Today we speak with Rick Bennett, the founder of Durbin Bennett Private Wealth Management. He is going to tell us exactly how he built a wealth management firm from scratch to over $1B in assets under management. He tells us why having a vision is so important to getting your first clients, how to build a network that refers, and how to leverage your time to find scale in a service business.
Summary For How To Grow A Service Business:
- Have a clear vision of where you are going – something exciting that people can believe in.
- Become an absolute expert in whatever you are doing – it will help you land the big names you want.
- Get early adopters sold on your vision and use that vision to your advantage going against bigger competitors.
- Use leverage to build margin into the business that can help you compete and scale.
- Build a referral engine by giving value without an expectation of return
- Use marketing and branding once you’re going outside of your network for customers
Interview:
Chris: Tell us how you decided to let go of the security of a great job and go off on your own?
Rick: My partner Brent Durbin and I were part of an international firm, PricewaterhouseCoopers, that saw our Austin outpost as insignificant. We were in the midst of the S&L loan crisis and one of our biggest competitors in town was Ernst and Young and they were taking clients from us left and right. Our managing partner would drive down from Dallas once a month and ask us to fire more people. We just hated having to do that. We could see the writing on the wall for our firm because in the 80’s, Austin was decimated. We announced our resignation and went out on our own. We figured that if we were going to fail, we’d rather do it on our own.
We started Durbin Bennett in 1987, three weeks before Black Monday. Day one, I went over to an old client of mine and asked if we could lease two offices for my partner and I to set up our new tax firm. They gave us a sweetheart deal and we were off to the races.
Chris: As a small business consultant here in Austin, one of our favorite questions is, “How did you get your first customer?”
Rick: Our first customer is now one of our very largest clients. This was a family with significant wealth and the patriarch of the family acted as CEO of the family office. He was a client of ours at the old firm. I had announced to all my clients that I was moving on to do my own thing and this guy actually reached out to me and asked for me and my partner Brent to come down to his office and show him our business plan. Because we hadn’t actively asked for the meeting, he requested it, we were in the clear competition wise.
The problem was that Brent and I didn’t have a business plan. We stayed up all night trying to figure something out. We got this little Excel spreadsheet and we showed up to the meeting with basically no sleep. It ended up going perfectly and they moved all of their tax work over to us.
Chris: For all our service business owners reading this, how did you land such a big client with such a small firm?
Rick: They loved entrepreneurs. They loved the spirit that we had and they wanted to support us. I think that’s the key advantage that any smaller service business has against the big guys. You can put your heart and soul into these clients and they can feel your passion. You have to use that to your advantage.
After our major client, we started hearing from other old clients from PwC and had more and more clients switching over to our firm. Something to note is that in 1990, Austin was a small town. You didn’t really have to do much advertising. Word of mouth spread pretty quickly and the circles people ran in were small. But we did have a strategy for closing new business that i think is worth sharing.
Brent and I were extremely different people. I was the gregarious rapport builder and Brent was the details oriented serious guy. Brent and I went on every single sales call and follow up meeting together because we figured, between the two of us, one of us would always connect with the prospect.
We were shown the power of differences by a business coach that we hired early on. Together, Brent and I are a very powerful team, but individually, not so much. We are fond of saying, “If it was just Brent, no one would show up to work, and it was just me, nothing would get done.” But the combination of these personalities created a dynamic that was very powerful for connecting with people.
While I was a tax guy, my heart was really in wealth management, so in 1990, we started the wealth management side of the firm. It was an obvious integration and the two services work really well together. Brent loved tax and came from a family of CPAs and I wanted to focus on wealth management, so that’s how we divided and conquered. We went back to our first client from when we started the tax business and he became our first $5M in assets under management. Because of our tax business, we were starting to be introduced to more and more high net worth individuals because we were doing a lot of options exercising work for tech employees in Austin.
We did take a big risk to try to supercharge the wealth management side of the business: we hired a guy that had a serious reputation as a wealth manager. We thought he was going to bring his book of clients over and that all of our tax clients were going to hear about him and it was going to be a boon. None of that happened.
Chris: Most small businesses have a do or die moment early on. What was yours?
Rick: We got to about $20M in assets under management, and we had some tax clients. And we had hired some advisors and gotten a better office down on 100 Congress. But the numbers were getting very clear. If we didn’t scale faster, this was never going to be a profitable business worth the effort. And because I knew everyone in town, there were 8 clients that I knew we had to get in order to hit the scale we needed to hit.
If we couldn’t get at least 6 of those eight clients, we were going to have to shut this firm down. So I wrote the names of the 8 target clients I knew we needed to get on a post it note and taped it to my computer screen.
These people were influencers in town and were wealthy and had strong relationships. If we couldn’t get them, we weren’t going to make it in Wealth Management. These were all people that I knew but I hadn’t put it all on the line and asked for their business yet. So I finally called each one of them and set up a meeting.
