This is a crossover episode of the Red Review. I was a guest on the Growing Consultancies podcast with Paul from Pegasus, the recruitment business, and he kindly lent me the recording to share with our listeners. The same rules apply well beyond consultancies, to construction businesses, supply chain businesses and outsourcers.
A caveat before we start. Neither Paul nor I are accountants, lawyers or financial advisers. Treat this as a set of questions to take to your own advisers, not as advice.
To grow a consultancy and sell it well, you need to lift two numbers: your profit over a two to three year runway, and the multiplier applied to it. Most consultancies sell at roughly four to eight times profit. You raise profit by winning work with clients that fit your sweet spot, and you raise the multiplier with a visible pipeline, a proven win rate, a broad client base and a team that can run the business without you.
Why does nobody tell you how to build a business you can sell?
Nobody volunteers this information. Accountants and lawyers rarely proactively advise you on shaping a business for sale, and I have never fully got to the bottom of why. The owners who are in the best shape tend to have a network of friends and mentors, constantly test their thinking, and push their advisers to think things through with them.
Paul added a point from the recruitment world. Most of the deals he sees happen off the back of a really good non-executive director who has been through the process several times and knows what to ask the accountants and solicitors. I do non-exec and board advisory work for businesses from SMEs up to multi-billion turnover contractors and consultants, and I see the same thing. A good non-exec saves you a lot of pain and the long way round.
How is a consultancy valued?
Two numbers smash into each other: profit and the multiplier.
Profit. A buyer will focus on the last 12 to 18 months of revenue, cash flow and profit, but you should give yourself a good three year runway. That means consistent accounts, good management information, and numbers evidenced and audited by your accountants
The multiplier. Most consultancies sell for between four and eight times profit. On 100 thousand pounds of profit, that is 400 thousand at four times and 800 thousand at eight times (hopefully your number is much bigger)
The multiplier is set by confidence factors that buyers will interrogate and negotiate on:
The strength and depth of your pipeline. The further out you can see opportunities, the higher the multiplier
Your win rate, and evidence of it over time
How many clients you have, and where your profit comes from
Why does client concentration matter?
If most of your profit comes from a handful of clients, a buyer sees risk. I have now run the analysis on 30 odd clients, and every one of them makes around 80% of its profit from 20% of its clients. The aim is to spread that profitability across more clients, which reduces risk and helps the multiplier.
Paul gave a great example from his side. One of his very large, successful clients has a largest client globally that makes up less than 1% of revenue. At the other extreme, he knows a consultancy that was heavily reliant on one major retailer. When the retailer changed its supply chain, the business was a shadow of what it had been almost overnight.
What goes wrong when young consultancies hit a ceiling?
I see this a lot. A business spun out from a bigger firm grows for a few years on a small number of clients, then runs out of mates to work for. The natural move is to buy a licence for a portal, find public sector notices and start hobby bidding all over the place.
It usually gets them into a mess. With a win rate of perhaps one in five, you burn your people out writing bids. And if you do win one written to a stranger, they probably never wanted you, because clients usually know who they want before they tender. You have probably underbid it, you are working with people you may not like, the work is further from home and outside your sweet spot, and your people are more likely to leave.
There is nothing wrong with having some key clients. You just need to find clients four, five and six. Maybe you talk to eight to convert four, and focus at client level rather than hobby bidding projects.
Why can you not sell a business if you are the business?
Buyers are painfully aware of it. You need a roadmap through the growing pains, from 15 towards 50 people or from 50 towards 100, to a place where there is a level of management below you that could run the business without you.
Paul's rule of thumb is that the pain arrives each time you treble. Going from one to three people is an adjustment. Three to ten is another. Ten to thirty means you need a management layer, and thirty to a hundred means several layers and a good chunk of non fee earning staff. Many businesses are under resourced on the non fee earning side.
What are the deal structures when you sell?
Many people assume a sale to private equity and being paid out in one go. In reality, whoever buys is likely to tie you into some kind of deal structure:
An earn-out. You may get something like 50% for your shares, and the other 50% only if you stay for a couple of years and hit KPIs
Deferred consideration, where you are paid out later
Equity rollover, which is common with private equity. They offer you shares in their wider business, and you may get a bigger payout when they sell again in three to five years
Warranties and capital adjustments. If what you promised does not come true, buyers can claw back from the money they have promised you
So you need as much certainty and good data as you can get, and you need to be careful what you wish for.
What is it like to sell to private equity?
There are some wonderful private equity and venture capital people. But a friend who is a non-exec described the model to me. A fund will buy ten businesses and expect two to absolutely fly and two to completely fail. The ones in the middle they will ride through, and they will be constantly on your case about KPIs and earnings.
If you decided to sell because you wanted a change of life, going from being the boss to having stakeholders focused on commercials can be uncomfortable. I have seen people sell to a much bigger global organisation and still be there eight or ten years later, because they never hit the numbers. Go in eyes open.
Which route should you choose: private equity, trade sale or employee ownership trust?
Each has pros and cons.
Private equity. They buy, scale and sell on. You may get an equity rollover, but you will be accountable to a new set of stakeholders
Trade sale to a larger consultancy. This is probably where you get the biggest return, but your brand will probably disappear into the giant. Paul's view is that many leavers do not worry about that as much as owners think they do
Employee ownership trust (EOT). The idea is that the business is sold to the employees through a trust, with debt paid off from the profits
There is a tax benefit to an EOT, but it has been reduced. Under the government's policy paper, for disposals on or after 26 November 2025, only 50% of the gain is chargeable at disposal, with the other 50% deferred. As ever, talk to your accountant.
Do employee ownership trusts work?
Paul and I disagreed a little. His view is that the premise is brilliant. Business owners take the risk and the stress, and should be rewarded for it. An EOT lets future owners get a stake without putting in their own money.
Where it goes wrong, in his view, is when the business is not doing as well as it should and it takes a lot of money to extract the original owners' equity. If nearly all the profit is pulled out each year to repay the debt, it strangles investment, leaves little bonus for the people growing the business, and can become toxic. Some EOTs set up in 2022 and 2023, when the market was buoyant, have since been caught out by two flat years. Others have been tremendously positive for everyone.
I had always fancied a John Lewis style business, and this made me think harder about how you would structure one.
What is changing in the consultancy market?
Consolidation continues, and a lot of the money behind the big primes is North American. Paul is seeing a new development in the last two years, with investment vehicles, sometimes run by people from outside the industry, buying small and medium sized consultancies of 20 to 50 staff and bundling them into a group
The big players are chasing huge programme delivery roles, which are attractive because they provide predictable revenue to take to shareholders. There will not be enough of those for every big firm to win, and while they are distracted I think there is opportunity for mid-sized firms and new groups to take the fight for projects worth hundreds of millions
Procurement is being simplified. With the new Procurement Act, risk averse buyers are dumbing down scoring and removing added value and innovation. Add AI and it is easier for everyone to answer the question and play the spec back. On the GCA's Construction Professional Services 2 framework, I said that around 15 firms were meant to be appointed per lot, and nearly 30 got in. The GCA's agreement page lists between 24 and 31 suppliers on each of the four main lots
Paul's view is that this is a positive. No single business can deliver it all in a tight talent market, and if SMEs do well, so do the large consultancies
How should a 20 person consultancy prepare for a sale?
Paul gave me a worked example. A 20 person consultancy, 2.5 million pounds turnover, 20% profit, mostly private sector. I have a client exactly like that. Here is what I told them.
Aim for visibility and certainty. Get the greatest visibility of your key clients' programmes of work, and find clients that are similar in vibe, where you make money, your staff are happy and the client is happy
Have a proper go-to-market strategy if you diversify. Figure out what good looks like, the capability you have and the right clients, and get well ahead of opportunities rather than hobby bidding
Look for adjacent markets and bridges. If you work in retail, look at mixed use or commercial office. Public sector organisations build many of the same things as the private sector, just inside a big fence. A university accommodation scheme, built with a private developer on a campus, can be a bridge case study. Another is the wave of PFI deals that are 25 years old and returning to public ownership, where working with the SPVs gets you case studies you can use to win with local authorities
Hire people who have worked in both sectors, and take baby steps
Paul added two more options: hire a director with relationships in the sector you want, or open another office to give you more coverage across the UK, and consider whether giving more equity to the right people would enable growth
Why does your ownership structure matter?
Something accountants do not naturally tell you at the start is how you hold the business. Many people start a company and own it personally, perhaps with three partners at 33% each. That is fine until you sell, when you are subject to capital gains tax, and it also locks you into paying everyone the same.
Some owners use a holding company above the trading company, so profits can sit there and be deployed into investments such as shares or property, and so the pension can be used more flexibly. I would call a limited company the greatest gift you can give yourself, and a holding company on top of it can help. Take advice from your accountant, because this depends entirely on your circumstances.
It is a travesty that financial independence, how money works, is not taught at school or university.
Should you spread yourself across other businesses?
Paul's warning is that some business owners get bored, start putting fingers in lots of pies, and end up doing a poor job of all of it. His advice is to stay on your main business, which is where you have the most leverage, and make lower maintenance investments elsewhere. Passive income is also an abused term, because a lot of it is not passive.
I agreed, and added that you can go and do other things once you have sold. If you do invest in or buy another business, the fundamental is a really good management team below you, possibly better than you.
What can go wrong with an earn-out?
I know people who sold a consulting business, not in construction, to a much bigger firm on a seven year earn-out. Over a beer I asked them to do the maths. Given the profit they were making, they might as well have held onto the business and kept taking the profit out. I still cannot work out how they got talked into it. Buyers are professionals at buying businesses and you are doing it for the first time, with lawyers involved.
My point is that you might be better off running a business of ten people and investing the profit, because investments compound. Paul's version is about choosing your ambition. A ten person business that generates a million pounds in fees and half a million in profit can give you a very good life. If you want to scale beyond that, you have to go through what Alex Hormozi calls the swamp, the stretch from one to three million of turnover where profit drops while you build the business. You need the stomach for it.
Why does key account management lift your valuation?
I studied Turner & Townsend because they were a competitor for most of my career. Paul pointed out that they got where they did by making a lot of hard decisions over many years and by not pulling all the money out each year. What I saw from outside was partner led client account management. Their partners were accountable for their clients and sponsored that activity hands on.
That is where many businesses go wrong, particularly bigger ones. They employ managers to run the business and nobody sponsors growth. If you focus on your clients, create the most value for them, and ask for a share of that value in return, you cannot help but be more successful. A key account management programme:
Helps you understand and spread your client concentration
Gets you visibility of pipeline, because clients will tell you about it, which helps your multiplier
Makes direct awards and negotiated work more likely, at a higher margin and more predictably
Does not need to be over engineered. Even a one page plan will do: who do we need to know, what is important to them, what is their pipeline, and what will we do about it. Look at it every month or two
Almost no businesses do this, because it is a bit boring and people might ask you about it. Everyone gets excited about bids in the end game, when the real value multiplier is in key account management, in the mid-game.
What is the one thing to take away?
Do not focus on bids. Focus on clients that have deals later, and the money and the fun will come. Figure out where most of your profit already comes from, run some market research on where the money will be and with whom, and find clients six, seven and eight that look like the ones you already love working with.
AI helps accelerate all of this, but it is a transformation, not a tool. A structured process and clear roles come first, and technology underpins them. Getting an AI tool to write your bids will not solve the fact that clients know who they want.
What are the main takeaways?
Your value is profit multiplied by a multiplier. Both can be improved
Spread your profit across more clients, and stop working with one hit, difficult clients
You cannot sell a business if you are the business. Build a management layer
Expect an earn-out, warranties and other structures. Read the small print and do the maths on your own alternatives
Employee ownership trusts, trade sales and private equity all have trade-offs
Set a North Star for your life and let the business enable it
Key account management is the most underused value multiplier
Quick answers
How is a consultancy valued? Profit, usually looked at over a two to three year runway, multiplied by a multiplier. Most consultancies sell for roughly four to eight times profit.
What increases the multiplier? A visible pipeline, evidence of win rate, a broad client base with low concentration, and a management team that can run the business without the owner.
How long before a sale should you prepare? Give yourself a good three year runway, with consistent accounts and good management information.
What is an earn-out? Part of the price is paid later, usually if you stay for a couple of years and hit KPIs. You may only receive around half of the money up front.
Are employee ownership trusts still tax efficient? There is still a benefit, but relief has been reduced. For disposals on or after 26 November 2025, 50% of the gain is chargeable at disposal and 50% is deferred, according to the government's policy paper. Speak to your accountant.
About the author
Jeremy Brim is Managing Director of Growth Ignition, which helps B2B and B2G businesses win more work. He does non-executive and board advisory work for businesses from SMEs to multi-billion turnover contractors and consultants. He was previously a board member of a business that was scaled and sold over two and a half years, and led a large bid team at Mace. He hosts the Red Review podcast in partnership with Bidscript.
Sources and further reading
Capital gains tax: employee ownership trusts relief reduction, GOV.UK
Construction Professional Services 2 (RM6356), Government Commercial Agency
Main Street Millionaire by Codie Sanchez, Penguin. I mentioned this on the episode, as a source of ideas on buying and valuing ordinary businesses
Related posts from Growth Ignition
What Does a Bidding Career Look Like in the Age of AI? https://www.growthignition.co.uk/thoughts/rrjuliangi
Don't hobby bid: go-to-market strategy for new sectors, from the episode with Matt Elliott: https://www.growthignition.co.uk/thoughts/rrmatte
Why research is the missing link in winning work, from the episode with Salia Mogensen: https://www.growthignition.co.uk/thoughts/rrsalia
Transcript
00:00:00 SPEAKER_00
[upbeat music] Welcome to the Red Review podcast, brought to you by Growth Ignition, the award-winning transformation and training business, and our partners Bidscript, the bid management, bid writing and opportunity search platform.
