Episode 5: Getting Ready: What to Do Before You Press Go

Welcome to Unlocking Value, on John Howard a partner at Garwood Growth. This podcast is for founders and owners of professional services businesses who are building great firms and starting to think about how to unlock the value they've created. You might already be preparing for investment, thinking about selling or just beginning to way up your options. Wherever you are on that journey, this is your chance to learn from founders, investors, and advisors who've been through before. Each episode gives you a behind the scenes look at what it's really like to go through the deal, the good bits, the hard bits, and what comes after. So if you're planning what's next for your firm and what to make clearer, better decisions, this is a show for you. Welcome to episode 5 of 6. As we start to approach the end of the series, we're tackling one of the most critical but often underestimated parts of any transaction, and that's getting your business ready before you press go. We talk about what readiness really means, not just hygiene factors like data, legals, and tax, but also the strategic readiness work that gives buyers investors confidence. We also talk about what gets missed, how to know if you're truly ready, and how to avoid a scramble when interest from investors and buyers starts to come in. You'll hear from Mark Robinson and Sean Hobern who built and exited multiple businesses together. They first got to know each other when Mark was a co-founder of two consulting firms, Qualcomm Solutions and later Edenbrook, and they went on to found and successfully exit Kimble, one of the world's leading professional services automation systems. You'll also hear from James Barraclaw, a corporate finance advisor who's guided over 200 owner-led deals and now helps firms get match fit for sale or investment. As always, if you haven't yet downloaded the unlocking value book, check the show notes for how to get a free copy. It's a practical guide to help you plan and prepare for a future transaction, and this podcast series helps bring it to life. So let's get into the conversation, starting with introductions from Mark, Sean, and James. Mark, maybe kick us off. Could you just tell us a bit about your background of businesses you built and what you're up to these days? Yeah, well, John first, thanks for the invite, and thank you everybody else for coming along as well. I'm Mark Robinson, and I guess to use a sort of cliché term which I don't really like, but I'm a serial entrepreneur, I've co-founded and exited three companies, the first two writing services firms, began with the late '90s with Falkram, which grew really fast. We got to about 200 people in just over two years before we sold it. And then again, in the early 2000, 2001, we'd even brought, and we got to sort of over 500 people in around eight years before we sold that. And then in 2010, I co-founded what was known as Kimball with Sean, and I'll leave Sean to, before we talk about more about that, which is a software and services business supplying professional services firms. So using the knowledge we had of building out those consulting firms to build software that help people run professional services firms. But typically, my role in all of these has been on more of the go-to market and the business development side in all three of those. And although since leaving Qatar, as it's now called, I've tried very hard to retire. I think I've been spending more and more time coaching, mentoring and investing mainly in tech firms and typically on the sales side, the business development side. And a lot of the times, it's as much talking about helping people to learn from the things I've got wrong as much as the things I've got right. Thank you, Mark. That's great. Sean, I'll come to you. Tell us a bit about your background, what's keeping you busy these days. Yeah. Well, very similar to Mark, sort of, in the professional services arena in one form or another for probably the last 35 years, worked with Mark or worked for Mark in a few of those startups that he talked about and then helped sort of grow an exit. Eden Brook, which was the last, the last one that Mark had founded. And I guess to Mark's point, we took that experience of growing a firm into how could we build software to support a firm? I guess in most professional services firms, you're doing a lot of work for your customers and sometimes you feel that we've developed this, we've built this and actually we've not really benefited from that other than the TNM or the fixed price rate. So we decided to start from a clean sheet of paper and builds and software that we would have loved to have how growing those businesses. So that was the last sort of, I guess, 10, 11 years of our lives was building that. And that was great. So working with a lot of professional services firms, all kinds of different shapes and sizes, which has been great, sort of gives you a better perspective of the whole of the professional services market, working with those customers. And yeah, Mark and I, we actually did that to private equity in 2021. And Mark and I, as he said, we've been working, advising tech firms, either services or software firms and making sure people don't get the same scars on the back that we've got. But we can now do it vicariously, can't we Mark? In terms of seeing the growth and the growth and success of companies, but not be the ones worried about making payroll and having all of those sharp issues that you'd often get. A bit more sleep at night, hopefully. It will sleep at night. Good. James, you come up from a slightly different background in corporate finance. Tell us a bit about yourself, the work you do and maybe some of the kinds of work you're doing with businesses now, you're at a lucid. Yeah, sure. Thank you for inviting me to this, John. So slightly different path, if you said, so I qualified as a chartered accountant about 26 years ago now and I went straight into M&A. Since then, I probably would say 95% plus of my clients have been entrepreneurs, private equity. Often those entrepreneurs are doing their first ever transaction. I would imagine nearly 200 completion since then and it's really fascinating when I was looking at how the M&A world works for those people who know what they're doing and are prepared for a transaction in advance that the whole thing works extremely well. They run very aggressive processes, they have lots of access to investors and buyers. It's quite hard, it's hard work but it's intensive, it's very questioning, it's very aggressive and the outcome can be very lucrative. But of course, that is a tiny percentage of businesses out there and one of the big things I've learnt over the last 25 years in M&A is that if you don't know what you don't know, how do you know what to do and so many businesses just don't. So about three and a half years ago, I came out of being a partner in an international M&A firm and I said I'm a lucid with a colleague who's a CFO, very different than me. And our whole mantra was, let's work with entrepreneurs who aspire to do a transaction at some point in the future and let's get the match fit. Let's distill the last 20, 30 years of our combined experience into what we would do to help them, really present their business well, but actually make sure the risk of the transaction falling over is substantially lesser. And if they actually choose not to transact, they should have a better business, regardless of that. And that's what we're all about, which makes it really interesting when you put these series of podcasts together, John, because it's very much kind of what we're doing day to day. No, that's great. Thank you. Thank you all. We've got a lot of ground I want us to cover. I think I'd like to start with just kind of a general question about getting businesses ready for sale or investment and what makes a difference in that. And if we start at the kind of broad level, I'd just love to hear how each of you thinks about readiness from your own working experience and Mark, I'll come to you first if that's okay. So when you think about getting a business ready for a transaction, from your experience as a founder and maybe some mentoring you're doing now, what really stands out to you as most important? Well, I'm probably from, you know, I mentioned before that the business