The Consulting Growth Podcast
Joe O'Mahoney is Professor of Consulting at Cardiff University and a growth & exit advisor to boutique consultancies. Joe researches, teaches, publishes and consults about the consulting industry.
In the CONSULTING GROWTH PODCAST he interviews founders that have successfully grown or sold their firms, acquirers who have bought firms, and a host of growth experts to help you avoid the mistakes, and learn the insights of others who have been there and done that.
Find out more at www.joeomahoney.com
The Consulting Growth Podcast
Preparing for growth inflection points: lessons from two successful CEOs
Any business school student will tell you about the S-curves that most companies encounter when they scale: when what got you to point A will actively prevent you from getting to point B. Anticipating these leads to smoother growth, happier employees, less stressed CEOs/owners, and keener investors / buyers.
Here, we learn from the growth journeys of Richard Goold (ex-CEO of Moorhouse) and Mark Palmer (ex-CEO of GoBeyond and OEE Consulting) - both of whom grew and exited their firms around the £40m mark.
The episode explores the critical inflection points that consultancies must navigate during their growth journeys: the importance of external perspectives, and strategies to sustain entrepreneurial spirit while scaling their firms.
• Defining inflection points and their significance in growth
• Emotional challenges faced by consultancy leaders
• Importance of engaging external advisors for fresh perspectives
• Balancing growth without losing entrepreneurial spirit
• Understanding client needs to define value propositions
• Diversifying client bases to mitigate risks
• Necessity of rigorous systems and processes for effective scaling
• Strategies for overcoming challenges at various growth milestones
• Importance of strong governance and succession planning
• Role of brand positioning in achieving competitive advantages
Prof. Joe O'Mahoney helps boutique consultancies scale and exit. Joe's research, writing, speaking and insights can be found at www.joeomahoney.com
Welcome to the Consulting Growth Podcast. I'm Professor Joe O'Mahony, a Professor of Consulting at Cardiff University and an Advisor to Consultancies that want to grow. If you'd like to find more out about me and access some free resources to help your consultancy grow, do please visit joeomahonycom. That's J-O-E-O-M-A-H-O-N-E-Ycom, o-e-o-m-a-h-o-n-e-ycom. Welcome back to the Consultancy Growth Podcast. I have the real pleasure of being joined by Richard Gould and Mark Palmer. So, richard, welcome to the podcast, and would you like to introduce yourself as well?
Speaker 2:Yeah, Hi Joe, hi Mark. Thanks for the invitation, joe. So I'm Richard Gould. I've been a consultant all my life. My most recent role was as a managing partner of consulting business Morehouse. We joined that as a new leadership team when the business was about 3 million in revenue, wholly owned by BT. At the time, we went through an MBO and we sold the business in 2019, having grown it to just short of 40 million pound in revenue and about 165 people over to you, mark thank you, joe.
Speaker 3:So my name, mark palmer uh spent a good chunk of my career in consulting about 23 years. You can see that that is a significant percentage of my career, but but not all of it. I did have a proper job. For the best part of 10 years I worked in automotive in France and the United States for a big automotive group, which was great training actually but but I came back to the UK in the early part of the 21st century and decided to join a boutique. I did toy with the idea of joining at one of the more famous strat houses and had a couple of offers, but thankfully made the choice to join a boutique. Hopefully I again. That journey from 2001 to 2023 is something that has marked my career and you know is very much who I am.
Speaker 1:I'd like to get a view from you about what inflection points are and and whether you I guess whether you how your own experiences of them at a high level, because it'd be useful to define what we're talking about before we start talking about it. So, richard, do you want to jump in first?
Speaker 2:Yeah. So when we talk about inflection points, for me they are the milestones on a journey for growth, and I think most people who have been on a growth journey consulting talk about those points that, when they look back, were fundamental in underpinning the next stage of their growth. And some people talk about it in terms of headcount, some people talk about it in terms of revenue and, you know, for me there were some, you know, sizable points in time on the journey where we had to recognise that doing what we'd always done in the way that we'd done, it was not going to be sustainable or scalable for what. We had to recognise that doing what we'd always done in the way that we'd done, it was not going to be sustainable or scalable for what we wanted to do. And I think there was something about the maybe 20 people, something when you got to 50, 60 people, something at the 100, 120 people, and then something at the 150 people people, and some of that was um governed by us learning as we went.
Speaker 2:Some of it was um determined by what our people were saying to us, and I remember when we were getting to 70 or 80 people, when you're having to, you know, tighten the laces on the shoes and bring about, you know, real rigor, real rigour of process technology, reporting and everything else that you know you would hear from you know, colleagues in the business saying you know we love the business, we love the direction of travel, but please make sure we don't grow into a little big firm.
Speaker 2:And you know that's something that I've always held on to. You know, how could we build the business without becoming a little big firm? That's characterized by the politics. And you know how do you remain entrepreneurial, how do you embody the diversity of a business and how do you make sure that you bring people on the journey with you by navigating those pivot points or those inflection points together. And you know that's definitely one of the things I learned. You know, on that journey, bring people on it with you, listen to them as you go through those inflection points and share with people the challenges and the reasons why you may have to do things differently as you continue to grow and be successful as a business okay, great.
Speaker 1:Thank you, mark. Anything to add to that?
Speaker 3:I think it's just probably the feelings side of it. So what do I mean by that? When you're a leader of a business and obviously Richard and I both were it's a lonely place and at particular moments, as the business grows, you know instinctively that you're hitting a wall, whether it's capacity, whether it's value proposition, whether it's systems could be all manner of things and the way in which you next go depends upon lots of things. It's what have you learned as a leader in terms of best practice? Who's advising you? And the problem is is there's lots of information out there and there are lots of people prepared to give you advice your own team and whichever advisors you've got.
Speaker 3:And I think the paralysis problem is to do nothing. And my own feeling is that you make mistakes. My own feeling is that you make mistakes. But I think to anybody on this call, I would be saying to you, you feel that you're going to get it wrong? Might, actually, but let that not stop you from making changes really difficult to navigate. So, um, but, but don't necessarily feel that you've got to get it right the whole time and don't feel bad that you don't know the answer, because I'm sure richard would say the same it's.
Speaker 2:Uh, it's a bit of a lottery at times I think, mark, you make a really interesting point there around advisors and leaning into other people, and I actually think that one of the things we probably didn't get right at the start was not leaning into external perspectives and we probably became a bit of an echo chamber where all of the partner team had come from big firms.
Speaker 2:All of us had experience of working in a big firm, would probably become um normalized to the processes and the securities of a big firm and none of us had really built a business from scratch and therefore there was a risk that we reversed what we'd always done into a business which was entrepreneurial.
Speaker 2:And actually, if I was to do the journey again now, I would absolutely be leaning into people and building a network of advisors around me who had been on similar journeys and could share some of those lessons. And you know, I'm sure we'll talk about the role of you know corporate advisors as we go through. But you know there's certainly a role for corporate finance firms to play. But what I think I'd missed is being able to tap into somebody who had been on a similar journey and could actually be a sounding board and could actually, you know from their own experience and their reference points, turn around and say actually I probably would think about this as an option, as well as the direction of travel that you're going on as well, because we would have learned a lot that way great point and I think we've all you know, we all will have seen there is.
Speaker 1:There is the founder mentality, which I think I might have stolen of the phrase from you mark originally where and I've seen it a lot where you have, um, founders who, quite rightly, are still watching the pennies, but because they're watching the pennies so tightly and perhaps don't want to pay for a decent CRM system or corporate advisors or a board, they're actually missing out on the bigger prize.