Hello and welcome to the Red Review podcast with me, Jeremy Brim.
Bit of a different episode this week.
Uh, I was featured on the Growing Consultancies podcast with Paul Micklethfrom Pegasus, the recruitment business, this week.
Um, and he's kindly lent me the episode to put out through our channel as a bit of a crossover.
00:00:35 SPEAKER_00
Uh, I had a guest booked in for this week.
Uh, I've run out of episodes in the can, as it were, that I'd racked up.
Uh, and I've had a guest this week, had to rearrange, and so Paul's kindly lent me this episode to put out through our channels.
And thank you again, mate, for having me on.
So this episode, if you didn't see it on Paul's channels, um, is about selling consultancy businesses.
So how do you effectively grow, scale, and then sell, sell a consultancy business?
But to be honest, the same rules apply for construction businesses, supply chain businesses, outsourcers, whatever it might be really.
00:01:10 SPEAKER_00
The same kind of metrics in terms of margin versus multiplier still stand, and so hopefully you find it useful.
Let me know what you think.
00:01:18 SPEAKER_01
Right.
Okay.
Welcome to the next episode of Growing Consultancies.
I'm delighted to be joined by a return guest.
[laughs] Welcome, Jeremy.
So Jeremy Brim has been on before.
Um, Jeremy is, I would say, an expert in supporting businesses, um, largely with commercial strategy, pr- particularly around securing bids on major projects.
Uh, but he now does a much wider role in terms of supporting businesses generally in a consulting capacity.
Have I got that right?
Have I got that terribly wrong?
00:01:47 SPEAKER_00
Close enough, I think.
[laughs]
00:01:49 SPEAKER_01
Excellent.
00:01:49 SPEAKER_00
Close enough.
Uh, we'll try not to go for the longest episode record again.
00:01:53 SPEAKER_01
[laughs]
00:01:54 SPEAKER_00
Um, hopefully we can keep people engaged this time.
But thank you for having me back, mate.
00:01:58 SPEAKER_01
No.
00:01:58 SPEAKER_00
Great to be here.
00:01:58 SPEAKER_01
Absolute pleasure.
So what we're gonna talk about today, slightly different to probably previous episodes.
There's obviously quite a bit of consolidation in the market.
There are quite a number of, I would say, business owners in the consultancy world who are probably, uh, knocking on a bit.
They're probably thinking about, uh, uh, an eventual exit because they're probably, let's say, anywhere from late 50s through to late 60s probably, uh, who are probably thinking about, uh, about an exit strategy.
Equally, at the other end, um, it's quite exciting at the moment in the consultancy world.
00:02:31 SPEAKER_01
I'm, I'm seeing loads of new...
Like almost it seems every week I see...
I turn on LinkedIn and there's another startup.
Um, somebody's left, um, a large or a medium sized consultancy and set up on their own.
So I guess what the, in a nutshell, what we wanna talk about today is how do you add real value to a business to the point that you could sell it?
Not that you necessarily intend to sell it, but how could you add value to a business?
What are the core elements needed to be able to get a business to the right multiple should you want to sell it?
00:03:02 SPEAKER_01
And then we're gonna also touch a bit about kind of different ownership models that exist out there as well.
00:03:06 SPEAKER_00
Mm-hmm.
And different routes to sale, I guess.
00:03:09 SPEAKER_01
Yeah.
00:03:09 SPEAKER_00
Um, yes.
Yeah, an interesting space.
So yeah, just sort of building on the intro bit.
I do do non-exec work, uh, for SMEs all the way up to big multi-billion turnover contractors and consultants and board advisory stuff.
Um, and very often, the reason why I, I, I said to you that we should do an episode on this is very often there is a disconnect, um, in business strategy.
People drift along, um, and they go after the wrong sorts of work, um, and take the wrong sorts of tactics in how they go to grow the business and run the business.
00:03:45 SPEAKER_01
Mm-hmm.
00:03:46 SPEAKER_00
Um, and actually cause themself a problem later in terms of, uh, their ability to actually sell the business.
Are they creating value and therefore an asset?
Um, and then also the approach by which they could, they could sell it.
They sometimes sort of tie their shoelaces together by accident.
So I guess today's a bit of a conversation about what the approach is to growing and then selling, uh, ultimately a consultancy business, um, and having some fun along the way, I hope.
00:04:13 SPEAKER_01
Good.
So I'm gonna start with the, the major caveat.
Neither me or Jeremy are financial advisors.
Neither of us have an accountancy background.
Um, and so [laughs] please take this, um, this conversation as, uh, advisory.
And we would obviously encourage you, should you get to a point where you wish to sell your business or do anything else with the business, to take proper legal advice from the professionals.
Um, not dismissing the fact that me and Jeremy are not professionals, but just not in that, uh, not in that area.
00:04:43 SPEAKER_01
We're...
More that we've spoken to an awful lot of business owners and leaders over the time.
We've seen a lot of business owners, leaders, um, do terrifically well within the consultancy space, but equally some do terrifically badly-
00:04:54 SPEAKER_00
Mm
00:04:54 SPEAKER_01
...
um, from a strong position.
Um, so that's why we want to try and give some value.
00:05:00 SPEAKER_00
Yeah.
I mean, we, we were talking beforehand, weren't we?
Um, that one of, one of the big problems in all of this is that nobody volunteers this kind of information.
00:05:10 SPEAKER_01
Yep.
00:05:11 SPEAKER_00
You have to go and find it or tease it out of them.
00:05:13 SPEAKER_01
Mm.
00:05:14 SPEAKER_00
It's quite rare that you find an accountancy practice, for instance-
00:05:18 SPEAKER_01
Mm
00:05:18 SPEAKER_00
...
that will actually proactively advise you in shaping this stuff.
00:05:22 SPEAKER_01
Mm-hmm.
00:05:22 SPEAKER_00
Very often we have to find our, our way, and I, I've never really got to the bottom of why that is.
Um, whe- whether they, you know, don't wanna put their PI at risk or whatever it is, I don't know.
But whether it's accountants, whether it's lawyers, you know, there are some specialist consultancies that will help you sell a business.
00:05:38 SPEAKER_01
Mm.
00:05:39 SPEAKER_00
But it's normally towards the more sort of spiky end of things.
00:05:42 SPEAKER_01
Mm.
00:05:42 SPEAKER_00
Pointy end of things.
Um, and so very often you end up finding that business owners, whatever business they're in actually, not just, you know, I do all sorts of stuff in different markets, not just consultancies.
Um, but v- you know, very often, uh, the ones, the, the business owners that are in the best shape are the ones that have a network of friends and mentors and have constantly tested their thinking and pushed the boundaries and driven their accountants and other advisors to, to help them think through these things.
00:06:13 SPEAKER_00
Um, so I guess, you know, yes, we're not accountants or lawyers or advisors.
Uh, probably the top tip straight off the bat is to go and talk to your accountant and, you know, really look for their wise counsel in, in the topics we're gonna discuss today and test the ideas with them and see what's best for you.
So no, you won't get any conclusions from today.
00:06:32 SPEAKER_01
Mm-hmm.
00:06:32 SPEAKER_00
But hopefully people will get some questions that they should ask those people around them.
00:06:37 SPEAKER_01
Well, one, one thing I actually would say is even Well, or in conjunction with that, the one thing I still see a lot of small business owners who do not have in their stable is they don't have a non-exec.
Um-
00:06:49 SPEAKER_00
Yeah
00:06:49 SPEAKER_01
...
and actually speaking in my world, re- the recruitment world, I would say the vast majority of deals I'm aware of that happen in the recruitment world, within the consult- recruitment consultancy world, are off the back of them having a really good NED in the background who has been through this process on several occasions in different guises with varying size growing consultancies, and they...
So they know some of the mechanism that they can then in turn then go to the accountants and the solicitors to say, "Right, okay, this is what we need to do.
This is what we need to position the business in." So the, the value of a great non-exec, I think, is, um, I think a lot of smaller consultancies don't appreciate the value of, uh, and, and they should.
00:07:30 SPEAKER_01
Um, because I think, um, you know, a good non-exec can not only help with maybe that ultimate aim of selling a business, but also just save them a lot of pain and, and make sure they don't make some mistakes that the non-exec may have seen numerous consultancies make over the years and, and can, you know, kind of give them the, give them the map so they don't have to, uh, take the long route round everywhere.
00:07:52 SPEAKER_00
Yeah.
No, I agree.
I agree.
Whether it's extracting the, the best value, uh, whether it's not being wasteful by making-
00:07:59 SPEAKER_01
Mm
00:07:59 SPEAKER_00
...
mistakes, that there, there is a lot to be said for that, for sure.
00:08:02 SPEAKER_01
Yeah.
Absolutely.
So let's start with then, how does a business, how does a consultancy business get themselves in a position where, um, they are a stronger proposition, would you say?
Uh, in terms of that they are seen as an attractive business to acquire, should, should that be their, their end target?
00:08:23 SPEAKER_00
Hmm.
So, I mean, I, I, I should say, first of all, uh, a healthy business is a best place to be in terms of being an owner and/or staff in...
But, you know, bear in mind, we're in, in the construction as a marketplace, construction infrastructure-
00:08:39 SPEAKER_01
Mm-hmm
00:08:39 SPEAKER_00
...
et cetera.
We're in the greatest fight for talent ever.
00:08:42 SPEAKER_01
Yeah.
00:08:42 SPEAKER_00
Well, you'd know better than anyone, wouldn't you?
00:08:43 SPEAKER_01
Yeah.
00:08:44 SPEAKER_00
Um, and so, uh, you know, running a good business with a sustainable, predictable pipeline of work off into the future is a perfectly sensible thing to do anyway-
00:08:54 SPEAKER_01
Mm-hmm
00:08:54 SPEAKER_00
...
as per our last fairly lengthy podcast episode was-
00:08:58 SPEAKER_01
Mm
00:08:58 SPEAKER_00
...
all about.
So-
00:08:58 SPEAKER_01
Mm
00:08:59 SPEAKER_00
...
do feel free to go back and dip into this one.
Th- this, this conversation's a bit more of a build on that specifically in terms of how you prime for or build a successful business and prime it for a sale, I guess.
So, um, and, you know, excuse us if we're teaching you to suck eggs.
There will be lots of business owners that know a lot about this stuff, and p- possibly more than us.
But first of all, some basics, I guess.
So how you value a business, uh, 'cause many people, like you say, we've got businesses springing up all over the place, right?
00:09:29 SPEAKER_00
People leaving big primes-
00:09:31 SPEAKER_01
Mm
00:09:31 SPEAKER_00
...
uh, the big tier one consultancies, et cetera, and starting a little business, and there's actually very little support for them in doing that.
00:09:39 SPEAKER_01
Mm.
00:09:40 SPEAKER_00
Uh, they may approach their bank that they open a business bank account with-
00:09:44 SPEAKER_01
Mm-hmm
00:09:44 SPEAKER_00
...
a NatWest or whoever, who provide some tools and things-
00:09:48 SPEAKER_01
Mm
00:09:48 SPEAKER_00
...
and they might go and get themselves...
Well, I would advocate getting yourself an accountant as fast as possible, a good one, and, um, getting their guidance.
But, you know, how they structure the business off into the future and their vision for it, and particularly when they start to make real money, how they structure things and build the business out is, is important in this regard.
So first of all, they should have in mind how you value a business.
00:10:12 SPEAKER_01
Mm-hmm.
00:10:12 SPEAKER_00
So there are two, uh, numbers or metrics that smash into each other in effect.
One is the profit of the business over, say, a two to three-year span.
00:10:22 SPEAKER_01
Mm-hmm.
00:10:23 SPEAKER_00
We should recognize that when, uh, somebody comes to buy your business, they will be most focused on the last 12 to 18 months of-
00:10:31 SPEAKER_01
Mm
00:10:31 SPEAKER_00
...
revenue, cash flow, profit, and we'll deep dive into that stuff.
But actually, you need to give yourself a good three-year runway-
00:10:39 SPEAKER_01
Mm
00:10:39 SPEAKER_00
...
to sell a business.
00:10:40 SPEAKER_01
Mm-hmm.
00:10:40 SPEAKER_00
Um, and so we, we need consistent, you know, sets of accounts, good data, MI insight to be able to really demonstrate your, your profitability, and obviously have that in your accounts in Companies House and things.
00:10:52 SPEAKER_01
Mm-hmm.
00:10:53 SPEAKER_00
So it's publicly available, so it's evidenced, audited by your accountants, they'll believe you.
So your profit number is important, um, obviously.
The bit that people understand less at first is that the other number that in effect comes into play with that is a multiplier, as we call it.
Um, and so most consultancy businesses sell for between a four and 8X multiplier.
So the profit, let's just say you make a profit of 100 grand.
Um, if you, um, sell the business for, um, a 4X multiplier, you'll sell it for 400 grand.
00:11:29 SPEAKER_00
If it's 8X, it'll be 800 grand.
Hopefully number's much bigger than that, actually.
Um, so that multiplier is informed, uh, by a number of confidence factors that the, uh, analysts and people looking to buy your business will interrogate-
00:11:45 SPEAKER_01
Mm
00:11:45 SPEAKER_00
...
and try to negotiate on-
00:11:46 SPEAKER_01
Mm
00:11:47 SPEAKER_00
...
ultimately.
Um, and so those are things like the strength and depth of your pipeline of opportunity.
00:11:54 SPEAKER_01
Mm.