development, the sale side is my kind of baby. Well, I think for me, if you're looking at it from a, you know, the buyer's perspective and the investment's perspective, then really you've got to be showing that you've moved past that kind of founder, led sales piece. You know, it is perfectly understandable that in your, in your original part of your start, your business or to be fair, even further down the line, that the founders are very folk, very involved in it. You know, they're presenting their vision, they're to the prospect, split the, you know, as you go along, but you've got to move away and demonstrate that you've moved away from that founder, led sale that you can evidence to a buyer that, you know, the sales success you've had so far is actually going to carry on past transactions, because I think a lot of people have focused very much on getting the point of sale when in reality, particularly when you're selling professional services for them, it's all about when those companies perhaps as an acquirer, you come together, can you continue that growth trend beyond that? And the more you can evidence that, the more you can show that it's not reliant on, on luck, you know, you haven't got one big customer that's got you there, it is really really important. And I can think, you know, back at my time at Edenbrook, you know, we had a point where one very large customer, I know Sean was currently having engaged in, was about 30% plus of our business. And we saw that as a warning, warning flag. And we proactive, we went probably a couple of years before we eventually did transaction to try and deliberately actually even turned down extra business to that customer at times, which I can tell you was pretty painful to make sure that we just leveraged the fact we had this great customer to win new business, to a point where this was now, you know, still an important customer, nothing like that percentage. And we had other customers who not only had a similar percentage, but potential to go beyond it. And that puts in a lot stronger place when we eventually, you know, got the business ready to sell. No, that's great. Thank you. Sean, from your perspective on that, maybe having set us along the side, marking those businesses, what, what are your perspectives and maybe what's changed on that as you guys have gone through different exits along the way in terms of what seems to really matter for readiness for a transaction? Well, I think the way I look at it is I think, and this is probably where James comes into play a little bit, is I think he's understanding what is best in class in a business like yours and what's a buyer looking for. And having early sight of that and having your business sort of really orientates itself around that. So what we've done in business is have a scorecard for the business that you're looking at on a monthly, quarterly basis that is seeing how you are doing against best in class. Now, it doesn't have to be hugely scientific, but, you know, your margins, your retention, all these sorts of things, he's understanding that. And I think having a track record of measuring your business against that scorecard is just going to make you so sellable. I think it helps you get in that mindset of what the buyer is looking for and being prepared to answer the questions about those things. So I think, you know, I'm a bit of a data nerd. So for me, that's great having that scorecard and the data to support that. And that is a real sign of readiness when you can see that you're starting to hit those best in class measures. I think then to Mark's point to really about found reliance, I think having all readiness. So how are you mature as an organization and have you got the right functions in place and the right people managing those functions? And I'd say the third bit of readiness is around the overall business readiness. And I think, you know, it's about having a consistent performance against those scorecards, not just one great quarter where you look great, you know. But, and where you've had bad quarters, and I think the James has probably done this a lot of times, he's having a really good narrative of why that was a bad quarter. You know, and so I think you've got to put your mindset in the buyer right from the beginning of the business. And then that will help you, I think, have a really good story when it comes to exit. I couldn't agree more, Sean, I think put yourself in the third party shoes and critically ask the questions of the business because I think we all, we all know because we've all, we all have our own businesses and we've run these and we've looked at other people's. It's very, very easy to get lost in the wood for the trees. You know the answer to it, but you're not articulating it. And it's very interesting when you just ask some very basic questions from a very third party, distant point of view, the answers you get. I think that's absolutely critical. I think the other thing, Sean, he said that was really good, is that a bit about data? I don't actually think it's about being a data nerd. I think you've got to think in reality, how either investors or acquires go to some great lengths to minimize their risk is by supporting their thesis through data. And they're looking for you to help them with that. That's the key here, businesses, investors, you know, private equity investors, definitely organizations, trade buyers, the actual emanate teams in those businesses do not want to take risk. They are not employed to take risk. They are employed to minimize risk on what is happening. And if you don't have that supporting data, you start relying on assertion and all the classic lines come out, trust me, I've been in this industry for years, it'll be okay. We've never had a problem before. And guess what happens? The interest level in the room deflates and no one's going to do it. And it's really important to get hold of. I think that's right. I think the one thing I'd add, it's quite interesting as well, is about being in, I don't know whether it's in sync or in the interesting bit of the market or being perceived an interesting bit of the market because again, for every business that says I've created an entirely new market, everyone told me I was wrong and I proved them that I was right and they were wrong. There are a million fails. And if you want to be salable and get something over the line, you need to be fitting into a wider market investment thesis, it's very hard not to. If you are, your data is almost supported by reams and reams of market stance right from the out. And I think thinking about how you fit into that market and how you articulate your story is absolutely crucial because that thematic approach is where all of the private equity guys come from. And just to be clear on that, are you saying kind of almost you use others in the market and the successor having or the evidence you can form from them as an additional foundation on which you're building your own story? Absolutely. Absolutely. Because the validation is absolute validation. There's a massive market opportunity. You don't have to believe me. Talk to these other 15p. Wow. That's powerful, isn't it? And private equity are fascinating there as well because you basically, you end up in these hot sectors, don't you? And you basically, you know, you can literally say things like, well, you bought our big competitor but we're better. You know, you should have bought us because the next guy is going to buy us, you know? And the marketer, any misconceptions you've seen among founders you worked with or maybe suddenly you might have had yourself about what readiness means and what people think versus what the reality of finally business properly really looks like. Yeah. One of the things that I guess, you know, I think we're all talking about this as if it's, you know, which will happen. You know, go to advisor, you do, you do better advisors and you say, right, we're going to sell in 12 months time or six months time. You suddenly make that decision, this is the moment. And you set this process off and you send out a little letter and, you know, teasing people that they're going to be involved. You try and get a short issue, build them into a process. That's all well and good, but you've forgotten that the outside world is going along without you. You know, the people are potentially