Is your technology hurting your business valuation?

In this episode of The Payoff Podcast, Andrew Wall speaks with Michael Lamm of Corporate Advisory Solutions about how outdated systems, poor data hygiene, and inefficient workflows can lower EBITDA and reduce sale value.

Michael shares what buyers look for in collections and debt recovery businesses—and the practical steps you can take to modernize operations, improve performance, and increase your valuation multiple.

If you’re planning an exit or looking to build a more valuable, scalable business, this episode breaks down what matters most.

🎧 Learn how to become exit-ready and maximize your business worth.

Meet our Guest: Michael Lamm: https://www.linkedin.com/in/michaellamm/

Meet our Host: Andrew Wahl: https://www.linkedin.com/in/andrewwahl/

Learn more about Quantrax: https://www.quantrax.com/

Transcript

SPEAKER_01 0:00

Welcome to the Payoff Podcast, brought to you by Quantrax. This is a show for debt recovery leaders who know the industry is changing, even if the conversations around them are not. Many collection operators are stuck doing what they've always done, uncertain how to move forward and wary of the unknown, especially when it comes to technology. This podcast will help you see things differently. Here we explore practical strategies, smarter systems, and leadership choices that help you move past the familiar, step into new opportunities, and actually improve performance. Each episode features real-world insights from operators and executives who have faced the same challenges, experimented, and discovered what truly pays off. No hype, no recycled talking points. Just thoughtful, actional conversations about growth, technology, and leadership in today's receivables environment. This is the Payoff Podcast, not the same old conversation. Welcome to the Payoff Podcast, sponsored by Quantrax. I'm your host, Andrew Wall. Today we're joined by Michael Lamb. Michael is co-founder and managing partner of Corporate Advisory Solutions, an independent investment banking firm based in Philadelphia. With over two decades in the industry, he specializes in M-A advisory, valuations, compliance, and growth strategies for lower middle market firms in the outsourced business services sector. His firm focuses exclusively on tech-enabled services like ARM, healthcare RCM, debt collection, and contact centers. He has overseen more than 145 transactions throughout his career, worth over $2 billion in deal value. Today, Michael's here to talk about why it's critical for collection operations thinking about selling to modernize their technology, because it can have a direct impact on how much they get out of a sale. Across the sector, he sees many owners still running 20-year-old systems and treating their data like an afterthought, assuming the buyer will fix it later. Michael explained why outdated tech and messy fragmented data can lead to owners falling well short of the final sale outcome that they dream about. So let's take a look at how getting serious about digital workflows and data hygiene can make the difference when it comes to sale. Welcome, Michael. It's great to have you on the podcast.

SPEAKER_00 2:18

Great to be here, Andrew. Thanks for inviting me.

SPEAKER_01 2:21

So uh let's start here. Uh when you meet a collection agency or RCM owner of thinking about an exit, what are the first three things you look at in their business?

SPEAKER_00 2:31

It's not always easy, but there are three main things that we we try to look at. Um client concentration and what the contracts of those relationships look like. Number one, tech infrastructure, so collection system, what other data sources that they are utilizing. Very important is compliance. Those are the three. But I'll give you one more, too, Andrew, that becomes really important is the owner dependency. So think about a situation where one owner who turns off the lights, turns on the lights every day. It's harder to transition those types of lifestyle businesses because you're in a situation where that owner is so dependent upon internally and externally that it makes it harder to transition the business.

SPEAKER_01 3:22

Yeah. Okay. Um so when you're thinking about uh transitioning a business, uh, what kind of margins and multiples at sale are we really talking about? What's the financial impact of outdated systems and how much can modernization really lift those numbers?

SPEAKER_00 3:37

A lot of the companies in the industry putting aside software and tech companies are trading on a multiple of what we call normalized EBITDA, which is earnings before interest taxes, depreciation, and amortization. That's the general metric, right? And in order to drive that EBITDA margin up, you got to be in a situation where you're working off of good technology that's not outdated, not manual workflows, all those things matter to dropping more to your bottom line. So what we find is a lot of the companies in our industry are generating 10%, 12% EBITDA margins, where if they were just able to kind of move ahead and enhance their tech their tech stack and look differently about how they're handling compliance workflows, their margins could go up pretty considerably. So that's why when it comes to planning, the more time you have to plan for an exit, the better the outcome could be in order to increase those margins.

SPEAKER_01 4:47

So how does that translate to multiples at sale?

SPEAKER_00 4:50

So um so if a business today, because they're on legacy software or they're having tech issues or compliance issues, is generating could only be at a three to four times multiple. Andrew, I mean, in a in a great situation, it can be trading for five, six, seven times plus EBITA. And it really, really matters. So that margin profile that I just described, if you can enhance it and you push the levers, it can be a meaningful payday for you as a uh as a seller.

SPEAKER_01 5:28

I so so for owners that are just doing okay but not really growing, what are the most common excuses that you hear for not modernizing? And how do you challenge them?

SPEAKER_00 5:38

Um too expensive, I don't have any time, I don't have a good IT person to help me figure it out. Um I have all this other labor and costs and insurance and compliance. How am I going to be able to figure that out, Michael? Is it is those are some of the common ones that people bring up to me as an advisor.

SPEAKER_01 6:02

So what do you say in response? How do you challenge them to think differently?