00:11:54 SPEAKER_00
Um, so the further you can see opportunities out into the future, and the better you can demonstrate your ability to convert those opportunities, i.e.
win rate and evidence of win rate over time-
00:12:08 SPEAKER_01
Mm
00:12:08 SPEAKER_00
...
the, the higher that multiplier will be, which is quite a significant factor.
Um, and then they will look at metrics like, uh, how many clients you've got and how many clients, uh, where, you know, where's the consolidation of profit coming from.
'Cause if most of your profit's actually coming from a very small number of your clients, uh, that's a problem.
00:12:29 SPEAKER_01
Yeah.
00:12:29 SPEAKER_00
So we want...
And as we talked about when we were together last-
00:12:33 SPEAKER_01
Mm
00:12:33 SPEAKER_00
...
uh, I'm on 30-odd clients now where I've done this analysis-
00:12:37 SPEAKER_01
Mm
00:12:37 SPEAKER_00
...
and they're all making 80% of their profit from 20% of their clients.
00:12:41 SPEAKER_01
Yeah.
The Pareto Law.
00:12:42 SPEAKER_00
And so, yeah, that Pareto Principle.
00:12:44 SPEAKER_01
Mm.
00:12:45 SPEAKER_00
We, we actually want to work on that and spread that profitability out over more clients, um, so there's not so much consolidation.
The risk is reduced.
00:12:54 SPEAKER_01
Mm-hmm.
00:12:54 SPEAKER_00
And that, in turn, helps you with your, your multiplier, for instance.
So those are the two big factors in terms of how you value a business, first of all.
00:13:03 SPEAKER_01
Yeah.
Um, and the, the, there's, um, what do they call it?
There's a different word for it.
Is it concentration they call it?
But, um-
00:13:10 SPEAKER_00
Mm
00:13:10 SPEAKER_01
...
in terms of, in terms of your client spread.
So that's, that's an important one, and certainly one of my very large successful clients, I think, um, I think the stat is, you know, their largest client, their largest client globally is less than 1% of their revenue.
Um, and that's-
00:13:24 SPEAKER_00
Yeah
00:13:24 SPEAKER_01
...
that makes it arguably a very safe spread, that they're not in a situation where one client goes down, um, then they're in real issue.
I can think of certainly, um, I can think of one consultancy that exists still today.
However, and this must be going back probably 15 years ago, let's argue, may-maybe around that kind of time, mayb-maybe a little bit more recently.
But they had one client, um, who made up a significant chunk of their, of their revenue, um, as a major retailer.
00:13:56 SPEAKER_01
Um, that retailer, um, uh, decided to, to, to change, change their supply chain.
And, and overnight, that business had been so reliant on that one business for such a long time that whilst they still exist now, they're, they're, they're a shadow of what they once were in terms of overall headcount.
00:14:14 SPEAKER_00
Mm.
00:14:14 SPEAKER_01
Because they'd got themselves in a situation where one client, they were so heavily reliant on one single client, and that's always a obviously a dangerous place to be for a consultancy.
00:14:24 SPEAKER_00
Yeah.
And we see that a lot.
00:14:25 SPEAKER_01
Yeah.
00:14:25 SPEAKER_00
We've got some shared clients in that sort of similar situation.
Um, so...
And it, it kind of marries back to what we'll probably find, what you'll see with these new businesses that are springing up, where people are leaving the bigger businesses, you know, perhaps fi- You know, we've got, I've got a few clients that are five years old, and they reach a kind of ceiling where they've run out of mates to work for.
00:14:51 SPEAKER_01
Yeah.
00:14:52 SPEAKER_00
So they've got that small concentration of two or three key-
00:14:55 SPEAKER_01
Yeah
00:14:55 SPEAKER_00
...
clients that are most of their revenue.
Uh, and as we talked about at our live session in Leeds, didn't we?
Um, they, they hit this kind of buffer or ceiling where, um, they get growing pains.
00:15:05 SPEAKER_01
Mm.
00:15:06 SPEAKER_00
And so the natural thing that they will start to do is to look at public sector stuff and to, they'll go and get themselves a license for some, uh, portal that gives them notices, adverts of public sector work-
00:15:18 SPEAKER_01
Mm
00:15:18 SPEAKER_00
...
and just start hobby bidding stuff all over the place.
00:15:22 SPEAKER_01
Yeah.
00:15:22 SPEAKER_00
Uh, and it gets them into a right mess.
So I, I have to unwind this stuff with clients all the time.
So there's nothing wrong with having some key clients.
00:15:29 SPEAKER_01
Mm.
00:15:29 SPEAKER_00
It's just that you need to find clients four, five, and six.
00:15:33 SPEAKER_01
Mm.
00:15:34 SPEAKER_00
And maybe you've got to talk to, you know, eight to convert four-
00:15:37 SPEAKER_01
Mm
00:15:37 SPEAKER_00
...
or six to convert three, and focus at that client level rather than hobby bidding projects and, and work down in the, the end game, as we, as we call it, um, because there's some unintended consequences of that.
So if you hobby bid stuff, in the unlikely event you actually win something, uh, 'cause they've probably got a win rate of, like, one in five or something.
So they're burning their people out-
00:16:00 SPEAKER_01
Yeah
00:16:01 SPEAKER_00
...
bidding that stuff.
00:16:01 SPEAKER_01
Yeah.
00:16:02 SPEAKER_00
Um, but the unintended consequence is, if you're writing bids to strangers and you win one, they probably never wanted you.
They had somebody else in mind, 'cause everyone knows who they want before they tender stuff really.
00:16:15 SPEAKER_01
Mm.
00:16:16 SPEAKER_00
Um, and so you're working with strangers.
You've probably underbid it one way or another, so your team will be immediately under pressure.
00:16:23 SPEAKER_01
Mm.
00:16:24 SPEAKER_00
They're probably working with strangers that they may or may not like.
00:16:27 SPEAKER_01
Mm.
00:16:27 SPEAKER_00
The work's more likely to be further from home, and it's more likely to be outside the sweet spot of the business.
Um, and so you tend to find that those deals are either less profitable or indeed loss-making.
00:16:38 SPEAKER_01
Mm.
00:16:39 SPEAKER_00
And your people are more likely to leave.
You're more likely to have absence and, and stuff like that.
So...
And there is a knock-on effect in terms of ultimately the health and value of your business in doing that stuff, um, because y-you'll end up with lumpy revenue and, you know, sort of black marks in the accounts in terms of loss-making clients.
At, at the other end of the spectrum, though, we also need to be careful of, um, succession and the, you know, sort of concentration of owner of the business, ownership of key relationships.
00:17:14 SPEAKER_00
So you can't sell a business if you are the business.
00:17:17 SPEAKER_01
Yeah.
00:17:17 SPEAKER_00
Um, and buyers of your business will be painfully aware of that.
00:17:21 SPEAKER_01
Yeah.
00:17:21 SPEAKER_00
So you'll need to figure out a roadmap to blowing through those growing pains of 50 people towards 100 people, or 15 people towards 50, but getting yourself to a place where there's a level of management below you that could run the business without you.
00:17:38 SPEAKER_01
Yeah, 100%.
Um, those ratios are quite interesting.
The one I've, the one I've heard, which I always quote all the time, I think it's genius when you think about it, is, um, that it's all about, um, the pain seems to be when you treble a business.
00:17:50 SPEAKER_00
Mm.
00:17:51 SPEAKER_01
So you go from one person to three people, that's an adjustment.
You have to, you have to change systems, but that's not too much of a pain.
Going from three to 10 is another big one.
00:18:00 SPEAKER_00
Yeah.
00:18:00 SPEAKER_01
Um, but then going from 10 to 30, and then obviously 30 to 100, um, roughly speaking, you know, trebling each time, each time you have to break systems.
Because, because it's very easy to manage 10 people.
When you get to 30 people, you probably do need a management layer.
Certainly when you get to 100 people, you probably need considerable management layers and probably, uh, y-you know, a good chunk of non-fee earning staff.
00:18:24 SPEAKER_00
Mm.
00:18:24 SPEAKER_01
Um, and so there's a lot to be said for having a well-managed business relative to the size of the business, and I think often businesses are probably under-resourced from a, from a non-fee earning capacity, um, or non-fee earning staff to be able to keep the business running smoothly and, and it have some proper structure behind it.
00:18:42 SPEAKER_00
Yeah, absolutely.
Um, and there is then an interplay with do you, with equity- So, you know, I've, I've worked with some businesses recently that are just owner-occupied, just one owner, and somehow they've managed to have a vision and an environment where people, you know, just want to play along with that and just take a salary and maybe a bonus.
Um, and you've got to make a decision, you know, whether you're a single owner or a small group of owners as to whether you do keep that concentration of equity to yourselves and scale a business and sell it.
00:19:15 SPEAKER_00
And if you can do that, um, and what the model is for that, or whether you start to, um, share the equity amongst junior partners as part of that journey to, to scaling the business.
And then you, in effe- i-in effect, they buy you out or-
00:19:31 SPEAKER_01
Yeah
00:19:31 SPEAKER_00
...
private equity buys you out, et cetera.
Um, these day, I, I don't know what your view is, Paul, actually, but, um, you know, in this great fight for talent, equity is a great le-lever to be able to, you know, provide or incentivize people with, I w- I would think, compared to working at a big PLC.
00:19:48 SPEAKER_01
100%.
I think you've got to have the right people, though, I think is what I would say.
And I think that's often the case.
I think a lot of...
There's a real, we've got a real succession, um, issue, I think, in the industry, um, whether it be contractors or consultancies.
I think we've got a lack of, um, we've got a lack of leaders, and that's a lack of, I think, willingness from the existing leadership to actually properly invest in those up-and-coming leaders.
00:20:12 SPEAKER_00
Yeah.
00:20:12 SPEAKER_01
And then you've equally got a lack of individuals who should be those up-and-coming stars who, who, who just don't see the, don't see the attraction of becoming a, an equity holder within, within some of these businesses.
So we've got, we've got, we've got a real issue, I think, in the industry in that regard, like never before.
Um, I think you've got a lot of people genuinely going, "I don't know if I want, I don't know if I want your job.
I don't know if I wanna work 70 hours a week and-"
00:20:35 SPEAKER_00
Yeah
00:20:35 SPEAKER_01
"...
be burnt out like you.
Not sure if that appeals to me anymore."
00:20:38 SPEAKER_00
Yeah, no, that's, yeah, that's interesting.
I, I think the other aspect is, you know, my world of winning work is a key component of being a partner in a business.
It'll be, if you're a partner of a business, it'll be at least 20% of your job is-
00:20:51 SPEAKER_01
Yeah
00:20:51 SPEAKER_00
...
building relationships with clients and, and winning deals, and that just doesn't suit everyone.
00:20:56 SPEAKER_01
Mm-hmm.
00:20:57 SPEAKER_00
Um, so lots of people work in a PLC where they can just be excellent at delivery and other people take care of winning work.
Whereas when you're scaling a smaller consultancy, um, pretty much the partners need to be pretty good at that stuff mo-most of the time, I would say, and that, that is quite rare.
And it...
I did a podcast on, uh, not sure when this one's gonna go out, but I did a podcast with a friend of mine, uh, on my podcast, The Red Review, with a friend, Ayo Abbas.
She made a really good point actually about the pandemic and how there are lots of middle managers now coming through the business or businesses, um, who had a num- you know, a few years where they didn't go out and talk to people or network-
00:21:36 SPEAKER_01
Mm-hmm
00:21:36 SPEAKER_00
...
'cause we were all sitting at home.
00:21:38 SPEAKER_01
Right.
Interesting.
Yeah.
00:21:39 SPEAKER_00
So there's a skills gap in that-
00:21:40 SPEAKER_01
Yeah
00:21:40 SPEAKER_00
...
relationship building piece, um, which hadn't really crossed my mind like that before, but I think that probably contributes to what you're seeing.
You know, those interpersonal skills, emotional intelligence, empathy, being able to engage with other people, uh, which is a great building block or cornerstone in how you grow a business.
Um-
00:22:00 SPEAKER_01
And you also add the reality-
00:22:01 SPEAKER_00
It's probably, yeah
00:22:01 SPEAKER_01
...
'21 to '23 was a golden era.
You could...
You just had to touch things and it would turn to gold.
Um-
00:22:06 SPEAKER_00
Yeah, yeah
00:22:06 SPEAKER_01
...
and so I think a lot of them came out of that, and then we're in an environment where it just seemed easy.
Seemed easy to win work, because they weren't in normal times.
You know, we had the, you know, the post-COVID rebound, and it really was relatively easy to, to run a consultancy business.
You know, t-'24 onwards, it's become progressively harder, [chuckles] um, is the reality.
Um, there's not, there's not as much work out there.
It's not as easy to, to get the work.
Talent is becoming a constant challenge and a constant issue.
So, um, yeah, you, you've gotta be a strong leader in the current market.
00:22:36 SPEAKER_00
You have.
It's a real challenge.
So, um, I guess the next bit is, um, deal structures, and then we can talk about how, who you could sell it to.
But, um, I get people approach me all the time, "Oh, you know, I wanna scale a business and then sell it," and they naturally think that's a sale to private equity.
Um, and so in terms of ways that you can be paid out in effect-
00:23:01 SPEAKER_01
Mm-hmm
00:23:02 SPEAKER_00
...
first of all.
00:23:02 SPEAKER_01
Mm-hmm.
00:23:03 SPEAKER_00
Uh, 'cause people can get a bit carried away with this stuff-
00:23:06 SPEAKER_01
Mm
00:23:06 SPEAKER_00
...
and they're not, they don't quite understand the consequences of, of some of this.