buying and investing. You're all going along quite happily. And if you're, if you're a consulting for a particularly, you're likely to be acquired by somebody's bigger than you, you know, for UK business, you're probably going to apply by a American company looking to come to the UK for the first time. They've got their own cycle. They've got a dedicated M&A team, they're not like you have to bring somebody in. That cycle might be they do one transaction a year, two transactions a year, you know, if you're sort of like coldness, they might do 20 transactions a year, whatever it might be. And you have to fit in with their cycle. So you might have said beautifully in your advisor might help you say, you know, on April 1st, we're going to do this and on 25th of December, we're going to close the deal. The reality is they go, if somebody's really interested, they're going to set the agenda. Conversely, you know, one of the problems you have is that if you hit somebody at the wrong time of the cycle, you know, when we were trying to start a Eden Brook, we did all of that. And the company eventually sold to a touch of consulting was in the midst of another transaction. So they couldn't handle, you know, our transaction, they couldn't do two at once and got the capacity. So they passed us by. In fact, it was about nine months later, we got a phone call from them saying, we're interested in buying you, are you interested? And we kind of went, we spoke to us nine months ago and weren't even, you know, even, you know, replied to our first response, oh, we were busy on this transaction, you know, by that time, they'd actually come to their choir was a management consultant for their business in the US was managing consulting and IT services. We just did IT services. We fitted an exact gap in their market that had some structural problems with the company they acquired that required us with much bigger to come in and effectively do a reverse takeover, although they paid us to do it. So their buying of us was really, really strategic for them. So we're in the perfect, you know, Jason said the perfect store where somebody's desperate to do because after this, the strategic problem, they're not, you're just not coming on the market and say, would you like to sell me, Gav, buy me, Gav, you know, you're kind of coming in there and doing it. So I think you've got to be cognizant however much you've run a lovely process and not saying you shouldn't run a process, but just be cognizant and the buyers, you're buying to won't fit into that. So you're timing of when you might exit as much as you'd love it to be, you know, we issue these papers, we get our bids and we sell it, we close the transaction, it will always be a longer time frame. One of the things I want to just leave people on that one is that you've got to be really careful that you're not sort of grooming your business for the point at which you think the transactions go in because inevitably when you're going through a process, your whole business will start to suffer because you're going to never to be get distracted. So you've got to make sure that, you know, if that transaction is delayed by a month, two months, three months, even longer, you haven't sort of had your business start to fall off a cliff. And that'll look really bad and make it almost impossible or much more difficult to get it away. What if you do at a price that's, you know, something that you're attracted to, it was attracted to you? Yeah, and I think that point about, there's lots of things you control, there's lots of things you can't control. And one of the things we talk about in the Unlocking Value publication that we've released is kind of, if you've got a specific time frame in mind, make sure that you kind of well backed up from that to give yourself some headroom and don't tie yourself to things that really are as much as you now try to control them outside of your control. Just wouldn't mind to go a bit deeper now and talk to end of some specifics about things that make a business ready for investment. I'm curious to what it comes back to the point about putting yourself in the buyers or the investors shoes. What are they really looking for when they're buying business? And what does that imply for what founders or owners need to be thinking about and how they prepare? What do they want to see? What should they, what should owners be thinking about to decide whether they're actually ready to start a transaction flow? But let's look at the investor view on that. Sean, maybe come to you from your experience of having been on the other side of that. What are some of the things that you've found buyers we most interested in versus maybe what you thought there would be interested in? Yeah, there's lots of different angles on this one, but depending on the buyer who take private equity definitely, they want to see some great sort of historic figures with some live trend lines, but I think they're buying the future rather than today. So they want to see that there's plenty in the tank for that business going forward. If they feel you've tapped out, you're at the peak, then there's no attraction of that business. It's more of a commodity buy than rather than a growth buy. But I think you have to, you have to, and this is why one of the metrics we used to give our customers in our software was a book to bill ratio. So what's your book to bill ratio? Is that constantly at sort of 1.2 or above, which means your growing business and your pipeline is bigger than the revenue you did last year for a buyer, says, okay, I'm buying something that's got some legs here rather than something that's, you know, that's reaching it's reaching the peak. So I think you've got to be thinking, you're not thinking about a point in time and then God, if we get there, that's it. You've got to always be thinking 12 months ahead, you know, so that you're selling something that's got some longevity, does that make sense? Yeah, it does. And you mentioned private equity on that. Do you think it's fundamentally different from a P buyer to a trade buyer on that kind of buying the future thing? Or do you think it's? Well, I've done it games probably way more qualified times to that, but I think it depends on it if it was a trade sale, what they're buying. Are they buying, you know, a skill set of people, domain expertise, in which case, maybe not so much, but I think private equity, definitely, you know, they want that growth engine there, you know, unless it's a tuck in acquisition to complement something else. So I think there are different flavors of that, but I think whatever you're business you're in, I think you have to sell the future, have the vision of where you're going in the next one to three years, not just where you are today. I think that's more the point, I guess. I think that's a super good point. And, you know, it's there from the very beginning, isn't it? What is mechanically, what is a company valuation? It is the future value of its cash flows, the key word is future, so you've got to really think about growth. If there's no growth, it's a tough, tough, tough sell. I think it's interesting, PE and trade, because I think if PE are buying a platform to go and develop and maybe do its own M&A story, they look quite in some ways. The difference being PE need it to stand alone. There's no synergy play, whereas trades, big trump card is, they can drive some synergies. Now, you know, a whole different podcast series for you, John, will be how many times in reality any of these buyers ever get the synergies out of it, not a lot, but you know, it's a fundamental starting point, isn't it? I think that's that. I mean, it's interesting going back to the question, if I may, that you asked John, John. I think, you know, what a buyer's investor is looking for. Miriam, different things, right? But I think it falls into sort of two broad camps. I think there's almost like the easy to do, easy to understand, hygiene factors covered risk is managed, ie, can I quickly, without wasting my time, really understand the nuts and bolts of this business? Does it make sense to me? Is this sufficient evidence for me to compare my own investment paper or buy paper? Can I scope a due diligence process? Can I think about all of that because there's data there? I, not a lot of uncertainty and it's all the box-banded nuts and