Speaker 3:I think that's right. I think there's an emotional attachment to the profits that it's their money because it's their company, and you sort of understand that because it's their company and you sort of understand that when I look at the little business I run today, I probably do have that emotional attachment to what's there in the bank account. So it's perfectly understandable. But, yeah, if you don't accept that there is an overhead that's necessary to grow and to become something bigger and better, then that's going to get in the way and I have seen that time and time again.
Speaker 1:That said, there are people are very happy to run a micro business forever, um, at high margin, um, but that's what it'll remain if you, if you, if you don't uh, spend the money on, on growth related activities, as we all know yeah, yeah, I don't mean to bore the listeners, but from the academic perspective, anyone that's been to business school will have seen that diagram of S-curves that you get, and there's a reasonable amount of evidence to support the idea that most growth organizations go through a series of S-curves if they do continue to grow.
Speaker 1:And the only thing I'd say, having seen that in practice and I'm hoping you guys will agree, but I can't guarantee it is that it's rarely as simple as that. And I really liked Mark's idea of hitting a wall, because very often it will be one or two things that cause your growth to stall, as opposed to a series of things. And you do them and then you hit the next plateau and in fact I would say probably actually doing, trying to do all the things you know, trying to, I don't know bring in processes, have a CRM, you know, get a leadership team, all in one stage is probably too much for a small organization to bear. And the other variable, of course, is the economy, which can, you know, greatly affect, which can introduce artificial, if you like, plateaus to firm growth or even reverse the firm's growth, and those dips and troughs bring their own challenges. Does that chime with your experience, or do you tend to see quite common patterns, whether it's headcount or revenue?
Speaker 3:Well, my experience was that, yes, the market, although I was always of the view that the market was big enough and we were small enough for actually our outcomes to be much more about our own inputs.
Speaker 3:So, and and that was the bit that was inconsistent is that if you didn't have everybody on board with the value proposition, if you didn't have every on everybody on board with the values, if you didn't have every on everybody on board with the values, if you didn't have everybody on board with, as you say, crm or how you're going to recruit, those became the problems. If you had 20 of people that were still selling the old value proposition couldn't get their head around the new one, it was. It was really damaging to the business. We'd had a very diversified recruitment strategy which worked, apart from one person who didn't really wanna deploy the new people. So most of the problems for me were around getting everybody on board with a concept and then you'd riff together. But if you didn't get that bit right, it was quite staccato and that's what held us up, thank you right.
Speaker 1:Well, let's get, let's get stuck into some of the nitty-gritty. So, um, let's assume I I'm running a, say, two million pound firm. I've got 15 16 people working for me. Uh, most of the I'm guessing you'll recognize this scenario Most of the sales are coming through me as the founder. Perhaps I've recruited a fair number of senior people who can deliver very well typically perhaps friends or people I've worked with previously. I'm probably a little bit too diversified in what I do because I'm chasing anything to bring the money through the door, because I'm worried about everyone's livelihood. But revenue growth has been pretty good. So I've got to the 2 million point and all of a sudden I'm starting to plateau. Now all three of us are board advisors to various firms. What types of things would either of you be looking for in our first meeting? What types of questions would you be asking and why would you be asking them, richard do?
Speaker 2:you want to go first? Yeah, why not? I'd really be keen to understand what you do in terms of your go-to-market offer and how you differentiate what you do and how that responds to current, evolving and future challenges of clients. Because whatever you do as a consultancy has got to be in response to challenges that clients are facing. And I think quite often you know we can go in and talk a lot about what we can do without going in and listening hard, so our clients feel heard in terms of what other challenges they are facing.
Speaker 2:And coming back to the point you just made joe around, you know recruiting really strong delivery people. You know, as a consulting leader, regardless of what stage of your evolution you're at, be relentless at holding the bar high. Because if you have great people in your consulting business, you do not compromise around the talent that you bring in and you invest in that talent, then you know, with the right people you are less restricted in terms of what you're able to offer. And there's something around being narrow and focused. There's something around really being clear around how you differentiate yourself. And then there's something around the quality of delivery and making sure that you do the very best job and you leave a real legacy, you know, in the business of clients that you work with yeah, great, great.
Speaker 1:And I think I think that also helps you find the sweet spot, because I think a lot of firms when and I guess this, this used to be my specialism, is that firms sort of sub two million, um, as I say very often often will do a bit of this and a bit of that and a bit of the other, either because the senior people they've brought in like doing that stuff, or the founder likes doing it, or because they're just focusing on bringing the cash in. And I remember one mentor I had said to me sometimes you need to get smaller in order to get bigger, and by that he meant you need to focus, as Mark, you know, always tells us that value proposition what do you do? You know, and that specialism then allows you almost to get to the next stage. Mark, there's going to be a lot you can add. What would you add to what Richard said? What questions would you be asking and why?
Speaker 3:I think client concentration would be top of my list. What you tend to find with a business of that size is that there's one, possibly two clients who traditionally dominate the pnl and that's been a key relationship of the founder or, if not, the founder of the business. So, and whilst that's not unusual and not something to worry about immediately, it's something which is you're going to have to diversify your client base, either in the same sector or in other sectors. So making sure that the business just doesn't get used to living off one or two traditional clients and then just slowly ebb away as the client loses interest in what you've got to offer. But equally, it's making sure that you double down on those relationships as well and it comes back to really something Richard was saying as well is that there's real clarity on what you stand for in those clients.
Speaker 3:You know a lot of organizations have sort of things have evolved. You know consultancies are very good at giving advice to their clients about. You know making sure that things don't just evolve. But then you know, physician heal thyself. We're not always the best at doing that to ourselves.
Speaker 3:I think the second thing, and probably the last thing that I would add is is this whole founder dependency piece at two million pounds? You tend to find that the clients are enthralled by the founder. The founders have got perhaps a key relationships or has got a particular presence which attracts clients, and therefore, what is the quality of the people who are reporting to the founder? How high is that? And what is the propensity of the founder to be able to essentially delegate responsibilities in terms of business development and key account management to the rest of the team? So I don't know what the answer is each time, but I think it's really important to examine that, and that starts to give you an idea of whether the business is fit to grow and what are the barriers, both behaviorally and structurally, to doing that.
Speaker 1:So you'll both have faced this. I'm assuming in terms of a, especially if you've inherited a senior team. But you know, very often if you've built a senior team, perhaps they're friends, people you got on with people that you worked with previously and they're great at delivery, and you've brought them on because they're great at delivery, on because they're great at delivery. But perhaps there either isn't the skill set to sell or there isn't the inclination to sell. So how did you, I guess, when you first joined your firms and they were still relatively small and you were faced with these challenges, how did you start to remove some of the burden from your shoulders, especially when it comes to client relationships and business development?
Speaker 2:there's so much in that question, joe. What a great question. Um, I think the first thing that you need to do is to demystify what sales is, because for so many people, sales is a dirty word and sales becomes synonymous with rejection and people not wanting to talk to you and not being able to get hold of people and not responding to emails, when, actually, having learned the hard way, I now look at sales through the lens of growth and really trying to help everybody in the organization understand how they can contribute to growth, because you can only grow a consulting business if there is not a binary dependency on one, two, three, four people to drive growth. And that has got to have been one of the key learning points for me. You know, as a consulting leader, recognizing the, you are a limiting factor in yourself. If you do not bring other people on that growth journey, you do not help them to grow and sell.
Speaker 2:And I think some of it comes down to relationships and even with the most junior of consultants, helping them recognize the importance of building relationships, doing a great job on the ground. You, you know, securing your own extension, building relationships with people who have the money, authority and need for what we do as a business in two or three years time, you know, really, really powerful, helping them translate the, you know, the knowledge that's in their head into thought leadership. So it's raising our brand and our reputation and reaching the market Again, really, really important. So for me, the key thing that I've learned, and I continue to reinforce through the organisations that I work with now, is demystify what sales is and flip sales from being selling into growth and growing and really bring to life what the different ways of growing a business are and how everybody you know, bar no one in a consulting business, can contribute to it.