SPEAKER_00 6:05

I I tell them I I kind of ask them to go backwards, right? And I say, where do you want to be? Right? Where do you want to be? So if you look historically at what the business has been doing, if you start planning and making some modifications to drive more to your bottom line, there's a very good likelihood that your business is going to be worth more than it is today. So I try to ask them to get a handle on what they're looking to accomplish. Because in a lot of cases, they may not be looking to sell the business, Andrew. They may just be saying, forget it. I'm just going to keep this and hand it over to my son, daughter, aunt, uncle, brother, cousin, whoever it may be, and let them run it. But a lot of a lot of owners have different aspirations. They want to they want to exit, they want a legacy, they want something different. And those are the owners that gravitate to actually calling people like us because they want to they have a goal in mind, Andrew. They want to get to a place and we want to help them get there too.

SPEAKER_01 7:09

Can you walk us through a before and after example where an owner really invested uh in digital transformation and materially changed that outcome?

SPEAKER_00 7:18

So when you do a conversion, as I've talked in other podcasts, it's never easy. Nobody ever says it's like an easy cakewalk. You wake up one day and you're like, oh, I'm gonna switch collection software, and magically everything works well, the clients are happy, and your team is using it efficiently. So I always tell people in a couple of case examples, is it's a three to five year plan, right? Now with AI and all the digital discussions, can you do it faster with a conversion? 100%. But if you give yourself three years up to five years to really get that working, it really makes a difference to your margin profile. Because now you've been able to reduce costs, put all your workflows into it, leverage it correctly to collect more, make your add more clients. I mean, those are all things that lead to ultimately a better outcome for the exit. On the other side, if you you just sit there with your old archaic technology and legacy software, the buyer that comes in, their mindset is well, we've got to make those changes. We've got to get you off the legacy software, we've got to get you a new IT person. All the things you could think about that become an important dynamic become even more critical for them to lower the price on the potential seller. And that's where having up-to-date new software, technology, everything else in place becomes so important. But on the other hand, there are situations where buyers, other collection agencies, they don't care. If you're just selling your collection agency to another collection agency that's on a different software, well, they're gonna just roll them in anyway. And but the valuation may not be too exciting. So you've got to factor all that in. That's why I'm saying the goal, what are you looking to accomplish really matters here?

SPEAKER_01 9:27

Right. Um so uh if an owner uh wants to exit in say three to five years, as you say, um, how early do they need to start modernizing and what should really come first? Uh do they look at data hygiene or their digital channels of staffing?

SPEAKER_00 9:43

I I like for I you know I always tell companies like technology is changing so quickly every day, every week, every month, is to evaluate, evaluate, evaluate, learn, do your research and development, talk to people about what systems they're using, talk to your competitors, your peers in the marketplace, use the trade associations to get a better flavor for what is available out there in the marketplace and what's working and what's not. Um and so that that's really kind of a key, a key point that I tell folks. And then I also get tell people that if they do have a technology person internally, is to get them on board. Find out what they're thinking because they're in that seat, they know what works and what doesn't. Go engage them in conversation and see what they have to say. And then there's obviously a lot of IT and tech consulting players that are in our industry that are offering up a lot of guidance too, right? And they're and and they're there more as a third party to say, have you thought about these three things before you do a conversion or technology change? I think that I think education and research is really important before you do anything.

SPEAKER_01 11:02

What would you say to the owner who is who is just committed to riding it out for five years uh and and what risks are they not maybe seeing uh to their retirement or legacy?

SPEAKER_00 11:14

It just comes down to what their expectation is. Because if their view is that they're not intro they they don't care about maximizing value, well, what is the point of really changing the Apple cart much? Leave it the way it is. And if you're not interested in adding a couple million dollars more in purchase price, then then then you're wasting your effort going through a lot of pain to get there. But it also depends too, Andrew, on the age of that individual, because if that age individual is 45, you know, they've got a long runway ahead of them before they retire, versus the guy that's 70 that says, you know, is it really worth the next three years of pain to do the to do the tech the technology change? And I could argue it either way, depending on where they're sitting with the business.

SPEAKER_01 12:04

Right, right. So uh for a listener or viewer who knows their tech is old uh and their their data might be a mess, uh, what is one practical, reasonably simple step they could take in like the next 90 days to become more exit ready that would make them uh feel more set?

SPEAKER_00 12:21

I would love to see them look at their data that they've got and and really understand what they're sitting with, right? Like everything they're ingesting into the software from clients and internal, understand what it is and how they want to utilize it going forward. Because a lot of the new systems that are out there are connecting so many other data sets than just in terms of analyzation of liquidation performance, collection performance to offer benchmarking, right? To be able to say, I'm working this type of portfolio, and this is really where we should be performance-wise, because we're not. I mean, those are real things that people gravitate to and want to understand how do they do better with less, right? Because labor tends to be more of a liability in this industry, and with the evolution of chatbots, robots, whatever you want to call them, the the less people you have to handle certain functions, the better you're gonna be from a compliance and hopefully liquidation perspective over time on the portfolios you're working on.

SPEAKER_01 13:35

Well, thank you, Michael. You've given everyone a lot to think about. Uh, where can they find you to uh learn more about your services and get in touch?

SPEAKER_00 13:43

Um, our website, www.corpadvisorysolutions.com.

SPEAKER_01 13:50

Thank you, Michael. That's it for today's episode of the Payoff Podcast. Thanks again to our sponsor, Quantrax, creators of the RMX debt recovery management platform. I don't know what you might be missing in debt collection software. Learn more at Quantrax.com.