Special Edition with Michael Kitces, Part 1

Ray Sclafani: On this part one of two special edition episode, I am joined by Michael Kitces, and we’re looking at what it really takes to grow a business beyond its early stages, and why the biggest challenge may be changing how the company works, not simply getting bigger. We discuss how leadership shifts from founder-led decisions to building teams and systems, why word of mouth eventually needs support from a more deliberate growth engine, and how coordination and culture become essential as a team expands. We also explore where AI can help, and where getting the details wrong matters too much. As you listen, ask yourself: What needs to change in your business for its next stage of growth? I hope you enjoy this episode of Building the Billion Dollar Business.

Michael, you’re such a good friend, and I’m so glad that you’re here. I want to flip the script today. You’re always talking about financial advisors, their businesses, and the industry, and you and I always riff on the future of advice.

Michael Kitces: I love a riff on the future of advice. Absolutely.

Ray: Before we get to that, what I really want to highlight is that you are an incredible entrepreneur. You own multiple businesses, and you’ve got a great operating system and a great team. A lot of people don’t know what it takes to build all of that. So I want to have a conversation, entrepreneur to entrepreneur. What’s the big problem you’re solving right now? What’s the big decision you’re contemplating as an entrepreneur?

Michael: In the Kitces.com business itself?

Ray: Yes. Not everybody knows about Kitces.com and the umbrella of all your businesses. Give us a little overview and tell us what you’re thinking about as a CEO, as an owner, and as an entrepreneur right now.

Michael: Internally, the Kitces.com team is now 26 people, 27 with me. So for those who are wondering, I’m not still sitting at the computer hitting the send button at 3 p.m. Eastern to send the emails out every day. There’s a whole team that does a lot of amazing things to make the platform happen.

Let me take a small step back. I look at the growth of businesses in stages. I’ve done the zero to 20, zero to 30, zero to 50-plus team multiple times now. At my advisory firm, we went from 10 to 60 people. XYPN has gone from zero to a 100-plus team. AdvicePay has gone from zero to almost 50. Kitces.com is now almost at 30. I’ve lived this journey multiple times.

When you start growing and adding team, phase one is what I call the starfish org chart.

Ray: I’ve never heard that.

Michael: You’re at the middle as the founder, and everybody reports into you, because they’re there to leverage you and make you more productive. You are literally the center of the business, and everything feeds into you. In the advisory context, this is all of us who have been advisors with one, two, three, or four team members, almost all of whom feed into us and help us be more efficient.

Then eventually you hit some capacity walls, and you reach the second stage, where other people in the business start doing revenue-producing things. In the advisor context, it’s when you add the second team, and suddenly there’s a team of advisors who serve clients, and none of them are your clients. There are other people in the business doing revenue work that isn’t you, and a whole bunch of changes have to occur.

Ray: Right.

Michael: Then there’s a third stage, where departments start forming. By the time you have two or three of those revenue teams, there are a lot of people to lead and manage, so your management team infrastructure starts to form. In the advisory context, now I’ve got someone in charge of the advisors, someone in charge of investments, someone in charge of operations, and maybe someone driving marketing and growth if I’m putting resources there. Functional departments start to form. That third phase is basically where we’ve been living for the past few years: creating our management team structure and all the functional departments of the business.

Now we’re at the next stage. When team members joined at the beginning and asked, “What’s the opportunity here?” I’d say, “We’re growing, and growth creates opportunities.” They’d ask, “What’s the career track?” and the answer was, “We’re growing, and growth creates opportunities.” It couldn’t really be articulated much more effectively than that. When businesses grow, more seats get created. The org chart gets bigger, and someone has to fill those seats. Every business’s natural inclination is to move its good people up. So if you’re doing well, you’re going to get opportunities to move up.

But let’s be honest. When I’m at the stage where we’re two or three people and someone asks, “What’s the five to ten year career track?” I have no idea. I don’t even know what this looks like in a year or two. I can’t give you a concrete guideline about the next five, seven, or ten years. Some of us try, and we do our best, but it’s mostly guessing. The truth is, there’s a point where your business is small enough that it’s not even constructive to build detailed career tracks and individual growth plans, because you don’t know what the business is going to grow into or which strategy you’ll pursue.

Ray: Because they’re going to change anyway.

Michael: Exactly. Then you reach what I’ll call stage four, where there are multiple revenue-producing units, multiple departments, and a management team leading those departments. Your organization has been around ten-plus years. You’ve shown staying power, organization, and infrastructure. And frankly, the expectations of new team members start to shift. When people come in now and ask, “What’s my career opportunity if I’m going to spend the next five to ten years here?” they really expect to see it, and they mean it. They’re thinking, “You’ve been here for the past five to ten years and grown to where you are, so clearly you can do this long term. I’m not joining an experimental startup. I’m joining a legitimate, sustaining small business that’s growing larger.”