Speaker 1:Right, I love the phrase. I'm going to get it wrong, but you said something about fortifying your extension or defending your extension. I really like that Nice phrase. Nice phrase.
Speaker 3:Mark over to you yeah, I think it's obviously different for each person because it it depends upon what you know. What context are you in? I'm going to come back to that word context. What I inherited was a very technical engineering mindset organization with huge and deep capabilities, so that the ability to do the job was never in question for the people I've considered. I was probably, you know, the least able person in the organization.
Speaker 3:You know there was a as everybody was talking about their quadruple stars of maths and physics and, uh, I was thinking, christ, I can hardly add up. This is going to be a challenge leading this lot, but we tended to spend our time and I learned this expression from one of the founders to add up how many angels could, could dance on the head of a pin. You know, there was a complete obsession with what we did and how to make it perfect. So the flip was really to try and spend 60% of the meeting on clients and markets and how could we win work? Didn't want to lose the essence of how good we were at what we did, because we were very good.
Speaker 3:We were the best, in my view. Humility being put to one side just there for a moment, but, um, but, but making sure that the client meetings were right. This is the client, this is the size of the client, this is what the client does, these are the client's problems and this is the way in which we're going to help the client and this is what's going to therefore, make it visible and useful to them. So, so, really, I spent several years trying to put the markets and the client problems in context in our meetings.
Speaker 3:And that allowed us to introduce things like CRM and strategic account management topics which I can board you about before, gentlemen. Sorry, but it worked because we were really making sure that the start of the meeting was about the clients and not about the stuff that we did and I did. One of my advisors came up with this lovely expression saying that the client is the hero of your narrative, not you. So you've got to put your client and your client's problems, and so we actually made sure that our meetings did that, and it just did help people to make sure that when they spoke to the client that they didn't start with the solution. They started with the client's context.
Speaker 1:Did you find that you needed to replace many people or was it very much an effort on changing the conversation and the skill set?
Speaker 3:over a period of seven years. A lot of people were replaced.
Speaker 3:Okay, most of them left of their own volition because they yeah in, not not in a nasty way, but they realized that the organization was changing. Nobody was pushing them out, but they decided that they would prefer to work in a yeah, in an environment where there wasn't some get at the top going on about the client the whole time. Yeah, so, um, and so we actually left on good terms in probably, you know, if I would imagine, over a period of seven or eight years, 60 people left, I would say there's only probably a couple of people that um are sticking pins in effigies of me. Okay, you know, for the vast majority it was uh, yeah, it was just evolution, and people would shake your hand and say, look, I see what you're trying to do. It's not really me, um, I've decided to go somewhere else and um, and it was fine. But but for the other half that remained, I know, I would like to think that it was a transformational moment and it made their careers because they went with it.
Speaker 2:Yeah, I think you're absolutely right, mark, and I think scaling consulting businesses can be great accelerators for careers for the right people. And you know, if I look now look now, having been out more house for a few years, of that partner team, 80 of the partners are people that we brought into the business seven, eight years ago as senior consultants, so progressed through the business who've, you know, seized the opportunity that they've had grown and developed into roles where now they're leading the business. I think that's really powerful. And one of the things I'm sure we'll come to later is the challenge that consulting leaders have in recruiting senior people.
Speaker 1:One of the hardest things bar none in my consulting experience was recruiting really good senior people outside of those that you grew yourself or you knew in the market, and even more so those senior people that were market focused, there to build a market and to sell or to grow the business and I guess that that speaks to what you said earlier about starting to take seriously the, the skills, competencies and attitudes especially around sales that you want to have in the organization at a lower level, so that in five years time you are producing a decent number of senior people yourself rather than having to look to the market yeah, it needs to be 70 30.
Speaker 3:You know you need to do at least 70 percent internally yeah, yeah, some, lots of expensive mistakes.
Speaker 1:Uh, and you do. Sometimes it's hard to tell if they're mistakes when you're hiring them, so it's not always the hiring process.
Speaker 2:There's some very capable people who get through that joe, if you listen, if I look back at attrition and you know the, the mca average at the time was about 70 to 80 percent attrition. We're always running at 10 to 12 percent and of that 10 to 12 percent the majority of our attrition was senior hires. That we got wrong, yeah, and senior hires we brought in who you know can't sell for the six. First six months they've got restricted covenants. Next six months they're out, you know, finding their way in the market.
Speaker 2:It's month 18 before you realize that actually they've flown a massive kite and they tend to just spend two years in lots of different consultancies moving around and that's a very expensive mistake and that's why, you know, if I was on the journey again, I'd invest even earlier in building that you know, growth and sales and business development capability with everybody in the business, because that's the biggest uh tailwind in a consulting business. That's not to say that we didn't recruit some good senior people directly, but they were the minority, the senior hire recruits, if I'm honest is there any goal mark?
Speaker 3:you were going to say something I was just going to say. I wholeheartedly concur. You know it's uh.
Speaker 1:Spending money with recruitment on senior hires is a good way of burning cash it's funny how that, how thin that black book actually is once it gets into the organization, it seems to lose several pages entirely the only name in it sometimes is a name in a person that it belongs to yeah, I've got one of them just here, actually
Speaker 1:okay. Is there anything else you would say? So I'm thinking about founders, typically around the two, two to three million mark, who who have hit the plateau. Is there anything else you would say to them? We've covered a fair bit before we move on about just thinking about opportunities as well, the.
Speaker 3:It comes back to something, um, that richard was saying about clarity on sort of what you do and who you are once you want to grow.
Speaker 3:There's this idea of, well, you know, maybe we should go and do go into the public sector, maybe we should start to do um, oju bids, or you know all sorts of things.
Speaker 3:Or, and you know, there's a chance meeting with a large organization that wants to take you out to the middle east.
Speaker 3:There are all sorts of things that come your way, and being sensible about which ones you back and which ones you don't back, I think is is is really important and you need to have some criteria because otherwise, the, it's the owner or the senior team's whims that win, and if and if that's the case, there is a bit of a road to wreck and ruin, because you start to chase stuff that is ultimately going to destroy your balance sheet. So I think having some criteria that the team have agreed is that we will put things through this sieve and if it is yes, yes, yes, yes, yes, well then you know we all look at each other and we go for it. If it doesn't work, all right, but at least we've been through some sort of scientific process where, as a senior team, we've agreed. But I think if you become a bit wild and start chasing stuff at that level of size, that is going to go nowhere. You're going to kill yourself.
Speaker 1:Yeah, I guess one thing before moving on, and I'm saying this to owners and founders of firms which are sub 2 million, perhaps 3 million, and that is not to rush in to the value proposition, because this is obviously a theme as you grow, you become known for something in the market. All your employees are aligned on what you're doing. But I I remember in in I like the hourglass figure where there becomes this point. The thinnest point of the hourglass is the one where you define your value proposition, you're very clear on what you do and then as you grow, you start to build out aligned services from that or perhaps enter into different markets strategically and sensibly at the appropriate time. But before that you've got the top of the hour glass and what I've seen a fair bit of is where actually the constraints to growth are the markets they're in and the proposition they're offering. So experimenting sufficiently prior to that stage to find the high growth, high margin markets that you think you can succeed in.
Speaker 1:And I say this because a lot of founders will jump from a larger consultancy or even from a firm where, for example, they might have been head of process engineering and they've got a great method, and then they go out into the market and they discover that actually they can sell a bit of it. But actually the market for process engineering isn't huge. So perhaps they experiment with a bit of lean, they experiment with a bit of process automation and so on, until they find that niche and they think actually this is it, at least for the next two or three years, where we can really pull the lever and grow you're talking about leading with capability and methodology there, which I think is typical of organizations in the early stages of growth, and I think it's fine because you're in a niche and because you're capacity constrained yourself.