bolts. Custom of concentration, management team with great gaping holes in it, numbers going backwards, funny territories being sued by someone blah, blah, blah. Can I get to know you quickly? But that's a base level. The bit that really puts the sizzle into it is then the second half, which is strategically, how does this really fit in with what I'm doing and how can I access that? Is it new customers? Is it new people? Is it new skills? Is it geography? Is it different disciplines? Does it allow me to cross-sell something? Is there something in here that strategically meets my objectives? Because I'm happy with the hygiene factors, you see what I mean? It all stacks up as a base level and now I can push my valuation if I need to. Of course buyers don't want to pay a high valuation. The cost, strategically, that makes sense, which comes back round to the absolutely totally 100% accurate comments that were made previously. Is there some growth in this? Sell it. You almost want them. It's a funny thing, isn't it? You almost want to say to your clients. Why don't you really think about launching your process at least 12 months before you think this is going to peak? Because you've got a lot of time for a process and it's still all going the right way before something goes wrong. You know, different deals. Some people, they're raising capital because they want to go on a three, five-year journey and grow, grow, grow. But a lot of people who just want to sell, you know, my honest advice at 25 years' experiences, you don't wait till you've got your optimum financial performance and then go now it's time to sell. Because you'll miss the boat. Because there's a mindset that entrepreneurs have, all of a sudden, they're not driving it as hard as they want to maybe were, because they're sat there going, "Hey, I'm 55 and I want to be out here in two years." And look at this villa I've got in Spain. I think I'll spend a bit of time there and all of a sudden, you know, that sizzle starts to just dissipate a bit. No, thank you. I think one of the revelations I had, I think, you know, darling to what Sean said is, I think when you're running a good business, you spend a lot of time with the data set up to give you the warning flags and the indicators of how your business performing, but that isn't necessarily digestible for the person who's are investing, you're acquiring you. And I've been, you know, quite often times, you know, you've got some of your acquiring for example where the M&A team want to buy you, you know, they're paid on the number of transactions they do. So there's in there, it's bizarrely, it's in their interest to make it happen. And your job in the process is to make sure you present your numbers, to listen to them and understand that. I present your numbers in a way that helps them. I can stick in scenarios where, you know, before we started doing managed services, you know, there was a big push for the Neurty part, you know, what, how much a Neurty revenue you've got. And so you could play kind of fast and loose with their, you know, with their knowledge. You weren't trying to think dodgy, but just to understand, well, actually, that revenue has really repeat revenue, you know, we've had that client for years. We've done that particular part of the contract. You might not call it a managed services contract. It allows them to put that into their model, which gives you a valuation much more easily. You say, no, no, no, that's not managed services revenue. It could be in three years time they cancel that work, even though we've been doing it for 10 years. And so you've just got to be flexible. But before you present those numbers, you've got to listen to how they're doing that and then presenting that way because generally they want to buy you, you know, you're not having a fight. So they're actually, you're trying to help them to present the numbers to their investment committee or their senior management to say they wanted to transaction. So make it easy for them. Yeah, and I think there's a really good point there about talking to your buyer or investor pool ahead of you transaction. What are they interested in really? Where are they on their investment cycle to avoid that? Oh, we've got a moratorium on M&A this year, or we're just swallowing a big overseas thing. You've got to do that. It's a really poor, poor process where everything's done in isolation, then all of a sudden, the IM goes out. You need to be talking six months, nine months, maybe 12 months, maybe longer out. Just getting the relationship built, listening to where, why they are and what they want. And then you take that away and think about how you're back to them. Sorry, Sean. Across him. No, you pretty much said what I was going to say, but the only nuance would be I think there's different flavors for different buyers within the same process and understanding that and not necessarily in your IM, but in terms of how you present understanding what the hot buttons are for those particular potential buyers or investors because they will have slightly difference agendas and thing vision for what they, where they're going with it. And that's not easy because you, you know, you potentially got half a dozen in the mix, you know, but I think really understanding it like you would if you're selling a project or an engagement to a customer, you really understand what it is that they're real, the real need and benefit for them could just, I mean, I think it's a really good point. Can you think of any, any examples that would bring that to life, maybe a couple of different people you've worked with on the buy side who different perspectives that you need to be kind of playing into slightly different, just to help people understand a bit more specifically what you say. Well, again, James, probably better here, but I mean, I guess if you've got maybe, I mean, in our situation, when we're selling Kimball, you've got PE and you've got trade in the mix, you know, and they've got different agendas, you know, so James's point, PE pretty much want to stand alone business, maybe they're going to do some tucking acquisitions, trade, it's a strategic thing because it's going to complement or they're going to get some economies of scale around the Salesforce or, you know, products they can sell to the same customers. I think you've just got to be mindful of each individual potential buyer and what's important to them and without making your, your, your I am completely generic and covering everything, but you're able to answer the question to knowing what their hot buttons are. Not easy, but I think I think it's just staying, think about your buyer really. Totally right. Are there things that you've seen James or Mark's on you guys have seen where people can overestimate how ready they are or things that maybe typically get left later than they really should that people kind of don't realize that one's going to catch me out. I should start earlier than that I might have fought. So where do, where do people think, yeah, I'm set. Let's go and actually do not, but I mean, if you got, how long have you got? We've not got that long, John. I think I think it's understandable because a lot of entrepreneurs, they're very focused on their own business and their own niche in the market and they're just driving that. And they don't think on the wider picture, which is why things like non-exx, board advisors, giving different perspectives, challenging asking questions are so important. I have to say that. I think that, you know, one of, one of the things that they can conceptually struggle with is the difference between basic management information that's suitable to run a business that they've possibly founded or running run for many years and therefore have an intuitive feel to how it works versus something good enough for an external due diligence team to get their teeth into. So there's always a gap there. I think the kind of stuff that catches people out on the preparation. I think there's always something about the C-suite, there's always something about the proper senior leadership team. Is it really investible? Are they really, or are people, you know, cap it out? Maybe some people, there's gaps, maybe there's that kind of thing is a bit of an issue. And I think one of the, the other big areas that consistently comes back, so it's always big