild:
Thank you so much for sharing that.

Randy Gerber:
You’re welcome.

Julie Littlechild:
We’re going to wrap up because I know we’re at time. Is there just anything else that you wanted to add before I do that, about the future of your business, or advice that you have? I want to make sure I capture that.

Randy Gerber:
The advice piece, I think I just gave. The future is along those same lines of who do you enjoy working for. One of the things that dawned on me about three or four years ago was, at the time we were focused on our established entrepreneur client, the emerging program hadn’t started. But it became clear to me that we need to serve the life cycle of a first-generation entrepreneur, from the start-up phase to emerging to established to legacy. From our business perspective, I think, within the next five years, you’ll see us build out that whole life cycle, and we’ll have products for each one of those populations that are very tailored and specific to them. I hope. So, that’s the plan, at least.

Steve Wershing:
That’s great.

Julie Littlechild:
That’s wonderful. Thank you so much for your time, again.

Randy Gerber:
Thanks, you guys.

Julie Littlechild:
I know people are going to get a lot out of this, and take care.

Randy Gerber:
You too. Talk to you soon.

Julie Littlechild:
Hi, it’s Julie again. It was great to have you with us on Becoming Referable. If you like what you’ve been hearing, please do us a favor and rate us on iTunes. It really does help. You can get all the links, show notes, and other tidbits from these episodes at BecomingReferable.com. You can also get our free report, Three Referral Myths That Limit Your Growth, and connect with our blogs and other resources. Thanks so much for joining us.