Speaker 3:I think that over time you are going to have to revisit that, because the price at which you're going to be able to charge for doing some process improvements is very different for the one for transforming the P&L of an organization. Yeah, and clearly you're gonna wanna position yourself for transforming the P&L of a large organization rather than getting known for resequencing some of their back office processes, and therein lies the rub. But I think it doesn't matter too much at the start because you're selling based on deep methodology and probably relationships, so your price is probably going to be okay. But it but so I agree with you. So the value prop isn't fundamental at that two million stage. It will be, in my view and I think you know Richard agrees at the next one, because because of course it's not the founder or the person who's dropped out of that large organization who's going to be leading the work or leading the sale, and therefore the specialness, if that's a word, has been removed.
Speaker 2:I agree 100 percent. I think it's the next stage where that discipline, consistency in terms of what you do and translating that into what clients need becomes really relevant.
Speaker 1:Right, okay, so I have been fortunate to have you two as business advisors to my two to three million pound consultancy, and I've taken on your advice of empowering the organization when it comes to business development, reducing some of the risk, honing my value proposition and perhaps refining a few processes here and there and being very clear on what type of work I'm taking and what type of work I'm not. So I've then grown quite successfully to the next stage, which, let's say, somewhere between six to 10 million, I think is a reasonable location for the next inflection curve, depending on the firm, depending on the markets and all the rest of it. What challenges do you typically see around this stage? Know, we roughly know what we're about. We've got a senior team who can sell. So what challenges did you guys face in your own firms once you got to the next inflection point and how did you overcome them? Yeah, I think a couple of things here.
Speaker 3:Richard touched upon it earlier pipeline management. So we're scaling the business. Now we want to make sure that we're clear on who our clients are. We want to get the whole business engaged in this, and you need the leader as well to be hugely invested in the whole process of going to market. So I think at this point you will need a marketing team, maybe not a massive one. You're going to need a CRM system and you're going to need your senior people putting enormous amounts of energy into making sure that your CRM system works.
Speaker 3:Yeah, and I think a lot of people buy CRM systems, spend a lot of money paying for the software licenses every month, and it's not up to date. It's frustratingly inaccurate. You can't use it for forecasting. It just becomes something which is almost a cost to the business, and I would implore leaders of listeners that there is another way. This should be the beating heart and center of your business. It really should be, and that comes through role modeling and it comes through just a relentless hard graft on getting it right. I think choosing the right software provider is important. You know, I'm not going to mention any names for fear, fear of being, um, uh, finding myself a lawsuit, but privately, I'm contactable for my thoughts on that, um, but there are some rather large behemoths who I would avoid. Yes, and there are some, uh, you know some stuff which is very easy to use and inexpensive, that I would be, um, definitely advising so I think, that's one bit um.
Speaker 3:I think the next bit is around culture and people. You need a um. We haven't talked about it that much but assuming you've got a really good recruitment process for the work that you're going you're doing out there in on the ground and you tended to get that right. It is at this point that you know you are building a culture and an organization that is going to be measured on glass door and and all organizations are going to start to become a little bit political at this size, inevitable. Not everybody's going to get on, but but the values and the, the, the whole sort of purpose of the organization you've got to get right. So it's worth spending time with professionals to facilitate. You know what binds you all together and what is it that and how you're going to describe yourself, whether it's a value proposition or an employee value proposition or. You know I'm not talking about seagulls and pictures. You know we're talking about stuff that really matters here. I think that that culture piece is really important at this point.
Speaker 1:Yeah, great, and it's also, you know, going back to your point about go beyond OEE, it makes it very clear to the employees whether they fit or not as well. And I often find that there are some employees who eventually will become a detraction or a distraction and a detraction from, from growth, because their hearts aren't in it. They miss the old family atmosphere and they're not up for the journey. And I think by focusing, you know, communicating, on what that culture is and where it is going, you almost become self-selecting the firm yeah, no, it's entirely we did.
Speaker 3:We work with a company in Cheltenham and spend a couple of days lots of tears, lots of you know, real heart-wrenching stuff and people telling us stories about their lives that I would never have wished, that they necessarily felt they needed to tell. That wasn't the objective of the session, but it's interesting how it all comes out and at the end of it it's a lot of good and people understood why. People said and did and behaved certain ways and, as you say, some people did leave, but it was a knowing decision. It wasn't, it wasn't an away from decision, it was a it was for the right reasons decision. But going through that process of really examining yourselves quite deeply for us was really helpful yeah, I think from my perspective, just building on mark's point, people.
Speaker 2:You've got to focus on the people, double down on the people, keep the bar high, engage, excite, create opportunities, empower people. You know, give people the problem, not the solution. You know, when I was in one of the big firms, the partners would just tell you what the answer is and ask you to execute on the answer. You know we got to a place where we were. You know the partners would just tell you what the answer is and ask you to execute on the answer. You know we got to a place where we were, you know, with a great deal of humility sometimes and vulnerability. And I say to the people this is a challenge that we've got. Let's roll our sleeves up and try and work it through and I guarantee you they got to a far better place together than we would have got to as a leadership team. Our own set of reference points then we would have got to as a leadership team for our own set of reference points.
Speaker 2:I think the other big learn for me remove the table stakes. You can never compete on salary in consulting because someone will always outdo you. Someone will always throw a join in by a bonus. We worked on the basis that we paid total earnings in the 90th percentile, base salaries in the 70th percentile. We never lost anyone based on that and it was just a key thing that we went out to market we were really clear about and we didn't lose people because of table stakes. What we were able to recruit people on was culture, was opportunity, was on the ability to develop and progress your career.
Speaker 2:And I know the other thing that jumps straight front to mind now is just decoupling that often challenging discussion that breeds from promotion and being clear around progression versus promotion and how people progress their careers. And again, something I learned the hard way, and especially with new generations coming through, who you know are all competing with people who are outside your organization. How do they feel that when they go down the pub on a friday or saturday night, they're talking about how they're progressing, how they're doing well, how they're adding value, how the organization that they're working in has the right ethics, is doing the right thing in the right way for the right reasons, not mercenaries and, you know, just chasing um the money all the time, because experience, you know I've certainly found has, you know, been more expensive, more important than the money which has, which has become table stakes in so many organisations.
Speaker 3:Well look, I agree, and I think it's one of the main differences between consultancies that succeed and consultancies that don't is that ability to hang on to people through non-financial means. You know, I think it's almost top of the question list and you can talk to person after person. They would all agree with that, and it's actually the reason why I think a lot of organizations that set themselves up as consultancies within large organizations don't work is because they just don't have a gig. What I'm talking about there is having a gig.
Speaker 2:Yeah, and building a business based on transparency. Just don't have a gig. Yeah, I'm talking about there is having a gig, yeah, and, and I'm building the business based on transparency and no surprises. You know, in the big firms it was a random number generator that determined what performance rating and what bonus I got, and it was people who didn't even really know me would sit in a room and work it through and then I'd be reversed into a normal distribution curve and in Morehouse we were really really clear that there was no normal distribution curve. Actually, if we had everybody at the 90th percentile when it came to performance ratings, then that was a good place to be.
Speaker 2:And if people coming out of a performance discussion were surprised, then we had failed as leaders, because there shouldn't be a surprise. If you're having regular conversations with people, if you're clear around what good looks like and you're providing regular feedback and having regular discussions, there should be no surprises. And again, I think the that is a key way to build goodwill, and goodwill is the only currency that we really have in a people business. So you build goodwill, build fellowship, create excitement, create engagement. Then you know people are on the journey with you and that's really really important, really really important now, consultancies exist in two markets, as I often say.