three, there's like the data to it for external, there's the leadership team. And I think it's client relationships, approving that they're really solid. We've worked with these guys for 10 years, they've never, never let us down. They spend a million dollars a year with us, come rain or shine. Well, are they going to do that when you've left? Can you prove to me? You could do that. And then it all starts, doesn't it? Oh, well, I'd rather we don't talk to them at the moment because we're just talking about a project extension, or actually we're just in the middle of a rather interesting conversation around recovery of time on something. So I'd really rather you didn't come along to it, do you know what I mean? All of a sudden you're, your confidence in the I am and your management presentation about super sticky relationships over the long term starts to evaporate quite quickly. Because no one wants to talk to their clients in a people business and say, I'm selling I might not be here. Yeah, that's a good point. I was just going to add to that, I mean, fundamentally for me, the most important thing particularly in a services business is, is it typically, isn't going to be one person who owns all the stock who can make the decision? It's going to be a group of people and my own experience and also from talking to many, many, many, many, you know, friends, people, people have come across who've got their own services particularly. There is a, it's almost always a mismatch in expectation between the founders. You know, it could, it's simply things like age, you know, when are people looking to retire? You know, they're family situation. Their expectation of how much money they need off the table and, you know, is, is different. Their expectation of the shape of a transaction is different. You know, how much they want to take off from day one and how much they want to potentially have in what inevitably was some sort of performance related earn out down the line. You know, fundamentally, what do they want to do going forward? You know, it might be okay for you if you're sort of my age and you want to retire and spend the time with the grandchildren. And if you're, you know, 15, 20 years younger, you might want to carry on in that business. And if you find that the company is acquiring you already has doing somebody doing that job, that personally works for you, suddenly working for somebody else. Those things are show stoppers. And I always ask the first thing when people speak to me is, you know, are you all aligned about your expectation of exit? Almost 100% at the time, if at 100% at the time, people are saying no. And typically what I'll advise is they go away now way before the direct transaction and maybe use a third party to help them and back that thing out and agree it. I mean, I was very fortunate with Sean and our other partner, David, that we were totally aligned. But that's the only time I've ever had that experience in my life or seeing it. So maybe we were the 1% so I'm very grateful for that situation. But, you know, it was a pleasure. Whereas I know I had bitter experiences, not, you know, a bit as a wrong word in terms of the people, but it was understandable. You know, we're all different. And, you know, I think people have to accept that the day you do the transaction isn't the end. It's probably the beginning. And so you've got, and people spend lots of time worrying about the transaction and not enough time worrying about past that. And even down to your, your management team, this will be incredibly law to you. We may not have made the sorts of money that you hope you're going to make from this. And you're leaving them in a terrible situation and that's going to come about you. You know, when they find out that they're not working for you without a fantastic relationship for many years, they're suddenly working for somebody that perhaps, to be honest, they're better than that person. But you've had to compromise in the transaction that's now their boss in America or whatever it might be. That's a horrible place to be. Let alone financially just for a person to point at you. So I think if you think about all of those things well ahead of the transaction, it's a lot less painful in the way you go through the deal. It is. And it's interesting, Mark, isn't it? That, you know, classic, I think it's an advisor issue as much as anything. Because, you know, your classic A advisor focuses on the process because that's within their control to some extent. And that's what it's all focused on. And they also focus on the stakeholder that has engaged them. And that is often a vendor who's going to run for the hills. So those questions that you rightly so pose are all kicked down the road with a, well, if they offer as big enough and the buyer's going to make it really interesting and worth while for that management team or private equity, you'll sort them out. You know, how many times have we heard these lines? It'll all be all right. We'll sort it self out later. But I absolutely agree. It's ridiculous. It should be dealt with right up front, the different groups within that management team and on the wider business. What do they want to get out of this? Where do they need to be for a deal to work? We're not selling houses, you know, we're selling living, breathing people that constitute a business. You can't just tell them what to do. Yeah. I'd agree. And we've spent a lot of time with clients and a lot of time, you know, thinking about these things on. We call it shareholder alignment, that kind of making sure that all the people who are ultimately going to have a decision to make are a lot of things. Indeed, there's one of one of the episodes in the series has been about that very subject and kind of talked to some different groups of shareholder if you've come through a process together and how they kind of made that work. Do you want more kind of switch your gears if that's all right? And think about how readiness kind of changes over time. I think lots of people think about there's a transaction and that's a point in time thing and it's a bit, it's kind of almost contained bit. And done well, I think getting ready for a process is something that kind of evolves. And probably the things you need to be thinking about, if you're three years out from a deal or different from the ones you need to be thinking about, 12 years out, they're all important, but it's important to get the things lined up. And I'm going to be interested to hear what you guys think about. So Sean, if a founder came to you and said we think we might want to do a deal in three years, what would you tell them about where they should start? And how would that be different if they said we think we want to do something in 12, 18 months? Like what would you do for an answer? Well, I think, I think James sort of talked about the hygiene factors first off. I think, in my view, you should be putting those foundations in place from day one so that you are capturing and managing the business with the level of hygiene that you've got that, you've got that at any point in time. So it's almost, that needs to be part of your day today, rather than an X, a one off exercise to prepare the alphabet, I think, if it's a one off exercise, you do it once and then it gathers dust and intolerance later, it's all out of date. So you have to institutionalize the things that you're going to need come exit, you know, to be that boring things like contracts, be that, you know, all of your HR data properly in place, you know, all of your data capture, your pipeline management, all of that stuff, or it should just be institutionalized. So I would be saying, have you got this institutionalized and is it part of your day today? So really, your focus should be on growing the business and having a healthy business, not necessarily focus on a point in time, because then you are always ready in a way with it with that hygiene. I think then you have to layer on top of that, some of the stuff we were talking about before that's, you know, what is going to make this super attractive and maximize your, your valuation here, and that might be your service lines that you're operating in and how of those matured over time, have you got proof points in certain sectors and things like that. But I would, I would be always saying, just get that bloody hygiene