So, getting back to your question, Ray: we are in what’s probably year one of a two-year project to build out our whole structure for individual growth plans. We’re reassessing how we do performance reviews, raises, and promotions, and building very formal career tracks that spell out the steps, the stages, and what it takes to move up at each one. We’ve had a generic version for the company. We have associate-level positions, senior positions, and lead positions, with a framework for what each level means. But now we have to define it for every key role in the business.

In the advisor context, that’s an operations career track, an investment team career track, and an advisor career track. In our context, we have what we call our nerds, so there’s a nerd career track for content creators, a research career track, an operations career track, and marketing and support career tracks. We’re building all of those out in much more detail, down to specific positions and key roles. We’re now large enough that this is an expectation for people coming in. We want to retain good talent. We’re large enough to build real five to ten year plans, still a little fuzzy at the end, as any strategic business plan is.

Ray: Sure.

Michael: But we can do it. We know we have the staying power, and we have enough infrastructure in our operations department to have people whose entire job is to put their heads down and build out these career tracks in greater detail.

Ray: That sounds amazing. So I’m going to ask a very leading question. What are your next three key hires? That should illuminate a little more about your strategy and where you’re headed.

Michael: We actually keep what I call a hiring roadmap document. Your timing is good, because we were spending time on this just last week, going through with the team how we rank all the positions across all the departments and what’s floating to the top.

The first is that we want to hire further into the sales and marketing end of the business. Our business, from a content standpoint, is very similar to a lot of advisory firms. We do a great job serving the people we serve, they tell their friends, and we grow. That’s how most advisory firms grow, and it’s how we’ve grown as a platform for ten-plus years. We put out good content, people share it, they get their CE, they learn things, they come back because it was helpful, and they tell the other people in their firm. We’ve had incredible growth from that.

But if we want to sustain our growth rate in the future, there comes a point where word of mouth alone doesn’t cut it. We have to get more intentional about marketing and build out depth in the sales process. So I’ve got a position on the roadmap for something to the effect of a director of sales and marketing, so we can build the team and systems infrastructure we need.

I like to grow at about 15 to 25 percent a year organically. That’s the target I live with. Faster than that is too stressful for the business. Slower than that, and I don’t grow fast enough to create upside career opportunity for my people. So if we’re going to hold that rate, how do we build the team and systems infrastructure to keep doing 15 to 25 percent growth on an ever-larger denominator every year? As we get bigger, that gets a little harder, so we have to reinvest for it.

Ray: Got it. So that’s the director of sales and marketing.

Michael: Next is another hire on our operations team. We’re figuring out exactly what it looks like, because we have a few different needs. We need more depth in financial and business reporting, getting better at the data of our business, which, as we’ve all experienced, gets more complex as we get bigger. We also want to deepen our hiring and recruiting capacity.

I find that as a business gets to 30 to 40 people, you eventually end up with a full-time person whose sole job is recruiting and the hiring process. Even with relatively low turnover, in most industries 10 to 15 percent is pretty low. That means your people stay six to eight years on average. With 30-plus people and 10 to 15 percent turnover, you’re replacing three or four people every year just because you’re doing well and people’s lives change. They move across the country to be with a significant other. Stuff happens. And because we’re still growing, at our growth targets I’m also adding four to six people a year. Between replacement hiring and organic growth, I might need to hire eight to twelve people a year by 2028.

Ray: And that’s a full-time job.

Michael: It’s like every month we’re hiring at least two people at any given time. One position we just put out, and another where we’re in final-round interviews from the one we started last month. I don’t know that we’re going to hire a full-time recruiter yet. That’s probably a little further out. But we’re building up our ops team so the people who do recruiting now have more capacity for a higher pace of hiring as we grow. We’ll probably end up with a recruiting person to attract talent, run a good hiring process, and get people onboarded onto the team.

The third hire on the roadmap at this point is another nerd. Nerds, for us, are the people who create the content: the writing, the webinars, the speaking, all of it. We’ve developed many of them over the years. We have a process for taking people who are naturally oriented toward writing, creating content, and sharing expertise, and helping them build that expertise. Some come in more senior than others, but we’ve taken people with no expertise and helped them develop and hone a particular area, build their personal brand, and ultimately turn it into something they can monetize. It’s our version of what every growing business does: you’re always bringing in new advisor talent to move up through the organization, so you have senior talent a couple of years from now. We’re always replenishing that pipeline.

Ray: It is so great to hear Michael Kitces talk as an entrepreneur about his own business. Here we are, coming up on the middle of the year, and I know you’re an EOS advocate and adopter.

Michael: Absolutely. We had our EOS quarterly last week. That’s why we were talking about the hiring roadmap. It’s all very fresh.

Ray: So, inside baseball: what are the big rocks over the next 90 days, maybe six months?

