“There’s no handbook or rigid exercise I take with me to vet opportunities. The first things I look at are the people and the proposition. It’s a lot harder to change your relationships with people than their processes and performance. They have to capture me with reasons to invest and make sure that interest is going to stay the course. You can’t invest in optimism, so any decision has to then be grounded in the empirical.”
“The leadership, management, branding, and financials have to be able to stand up to scrutiny. In the forty years, I’ve been doing this, nothing is more attractive than the strength of your forecasting.”
“Decisions don’t hinge on your P&L, attractive ratios, or which facility guarantees your cashflow. These are all positives, but anyone can tell you where you’ve been, investors want you to demonstrate where you’ll be going and why with critical evidence. They want as close to certainty as possible.”
How accurate, predictable, and confident are you of your forecast, how is it constructed, contextualised, and how far does the line of sight extend before it loses integrity?
Good forecasts are built on:
- A bedrock of solid information
- A healthy CRM
- Clean operations
- Transparent numbers
“It’s no good having the reporting in your locker when decisions are being made on the floor. It’s why cube19 still makes the hairs on the back of my neck rise up, because the information you need to make better decisions is there when you need it.”
“I see too many businesses that are running well, but can’t demonstrate it. Imagine every conversation like a legal case where it’s not what you know, but what you can prove. How can you expect to sell when you don’t know your topline ratios, turnover, or forecasts as a minimum? It’s sometimes frightening that owners don’t realise what is happening, or has happened until an audit unearths it.”
The three points to every plan
“Businesses like SThree succeeded above others because they documented a repeatable, and therefore, scalable process. One of the first things I do to position a business for sale, investment, growth, or simply for efficiency, is to make a three-part-plan:
- Where we are now
- Where we want to be
- What will take us there
Ground everything in numbers and processes and not individuals. People are too ethereal. Identify what your desired destination is and chart the incremental steps that take you there.”
“I like to know what the owner’s vision is, their drivers, and how the financial reality compares so that we can course-correct that alignment. I need to see why I’m being involved and what they need from me.”
“The whole process takes about three months to get to really know the people, ascertain the business reality and see whether we’ll bring enough to the table as partners.”
If you’re parting with equity you need to know the investment adds something immediate to your business, and that there’s continued capacity to add value as you grow.
Look at what advice you need for the next stages of growth and consider if you might outgrow what’s being offered. Investment isn’t a shortstop, it’s a partnership where the value should compound.
A new attraction for investors
Investors will want to know what’s scalable, sustainable, and profitable. They want good management information with the i’s dotted and the t’s crossed. Any gaps in compliance or documentation will completely derail the process or prompt a much deeper investigation.
“The power of branding and its ability to open doors to markets, PSLs, and talent is far more prominent than it used to be. Things are changing there, but ultimately, there’s no shortcut for hard work and driving a business for investment or sale is hard work. You can’t “will it to happen.”
“Every agency is bigger than an individual and having cross-company visibility over performance, progress, and targets are the anchors and motivators that spur companies to the highest feats.”
It takes a lot of grit to push your business into uncharted growth and the more visibility you can arm yourself with the more confident your strides forward can be.
About Graham Palfery-Smith
When we started exploring the topic of agency investment and acquisitions, Graham was the first name we had to get involved. Acquiring his first agency in 1994, he’s been involved in 63 transactions in the recruitment space, ranging from a 12,000 person business down to a sub-20 operation. In a single year, he bought ten businesses under the banner of what became Hudson. He later bought six businesses across two years for FiveTen Group. He’s NED for six recruitment businesses and Chairman of 6CATS, global experts in tax and compliance for the international contract workforce.