Speaker 1:They exist in the market for clients and also a market for people. Um, and we've unusually focused on the people at this stage, what would you say about the client facing organization around the 7 million, 10 million mark? What should I be thinking of as the still the founder owner of the firm and I've got you know, I've got a proposition I have, I'm selling reasonably successfully into a wider group of clients. Is there anything I should be thinking about in terms of the market or my offering? Well, I think the first thing there.
Speaker 2:Joe is, from my experience, when you're getting into that seven to 10 million, sometimes it's not always the founder who's at the head there.
Speaker 2:Quite often founders, who are typically entrepreneurial, have outgrown their role or moved into a slightly different role.
Speaker 2:It might be a new leadership team. That was certainly the case when we got to Morehouse. But I think, in response to your question, I think quality of earnings and quality of revenue is really important, because making sure that you are earning, you're able to earn good quality revenue and deliver without risk of rectification and get paid on time and generate good margins, is really, really important, and I think this is the point in your growth journey where cash is king. Cash is king at every stage, but this is where you bust a business If you have not learned early enough. The cash is the option in the business and you really do need to think about everything from your work in progress, the type of work that you're doing, whether it's risk of award, whether it's time materials, whether it's work package-related work, your discipline around invoicing, the commercial terms in which you engage with clients and making sure that cash collection is owned by not just finance but also people leading delivery on the ground.
Speaker 3:I'm going to come back to the value proposition stuff here, because I think that we've talked about the uniqueness at the £2 million size, but I think that now at the sort of 6, 6, 7, 8, size, but I think that now at the sort of six, six, seven, eight, all the way up to ten, the, your uniqueness is unlikely to be successful commercially just through methodology and capability. So I think this is a stage in an organization's maturity where having something, having a value proposition which describes the problems, the client's problems, that you solve, becomes essential, something which makes you referable and something that makes you the biggest in your niche. You need to own a niche at this point and it's a courageous move, but I think it's one that's essential if you're going to succeed. So a lot of organizations try to convince themselves I'm not going to go narrow because I'm going to close off a huge chunk of the market to myself and I'm nervous about doing that. But the truth of the matter is that going narrow doesn't do that. You know going narrow all that it does is it brings clarity to who you are and what you do, and it means that the right buyer and we all know that the right buyer is rather important in this process is going to find you. You know the Internet ensures that that will happen. And even if it isn't the Internet, certainly your network and the referability of your service goes through the roof. And what I mean go through the roof? I mean there is an exponential magnetism to your business, generated by going narrow and going in that courageous space that you're now going to own.
Speaker 3:And the benefit of that is it gives some purpose and some energy to your marketing as well. Because if you can't make that decision to go narrow, then your marketing is inevitably going to be wishy-washy and have no real oomph to it. But once you've decided that this is the client problem that you fix, well, your marketing team will hug you, if they're any good, and start to be able to support the sales engine. The expression I used to use is the marketing can then start building the snowballs for the rest of your team to throw. But up until that point there are no snowballs, there's nothing to throw, because it's wishy-washy, mush. You know, we've got a website, we've done a webinar, we've done a conference. Well, what did you say? You know what was around it. It it's all the time it's diluted so you can tell, get a bit excited about this, but you need to be on concentrate, not on dilute, and I think that is what a business really. The ones that have turbocharged their growth at this point have been on concentrate and not on dilute.
Speaker 1:Oh great, that's really nice, lovely phrase to bear in mind thinking about this. Okay, so there's a few more stages that we want to talk about, so I'm going to move on, but I've still got you as board advisors because you're still adding your value, although in reality, actually during this journey, you might change your advisors depending on the expertise that you're needing but let's.
Speaker 3:By the way, I've already recommended to one organization that they get rid of me in about 18 months and take richard on instead.
Speaker 1:Just to illustrate oh there, there we go.
Speaker 3:Great, because I've realized that there's somebody better in the market.
Speaker 1:Yes, and that speaks to your point that you haven't mentioned here, but you've mentioned various times in previous conversations about paying it forward.
Speaker 3:Yeah.
Speaker 1:Integrity and honesty around advice is crucial. So I've still got you guys um and um. I've grown past the 10 million point. Now I have a ceo in place, I've put myself as chair, let's say, um, my margins have dipped a little bit, I'm finding, because I'm investing a fair bit in training and culture and all of those wonderful people, things, um and. But what I have now I've got my eye on sale perhaps. So I'm starting to think well, it's time for me to go. Perhaps I've diluted my share ownership. I've given some shares to some of the leadership team and certainly the ceo. Um, so I'm I'm heading past 10 million. What types of? What are your priorities here? So, who would like to go first? What are we thinking? What should be top of mind post 10 million?
Speaker 3:yeah, Do you want to go?
Speaker 2:Yeah, I will do so. There's a couple of things in here I think. If you are on a trajectory to a transaction, then baseline your business, be really clear around where you are and where you need to be to maximise value, because any of the key levers that will have a material impact on value will take time to ensure are in the best possible position. And we talked right at the start of this podcast about the role of professional advisors, and you know corporate finance is certainly one of them and, from my experience, corporate finance are phenomenal when it comes to putting a wrap around your business, going out to market, finding some interesting buyers coaching you for a sales process and getting the best value that they can get. What I really missed was the advisory support in the 18 months to two years before we engaged corporate finance to say this is where you need to be when someone puts a wrap around you and takes you out to the market. These are the key components that will have an impact on value. This is what value means for potential acquirer. This is therefore what you need to focus on. These should be your priorities, alongside everything else that you do around, alongside everything else that you do, and you know, again, we learned the hard way.
Speaker 2:You know, two things that you know we hadn't done very well was knowledge management and codifying the tacit knowledge of our people. So when they walked out the door we didn't lose the skills, knowledge and experience that you know they had in their head. And you know, the other piece was around some of our systems and processes. You know, none of those things were hard to do. We just didn't know that they would command a multiple. That was important for us in terms of valuation. So you know some of the conversations you know you and I have had. Joe is around the unknown unknowns. How do you uncover those unknown unknowns? Because if you've managed to grow your business to this level, you've clearly got something in your business which is magical and will support growth. So don't constrain your growth by not reaching out and listening to the advice and guidance and support that can help you to get to where you want to get to.
Speaker 1:Richard, I very rarely talk about the services that I or my guests offer, but you have thrown the ball up there, so I'm going to knock it into the back. Do you know of any great services that founders might look at when seeking to discover the unknown, unknowns or benchmark their organizations? It's a leading question, obviously.
Speaker 2:We've all worked on this kind of stuff for a long time and you could go to any of the corporate finance firms and they will come up with a colorful wheel or a list of drivers for growth and everything else.
Speaker 2:The challenge that I found was that they were very good at painting a picture theoretically in terms of what you wanted to do, but there wasn't anybody who'd been in my position as a deal principal that could help me, coach me, support me, challenge me and provide some accelerators.
Speaker 2:So I think what we are able to do now is, having been on the journey of other founders, to share what those growth drivers are and to really share the knowledge and the experience and the skills and the scars of you know what will help organisations get to where they want to get to. And it's a not-for-now, you know, conversation. But I think the work that we've done around the growth drivers and the accelerators that will absolutely drive value and I think the reference points in the experience and the case studies that we can point to are quite significant. And you know, again, more than happy to have conversations with any organization on this growth journey just to share some perspectives and the learning. So you know, know people really do realize their full potential when it comes to a transaction of a professional services business so just just building on that, obviously you know, identifying the unknown, unknowns is, is important, um, but what?
Speaker 1:what in your experience are would be top of the list of gaps or drivers or risks that an owner might be considering with their eye on a transaction?