institutionalized in your business. And as you get closer, I think, as you get closer, I think it's about understanding who your potential buyers are and then some things we talked about. And, you know, James and his company would be good. That's where you're sort of looking to maximize your value. So have you got something unique in terms of a service line, in terms of sector expertise, in terms of geography that's going to really appeal and how do you sort of elevate that and accentuate that so that you are really promoting it as much as possible. You know, maybe you're thinking about, you know, if it's a service line that somebody's really interested, you've got a skill set in a service line that you're really making sure your pipeline is demonstrating how you're really growing in that area, how you're gross margins in that area are better than other parts of your business, how you're getting more annuity revenue in that, you know, all those sorts of things, but it just starting to then, because that's when you're sort of levering up the valuation. Yeah. I think, you know, that's absolutely right. I think the interesting thing to look alongside that, which I think is related to time, is working out, you know, what battles you actually can win. What are the things that you nail properly, even your time scale, because if you've got three or four years, and I think using that concept of institutionalizing the data build is a brilliant one. That's wonderful. We all aspire to it. How often do we see that? Not enough. So when someone comes along and says, hey, I really want to do this in the next eight, nine months or actually something which happens quite a lot, I've had a few phone calls from people. It looks pretty interesting. What do I do? I think the thing to do is to go, okay, if you really want to, if you really want to go for this, fine, you're probably not going to really maximize value unless someone is strategically in such a situation they need to buy you. So if that's the case, let's just make sure you do the hygiene things we've talked about right. But then what are the two or three things that really drive value? And let's just nail them properly, because we can probably do that in six, eight, nine months, 12 months. Let's not try and do 15 things and half finish some of them and not start others and sort of bodge a couple of others, because it'll all unravel in the process. So, you know, if it's a case of, there's a particular, as you were saying, sure, service line that's super interesting, that's growing them at, let's make that the cornerstone, because that's what's got these guys interested. And then when we talk about that, we have everything absolutely nailed. I think also my observations, I think this assumption that, you know, you're going along quite happily, quietly, and suddenly you decide that there's a process to do three years whenever it out. The reality is, if you're doing well, you'll start getting people phoning you up within a couple of years. And you won't, you're not ready then. But there is a point when you're not quite, you don't think you're ready to do a process, but people will give you potentially attractive offers. And what tends to happen is, you know, you'll get a phone call and email saying, you know, you're interested with such a big company done in a jar and you think, that's really exciting. They bought somebody like us. This could be great. So you go off in a completely random way and you start having conversations with them and you waste a lot of time and they ask you for more and more and more information that burns up time. So, you know, back to, I guess my point about the stakeholders being aligned, you know, one of the tips that we did was we have a session where we agreed, even though we could not all agree, this is in my services business, we could not all agree on what as stakeholders, what the, you know, exit was going to be and how it would look, but we all agreed that if, you know, if the devil, we called it, if the devil came to bias, what would be the number that we would take as the minimum number we'd walk off the table for, you know, so if we, if we literally said the day of the transaction, forget the earn out, whatever it is we've gone, we all agreed on a number. And then what you can do is when you get those specular offers, you simply say, will give me a range for a business like us that you would pay, no, you know, no commitment here, give them the minimum information of what your revenue growth has been, what your track record, don't have to give them all the details they claim you need, just to give you that speculation. And if they give you a number and we had that situation once, give a number that suddenly is in your range, then it's worth spending some cycle 10, then you probably have to rush and get an advisor, but, but either way, you've qualified that otherwise you can spend lots and lots of cycle time, you know, having those accommodations. So I think it's really important that you, you do that, I think it's just a simple thing to do. And that's right. And there's also a really interesting thing that people just seem to forget, you know, they get a knock on the door. It's all very flattering, feel good, but let's be honest, those, those larger consulting businesses that are very quiz, for example, and all of private equity, they all have their own deal origination teams who are paid to speak to entrepreneurs. It's flattering, but they're on a fishing trip. And the problem I think sometimes with people is particularly if they haven't sold before, they just open up the bonnet immediately with no thought for what they're saying. And once you've told someone something, you can't untel them it. And then the advisor comes along and says, oh, no, actually the annual recurring revenue is not that number, it's this number, and it's like, hmm, too late. And the bit that's quite insidious and you've got to be very careful about is the corporate and private equity memory is long. So when you're going to do that in 2025, it's going to take you quite a long period of time before you can tell a very different story for them to go, that's okay, that's great. You know, it's a few years, so you've got to be very, very careful what you say. But of course, if you just focus on giving them the bare minimum that you're rock solid on, because this is the way you run your business and collect your data and think about the world, you are protecting yourself. Yeah. So you're doing lots of nodding? Yeah, I advise cut the businesses and one of them, I think it's that, you know, flattery of that inbound. My mantra is less is more in terms of what you tell them, because they have got long memories and, you know, come back in a year's time and you'll have told them what you're going to do this year and if you haven't done it, they're not going to forget that. You know, so you've blown it there straight away. So only cast a, as James said, any cast iron facts that you're really solid on and I would say less is more. One of the things that we see a lot in our work is how easy it is for people to underestimate how long good succession planning takes and how key that is to a business is readiness and it can be really obvious if you're wanting to exit, but it can be important even if you're not wanting to exit, but you're trying to grow and you use the kind of owner or founder might need to start to move into a different role that you're going to have more capacity. So what do you guys think about succession in Mark and Shauna? I suspect that's something you've had to think a lot about yourself, so maybe start with you Mark. What's your general view on kind of succession as a factor in reading this? I think, I mean, it's obviously really important because most, you know, at least one of you maybe wants to be there, I think the thing to remember is that it's your baby, you know, it's really hard to give out and you don't realize even if you give somebody that role that you're not interfering, but it's very easy to say, I mean, if you're in a big company and somebody says to bring in your successor to, you know, as you grow the business, if it goes wrong, you know, if you're working for Oracle or something as we both did, you know, they can afford that blip in the road. It doesn't affect your career. You know, this is your mortgage money you're paying with