Chris: How did you walk the line of asking for their business but not violating their trust and friendship? A lot of business owners are scared to ask their friends and network for business. How did you do it?
Rick: I told them I wanted to give them a vision of where we’re headed with the firm. I told them our story, told them about what we were trying to accomplish. I told them about our independence and how we were going to do things differently than the big guys. And again, they loved that entrepreneurial spirit. We didn’t try to compete on price. We didn’t try to do things for less. Because we were able to get that vision across, we ended up getting 6 of the eight clients exactly. This put us around $60M in assets under management.
Chris: Then you grew from there through a lot of referrals and networking. Can you tell us your process for referrals and networking?
Rick: We did a great job of regularly reminding our clients that if they knew anybody we could help, to let us know. We would inform clients that we were completely dedicated to working with them on an independent basis and that we have this vision and we want more clients that are like our current clients because they were the ideal client. Really, our early clients were sold on our vision and our business model and we got them to help spread that vision. They became our ambassadors.
“The secret sauce to networking is being willing to connect people with each other regardless of whether it helps you or not. I am known as a networker at this point because I love meeting people, and I love hearing what they are doing. Once I get a grasp of what they are doing, I immediately start running through my mind and trying to figure out who to connect them to.”
Chris: What is your advice to business owners currently growing in Austin right now that haven’t quite hit escape velocity yet?
Rick: You have to have a passion for whatever you’re doing. You have to want it more than anything. If you don’t have that passion, then I would say, don’t do it. But if you are, pour your heart and soul into it, whatever it is. If you are that passionate and committed, the belief and commitment is infectious. People can tell. And it will be much easier to find your early adopters that will help carry your business to the rest of the community.
Chris: As an investor and operator in service businesses, what’s your thoughts on them as a business model?
Rick: Tax was very much a one dimensional business, where you got a fixed amount of money for a fixed amount of time. You were trading time for money. It was a great business and you could have a nice livelihood from it, but it was really hard to leverage. That’s why I was obsessed with wealth management. It could be leveraged and was a dynamic service offering with multiple right answers..
Chris: Can you share what you mean by leverage in a service business?
Rick: Here’s an example. We have an investment committee and on that committee are active members and partner members. The process that the investment committee has created and continues to iterate on is extremely deep and sophisticated. That small group of people is able to manage over $1 Billion in assets under management. They do need support from our client ops team but that’s leverage. We have advisors who work directly with clients on their goals which is the heart of our business but you can’t leverage that personal one on one relationship. So you get the leverage from the investment committee’s ability to service all of those clients by having a sophisticated, flexible investment model that can be applied across different clients’ needs. You are leveraging a skill set over a large number of clients. By doing this, you have more margin and resources that can be spent on investing in the more one on one service aspects of the business, like hiring the absolute best advisors.
Let’s take another example: say you are a business coach. We worked with a business coach early on and it was absolutely critical to our success, by the way. This guy was a genius at taking concepts, refining them, and turning them into workable products. If you can do that, then multiple people can be using your products at the same time.
You can’t be coaching two different clients at the same time in person but two clients can be using your template or worksheet. That’s leverage.
Chris: A lot of business owners come to our small business consultancy in Austin after they’ve hit that plateau of growing through their own network to learn what to do next. Once a business owner has tapped their network and sold their vision to everyone they know, how do you grow from there?
Rick: Once you have exhausted your network and everyone you know, knows what you do, then it’s time to invest in the brand. We decided that we needed our brand to represent what our vision was, not where we were. Meaning, we wanted to look like a firm with $1 billion under management, not $100 million under management. We were CPAs so marketing wasn’t our strong suit. So we needed help and we got outside help from branding professionals. This helped us reach out to strangers and portray the level of service we were providing. But the basic solution is that once you need to reach out to strangers, it’s time for marketing. Back in the day in Austin, it was more about networking and speaking at groups and sponsoring events. These days, there is a much stronger focus on digital marketing.
Finally, we have always believed that you have to be an expert at whatever you are doing. That’s how you are going to land the major clients that ultimately will help you grow your business. When you go after those big names that you know will put your business on the map, they are going to cross-examine the heck out of you. They are going to do their homework. And you need to be an expert to get those clients. Once you do, the rest is gravy.
Chris: Any other thoughts on ways to build that referral network you were able to create?
Rick: Brent was an absolute genius with tax but he didn’t want to go out to social events like I did. Instead, he connected with great attorneys and other professional service providers and told them, “Hey if you have a question, just feel free to call me. I’ll either give you the answer or I’ll look it up and get it back to you, free of charge.” He became a go to resource for these people and that built some incredible relationships that ultimately led to a lot of introductions to new clients. This was only possible because he was an expert.
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