Speaker 3:I think brand is an important one here, and I'm talking about not so much employer brand although I'll come back to that, the two are linked is essentially the. Over a number of years there would have been a brand at 2 million, which is generally a bit, you know, a bit JPEG-y Mickey Mouse, and then at 6 million, might well have been polished. But the essence of brand is obviously so much more than a logo. It's everything. It's the quality of your premises, it's how your people turn up, it's the you know, your website, the content you produce, the conferences you run. So at that point we had a complete shakedown of that and relaunched the organization. We moved premises. We moved out of three beautiful cotswold barns, um, um and um, and into some you know what for some people would be soulless premises in in oxford, um, on the tech technology park.
Speaker 3:But what were we doing? We were moving from being, you know, almost from a cow shed, um, to actually being in a metropolitan area and on a motorway and on a railway that took us into London in 45 minutes. We, you know we, went from orange to this, you know, beautiful blue we had. We made sure that, rather than doing conferences in our cow shed in Oxfordshire, that we would take the design museum and we would bring Matthew Syed and Natasha Kaplinsky along and would do, you know, 80k events with 300 people and the very, very best content. So it was a conscious decision that if we're going to get to our 25 million pound objective and we're around 10 million at the side we're not going to do it playing around. Now. What we didn't do is therefore pay out the same bonuses. What we didn't do was maybe um have such um a lavish meet, a meeting fit out, sorry, um meeting room fit out, as we might have done. But we made a conscious decision that this is where we're going to place our bets, and I think that for us brand was big, but we did do the employer brand alongside it. And what I would recommend a lot of organizations do is the sort of Sunday Times top 100 piece A you get the award if you're any good, and that's good in terms of attracting, but also in terms of selling who you are.
Speaker 3:But the bit that was most valuable was the feedback from our people, and our people told us where we were good and where we weren't so good, and the secret sauce was over a period of a couple of years where they told us we weren't so good.
Speaker 3:And the secret sauce was, over a period of a couple of years where they told us we weren't so good, we fixed it, and actually there's nothing quite like doing what you say you're going to do.
Speaker 3:And after two years we watched our Glassdoor score creep up from 3.8, 3.9 to 4.7. And it became a thing that where people who were going to buy our services, people who were potentially going to invest in us or people who were going to join us, those proof points of Sunday Times 100 status and a glass door and all the comments that are around it, became a vehicle, a marketing vehicle, and so the employer brand became part of the brand right as well. So I so I think that investment in brand and employer brand really anchors you, because you're genuinely listening to what people are saying, whether it's on the client side or whether it's on the people side, but you've got proof points, which you know you are. You'll excuse the expression, but you are dropping your trousers knowing that you don't mind if people are looking in. You know you, but if you are, if you do believe in what you're doing, you should be brave enough to do that.
Speaker 2:Well, that's a great point, Mark.
Speaker 2:And the other thing just to build on that is, as leaders in a business, do not ask questions where you will not do something with the answers you get really, really important if you are perspective, listen to what they've got to say and do something about it. And, on the glass door point, don't ignore what people write. If it's positive and affirmative of where you want to be going as a business, thank them for it. And if it's not and you will get some rogue responses, whether it's by accident or whether it's on purpose respond to it. And it's one of the most important things that I did as a leader I responded to every single Glassdoor review. Wow, because it either neutralized the ones which, which you know, maybe the writer got confused with the name or the organization or were being deliberately, you know, provocative, or just to thank people because, as mark said it, it's a place where a potential acquirer will look, but it was absolutely a place a hundred percent of candidates looking to join your business will look as well. Really important to get even some clients.
Speaker 3:Yes, yeah, and you know. To come back to the consultants are notoriously difficult to manage. You know, in a, in most organizations, because of politics, people keep their head down. They buy the rah, rah, rah, or even if they don't, because they're sort of picking up their salary and it perhaps suits them geographically. But consultants are, you know, the hardest to keep happy and they find it easiest to move on. So you know, the one way to make sure that a consultant you know you're keeping them happy is you really got to prove that you're listening to them, because they're bright and capable and you're actually training them to be critical thinkers. So why would they not start to be critically? Think about the organisation they work for? It's guaranteed that they're going to be.
Speaker 2:That's absolutely right. And then Mark that leads into you know another point which is important for Joe's question they're going to be, and that's absolutely right, and that mark that that leads into you know another point which is important for joe's question, when it comes to heading towards a transaction and that succession planning, because you cannot develop a succession plan overnight. A succession plan takes, you know, months and if not years to get in place and to ensure that there is a succession for all the key roles in a business. And when you're getting to 20 million revenue, you're likely to have market facing teams, you're likely to have service or proposition focused teams. You'll have senior people leading the business.
Speaker 2:You need to have a think about who are you growing into that role? If that person wasn't to come back in tomorrow, what's your emergency successor for that person? And who have you got on the runway? Who, in two years' time, can free that person up to do a different role? And so many organizations get caught out on this. So many organizations and acquirers of people, businesses, want to know what the talent pipeline looks like through the lens of succession. And you know, having been, you know the other side of management, due diligence. You know on acquisitions before they really really want to kick the tires around it, and quite often they'll also wrap up some of the assumptions that you've made and some of the guarantees you're making in warranties as well.
Speaker 1:I think on that, that's a really good point, and it makes me think of conversations I've had with several founders or CEOs or owners around how risk averse investors and buyers are, and I think that's something that a lot of owners miss because they're focused on the profit and the growth and aren't we a wonderful company? But succession planning, among other things, is one of the major risks that will sometimes scupper a deal when it goes from the buyer, who is perhaps kicking the tires, or the private equity lead who's kicking the tires, to the investment board or the buying board, who say that the risks are too high.
Speaker 2:And there's no coincidence in the deal structure of most deals involves a deferred consideration, because they are worried that the principles of an organization that's being sold will make enough money to want to go and do something different. So if, alongside that, you're not able to paint a picture of the people that can step into your shoes and ensure the continued success and growth of that business, then there's a problem, and that problem may manifest itself in that deal not materializing, or it may manifest itself in the value being reduced I want to talk, um, I want to talk briefly about something that was quite boring, uh, but utterly necessary for a firm of this stage, and that is the plumbing of the organization.
Speaker 1:So the processes, the IP, the competence structure, training plans and all the rest of it. This can be quite a big overhead, and I'm guessing both of you had to lean quite heavily into this. So how did you, I mean, what were your thoughts, what were the risks? What would you do differently? Um, when it comes to what I'm loosely calling the plumbing of the organization, I'll talk about um, the ip, first of all.
Speaker 3:Yeah, I think there's a big piece to be talked about on the sort of people finance system side as well, which I've asked Richard to cover. Richard, are you happy to do that? I'm sure you've got bits on the IP to add. We realized that as we grew we needed to have different grades in the business. We'd hired lots of people I'd expect you'd call journeymen, people who sort of knew what it is that we did.
Speaker 3:But you get to a certain size and you realize that the way, if you're going to compete against a lot of the other clients, you're going to need juniors. You're going to need seniors. You're going to need project managers. You need to. You're not going to be competitive otherwise. You're going to need project managers, you need a. You know you're not going to be competitive otherwise. And this means that you're going to have to train your people. But you're going to need to train them not just in what you do, but also you're going to need to train them in consulting.
Speaker 3:I know and it is that thing that everybody laughs about but actually the difference. You can tell whether somebody has been trained to be a consultant or not. You know how you turn up and how well you listen and how well you actually go about your analysis and problem solving. It's not by accident, it's trained, but also the behavior set and the values. And you know, we would even go down into that. We wanted people, when they would turn up at a client site, to treat the people who would sign you in on the service desk, the factory, the factory or the service centers, managers, ea and the people who were doing the food, everybody with equal respect. And if we found that there was anybody not espousing those values, they were off, not just the team but the business. So values how to be a consultant and then actually learn the methodologies and capabilities that we had for us became a 16-week program.