So-
00:23:10 SPEAKER_01
Mm
00:23:10 SPEAKER_00
...
um, so first thing is it's likely actually that you, whoever buys the business, you're gonna get tied into some sort of earn-out.
00:23:19 SPEAKER_01
Mm.
00:23:19 SPEAKER_00
Which means you're gonna have to stay...
You'll probably get something like 50% of your money-
00:23:23 SPEAKER_01
Mm
00:23:24 SPEAKER_00
...
for your shares or for the business if you own all of it, and to get the other 50%, you've gotta hang around for a couple of years or more and hit some KPIs.
Um, and so we'll come back to some consequence of that.
There is deferred consideration where you might get paid out later.
00:23:43 SPEAKER_01
Mm-hmm.
Mm-hmm.
00:23:44 SPEAKER_00
Um, and quite often with private equity actually, there's equity rollover where they will offer you shares in their mothership business, and you get bigger equity payout when they se- 'cause basically private equity are gonna buy your business and then sell it again in three to five years when it's scaled a bit more and made more money.
00:24:03 SPEAKER_01
Mm-hmm.
00:24:04 SPEAKER_00
So they may well give you a share of that pie when everyone exits.
00:24:07 SPEAKER_01
Mm-hmm.
00:24:08 SPEAKER_00
Which is interesting, um, and we'll sort of come back to.
Um, but you've, you've got to be careful of things like warranties, um, and sort of capital adjustments because ba-basically the warranties thing, for instance, when you do the deal, there will be caveats that you only get your other 50%-
00:24:28 SPEAKER_01
Mm
00:24:28 SPEAKER_00
...
if what you've promised comes true.
00:24:32 SPEAKER_01
Yes.
00:24:32 SPEAKER_00
So either if you've slightly u- overcooked it or-
00:24:36 SPEAKER_01
Yeah
00:24:36 SPEAKER_00
...
got, heaven forbids, let's say, misled them-
00:24:38 SPEAKER_01
Yeah
00:24:38 SPEAKER_00
...
they've got a warranty-
00:24:39 SPEAKER_01
Yeah
00:24:40 SPEAKER_00
...
and they can claw back, um, certainly from the money that they've promised to pay you.
So you got-- we've gotta do a really good job of having as much certainty as possible, good data in what we're doing.
But what I always say to friends, you know, where I'm a non-exec or friends that own businesses and things, is just be really careful what you wish for.
So there are some wonderful private equity venture capital people.
Um, but I, I, I had lunch with a friend and my non-exec for me actually, who I'm meeting next week as it happens, uh, a couple of years ago, and 'cause I'd got a client who'd been bought by private equity and I just couldn't understand their behaviors.
00:25:19 SPEAKER_00
They'd bought a public sector facing business, and they were just ramming it full of salespeople who were generating lots of leads but fairly short-term stuff.
00:25:29 SPEAKER_01
Mm.
00:25:29 SPEAKER_00
And they weren't thinking through investing in the bid team, for instance-
00:25:32 SPEAKER_01
Mm
00:25:32 SPEAKER_00
...
to convert that or in solutions that those salespeople could offer.
Um, so the, the business was just death by a thousand cuts.
00:25:40 SPEAKER_01
Right.
00:25:40 SPEAKER_00
And what my friend Mark described to me is private equity will buy 10 businesses and they expect two to absolutely fly and smash it.
They also expect two at the other end to completely fail, and then the ones in the middle, they'll just ride basically through.
Um, so if you're not the owner of one of the two that smashes it, if you're somewhere in the middle, they're going to constantly, you know, be on your case about your-
00:26:07 SPEAKER_01
Mm
00:26:07 SPEAKER_00
...
KPIs and earnings and-
00:26:10 SPEAKER_01
Mm
00:26:10 SPEAKER_00
...
all of that kind of stuff, um, which you might or may not be up for.
But, you know, you've probably decided you wanted to sell the business 'cause you'd like to drift off and do something else or have a change of life or something.
And so suddenly going from you being the boss to in effect having stakeholders or bosses who are quite, you know, focused on commercials much more than you've ever been before can be uncomfortable for quite a lot of people.
00:26:35 SPEAKER_01
Mm.
00:26:36 SPEAKER_00
And so we need...
You just need to go in eyes open in terms of who you're gonna be working with or for and what the real metrics are.
Because I- I've seen people sell a business to a much bigger, a trade sale actually to a much bigger global organization, and then they're still there like eight or 10 years later 'cause they've never been able to hit those numbers.
00:26:55 SPEAKER_01
Right.
00:26:55 SPEAKER_00
Um, things haven't panned out and it's, it's frankly uncomfortable and awkward.
00:26:59 SPEAKER_01
Mm.
00:27:00 SPEAKER_00
Um, so I guess that kind of brings us to the types of buyers.
So as we said, we've got private equity who are looking to buy your business and then sell it later for more money, scale it, maybe invest in it a bit to do that.
There's maybe a lot...
in, in this context, a larger consultancy, a trade sale to a larger consultancy.
Um, and then there's the, the topic we've, I'm not sure argued about, but-
00:27:25 SPEAKER_01
Mm
00:27:25 SPEAKER_00
...
um, of a employee-owned trust.
00:27:27 SPEAKER_01
Mm.
00:27:27 SPEAKER_00
You know, do you in effect sell the business to, um, the employees or put debt into the business to pay you off and the profits-
00:27:34 SPEAKER_01
Mm
00:27:34 SPEAKER_00
...
of the business-
00:27:35 SPEAKER_01
Mm-hmm
00:27:35 SPEAKER_00
...
pay it off and the staff end up with the business in effect.
And there's pro, there's pros and cons to each of those routes, I guess.
00:27:42 SPEAKER_01
Yeah.
00:27:43 SPEAKER_00
Um, so are we...
EOTs.
00:27:46 SPEAKER_01
Mm-hmm.
00:27:46 SPEAKER_00
Let's, let's tackle that one then, 'cause I know-
00:27:48 SPEAKER_01
Mm-hmm
00:27:48 SPEAKER_00
...
we've, we've chatted about this before.
00:27:50 SPEAKER_01
Yeah.
00:27:50 SPEAKER_00
[lip smack] It's a brilliant idea.
00:27:53 SPEAKER_01
Mm-hmm.
00:27:53 SPEAKER_00
It feels lovely.
00:27:54 SPEAKER_01
Mm-hmm.
00:27:55 SPEAKER_00
I should say, again, talk to your accountants, don't take my word for it, but there is a tax benefit in selling, in doing an EOT.
00:28:00 SPEAKER_01
Diminished now, but yeah.
00:28:01 SPEAKER_00
Yeah.
00:28:02 SPEAKER_01
It's not as good as it used to be.
00:28:03 SPEAKER_00
No.
00:28:03 SPEAKER_01
Yeah.
00:28:04 SPEAKER_00
But still pretty significant-
00:28:05 SPEAKER_01
Yeah
00:28:05 SPEAKER_00
...
compared to capital gains on a-
00:28:07 SPEAKER_01
Yeah
00:28:07 SPEAKER_00
...
a, a traditional sale.
00:28:08 SPEAKER_01
Yeah.
00:28:09 SPEAKER_00
Um, so but they don't tend to pan out very well, was your view, and I'm beginning to agree with you, I think.
00:28:17 SPEAKER_01
I think...
Yeah, I think to be clear on my view of EOTs, I think, um, I think the, um, the premise of them is brilliant.
Um, you know, I think, I think it make, it makes perfect sense to me.
I think, I think the first thing to say is that being a business owner, taking the risk that comes with being a business owner, taking the risk of being a business owner in a high growth business and the stress that comes with that, all business owners, um, 100% should absolutely get the reward for doing that.
00:28:49 SPEAKER_01
And if they're the original equity holders, 100% they should get their, they should get their...
They should earn, earn, earn, rightfully earn getting their equity out of that business if that's what they wanna do and sail off into the sunset.
They, they've totally earned, earned the right to do that.
So the idea of an EOT I think is brilliant because the opposite of that is to, is a normal partnership model, um, which again I think is still a very viable model, um, you know, don't get me wrong.
But I guess the EOT provides an opportunity for the future owners of that business not to have to put in their own money to, to, to immediately to, to get an, to get a stake in that business.
00:29:26 SPEAKER_01
Where it goes wrong, I think, is that...
And, and I appreciate that the EOT is a, is a structure that HMRC have to, HMRC have to sign off, so you can't, you can't properly take the piss with it.
But, um, um, if you are in a scenario where, um, the business is not, is not doing as well, um, as it should be doing, um, and it takes a lot of money, a lot more money to extract all the equity out of the business to pay off the original equity holders, then it can really strangle a business because if literally nearly all the profit is getting pulled out of, uh, e- each year to pay off the, uh, to pay off the EOT, to pay off the debt, then it just strangles investment.
00:30:04 SPEAKER_01
There's no, there's no investment, there's very little, um, bonus paid to those who were the ones leading the charge in terms of growing the business, and it can become quite a toxic environment.
And I think there have been some tremendously good EOTs that have been really positive for everybody involved, both the old equity partners and, and, and the new ones, and generally the wider business.
But there have been some in my view that are not going so well at the moment as well because, um, people feel that, um, they're having to work really hard and g- will not see any tangible benefit for the next 10 years in reality.
00:30:38 SPEAKER_01
And in that case-
00:30:39 SPEAKER_00
Mm
00:30:39 SPEAKER_01
...
it can become quite a negative environment, I think.
00:30:42 SPEAKER_00
That's really interesting.
Yeah, I'd not thought of it from that perspective before.
Um, yeah.
I'll have to reflect on that 'cause I'd al- I'd always fancied having a business that was like the John Lewis model.
00:30:53 SPEAKER_01
Mm.
00:30:54 SPEAKER_00
Um, but I, yeah, I kinda get that that is a bit of a thing, isn't it?
How do they pay that debt off and still invest in the business and have a good time?
You have to think very, very carefully how you structure it.
00:31:05 SPEAKER_01
Uh, uh, well, well, I, I think probably it works.
I mean, bear in mind, I think, I think equally I would argue there are probably some businesses that have gone down the ELT route back in, for argument's sake, '22, '23, and the horizon at that point-
00:31:18 SPEAKER_00
Mm
00:31:18 SPEAKER_01
...
was the market was very buoyant, so they could probably have afforded within the kind of profits that they were projecting to pay healthy chunks off of the loan whilst also still having healthy profit that they could use to reinvest in the business for further investment, pay bonuses to existing staff, et cetera.
The reality is, unfortunately, that as it stands at the moment, '25 and '26 have been pretty flat years for the industry.
00:31:41 SPEAKER_00
Yeah, yeah.
00:31:41 SPEAKER_01
That's the reality.
It's not b- it's not been easy to be a consultancy or a contractor in, in, in the current market.
You've got, you know, you've seen, you know, some of the very large players making significant redundancies, um, in, in the last, uh, in, in the last kind of 18 months.
Um, you've seen some small businesses not growing as, as, as quickly.
Um, um, you know, I would say in certain sectors, certain disciplines, you know, you know, I've, I've, I've did some scenarios where I've, I've got exceptional candidates at certain levels when you're talking the upper end of the kind of associate director through to project director level, who are probably struggling to find opportunities at the moment in London, for example.
00:32:17 SPEAKER_01
Um, so, so the, the-
00:32:18 SPEAKER_00
Wow
00:32:18 SPEAKER_01
...
the market definitely has taken a battering, there's no, no debate.
There are some businesses still doing exceptionally well, but I would say probably there's a small percentage that are doing exceptionally well.
You've got some that are probably doing quite badly, and then you've got a whole host in the middle that are just, just kinda keeping their head above water, uh, is, is probably how I would describe the market.
So, there is an element that some organizations may have gone into the ELT, um, structure w- with very well, well, well thought out intentions.
00:32:45 SPEAKER_00
Mm.
00:32:46 SPEAKER_01
And then the market has, has caught up with them.
00:32:49 SPEAKER_00
Okay.
No, I get that.
So, sort of pros and cons then of those three different routes.
So, ELT is nice because you're providing a legacy for the people that have helped you build the business-
00:33:00 SPEAKER_01
Yeah
00:33:00 SPEAKER_00
...
in the widest sense, and you'll be at a point at that business hopefully forever and say, "I started that."
00:33:05 SPEAKER_01
Yeah, yeah, yeah.
00:33:06 SPEAKER_00
Um, and there is a tax benefit, um, depending on your ownership structure-
00:33:11 SPEAKER_01
Yeah
00:33:11 SPEAKER_00
...
which we'll come back to, holding companies and stuff.
Um, trade sale to a larger consultancy is probably where you'd get the biggest return, most money for the sale tends to be, but your business will probably lose its brand and disappear off into that giant and legacy-wise.
00:33:29 SPEAKER_01
Another organization, yeah, yeah.
00:33:30 SPEAKER_00
Um, you know, you need to reflect on if that's what you want for-
00:33:34 SPEAKER_01
Mm
00:33:34 SPEAKER_00
...
the people who've built the business f- with you, for you.
Um, and then private-
00:33:38 SPEAKER_01
I don't think many people worry as that as much as you think they do, you know?
00:33:40 SPEAKER_00
I don't think they do, no.
00:33:41 SPEAKER_01
[laughs]
00:33:41 SPEAKER_00
They probably don't give a shit about it.
00:33:42 SPEAKER_01
Well, I think, I think they might do for a short period of time.
But, um, [laughs] yeah, I, I mean, I, I genuinely find it very sad that there are certain businesses, um, that no longer exist in the industry.
00:33:53 SPEAKER_00
Mm.
00:33:53 SPEAKER_01
Um, you know, you've, you've been employed by one of them.