here, you know, it's very hard to do. But I think culturally, you know, one of the signs, you know, you kind of see a rent. So I remember back in the business, Shauna, I worked before for the last one, you know, Shauna was running the biggest part of our business and, you know, doing it. I want to do a great part of the job in that and it was a resinist point where I felt, you know, I'd set as my business parts beginning, the kind of vision of values in the business. And it was a point in time. I think we did some sort of surveying where people said, actually, our loyalty is no longer to that kind of value and vision. I'll prime, you know, yes, we believe in that, but our primary loyalty is actually to the practice, the team I work in was actually, you know, Shauna and the biggest practice of these practices. And my nose was out of joy, I can tell you, you know, because, but actually I suddenly woke up one day and realized that's a really good thing, you know, we're now building out of that. This is scalable. Maybe when we do get that offer, they won't be going, oh, you know, Mark, you need to be here for the next 100 years. And that's, that's kind of when it happened, you know, when it got to. So I think it's really important, a funny story is that there was a very large Italian services firm who won't tell any more about it, because you might guess who it is, who actually we got into quite a bit down the process who actually in the stipulation, the number one thing they wanted was that the CEO would commit to being in the business for the next 10 years, otherwise the deal was off. It was a kind of family business. I think that's very unusual, but I mean, not having succession there planned was a really big problem. So it can bite you. So I think it's fundamentally important. But I think it is difficult to do because you can't necessarily do that. And I think, you know, one of the things that your conservators business grows on is that you start to have a glass ceiling. You start to lose the opportunity to promote people because you're stuck in situation. And in fact, in our Eden book business, one of the things we realized that and we actually planned to start a separate business, funny enough to do professional social automation which you and I went on to do because we thought that was the only way we could pull some of the people who were kind of blocking the promotion path of succession into another business. So it filled some holes. Unfortunately, or thankfully, we saw the business full. We got to that point. And then some of us went off and did that as a separate thing afterwards. But we had proactively thought about how we could enable that without impacting the financial stability of the company. James, from an advisor standpoint, what do you see in terms of succession? What do people get right and what do they maybe trip up all? I think to be honest with you, it's done quite badly and for lots of reasons that Mark touched upon, you know, it's quite hard in the scale, a small scale business to have two leaders, you know, who wears the crown and all that kind of stuff. I think also there's a practical issue that people get very head up about and it's the cost. You know, if you're a founder, entrepreneurial leader, CEO, and then you think I need to replace myself and that's going to cost you a couple of hundred thousand a year for the right candidate, that makes a dent in profitability, everyone's telling you to maximize your profits, to maximize your value, it all feels quite hard. It's just not done very well. I think where it works better, I think first of all, there's a good long run in and there is genuine succession. So it's not that you end up with two CEOs, let's say, there's just focus on that. That's not the only succession thing, but it just short hand for the whole kind of level. You don't have to parallel running. That's quite difficult. So it requires somebody to step up or to step out, to create the space for someone to come in. I think you need time to let them have a really good go, but you have to manage their performance well, because if they're not the right person, don't sort of plug the dead horse and persevere with it. And therefore a lot of it comes into the right kind of recruitment for the succession. And it might be that an organisation really would benefit from someone with experience external to the business. Sometimes it might be internal, but I think one of the things we see a lot of, you can struggle is, here is someone, they've been with us for a long time. They were head of sales and then they moved to be head of operations and they're clearly going to be CEO. And where is the question of, is that actually your CEO or should that be the CEO or should that go back to sales? It's just because you've been around a long time and you're a good person and the servant of the firm doesn't mean that it's not a seniority system. You've got to think about that. And therefore running an objective with some third party input, proper recruitment process like you would if you were working for a large corporate is actually really good discipline rather than try and do it on the cheap internally, because it can feel easier to do. Go back to what we said before. What would your buyer or investor think of that candidate? What would they really think? And I think within that as well, the other thing about succession is, you know, let's do a succession program. Let's actually, you know, what does succession mean? What does it need to look like? How do we manage that? How do we help someone and let's give them enough time to do it? Sean, anything to earn on succession? Yeah. I mean, I think there's a lot of management contours. His love of a good old race he made tricks, but I do think that, you know, the delegation of responsibility and accountability, I think is an important thing. It's a halving to Mark's point, it's really hard for founders to let go of things. But I think you have to do that and I think you have to give accountability. But yes, you maybe have to have a safety net there or an early warning, you know, system that's going to, if things are going off the rails, you can jump in. But I think you have to let people stand on their own to fee and feel like they own it, because it will come across when they're part of the due due diligence process. If it is obvious that the founders pulling all the strings, then it's going to come across. You know, but if someone truly has been given the accountability for an area of the business, I think it will come across. It is super hard. I totally, I'm probably one of the worst culprits of, you know, not wanting to let go or, you know, looking out for things, but I think if you can do it, and I think it's about the organizational structure and just making sure that you are, you know, the delegation is there and the ownership is there. One of the things that surprised me when I took a previous best business as CO to set through PE back measure by out was that the investors never wanted to speak to the owners of the firm who were going to be exiting their intention was that they wanted to exit and they want to do a clean and that was part of the part of the deal and we were all okay with that. But, you know, they talked to him about kind of deal terms and, you know, contracts and tax and that kind of stuff that was in the not so much, but they never even spoke to them once. I don't think about the future of the business because it was about us as a team that was going forward, not the team and I'm not saying we got all that right, but they were interested and people often surprised when I particularly if it's somebody who really wants to leave, I'm like, well, you're invested, the investors are not interested. We talked about this as being they're not interested in the past, they want some hygiene stuff from the past, they're interested in the vision and the future and the kind of dream they're buying into and you're kind of just history as far as they're concerned. I'm going to start to kind of bring us to a close of it. We could probably go on for a really long time, but I guess just before we get into a couple of rapid-fire questions, anything that we have it cover that you guys think is super, super important from a specifically from a readiness standpoint that people ought to be thinking about, either things Mark, Sean, that