Speaker 3:Yeah, it was something that you couldn't do over 16 weeks, but it's something that happened over the first two years of joining the business. We got professionals in to help us with the structure of it. Most of it was delivered internally. We wanted to make sure that every director on the senior team was involved. So you know, I picked up two or three days of it. Another one of my directors did the commercial bit, another one did the financial bit. So it was an opportunity, also at Christmas every year, to bring together a cohort of the whole year and actually put them through their paces using the tools, and we would do a week of acting almost with them and we would be a client and they would spend the week at the offices getting to know each other and actually fixing this imaginary client problem using all the tools and knowledge that we got. So it became a big part of the culture of the business and, uh was something which I think helped to set us apart.
Speaker 3:But failure to have done what we would have done and I think is the important thing is that we would have become inconsistent in the market behaviorally. We would have been known to have a whole load of journeymen. People that sort of were good at the thing but perhaps not good at being consultants, and it opened our recruitment angle to all sorts of other types of profiles. So we started taking people out of business schools who were sort of 31, 32, the advantage they were multilingual, they were from all around the world. 32 the advantage they were multilingual, they were from all around the world. They um, we actually managed to hire some females into the organization, which for us was a was an amazing opportunity because going down the journeyman route, we ended up with lots of mechanical engineering males as I used to laugh in um, rubber-soled shoes and rucksacks.
Speaker 3:You know there was a real sort of feel that I wanted to get away from. So build, building that ip was necessary because you need to be able to have consistent um approach and ability to deliver the programs. But it's much more than that. It's a culture defining moment. You're building a consistency, but so doing, you're actually building in diversity as well, because you're opening up your organization to all types of backgrounds and all types of age groups, because you're going to be able to absorb them into what you're doing and who you are.
Speaker 1:Yes, and I guess in most firms certainly more investable firms that leverage ratio that probably becomes evident. Approaching the 10 million mark, where you have teams that justify talking about a leverage ratio, requires perhaps sometimes younger, lower paid juniors that need more guidance and IP to ensure that they do a decent job 100%.
Speaker 2:I like your analogy, joe, of the plumbing, because it suggests that it's a stuff that is often unhidden but when it goes wrong or leaks it causes substantial damage. And there's so much in a consulting business that is behind the scenes but if it breaks can cause substantial damage. And if you look at just management information, having one version of the truth, trusting what comes out, making decisions based on management information, not data, is really important, because consulting businesses move very fast and you know, in our business we always work on a 12-week cliff and you know we only really have certainty of work 12 weeks out. And you know, one minute you're celebrating a big win where you need 20 people and, almost schizophrenically and simultaneously, you are shaking and convulsing or convulsing because you don't know how to find those people and you never have too much time to stand still. And this is where your resource management processes are really important, really important the way in which you have a reliable version on availability or visibility and availability, having people in the business who are maintaining relationships with your associates or your contractors your off the balance sheet resources, so there's no surprises making sure that there is that relationship between those people who are out in the market, selling work and your people team who help to you know resource it afterwards. Um, so, management information really really important. Uh, finance systems and processes. We've already talked about cash, but you know having um. You know automation where you can, or driving efficiency when it comes to billing, invoicing, project management, etc. Um, making sure that you've got fail safes where there's also ways to track the. You know what is meant to be coming in, is coming in in the right way, having clear ownership and accountability around it too.
Speaker 2:You know marketing we've touched on, but making sure that marketing is aligned with. You know sales and and people too, because you know we want to make sure that we're winning awards. We want to make sure that we have a reputation in the market as being the best that we can be, but we also want to make sure that we are generating um content, that is, want to make sure that we are generating content that is relevant to the challenges that clients are facing and making sure that we share a perspective in terms of how we can help clients. We can share a perspective in terms of what may be around the corner, and you know how do we help clients see around corners.
Speaker 2:You know how do we translate some of the policy, some of the regulation, some of the legislation, some of the market dynamics, some of the turbulence in the market. That will create opportunities but can also create risks, because actually, if we are sharing something and reinforcing that something through different media, then clients may want to pick up the phone and say, look, I saw that. That resonates actually with me. Can we talk about it? That's where some of your inbound comes as well Having a good balance between outbound, which can be expensive, and inbound, which, if you execute it really well, can be inexpensive or less expensive.
Speaker 1:I think it's important for and, to be honest, if you're a CEO or owner at this stage of a firm, you probably know this, but don't always act on it, and this is the idea you know. You talked earlier, richard, about the multiple of ebitda. Well, if you've been focusing on ebitda, on growth, for a long time, sometimes it's a bit of a mind shift to shift to thinking about the multiple, and at this stage you'll often make more. If you can get that multiple up from six to eight, you're actually going to have more impact on the valuation of the firm than if you got the EBITDA up from 20% to 22%, and so this idea of building the machine not only minimizes the risk for potential buyers and investors, but it actually produces a higher value firm at the end of the day.
Speaker 2:Well, not only does it do that, joe, it also reduces the risk of ebitda dilution or a multiple dilution, because when a when a consulting business sells their, their business, the the valuation is based on, you know, a multiple of ebitda, and I've never been involved in a business that I've either sold or advised companies on where that multiple goes anywhere other than down. Yeah, and all of the stuff that we've been talking about helps organizations to protect themselves from that EBITDA multiple reducing through due diligence.
Speaker 1:Yeah, good, okay, sorry, mark, go on. You were going to say something.
Speaker 3:It's a few minutes ago now, but I was just going to come back to something that richard was saying, which was around um, this piece around the, the, your resourcing capability. I just thought a couple of numbers might be useful there, you know. So we were trying to resource around, you know, if I think around this 10 million mark, you know how many people have you got? You've probably got 50 or 60 people and we probably had around half of those were associates. So let's say we were using 30 associates at that time to give people an idea, we probably had a 500 associate strong book to be able to regularly do 30. Yeah, yeah, and I just want people to, I guess, get an understanding of if you're not engaging with that size of labor marketplace, you're not going to be able to consistently keep your growth profile going. And it really just underlines how important it is that role of um, of the resourcing ops manager, ops director role. So it's just a stat. I thought it was just no.
Speaker 1:I think that's really useful and and something we haven't talked about is who you start to compete against when you, when you're growing and increasingly as you grow, you're going to be rubbing shoulders or coming up against the big four and some much larger firms, and having a decent associate pool will allow you to compete, and also partnerships, sometimes with other firms, will allow you to compete in spaces where perhaps you couldn't have done before great and link to link to that.
Speaker 2:Never turn off the recruitment engine because it takes a long time to turn it back on. Even if you are flatlining on performance, even if in the dark days you are regressing in terms of your pipeline, always keep the recruitment pipeline going. That doesn't mean bringing new heads in. That means making sure that you are attracting candidates and you are moving people through that, that pipeline. Really, okay.
Speaker 1:So I, as the owner of the firm, have successfully thank you for your great advice now managed to attract uh, private equity, uh investment, which has allowed me to exit, and the ceo is and I guess you know this is not dissimilar to the situation that some of you guys have been in, so we've managed to attract a pile of cash. Number one for me to exit. The senior team have fairly ambitious earn out targets, but there's also some money for investment. So we're now well past the 10 million mark. Perhaps we're on 20 million. Now, what's going to enable us to hit those two targets? Number one are you hitting your personal earn out targets but also ensuring that the firm continues to scale past 20 million?