00:33:55 SPEAKER_00
Yeah, yeah.
00:33:56 SPEAKER_01
A lot of people thought it was a great business at, at, at one point.
Um, a- and there's been others, you know, stalwarts in the industry that were, that were the, regarded as the best names in the, in the industry in certain, in certain disciplines now, now no longer exist and, and the legacy that's been left after them is quite sad in some cases because they're, they're being consumed by big American consultancies or other, other, other major countries' consultancies and, and now they're, um, you know, they...
You know, I'm talking about organizations where they were, they were well known for one particular discipline and, and now that discipline is not really a core part of their service anymore, which is, which is quite sad.
00:34:34 SPEAKER_01
Um-
00:34:34 SPEAKER_00
Yeah, yeah
00:34:34 SPEAKER_01
...
or not a significant part of their service line anymore.
Um-
00:34:37 SPEAKER_00
Yeah, I mean, we've seen, again, depends when this episode goes out, but we've seen the news with Arcadis this week, um, that they're offloading their architecture businesses that they'd bought, in effect, a change of strategy, focus on EBITDA and all that stuff.
00:34:53 SPEAKER_01
Mm.
00:34:53 SPEAKER_00
Uh, which, you know, let's not get...
People get a bit over-focused on EBITDA as a thing.
00:35:00 SPEAKER_01
Mm.
00:35:00 SPEAKER_00
Um, so that's a measure of profitability.
Uh, I would advocate people googling Warre- Warren Buffett's view of that and how you really measure a business, 'cause EBITDA doesn't take into account, uh, investment and, uh, certain types of debt and things.
So, um, and that's probably kind of why some of these busine- big behemoths end up in the place that they do.
00:35:21 SPEAKER_01
Mm.
00:35:21 SPEAKER_00
They're f- they're focused on a little profit number in a big spreadsheet somewhere.
00:35:26 SPEAKER_01
Mm.
Mm.
00:35:26 SPEAKER_00
Um, and not on how they're gonna create the most value for their clients.
00:35:30 SPEAKER_01
Mm.
00:35:30 SPEAKER_00
And then take a share of that value in return.
You're right on the, it's largely North American money, so either US or Canada-
00:35:38 SPEAKER_01
Mm
00:35:38 SPEAKER_00
...
uh, is behind all of the primes that now dominate the UK-
00:35:42 SPEAKER_01
Mm
00:35:42 SPEAKER_00
...
and global program, you know-
00:35:44 SPEAKER_01
Mm
00:35:44 SPEAKER_00
...
program delivery partner type stuff, which is where, you know, we've lost the EC Harrises, Davis Langdons-
00:35:49 SPEAKER_01
Mm
00:35:49 SPEAKER_00
...
et cetera, into those big beasts.
00:35:51 SPEAKER_01
Mm.
00:35:51 SPEAKER_00
And there, there's a global economic reason for that in how, uh, in the US they've, you know, sort of pumped the economy with, um, you know, creating money and all of that kind of stuff.
00:36:03 SPEAKER_01
Mm.
00:36:04 SPEAKER_00
Uh, it is a truism.
You can go and make a, you know, I've got friends who have moved to the States with some of those consultancies or independently, and they make a lot more money than I do.
00:36:12 SPEAKER_01
Mm.
00:36:13 SPEAKER_00
Um, it's quite easy to make a really good living in the States in our kind of world, and you're, you're obviously going back towards recruiting people in the States.
00:36:20 SPEAKER_01
Yeah, yeah, we're, yeah, we're heading back into the US market and, you know, the, you know, the e-evidence is that, you know, in the consultancy world anyway, and probably the same in contracting, not, not as easy to make the sh- make the shift if you're a, if you're a Brit and you wanna go work with a contractor over there.
But yeah, you, you're probably talking double the salaries, um, to make the equivalent move in the, over to the US.
Um, which logically suggests that, that, that they're gener- they generate double the fees as well the, the, comparative to a U- UK consultancy, because they can't, they can't pay double the salaries unless they're paying them, unless they're generating double the fees will, will be the obvious conclusion to that.
00:36:53 SPEAKER_00
Yeah.
00:36:53 SPEAKER_01
Um, so yeah, there's a lot of that going on.
The, I t- I'll tell you where I'm seeing a real rise of organizations, Jeremy, are, I presume, PE-backed, where you are getting, like, names you don't even necessarily recognize immediately because, because they're actually, um, uh, an investment, an investment vehicle that are buying up a number of-
00:37:13 SPEAKER_00
Mm
00:37:13 SPEAKER_01
...
um, I would say properly small consultancies or small to medium-sized consultancies.
Uh, and they're, and they're bund- bundling them together as a, as, as a consortium, probably eventually then to, to, to trade under one name.
But you're seeing a lot of that activity at the moment, you know, businesses getting bought out that are anywhere from, you know, 20 up to 50 staff getting bought out, brought into a, a, a, a consortium of businesses, um, that all operate within the built environment.
May- maybe either the same discipline, core disciplines or different core disciplines.
00:37:45 SPEAKER_01
Th- there's a real, there's a real growth of that at the moment.
00:37:48 SPEAKER_00
Mm.
00:37:48 SPEAKER_01
You know, real growth.
And, and that's quite, um ...
that's really, that I think is a new development.
00:37:55 SPEAKER_00
Yeah.
00:37:55 SPEAKER_01
So I think you've always had the big PE deals where, um, you know, an organization buys, uh, buys a major consultancy because they've just got the, the bandwidth and, you know, they're, they're a significant player, and they, and they grow that and sell it on.
That's, that's common.
Trade sales, um, again, a larger consultancy buying out a smaller consultancy, again, happens on a quite a, quite a regular basis.
Even one large consultancy buying another large consultancy.
Obviously, we had all the furore over WSP potentially buying Arcus, uh, Arcadis, which is-
00:38:26 SPEAKER_00
Mm
00:38:26 SPEAKER_01
...
obviously, they're taking a step back from that, but that kind of thing happens.
But this thing where you are often getting individuals who are not even from the industry, but have recognized the value in professional services consultancies and are now coming in and buying up a number of SME consultants and merging them together, that I would say is probably a fairly new thing in the last two years, which I've, I've not necessarily seen.
Don't know if you've evidenced that in the past, but I've not really seen much evidence of that-
00:38:54 SPEAKER_00
Yeah
00:38:54 SPEAKER_01
...
until recently.
00:38:55 SPEAKER_00
Uh, no, I'd agree.
I hadn't.
00:38:56 SPEAKER_01
Mm.
00:38:57 SPEAKER_00
Um, it is a bit of a new development.
I guess with, 'cause of the consolidation with the, the WSPs, et cetera, buying stuff up-
00:39:06 SPEAKER_01
Mm.
Mm
00:39:06 SPEAKER_00
...
if you're a government organization looking to procure a framework-
00:39:11 SPEAKER_01
Mm
00:39:11 SPEAKER_00
...
or a big program of work and you want, uh, you know, four delivery partners to come and work with you on different parts of it-
00:39:17 SPEAKER_01
Mm
00:39:18 SPEAKER_00
...
um, there aren't actually that many firms anymore with the balance sheet that could carry-
00:39:23 SPEAKER_01
Mm
00:39:23 SPEAKER_00
...
a lot of work 'cause they've all been buying each other.
00:39:25 SPEAKER_01
Mm.
Mm.
00:39:25 SPEAKER_00
So, um, yeah, there's probably five, I guess, that are the really big dogs.
But, yeah, you take, actually, you take, um, the universal development, the big sort of theme park that's gonna be built in, uh, Bedfordshire.
00:39:39 SPEAKER_01
Mm.
00:39:39 SPEAKER_00
And you look at the contractors and the consultants that, uh, you know, there's, there's, I'm guessing, you know, it's all under NDAs and stuff.
I'm not party to it.
But, um, you know, there have been, uh, some articles about contractors who have been appointed and consultants that have been appointed, and they're not all the big ones, actually.
00:39:56 SPEAKER_01
Mm.
00:39:56 SPEAKER_00
Um, so some of the medium-sized ones have, have got on.
00:40:00 SPEAKER_01
Mm.
00:40:00 SPEAKER_00
So, there must be opportunity to be provider five, six, seven or eight on a eight-slot framework, um, 'cause clients shouldn't be procuring two companies that are owned by the same parent, for instance.
00:40:15 SPEAKER_01
Yep.
00:40:15 SPEAKER_00
Um-
00:40:15 SPEAKER_01
Yep
00:40:16 SPEAKER_00
...
so I'm guessing it sort of creates some opportunity.
I also think the big primes are all getting, uh, the, because of the nature of the way they're funded and their leaders are mar- remunerated, uh, they're all focusing on the large project, you know, program delivery partner roles like, um, you know, Mace and T&T and Mott's et cetera, had on National Hospital Program.
There's talk of another one of those for Great British Nuclear and for the SMR program, et cetera.
00:40:44 SPEAKER_01
Mm.
00:40:44 SPEAKER_00
Where they can just go and body shop in hundreds of people and make 100 or 200 quid a day on each of those hundreds of thousands of people on these big programs.
00:40:53 SPEAKER_01
Mm.
00:40:53 SPEAKER_00
It's quite, it's attractive to them because it, or anyone, because it's predictable revenue off into the future-
00:41:00 SPEAKER_01
Mm
00:41:00 SPEAKER_00
...
that they can take back to their shareholders and say, "Look, we've got this runway of revenue off into the future." But I think, A, there won't be enough of those for all of the big gun, guns to win.
00:41:13 SPEAKER_01
Mm.
00:41:13 SPEAKER_00
So they're gonna be fighting each other for those, and not all of them will be successful.
00:41:17 SPEAKER_01
Mm.
00:41:17 SPEAKER_00
So it'll be interesting to see who wins out.
I have a view between, you know, sort of my friends in those businesses, which ones are more likely to.
00:41:25 SPEAKER_01
Mm.
00:41:25 SPEAKER_00
Someone's gotta lose.
00:41:26 SPEAKER_01
Mm.
00:41:26 SPEAKER_00
Uh, but as they're all distracted with that, I, I think there is opportunity for the, the middle band organizations and those new ones that have been bought together by, you know, bits and bobs bought together by PE firms-
00:41:38 SPEAKER_01
Mm
00:41:38 SPEAKER_00
...
uh, to take the fight for, you know, I don't know, a big project management commission with Birmingham City Council or something that's not right up there in the stratosphere of billions but is building stuff in the hundreds of millions.
Um, I think there's opportunity there.
00:41:51 SPEAKER_01
And, and, and even, even some of the less glamorous stuff than that, you know.
You know, the, uh, the railway, collectively the railway, uh, in the UK needs maintaining.
00:42:02 SPEAKER_00
Yeah.
00:42:02 SPEAKER_01
Um, water infrastructure needs maintaining.
The NHS, the prison service have all got massive estates, um, that need maintaining.
Um, so there's a lot of, there's a lot of stuff to be had there that, um, the, the, there's, there's, there's still a lot to be had, isn't there?
There's a lot of opportunity within that sec- within those sectors.
00:42:21 SPEAKER_00
There is.
00:42:21 SPEAKER_01
Um-
00:42:22 SPEAKER_00
And the way that procurement's going, we've got this, we've got in public sector and regulated industry stuff, uh, sort of hardened social infrastructure.
Um, the way that procurement's going because of the new Procurement Act and how that drives procurement people to be accountable for stuff, and as they're risk-averse, they are simplifying procurements.
We're seeing a lot of scoring criteria on big framework bids and project bids that have been really dumbed down.
They've got rid of added value or innovation as a scoring criteria.
Um, and basically you can get on by just answering the question and playing their spec back to them.
00:42:58 SPEAKER_01
Mm.
00:42:58 SPEAKER_00
So that's one thing.
00:42:59 SPEAKER_01
Mm.
00:42:59 SPEAKER_00
And then the onset of our favorite subject, AI.
00:43:02 SPEAKER_01
Mm.
00:43:03 SPEAKER_00
Um, you know, that's making it easier for people to be able to write a compelling bid and do a good job of it.
It's...
So I'm not even worried about AI from a pace perspective or efficiency perspective.
I, I think not worry, the opportunity is how it makes everyone better-
00:43:20 SPEAKER_01
Mm.
00:43:20 SPEAKER_00
And raises the, you know-
00:43:21 SPEAKER_01
Mm-hmm
00:43:21 SPEAKER_00
...
the tide's raising.
00:43:23 SPEAKER_01
Yeah.
00:43:24 SPEAKER_00
Um, and so again, those middle band organizations, A, it's easier to get on these frameworks, and B, they've got tools that make it even easier.
00:43:32 SPEAKER_01
Mm.
00:43:32 SPEAKER_00
So we've seen on, uh, Crown Commercial Services or now Government Commercial Agency, biggest consulting framework in the country, they were meant to have 15 providers for multi-DIS architecture PM and QS, 15 for each of those, and they've got nearly 30 on all of them.
00:43:47 SPEAKER_01
Mm.
00:43:48 SPEAKER_00
'Cause everyone answered all of the question, and then it was closest to the mean on price wins, and nearly 30 of them were very close to the mean within 1%, so they just let them all in.
00:43:58 SPEAKER_01
Really?
Wow.
00:43:59 SPEAKER_00
So there's 30 firms who've got access to all of the prime, you know, work for government if they sell themselves to clients and leverage the framework effectively.
Um-
00:44:09 SPEAKER_01
Well, that's a positive, I would argue, isn't it?
00:44:10 SPEAKER_00
Yeah, I think so.
00:44:11 SPEAKER_01
Um, because the reality is, the, the reality is not one business can deliver it all because, isn't it?
'Cause the, the talent war is so tight at the end of the day.