Michael: I can tell you exactly what they are. We’re recording this the very last week of June. We set our company rocks last week. The team is brainstorming their quarterly rock initiatives this week, and we’ll finalize rocks next week, the first week of July. Then we’re off and running into the quarter.

Just a day or two ago, because we’d set company rocks, we held a full team meeting where we read out the rocks we’re working on as a company, so everyone can focus on what they want their own quarterly initiatives to be at the individual and team level. Everyone on the team ideally takes one or two rocks a quarter.

So what’s on our rock list? We’ve got a data project. We have a set of weekly data areas we report on for the health of the business, and some very senior people still pull that data manually. We have some of our data centralized, but not in a way where someone can immediately pull their numbers. So we’re doing some data automation to get the reporting numbers to report automatically, so people don’t have to dig up their numbers every week.

We’ve got a pair of rocks on an internal management training program we’re building for our rising leaders, who need to be trained in management, in EOS, and in everything we do to help managers succeed in the organization.

We’re also working on a written version of our culture statements. We spent a lot of time building out our core values. Like every organization, we have a culture, and we live it quite well. It’s very consistent across the team. But we haven’t written it down and expressed it very well. Now that we’re ramping up hiring and people ask, “What’s it like to work at Kitces?” we’re sometimes fumbling for words. So we want to be more intentional about the culture.

Ray: It’s fuzzy.

Michael: I’ve also got a rock to stand up an initial knowledge base of all our Kitces content so we can start experimenting with AI. We’re trying to figure out how much we want to turn over to AI, because we’re so particular about our editing and quality control process. I’m very wary of just making an “Ask Kitces” bot.

Ray: Hallucinations.

Michael: Right. You can think of our content in two domains. There’s the technical content, such as tax law, investment research, and retirement research. And there’s the practice management side. To me, the practice management side is much more straightforward. We can take our research and content and express what Kitces would say about a situation in your business pretty well. Technical content is different. Tax law uses specific words because they have specific meanings. If generative AI gets it close but doesn’t use the exact right word, it can materially change the recommendation in a very problematic way. So we’re figuring out which parts of our content to express through AI, how, and which use cases are useful to advisors without creating quality control issues for us. I’ve got what is basically an R&D rock to work on that.

What else? We’re building a new process for how our education team, which builds our summits, CE intensives, and other live events, hands information off to the marketing team, which puts it on the website and communicates it through email, social, and everywhere else. In a larger organization, multiple people touch marketing and multiple people touch content. It’s not glamorous, but it’s very real. You need a clear process for how what people create gets to the marketers, in a way that’s consistent with the tone and brand of how we show up.

Ray: That’s all of it.

Michael: We’ve also got a rock to revisit our paid ads strategy. We spend a couple hundred thousand dollars a year on a wide range of paid digital marketing, and we haven’t really audited what’s working and what we could trim in a while, so we’re going to clean some of that up.

And our big internal project is a website redesign. The external Kitces.com homepage was incredibly modern when we designed it more than ten years ago. It’s a little dated now. For all of you who feel like we look a little dated, we’re quite aware.

Ray: So when should we expect the new Kitces.com to go live?

Michael: Probably at the very end of the year. It’s an annual goal for us. Last year’s year-long project was rebuilding the whole member section on the back end of the site. Members who log in have noticed it looks completely different. It’s much sharper, you can find things more easily, and we’re still iterating. From a technology standpoint, the member section was tied to the front end of the blog in our original design, and that infrastructure didn’t scale. So we spent all of last year separating the blog from the member section and rebuilding the member section as a standalone on scalable infrastructure. This year’s project is basically to rebuild the website from the ground up. Not the content, but the visual design, the theme, and the technology behind how WordPress expresses it. It’s going to take the full year, so I’m guessing it goes live in November or December.

Ray: As I listen to you describe your rocks, this is great. Thank you for being so transparent about what you’re doing.

Michael: Absolutely. This is the reality of building a business. What are the quarterly initiatives that move the company forward? And we reset every 90 days.

Ray: Every listener is probably thinking, “Michael Kitces has it all buttoned up. It’s this great organization.” And it is. But when you lift up the hood, you’re building a business like everybody else.

Michael: Yes. We’re figuring it out, things go wrong, you have to call the occasional audible, and it always feels a little like building the plane while flying it. I have a slightly different context because I’ve done this journey a few times now. But for most of us and the businesses we build, every day you wake up, you’re running the largest company you’ve ever run. So that feeling of building it while flying it never entirely goes away, because you always get a new set of challenges. More size, more team, more problems. Different problems, better problems, higher-quality problems. But they never go away.

At some point, either you think it’s fun to wake up every morning with a new set of challenges to solve in the business, or you don’t. If you don’t, at some point you’re going to bottleneck and put a ceiling on the growth of your business, because you won’t want to keep doing the change and adaptation it takes to keep it going. And if you do think it’s fun, you just keep getting a fresh series of challenges to tackle, the business keeps growing, and on you march.

Ray: Awesome.