Speaker 3:Yeah, a couple of levers that we used which I think are worth considering. So one is sector. You haven't really talked about sector that much. I think, back at 10 million, you might have some sector uh persona on your website and own a sector notionally, but we certainly and I would advise people to look at having investing in sector expertise. So having, you know, perhaps six or seven people dedicated you know what perhaps banking, insurance, health, retail but you're not going to win against the big four and the larger companies if you don't know the markets and don't know the sectors in some real depth. So I think if you're at that size and you're going to consistently win against those people, you need to have deep sector expertise. So you need your marketing team, marketing, analytics, digital, to really back up those sector teams.
Speaker 2:Right and I think, linked to that Mark, you've probably also got the same investment needed on your services and capability side to make sure that you've got the ability to deliver what it is you do really well at a bigger scale because you want to be doing the longer term work with larger clients and quite often different geographies as well yeah, and I think that's absolutely right and I think about it some of the hires that you now make, again, as we've said before, you probably don't want to be bringing in sector mds from externally.
Speaker 3:You need to be probably making them internal ones. But you you can with, I think, less risk, bring in sort of hires or a couple of layers down from that or if only one, and they are going to bring new insights and new methods and your IP base needs to be flexible enough to actually embed that new IP that's being brought in. You can't have an IP bed that doesn't evolve quickly in line with what you're trying to do. I guess the second bit and this worked well for us was actually going international. So we went to Kuala Lumpur and to Germany in particular, because and I think the Kuala Lumpur example is more interesting because we felt that what we instance it was a customer journey design, but it needed people on the ground who were good coaches and who were willing to travel and was equally good on the technical as the people side.
Speaker 3:And we found in Asia that there was a huge gap in the market for doing that. Loads of people saying go to america, you know great market, so many organizations that sort of kill their cash pile by going out to the states. Because I see, yeah, yeah, because I mean it's such a difficult market and yeah, yeah, and it is obviously the the most mature, probably of all the consulting markets as well, um, but we made that conscious decision to go to Asia, and actually specifically to Kuala Lumpur, with its proximity to Singapore and not too distant, obviously, from many other markets, and it worked really well. We grew very quickly. We had a couple of very friendly clients, but we were able to win work locally quite quickly as well.
Speaker 3:But, um, you know you've got to do your analysis. You know, work out why you're going somewhere and and why it is that you have an advantage there. It much in the same way as you were successful initially in the uk. So, um, um, but, but don't, don't go for what you know. What that very often happens is it, you know is is the ego driven. Yeah, we're going to the state type thing. You know I would be pushing people very hard, um, to analyze whether that is the right decision or not and and just just quickly.
Speaker 1:I mean, it is risky, um, and and people can go too early, um, when, when there are still great opportunities in the uk and perhaps western europe, um, and so you know, reiterating your point about really doing your research on on the markets, and where are you going to get the people and what's the long-term plan? Because in some ways it's like starting up another company in it, just in a new territory, and and I've I've seen a few times people go too early or, as you say, based around ego, because they want an international company and things go wrong and expensively wrong.
Speaker 3:Yeah, it's the classic analysis where are we going to win? And really think about why you might win. And our decision was done almost pretty much post-Brexit. So there was a bit of an emotional time, as you'll probably remember, where the German, french, italian markets I mean, it was more Germany and France that were of interest to us, but there was a sense that we weren't very welcome at the time, having rid ourselves of this turbulent priest called the EU it was. You know the sentiment wasn't great at that time.
Speaker 1:Yeah, yeah, richard, anything to add? Yeah?
Speaker 2:I think this size of business now is going to be really dependent on robust governance and, if you haven't got it in place already, just making sure that you've got the structures there around a board, around advisors, around non-exec directors and surrounding yourself with people that have deep market experience that can add value to what you've got but also bring with them different experience and knowledge and perspectives that prevent you as we talked about earlier becoming an echo chamber. Yeah, provide that constructive challenge. So having the right cadence when it comes to, you know, management meetings and board meetings, having enough time to look out as opposed to being internally focused and making sure that you've got that constructive challenge that supports you on the journey that you're on and making sure that you're in the best possible health that you can be as a business today.
Speaker 1:What enables you, at this stage, to compete successfully against firms that have already been through this transition? They've got a brand in the market. They might be slightly more expensive than you if we're talking the big four, but if we're talking some other firms, perhaps they're not more expensive. Sorry yeah, perhaps they're not more expensive than you, so you can't compete on price. Sorry yeah, perhaps they're not more expensive than you, so you can't compete on price.
Speaker 2:How do you compete with more bigger, efficient players in the market. I think, from my experience, it's being able to leave a really relevant track record and experience. I think it's also as much about how you do as what you do. So you know, we always said that we wanted to support clients on their most strategic challenges and we wanted to work in blended teams and we wanted the client to put their very best people alongside our best people, and we believe that all of our people were really, really strong and in doing so and through multidisciplinary teams, it would mean that we could leave a legacy of increased skills, knowledge and capability in that organization when we left.
Speaker 2:That's very, very different to the big firms that we found ourselves competing against, because big firms are motivated and incentivized to putting full teams of people and when they leave, at the end for things to fall down so the client can't afford them to leave and bring them back in. And we took a very different mantra if it's that important to you, client, then let's work together on it. Don't pay us to learn about your organization. Pay us to bring our skills, knowledge and experience that you haven't got in your organization to fix your biggest problems and in. So we will support your people to build some of the skills and experience that will help you continue to be successful when we finish the work that you've engaged us to deliver.
Speaker 1:Right Mark. Anything to add on that?
Speaker 3:Yeah, I think a couple of things I think you know. One is you know, we joined the MCA and made it our. We wanted to win awards, that was part of it. We we wanted to win awards, that was part of it. We also wanted to learn from the rest of the industry as well, and we, you know, you're looking for a kite mark as well when you're not a household brand. Yeah, so the kite marks of we talked about Sunday Times 100 or, you know, top 100 already, the kudos from winning awards, those are things which matter to clients actually, because if they never heard of you, but they can see the brands that are associated to you, that are, um, ones that you know, household names. I think that that helps.
Speaker 3:But I'd come back, you know, to the winning work.
Speaker 3:I mean, I completely, completely concur with what Richard was saying in terms of being there to transfer skills and ensure that, effectively, you're planning your exit as soon as your entry is really what he's saying, which is really what a good consultant should do and a lot of the big four don't do.
Speaker 3:So it does become a a usp the fact that you're planning to leave, you know, and you're planning to leave on on the best of terms, with all the deliverables done, is a you shouldn't be a, in some ways a differentiator, but it is. But I think the other piece to win the work is um we come back to the challenger piece, which we've talked about before is to be non-compliant, and what do I mean is is that very often, the exam question which is set in the RFP is one that you're going to have to go along with until you get to pitch. But I would recommend that in a situation where, all things being equal, you need to stand out. Now you've got to run the risk of becoming last in the pitch, but there is no point coming second or third out of four. You either need to come first or fourth. So, on my basis that um, I'm, you know, you're prepared to come forth.
Speaker 1:Well, sometimes, if you're prepared to come forth, then you need to go in hard and probably tell them that the exam question was wrong yeah, great, I really like that, especially having seen, well been in many big four pitches and they're very risk averse, very standardized, very obvious, um, and so you know, the capability of a smaller firm to offer something different and challenge perhaps where where bigger firms perhaps wouldn't is is fantastic. Thank you so much for your time. Uh, really appreciate it, and I think there's another podcast perhaps about what happens to the ceo when they decide to leave and then, uh, what happens post that. But we'll say we'll save that for another time, but in the meantime, thank you so much for your time been a pleasure to be part of it.
Speaker 3:Thank you both.
Speaker 1:Yeah, thanks so much, joe, thanks mark if you'd like to find more out about me and access some free resources to help your consultancy grow, do please visit joeomanicom.