00:44:21 SPEAKER_00
Mm.
00:44:21 SPEAKER_01
There's not en- there's not enough people in, in one organization that could deliver it, and that's, that's the reality.
So that's probably a positive, and hopefully a lot of those are SMEs, so that it enables SMEs to grow.
And I, I'm always of the opinion that if SMEs do well, so do the large consultancies.
00:44:36 SPEAKER_00
Yeah.
00:44:36 SPEAKER_01
You know, um, a rising tide, um, floats all boats or whatever the saying is.
00:44:41 SPEAKER_00
Yeah.
00:44:41 SPEAKER_01
Um, and that's quite, um, that's quite important, I think, for the industry as a whole to, to collectively see an improvement in the talent available and the work available-
00:44:49 SPEAKER_00
Yeah
00:44:49 SPEAKER_01
...
I would say.
00:44:50 SPEAKER_00
So I guess to recount then, how do you grow and ultimately sell...
How do you grow a healthy business and ultimately sell it well?
So I guess picking through what we've talked through.
Um, so you need to work on, obviously, let's try and find work with clients that are good to work with, that's profitable work where your staff are happy.
If you can figure out what that avatar, what that DNA of that situation looks like, so work that's in your geography, sector type, capabilities, sweet spot, where you make money, your staff are happy, and the client's happy.
00:45:27 SPEAKER_00
Figure out what that looks like and find more clients in situations like that.
That will up your profit figure.
So stop working with one-hit wonder clients that are difficult, you know, that drag your staff, et cetera.
So not only will you be, uh, more profitable, but your multiplier will go up because your staff stay, you've got a higher repeat business metric, and you've probably reduced the concentration of clients.
You've got a broader base of clients.
And if you can manufacture then a team around you, that means that you could leave, ultimately.
00:46:00 SPEAKER_00
That's how you're going to up the profit and up the multiplier, get the best return-
00:46:03 SPEAKER_01
So let's-
00:46:04 SPEAKER_00
...
everybody's happy.
00:46:05 SPEAKER_01
Let's, um, let's look at, um, not real life.
I'm, I'm not talking about any particular firm here, but let, let, let's give a, give an example, uh, and get your views as what, what you'd do if you were in this business.
So let's say you have got a 20-person consultancy, 2.5 million turnover, 20% profit, um, predominantly private sector at the moment.
What would, what would your advice be to them to get to a point where they're gonna get to a point where they are a viable, safe business that probably is a business that somebody would want to buy?
00:46:38 SPEAKER_00
So the private sector, I've got one exactly like that, actually.
00:46:41 SPEAKER_01
Right.
00:46:41 SPEAKER_00
So I can tell you what I told them.
Um, so I've, I've got a client who's onboarding, uh, that's a PMQS firm largely working in retail.
00:46:51 SPEAKER_01
Yeah.
00:46:52 SPEAKER_00
Um, which is interesting.
So volatile market-
00:46:56 SPEAKER_01
Yeah
00:46:56 SPEAKER_00
...
challenging stakeholders-
00:46:57 SPEAKER_01
Yeah
00:46:57 SPEAKER_00
...
challenging clients, but they've found a way.
Um, so there's nothing wrong with being, you know, focused.
Um, a lot, I talk a lot about public sector stuff, um, because it's easier, and it's easier to visualize-
00:47:11 SPEAKER_01
Mm
00:47:11 SPEAKER_00
...
and it's quite predictable.
00:47:12 SPEAKER_01
Mm.
00:47:12 SPEAKER_00
Private sector's much harder 'cause there's no publicly available data.
00:47:16 SPEAKER_01
Mm.
00:47:16 SPEAKER_00
You've got to go and actually do business development-
00:47:18 SPEAKER_01
Mm
00:47:18 SPEAKER_00
...
talk to people, find things out-
00:47:20 SPEAKER_01
Mm
00:47:20 SPEAKER_00
...
find your tribe, et cetera.
So, um, first of all, there's, uh, that specialism, um, is a, a, an opportunity but a risk as well.
So 'cause we hadn't really talked about sectors and diversification so far.
Uh, we did in the previous episode-
00:47:40 SPEAKER_01
Mm
00:47:40 SPEAKER_00
...
talk about being careful-
00:47:41 SPEAKER_01
Mm
00:47:41 SPEAKER_00
...
uh, not to try...
You, you need, if you're going to enter a new market, you need to do a proper go-to-market strategy.
00:47:48 SPEAKER_01
Mm.
00:47:48 SPEAKER_00
Figure out what good looks like-
00:47:50 SPEAKER_01
Mm
00:47:50 SPEAKER_00
...
the capability you have-
00:47:51 SPEAKER_01
Mm
00:47:51 SPEAKER_00
...
the right clients for you, and then get well ahead of opportunities-
00:47:54 SPEAKER_01
Mm
00:47:54 SPEAKER_00
...
and engage it effectively.
00:47:56 SPEAKER_01
Mm.
00:47:56 SPEAKER_00
So don't just hobby bid stuff-
00:47:58 SPEAKER_01
Yeah
00:47:58 SPEAKER_00
...
that comes across your path, uh, because again, you'll probably end up winning stuff with strangers that won't pan out very well.
So they need to create a rum- a roadmap to, um, an even more healthy, successful business.
00:48:12 SPEAKER_01
Mm.
00:48:13 SPEAKER_00
The critical thing is visibility and certainty.
So they need to try and drive at getting the greatest visibility of pipeline data-
00:48:22 SPEAKER_01
Mm
00:48:22 SPEAKER_00
...
from clients off into the future.
So what are their key clients' programs of work off into the future?
And then what other clients can we approach and onboard that are similar-
00:48:34 SPEAKER_01
Mm
00:48:34 SPEAKER_00
...
in vibe-
00:48:35 SPEAKER_01
Mm
00:48:35 SPEAKER_00
...
so that we continue to grow and make more money, um, and have a good time with similar clients.
So that's a school of thought.
They may look at diversification, whether it's adjacent.
00:48:46 SPEAKER_01
Mm.
00:48:46 SPEAKER_00
So if you're into retail, do you look at mixed use?
00:48:49 SPEAKER_01
Mm-hmm.
00:48:50 SPEAKER_00
Do you start to look at commercial office?
00:48:52 SPEAKER_01
Mm-hmm.
00:48:53 SPEAKER_00
Or do you look at those kind of assets but in the public sector world?
00:48:57 SPEAKER_01
Mm.
00:48:57 SPEAKER_00
'Cause you can, if you can do commercial office stuff, you can build an office for a council, um-
00:49:02 SPEAKER_01
Mm
00:49:02 SPEAKER_00
...
and/or, and/or Inside a big fence at a defense authority.
There's loads of people working in public sector-
00:49:10 SPEAKER_01
Mm
00:49:10 SPEAKER_00
...
who are actually building exactly the same stuff-
00:49:12 SPEAKER_01
Mm
00:49:12 SPEAKER_00
...
as people in the private sector.
00:49:13 SPEAKER_01
Mm.
00:49:13 SPEAKER_00
It's just inside a big fence.
00:49:15 SPEAKER_01
Mm-hmm.
00:49:15 SPEAKER_00
So I would look for stuff that's similar to what you're doing in other domains-
00:49:21 SPEAKER_01
Mm
00:49:21 SPEAKER_00
...
and think through your people, your recruitment-
00:49:25 SPEAKER_01
Mm
00:49:25 SPEAKER_00
...
your succession-
00:49:26 SPEAKER_01
Mm
00:49:26 SPEAKER_00
...
that helps you enter those markets, 'cause you'll, you'll win work through case studies and CVs-
00:49:31 SPEAKER_01
Mm
00:49:31 SPEAKER_00
...
ultimately in solution.
00:49:33 SPEAKER_01
Yeah.
00:49:33 SPEAKER_00
So, um, you know, you'll need reference ability and to build that in time.
So for instance, with that client I'm working with, they wanted to get into public sector.
00:49:41 SPEAKER_01
Okay.
00:49:42 SPEAKER_00
Haven't got any experience.
So I said, "Well, look for bridges." So, uh, you could look to work on university student accommodation-
00:49:51 SPEAKER_01
Yeah
00:49:52 SPEAKER_00
...
'cause that's with a private sector developer partner, but it's technically on a university campus, so that gives you a bridge of a case study to get you somewhere.
00:50:00 SPEAKER_01
Mm.
00:50:01 SPEAKER_00
Or these days in particular, actually, there's a huge bow wave coming of PFI deals that are aging out.
So you and I-
00:50:08 SPEAKER_01
Oh
00:50:08 SPEAKER_00
...
are old enough to remember-
00:50:09 SPEAKER_01
Mm-hmm
00:50:09 SPEAKER_00
...
these big PFI deals being procured.
00:50:11 SPEAKER_01
Mm-hmm.
00:50:12 SPEAKER_00
They're now 25 years old and are coming back into public ownership.
So you could work with, uh, the SPVs to help understand the asset, what's left that they're handing over, get yourself some case studies in that.
Technically, that's kind of public sector, and then that gives you a bridge to win some public sector work with the local authorities-
00:50:32 SPEAKER_01
Mm
00:50:32 SPEAKER_00
...
that are inheriting that school or whatever it is from the, the, the PFI SPV.
00:50:37 SPEAKER_01
Mm.
00:50:37 SPEAKER_00
So I'd, I'd look for those bridges, hire some people who have worked in public sector stuff as well as private sector stuff so they can do both and, and bridge your way across and take baby steps, really.
00:50:48 SPEAKER_01
Yeah.
Okay.
00:50:48 SPEAKER_00
But ultimately, you're trying to still propel a predictable, sustainable, healthy business.
Um, so just be, you know, take, take a, a good view and a, a meaningful approach to doing that.
00:51:03 SPEAKER_01
Yeah.
And from a, you know, talent perspective, that could be, you know, hiring a director who, who directly has access or directly has the relationships within, within a sector that you want to get into.
Um-
00:51:14 SPEAKER_00
Mm
00:51:14 SPEAKER_01
...
that could be, could also be opening up another office elsewhere in the country.
00:51:18 SPEAKER_00
Yeah.
00:51:18 SPEAKER_01
Staying in, staying in your lane in terms of the sectors that you specialize in, but, but giving yourself more coverage up and down the UK, um, I would say are two, two obvious strategies around that, that, that maybe companies need to look at.
00:51:29 SPEAKER_00
Yeah.
00:51:30 SPEAKER_01
Um, the third one is for that kind of size business, you're often right that that may be, um, a single owner business, or it may be that, you know, there's a couple of people have equity in that business.
Um, you know, touching on what you said earlier, you know, should you give more equity away?
By that point, will, will you enable more growth, um, by, by having somebody else who genuinely is invested in, in seeing the business grow?
00:51:50 SPEAKER_00
Mm.
You can do that through B shares, though.
00:51:53 SPEAKER_01
Mm-hmm.
Mm-hmm.
00:51:53 SPEAKER_00
Um, you know, I've, I've got a friend who, uh, buys businesses with funders, boring businesses.
00:52:00 SPEAKER_01
Mm.
00:52:01 SPEAKER_00
Um, it's actually, it's, it's not of this world, as it were, your sector.
00:52:05 SPEAKER_01
Mm.
00:52:05 SPEAKER_00
But it's worth looking at some, um, reference material.
There's a lady called Codie Sanchez in the States-
00:52:10 SPEAKER_01
Yeah.
Yeah
00:52:10 SPEAKER_00
...
who wrote a book called "High Street Millionaire", I think it is.
00:52:13 SPEAKER_01
Mm.
00:52:13 SPEAKER_00
Uh, where she advocates buying laundromats-
00:52:16 SPEAKER_01
Laundromats, yeah, and stuff.
Yeah, yeah, yeah
00:52:16 SPEAKER_00
...
and, you know, car, uh, car washes and things.
There's actually a lot to take from that-
00:52:21 SPEAKER_01
Mm
00:52:21 SPEAKER_00
...
um, for us, um, in how you value a business.
But, yeah, but, you know, I've got a friend who, who, who does that in the UK.
00:52:29 SPEAKER_01
Mm.
00:52:29 SPEAKER_00
And he bought a funeral directors, went and got a director from Co-op Funerals to come and run it, gave him some B shares.
Uh, and he's, he's doing similar thing to what you mentioned in terms of those PE firms that are buying up bits.
What they're doing is consolidating the back of house.
00:52:44 SPEAKER_01
Mm.
00:52:45 SPEAKER_00
So you've got one accounts team-
00:52:46 SPEAKER_01
Mm
00:52:46 SPEAKER_00
...
one HR team, one marketing team-
00:52:48 SPEAKER_01
Mm
00:52:48 SPEAKER_00
...
propelling those different brands, or they consolidate the brands into one big engine and have, you know, consolidated.
So they, they, they create efficiencies to drive the profit up by basically cutting the o- the, the back of house stuff, looking for the efficiencies over time.
Um, and he's doing the same.
So he's got one accounts team, one HR team, one marketing team for his funeral directors, his car wash, his-
00:53:10 SPEAKER_01
Mm
00:53:11 SPEAKER_00
...
his barber shops, all sorts of stuff.
And he's, he's very wealthy dude, very, very good at it.
00:53:17 SPEAKER_01
Mm.
00:53:17 SPEAKER_00
Grows all those businesses.
It does, it circles us back to a point, something else that our accountants don't naturally tell us about when we start a business is ownership structures.
00:53:29 SPEAKER_01
Mm.
00:53:30 SPEAKER_00
Holding companies.
So very often people get excited, start a new business, as we all do, and you own the business personally.
Um, so perhaps there's two or three partners have 33% each-
00:53:44 SPEAKER_01
Mm
00:53:44 SPEAKER_00
...
or whatever it is.
Um, and that's cool, apart from when you go to sell it-
00:53:49 SPEAKER_01
Mm
00:53:49 SPEAKER_00
...
you're subject to capital gains when you, you sell it.
And also, it means that you're locked into paying yourselves 33% of the profits in divid- or whatever you decide to give yourself in dividends.
You need to give yourselves each the same amount.
00:54:04 SPEAKER_01
Mm.
00:54:04 SPEAKER_00
There's no wiggle room in terms of, you know, that is earnings that you'll be-
00:54:08 SPEAKER_01
Yes
00:54:08 SPEAKER_00
...
taxed on.
00:54:09 SPEAKER_01
Yeah.
00:54:10 SPEAKER_00
And you'll, you know, we had a bit of a laugh, didn't we, with our accountants when we first started out.
You'll play the game-
00:54:14 SPEAKER_01
Mm
00:54:14 SPEAKER_00
...
maybe of paying yourself 12 and a half grand-
00:54:17 SPEAKER_01
Mm
00:54:17 SPEAKER_00
...
so you get your NI and your pen- your public pension and all that state pension-
00:54:21 SPEAKER_01
Mm
00:54:21 SPEAKER_00
...
and then the rest is in dividends.
00:54:23 SPEAKER_01
Mm.
00:54:23 SPEAKER_00
And again, talk to your accountants about how all of that works-
00:54:26 SPEAKER_01
Mm
00:54:26 SPEAKER_00
...
and how they'd like to work with you.
Uh, but actually if each of the owners, so I've got friends, uh, that own a business together, but they, two of them have, uh, 50% each of a specialist business.
Uh, and they have a holding company each that they and their wives have 50% of each.
00:54:43 SPEAKER_01
Mm.
00:54:44 SPEAKER_00
So they can maximize, um, how they invest the money from the business in their own way.
So they just pay themselves 50 grand.
Their wives work in the business or on the business, and they pay them 50 grand, so they're under the 40% tax threshold.
00:55:00 SPEAKER_01
Mm.
Mm.
00:55:00 SPEAKER_00
So they're 100 grand each households, and the rest of the money just sits in their holding companies and can be deployed into investments in stocks and shares-
00:55:09 SPEAKER_01
Mm.
Mm
00:55:09 SPEAKER_00
...
or other things, but property quite often.
00:55:11 SPEAKER_01
Mm.
00:55:12 SPEAKER_00
Uh, but critically they can also, um, pay up to 60 grand a year into their pension, uh, which staff, you can't do with staff.
00:55:20 SPEAKER_01
Mm-hmm.
Mm-hmm.
00:55:21 SPEAKER_00
Um, so again, get advice on this.
00:55:24 SPEAKER_01
Yeah.
00:55:24 SPEAKER_00
But, um, you could have a SIPP or a SSAS pension where you can-
00:55:27 SPEAKER_01
Yeah.
Yep
00:55:27 SPEAKER_00
...
you know, invest your pension-
00:55:29 SPEAKER_01
Yep
00:55:29 SPEAKER_00
...
in stocks and shares or property stuff-
00:55:31 SPEAKER_01
Mm-hmm
00:55:31 SPEAKER_00
...
and lend money to other businesses, and that's, that's where you really get wealth from-
00:55:36 SPEAKER_01
Mm-hmm
00:55:36 SPEAKER_00
...
really, is how you, uh, take the profits from the business as the owner, uh, and then deploy that either in growing the business.
You can invest, leave the profit in the business and invest it in growth-
00:55:48 SPEAKER_01
Mm-hmm.
Mm-hmm
00:55:48 SPEAKER_00
...
but you might take a proportion to invest in a property portfolio-
00:55:51 SPEAKER_01
Mm-hmm
00:55:51 SPEAKER_00
...
or into other businesses, be an angel investor, whatever it is.
00:55:56 SPEAKER_01
Mm-hmm.
00:55:56 SPEAKER_00
But the, the gre- as I say to people, the greatest gift you could give anyone, or particularly yourself, is a limited company.
00:56:02 SPEAKER_01
Mm-hmm.
00:56:03 SPEAKER_00
Um, whether you own just a, a trading company together-
00:56:06 SPEAKER_01
Yep
00:56:06 SPEAKER_00
...
or whether you have a holding company above it.
00:56:09 SPEAKER_01
Mm-hmm.
00:56:09 SPEAKER_00
Um, it's, it's a travesty really that this stuff isn't taught to people at school or university.
00:56:15 SPEAKER_01
Yeah.
Yep.
00:56:16 SPEAKER_00
Financial independence, financial freedom stuff, understanding how money works-
00:56:19 SPEAKER_01
Mm-hmm
00:56:19 SPEAKER_00
...
FIRE and all that.
00:56:20 SPEAKER_01
Mm-hmm.
00:56:21 SPEAKER_00
Um, so I would advocate strongly if you're gonna start your own business...
Uh, congratulations first of all-
00:56:27 SPEAKER_01
Mm-hmm
00:56:27 SPEAKER_00
...
'cause it's a fantastic journey.
00:56:29 SPEAKER_01
Mm-hmm.
Mm-hmm.
00:56:29 SPEAKER_00
Um, you've obviously got a bit of entrepreneurial spirit.
00:56:32 SPEAKER_01
Mm-hmm.
00:56:32 SPEAKER_00
Um, but educate yourself on financial independence, financial freedom stuff, investment, and how businesses work.
Um, and engage your accountant and others and mentors to help learn about this stuff, because it...
I don't know why, it's an odd human thing, but nobody will proactively tell you this stuff, it seems.
00:56:53 SPEAKER_01
Mm-hmm.
00:56:54 SPEAKER_00
Um, and so, um, people are welcome to, you know, drop me a line or give me a call and I can give them some coaching on this stuff, um, and point them in the right direction or to the right sorts of accountants and things.
But, um, it's really important 'cause you don't, you don't wanna wake up in 20 years' time and A, have a business that's difficult to sell or undervalued-
00:57:13 SPEAKER_01
Mm-hmm.
Mm-hmm
00:57:13 SPEAKER_00
...
'cause you've got...
You're in the business not working on the business.
You are the business.
You know, all of the stuff we talked about that kind of devalues it-
00:57:22 SPEAKER_01
Mm-hmm
00:57:22 SPEAKER_00
...
concentration of clients, et cetera.
But worse, you own it personally and you get, you're gonna get walloped for more and more capital gains by, by the looks of things.
00:57:32 SPEAKER_01
Yeah.
I think that's, I think that's all the danger.
Um, I do think equally another thing that is worth stressing, I do think, um, some business owners can just generally get bored, and they start to go look at different investments, start doing lots of other things, start to get lots of fingers in pies, um, when really their major cash cow is they've just gotta make that business work because that's the business they know inside out, and that's where probably they're gonna have the most leverage.
00:57:56 SPEAKER_00
Yeah.
00:57:56 SPEAKER_01
When you get to a point where you've got a ridiculous amount of excess profit, then you start thinking about investments.
But arguably some, should some of those investments be fairly, um, what's the word?
Kind of, um, kind of low activity investments-
00:58:09 SPEAKER_00
Yeah.
Passive stuff
00:58:09 SPEAKER_01
...
you don't have to do anything with them.
Yeah.
Very much passive stuff, and I think, I think passive is becoming a much abused...
Passive income is becoming much an abused term these days.
00:58:17 SPEAKER_00
Yeah.
00:58:17 SPEAKER_01
Uh, 'cause a lot of passive income is not passive income.
00:58:19 SPEAKER_00
No.
00:58:19 SPEAKER_01
[chuckles] Um, but there are some true passive incomes, whether that be property, whether that be, you know, uh, just, just physically investing in the stock market.
Whatever it may be, there are different, there are different ways to, to do that.
Um, whereas a lot of people try to be intelligent with their money and think they can, think they can, uh, manage one business and another and another, um, and invariably do a shit job of all of it [chuckles] and, um, and not make as much money as if they'd have just literally stuck to their main business and made some, some fairly low maintenance investments elsewhere that, that just tick over.
00:58:49 SPEAKER_00
Yeah.
Afraid so.
You're bang on.
00:58:50 SPEAKER_01
Yeah.
00:58:51 SPEAKER_00
Yeah.
You're, you're, you're bang on.
You can go and do other stuff, uh, once you've sold this business.
00:58:56 SPEAKER_01
Yeah, yeah, yeah, yeah, yeah.
Or, and/or with anything, it's the same.
And this, this is the same whether it's your single business or other businesses, you're only as good as the people who, um, who, who you've got working for you.
So, um, you know, if, if you want to grow a business, it's fundamental that you build a really good management team below you who are, who are, who are just as invested, probably with equity-
00:59:22 SPEAKER_00
Mm-hmm
00:59:22 SPEAKER_01
...
um, but are bloody good, possibly better than you, and, and can help you grow something should you go and invest in another business.
So going back to your mate who buys businesses, I imagine probably what he does is just make sure that he's got somebody really good managing that business.
00:59:36 SPEAKER_00
Yeah.
For sure.
00:59:36 SPEAKER_01
That's not him, that's not him managing the business.
00:59:38 SPEAKER_00
Nope.
00:59:38 SPEAKER_01
So if you start getting to the point where you've probably got somebody who's okay because they're cheaper to hire probably, but not brilliant, then you're gonna get sucked into managing that business, and then suddenly you're, uh, you've got, you're across too many things and you do a terrible job of everything because you're, because you're not an expert and you're too stretched.
00:59:55 SPEAKER_00
Yeah.
Afraid so.
00:59:56 SPEAKER_01
Yeah.
00:59:57 SPEAKER_00
And it's kind...
You've gotta have some fun along the way, right?
00:59:59 SPEAKER_01
Mm-hmm.
01:00:00 SPEAKER_00
Um, so although we all work hard-
01:00:02 SPEAKER_01
Yeah.
Mm-hmm
01:00:02 SPEAKER_00
...
it's not, hopefully it's not work work too often.
01:00:06 SPEAKER_01
Yeah.
01:00:06 SPEAKER_00
Hope, hopefully there's fun along the way and you're enjoying what you're doing.
So, um, again, I, I would advocate that people think before they start a business ideally, but certainly anyone can do it at any point.
I've coached pe- three people on this this week.
Uh, set a bit of a vision for yourself, a North Star.
So just think through with your stakeholders, your wife, partner, family, whatever, what you want your life to look and feel like in 5, 10 and 20 years' time in three, uh, continuums, work, personal, and wellbeing.
01:00:40 SPEAKER_00
So my wife and I have been on a financial freedom journey for 14 years.
We, as I sort of described, we pay ourselves 50 grand each, and everything else is invested in property stuff predominantly-
01:00:50 SPEAKER_01
Mm-hmm
01:00:50 SPEAKER_00
...
and sometimes some other interesting things.
01:00:51 SPEAKER_01
Yeah.
01:00:52 SPEAKER_00
Um, and, uh, but we have reset that North Star every couple of years, and it informs our decision-making.
So, um, everything that we do is aligned with where we want w- where we want life to be.
So we, so...
'Cause it's far too many people drift into things with all the right intentions-
01:01:14 SPEAKER_01
Mm-hmm
01:01:14 SPEAKER_00
...
but then wake up in 20 years' time and they're not where they wanted to be.
So every decision we make particularly investments and where, where, you know, things that we launch in the business, et cetera, is does it help us particularly and ultimately help our daughter and, you know, sort of legacy in terms of where we're going?
So I j- I just advocate that people set themselves a bit of a vision as to what they want their life to look and feel like, because their business should enable that under- uh, fundamentally.
It should be, it's symbiotic.
It, it's a big...
It, it will dominate the work, work stream.
01:01:45 SPEAKER_01
And also, you can, um, yeah, it, it, it fundamentally depends where your aspirations are and what you, and what, what you see your, your lifestyle being like.
Um, there are a lot of business owners who really should, um, get a business really dialed in, stop at a headcount of 10 people, um, generate a million quid's worth of fee, and generate half a million quid's worth of profit each year, and that could be, that, that, that is absolutely achievable within a lot of consultancy environments should they choose to do that.
Um, uh, and, you know, generating half a million profit, um, you know, 20, 25% goes to the taxman, yes, but you're still generating 375K of profit each year, uh, which you, you know, you could pull out a fair chunk of that and live a, live a bloody good life off the back of that on a, on an annual basis, putting money in your pension, et cetera.
01:02:31 SPEAKER_01
But equally, if your aspirations lie beyond that, then you have to accept that you are gonna go through, um, what, um, uh, a guy called Alex Hormozi calls a swamp.
01:02:40 SPEAKER_00
Mm.
01:02:40 SPEAKER_01
Uh, where getting through one to three million turnover is hard work because you will see your profit significantly drop over that period because you're building a business.
Um, you've just got probably a higher, higher cash flow and not as much profit for that period of time, but you have to go through that to then get to the stage where you can suddenly bounce out the other side of that and start making a, a million-plus profit.
Um, but you have to recognize that's hard work.
[chuckles]
01:03:04 SPEAKER_00
Yeah, yeah.
01:03:04 SPEAKER_01
That is hard work to grow a consultancy or in fact any kind of business doing that.
So do you, um, have you got the stomach for that?
Are you prepared to graft for that?
And so, you know, the point is setting out what you see the business being, what you see your lifestyle being, um, you know, how hard you're prepared to work, how many, how much sacrifice are you prepared to make, how many hours are you prepared to work per week-
01:03:26 SPEAKER_00
Mm
01:03:26 SPEAKER_01
...
to get to, to the goal.
And that's what I think a lot of business owners don't do.
They don't, they don't set out a vision.
They just, just crack on and see what goes on.
01:03:34 SPEAKER_00
Yeah.
Uh, kinda get lost in ego a bit.
01:03:37 SPEAKER_01
Mm.
01:03:37 SPEAKER_00
Um, 'cause you, you sort of visualize themselves having a bigger business and, like you say, don't think through the consequences.
The other one at the other end is, um, they get tied into a, a, an earn-out that's-
01:03:49 SPEAKER_01
Mm
01:03:49 SPEAKER_00
...
really long.
01:03:50 SPEAKER_01
Mm.
01:03:50 SPEAKER_00
Um, so I've got some friends who sold a consulting business, not construction consulting, uh, to a much bigger firm, trade sale, but they're on a seven-year earn-out.
01:03:59 SPEAKER_01
Right.
01:04:00 SPEAKER_00
And just over a beer I was like, "Just do the maths.
The profit you're making, you might as well have just held onto the business and then just stopped." What, you know, 'cause the multiplier meant they, they might as well have just he- held onto it.
01:04:14 SPEAKER_01
So they just kept on making the profit each year, taking the profit out each year and-
01:04:17 SPEAKER_00
If they, if they'd done that, they'd have been better off.
01:04:18 SPEAKER_01
Right.
Yeah.
01:04:19 SPEAKER_00
I can't, I can't for the life of me figure out how they got talked into it.
Uh, 'cause, you know, these people buying businesses are professionals at buying businesses.
It's probably not the first time they've done it-
01:04:28 SPEAKER_01
Yeah
01:04:28 SPEAKER_00
...
but it's the first time you've done it.
01:04:29 SPEAKER_01
Yeah, yeah.
01:04:29 SPEAKER_00
And they can talk you into all sorts of things, and lawyers-
01:04:32 SPEAKER_01
Yeah
01:04:32 SPEAKER_00
...
get involved.
It all gets a bit out of hand.
Um, where, like you say, you might've been better off just running a business of 10 people, uh, investing that couple hundred grand a year or whatever in some property stuff, 'cause bearing in mind it compounds.
01:04:45 SPEAKER_01
Yeah.
01:04:45 SPEAKER_00
Investments compound probably up.
01:04:47 SPEAKER_01
Yeah, yeah.
Yeah.
01:04:47 SPEAKER_00
Um, so you know, if you'd, if, if you'd put away half a million quid, you know, seven years ago, it'd be worth a million quid now.
Doubles every seven years if-
01:04:57 SPEAKER_01
Yeah.
But even-
01:04:57 SPEAKER_00
...
you know, if you put it in just the S&P 500 it'd be more than that.
01:04:59 SPEAKER_01
I, I think, I think there's a lot of interesting business out there.
I know you, I know you work for one or two businesses this kind of size who are maybe in the hundreds.
Um-
01:05:06 SPEAKER_00
Mm.
01:05:08 SPEAKER_01
And I think, you know, they look at, they look at some of the big deals that have gone through recently, like for example, you know, CBRE taking an investment in Turner & Townsend, and you know, the money that T&T got for that.
Um, I know a lot of the partners in, in that business incredibly well.
They have grafted, and grafted, and grafted, and grafted.
They also built a business at the right time, in the right environment, and did a lot of things right.
They made some incredible-
01:05:40 SPEAKER_00
They did
01:05:40 SPEAKER_01
...
decisions.
They had, um, they had years where, um, they, you know, they didn't just take all the money out, and this is where s- a lot of consultancies go wrong.
They pull all the money out each year.
Um-
01:05:49 SPEAKER_00
Mm
01:05:49 SPEAKER_01
...
you know, someone like T&T, they did an awful lot of things right, and everyone looks at that business and goes, "That's amazing they got to that level." They got to that level because they made a lot of very hard decisions over a number of years.
The, the equity partners who benefited from that, you know, almost killed themselves with the amount of effort they did to get to that place.
They, they did exceptionally well as a business.
Um, but not through luck, [chuckles] through just-
01:06:13 SPEAKER_00
No
01:06:13 SPEAKER_01
...
through just hard graft and some really intelligent leadership.
01:06:16 SPEAKER_00
Well, do you know what, though?
'Cause I studied them 'cause I was a competitor to them.
01:06:19 SPEAKER_01
Mm.
01:06:19 SPEAKER_00
They were the enemy for most of my-
01:06:21 SPEAKER_01
Yeah
01:06:21 SPEAKER_00
...
career.
Um, and in hindsight now, uh, the thing that they did which was really strong was partner-led client account management.
01:06:30 SPEAKER_01
Mm-hmm.
01:06:30 SPEAKER_00
They had key account management going on.
I, I've not seen under the hood.
I don't know whether they had key account plans actually written down or whatever, but their partners, directors were accountable for their clients-
01:06:42 SPEAKER_01
Mm
01:06:42 SPEAKER_00
...
and they sponsored that activity-
01:06:44 SPEAKER_01
Mm
01:06:44 SPEAKER_00
...
really hands-on.
01:06:45 SPEAKER_01
Mm.
01:06:46 SPEAKER_00
And that again is where a lot of businesses go wrong, particularly the bigger ones.
01:06:51 SPEAKER_01
Mm.
01:06:51 SPEAKER_00
Um, they employ managers as, you know-
01:06:54 SPEAKER_01
Mm
01:06:54 SPEAKER_00
...
accountants or whatever to run businesses, lawyers, et cetera, and they don't have that sponsorship of that business growth and particularly-
01:07:03 SPEAKER_01
Mm
01:07:03 SPEAKER_00
...
key account management-
01:07:04 SPEAKER_01
Mm
01:07:04 SPEAKER_00
...
um, activity, and so they, they drift.
01:07:08 SPEAKER_01
Mm.
01:07:08 SPEAKER_00
Um, and they get focused on the EBITDA and- ...
and that stuff.
01:07:10 SPEAKER_01
Mm-hmm.
01:07:11 SPEAKER_00
Um, where actually if you focus on your clients, creating the most value for those clients of anyone, and just ask for a share of that value in return-
01:07:19 SPEAKER_01
Mm.
01:07:19 SPEAKER_00
...
you can't help but be more successful.
01:07:21 SPEAKER_01
Mm.
01:07:22 SPEAKER_00
And it has, if you have a key account management program at the heart of things, that helps with understanding that concentration of clients and trying to spread it and planning around that.
But those clients can't help but tell you about their pipeline, so you get that visibility which helps your multiplier.
01:07:39 SPEAKER_01
Mm.
01:07:39 SPEAKER_00
You're much more likely to get direct awards and negotiated business, which is at a higher margin and again-
01:07:45 SPEAKER_01
Mm-hmm
01:07:45 SPEAKER_00
...
more predictable.
Um, there's loads and loads of benefits to KAM-
01:07:49 SPEAKER_01
Mm
01:07:49 SPEAKER_00
...
what, you know, what we call mid-game, mid-funnel.
Um, and almost no businesses have a key account management program-
01:07:55 SPEAKER_01
Mm
01:07:55 SPEAKER_00
...
'cause it's a bit boring, isn't it?
01:07:56 SPEAKER_01
Mm.
01:07:57 SPEAKER_00
You have to look at it and do something about it, and people might ask you about it.
So they, everyone gets excited about bids in the end game.
01:08:04 SPEAKER_01
Mm.
01:08:05 SPEAKER_00
When actually the, the real value multiplier in businesses like these is key account management of your key accounts.
Even just-
01:08:12 SPEAKER_01
Mm
01:08:12 SPEAKER_00
...
a one-page plan.
01:08:13 SPEAKER_01
Mm.
01:08:14 SPEAKER_00
Who do we need to know?
What's important to them?
You know, what's their pipeline?
What we gonna do about it?
Look at that once a month or once every couple of months, talk about the next steps, and you'll smash your numbers to bits and have a much better time, and almost no one does that.
But T&T did.
01:08:28 SPEAKER_01
I think, um, I think they and other businesses that have been very successful, I think did two very things well.
They were, they were focused on providing real value and off the back of that, growing accounts, and then having a relentless attitude to new business.
01:08:43 SPEAKER_00
Mm.
01:08:43 SPEAKER_01
And that for me actually is where I, I, I see a lot of businesses who are maybe in the hundreds who are properly losing their way because I, I do not think they've got enough out-and-out strategic work winners.
They don't appear to have the ability to grow accounts, and they certainly do not do enough business development.
01:09:02 SPEAKER_00
Yeah.
01:09:02 SPEAKER_01
Um, is, is for me a big, a big issue for a lot of businesses out there.
01:09:05 SPEAKER_00
Yes.
So I mean, uh, I've had a real realization in the last year, um, that nobody teaches people in B2B, B2G generally, let alone consultancies in construction, how to actually grow a business.
01:09:19 SPEAKER_01
Mm.
01:09:19 SPEAKER_00
There's not an MBA you can go on, there's not a course you can go on that actually teaches you how to do this.
We all learn by doing the same-
01:09:26 SPEAKER_01
Mm
01:09:26 SPEAKER_00
...
as we all learn how-
01:09:27 SPEAKER_01
Mm
01:09:27 SPEAKER_00
...
to use Excel.
01:09:28 SPEAKER_01
Yeah, yeah.
01:09:28 SPEAKER_00
And so people have gaps in knowledge, and quite often vast ones, and that's why people have ne- most people who listen to this podcast will never have heard the term capture before.
01:09:37 SPEAKER_01
Mm.
01:09:38 SPEAKER_00
But that is what the Mace and the T&Ts and the AECOMs.
Yeah, there's a job advert out at the moment from AECOM and another one from Atkins Realis for capture managers, people who are building campaigns to win big deals and frameworks 18 months before tender.
01:09:53 SPEAKER_01
Mm.
01:09:54 SPEAKER_00
Um, you know, the smaller consultancies, you don't need to employ people like that.
You just need to understand the philosophy and pick the right deals and get ahead of them.
01:10:02 SPEAKER_01
Mm.
01:10:03 SPEAKER_00
Um, and but no- nobody teaches them-
01:10:05 SPEAKER_01
Mm
01:10:05 SPEAKER_00
...
that stuff, apart from me, of course.
01:10:07 SPEAKER_01
[chuckles]
01:10:07 SPEAKER_00
Um, drop me a line.
Um, but it's, it's one of the biggest problems in business.
People are running wildly suboptimal sort of work-winning engines-
01:10:17 SPEAKER_01
Mm
01:10:17 SPEAKER_00
...
'cause th- they don't know that stuff.
They don't know how to connect the dots through their funnel or client journey.
Um, and so the ones-
01:10:25 SPEAKER_01
And how does a small business do that then?
What, what...
'Cause obviously I'm not necessarily saying all large ones who do it perfectly well, but, but they've probably got a, a, a better focus on it.
How, how does a small business, going back to that 20 person, 2.5 million pound business, how do they start to track and monitor, you know, the, the clients or the opportunities that they, that, that they, they feel they want to prioritize and target-
01:10:48 SPEAKER_00
Mm
01:10:48 SPEAKER_01
...
bidding for?
01:10:49 SPEAKER_00
Well, again, AI will help accelerate this.
01:10:51 SPEAKER_01
Mm.
01:10:52 SPEAKER_00
Among many things through the funnel.
Obvious- obviously, when people think AI, they think written word, and therefore being able to bid more things-
01:11:00 SPEAKER_01
Mm
01:11:00 SPEAKER_00
...
'cause you could just get Copilot to do it for you.
01:11:03 SPEAKER_01
Yeah.
01:11:03 SPEAKER_00
That's a vast mistake, and I've, I've just launched a bid writing or AI-powered bid writing training course for that very reason, 'cause actually, like anything, it's about transformation.
01:11:14 SPEAKER_01
Yeah.
01:11:14 SPEAKER_00
You need, you need a structured process, clear roles and responsibilities, and then the technology is an enabler.
It's not the answer.
01:11:21 SPEAKER_01
Mm.
01:11:21 SPEAKER_00
It underpins a process.
So don't think that you could just get Claude or something and knock a load of bids out and you'll be-
01:11:28 SPEAKER_01
No
01:11:28 SPEAKER_00
...
r- all right, 'cause clients still know who they want.
01:11:32 SPEAKER_01
Yeah.
01:11:33 SPEAKER_00
Getting Claude to write your bids for you won't solve that.
So you've gotta go up into the mid-game.
So, um, figure out where most of your profit is already coming from.
01:11:43 SPEAKER_01
Mm.
01:11:44 SPEAKER_00
And where, so which clients and situations is that manifesting itself and why?
And then do some market research on your marketplace and sectors you wanna work in.
Where's the money gonna be with who?
And just pass it through that lens.
So whi- which clients of all of that are similar to the ones where, and have similar situations to the ones where you're making money, your staff are happy, and the clients are happy.
So that middle of that Venn diagram.
And then, so if you've got five key clients delivering your, most of your profit currently, just find clients six, seven, and eight that look and feel like them.
01:12:19 SPEAKER_01
Yeah.
01:12:19 SPEAKER_00
So don't focus on bids.
Focus on clients that have deals later and the, you know, the money will come and the fun will come.
01:12:27 SPEAKER_01
Good.
Jeremy, thank you again for being on.
We've just gone well over an hour again, which is good.
01:12:32 SPEAKER_00
Very good.
01:12:32 SPEAKER_01
Good work.
Um, and I'm sure we'll do more of these.
We'll, uh, we've always got a lot to talk about, so we'll, we'll keep on thinking of, um, additional, um, subjects to discuss and, uh, go for a round three.
01:12:44 SPEAKER_00
Very good.
Thank you for having me.
01:12:45 SPEAKER_01
Pleasure.
Cheers.
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