you learn that you do differently or kind of James, your top one or two tips, anything on the readiness point to bring in before we get into some other stuff? Mark, I think. Well, I thought Mark would have, but I'll team up for this one. Oh, for it. I think you go to Mark here, is that that's mechanistic, not just networked from the founders, you know, so having a real demonstrable sales engine that isn't just net, I mean, he's God of network selling, but you spend a lot of time making sure that we had a mechanistic sales engine there, because I think that the repeatability is important, but I think. Yeah, I know. I obviously agree with that. I think I spend a lot of time now with people helping them around the sales engine and scalability of that, and why is it that you're, why is it that you're different? What's the really understanding of fundamentally? Often times, you know, when I look at sort of win-loss analysis, for example, you know, people will say to you, why did you lose this or why do you win it? And you find out they haven't asked a fundamental question. We had a differentiator and they'll go, great, did the customer say it was a differentiator? And some people will say, yes, it was. And, you know, but their third best is did they say that differentiator mattered to them? And people sort of sit on their hands and kind of go, no, I never really asked that question. So you kind of, that's why, you know, that's the reason you've actually lost. And that's true of customers, that's also true of people looking to acquire you, you know, really trying to see why this, what do you add to that transaction? One thing I'd add as that, I think we've kind of touched on it, is the, just a specific tip, I would say, is one of the things we would do was run kind of a mocked, you diligence exercise. Yeah. And actually tell people we were doing that. And that may, you know, to what Sean was saying, that may just create the data route. Because one of the, often times when you do these transactions, it's very confidential. You know, when you're, when you're being bought by a, say, a public company, they will not want this to go to the market, you know, it's marketed sensitive. And, you know, you'll be signing in blood, this doesn't come out anywhere. Um, so you've got, you know, just suddenly saying an email to all your team, can you make sure we've got all the sign contracts and the purchase orders and all the things that they're going to ask for? Suddenly rings alarm bells. And if it's just something that you do every six months, you do a little audit and we used to bring a guy and didn't we Tim Sean, who was, who kind of, you know, who come in and they knew Tim was coming in. Tim helped us on the M&A down the line and help us getting ready. But Tim would just do this and everybody just didn't think it was a normal thing. Oh, yeah, yeah. No, I'm sorry. I haven't got that copy. We'll ask the customer for that. And quite often it's the customer. If you're suddenly asking your customers, can we, can you find those contracts and the invoices back from such and such? We can't find anymore. That's a real alarm bell. If you say, can you have it by next week, please? If you've actually asked them say, you know, well, you've got a couple, you know, when you can find it, that's fine. It's a much better place. Suddenly you've got that data, but also from a buy point of view, if you turn up with everything to every I and T crossed and available for them, that just gives them a wonderful feeling about the way you run your business. Even if to be honest, you've actually done this thing in the back, but I had to make it happen. Their perception is that you're, you know, you're a well-owned machine. No, great. Tim, then you're finally ready and there's a top tip for you. I think, I mean, there's loads of really good stuff there. I think that do things properly, don't skimp, don't rush, don't worry too much about pressure from external, because as we've said, maybe 20 minutes ago, you're very unlikely to be running to someone else's time table anyway. So don't skimp, because it will come back and bite you. And I think the other thing is that we've talked a lot about data prep and depersonalizing and succession, leadership and things like that, that does the other thing that's really obvious that people just don't do, which is practice, practice, practice, practice. You've got a big session where you're going to present the business to your number one buyer, practice, practice, practice, practice, and, John, you remember this, and when you've got that number one buyer or investor, what you do is you don't have that, your number one presentation, go and find the people you can't stand and hate and would never sell two in a billion years and go and do it on them, first of all, two or three times, then go and talk to, and then in the great Aaron of the world, you'll find the people you met first of all with the best. But anyway, that you just need to practice it. That's great. Now, thank you guys. It's been a great conversation. I've got a few questions I'm asking all the guests across the series and I'll kind of take it in turn and try to start with you on the first one and then come to James and Mark and then we'll do the same on the second one. The first one is, if you could go back and give yourself one bit of advice before your first experience of preparing for a deal, what would that be? It might be about mistakes you made, value generated, something really different. What advice would you give to Charlotte of the past? I think it's getting the balance of your time between running the business and the process and making sure you're giving both the right amount of time and not favoring one too much, I think. That's hard and it just means you're doing long days, but you mustn't forget about the business because, as James said, Bill, it would be a different time scale and soon as business starts to drop, then you're in a world of pain. I think it's getting that balance and getting a right team to help you in that as well. Everybody knows what they're doing and it's not all on your play, but making sure you've got the balance between running the business and running the process. I think you, James, don't wing it. Do not wing it. You have to from time to time but minimise the number of times you are absolutely winging it because you will get found out. That's great. That's great. I would say have a think and visualise what it's going to be like that you're no longer your own boss and think how bad that's going to be. Then multiply it by 10 and then when you're negotiating your deal structure, think about what you want to get off the table. I think there's a stat somewhere, however, it's true that so's the average time that somebody stays in the business when they sold it is 18 months. I think you have to think that it's going to be the minute you leave. You've got to be whatever performance number you've got, whatever extra money you might have, you've got to think, actually have I got enough off the table that if I really hate this, I can walk away because after all, you can always do it again. Yeah. No. Second question then. It might link into that a bit is what one piece of advice would you give to a founder who's thinking about taking you on investment or selling whether that's five years out or next year? What advice to a founder who might be listening, Mark? Well, I think it's don't be too focused on the short term. I think you've got to be focused on just building out of business for the long term and something will happen at the right time if you do that. I think you've got to be focused on the long term and not worry about whether it's going to be two years out, three years out, five years out, ten years out. Have a depressing heart might be, you've got to make the business right and I think there's some things you can do at the beginning. One of the things that I'm sure James does when he first arrives, he says, who are the people that are likely to buy you? I think you know that. That's what advisors will ask you. If you know that, think about making yourself easy for then to acquire it. It's very tempting to do, we could do a bit of this. We could start an operation in the US. We could start an operation in France. We could do this extra service line and you have this very broad set of things that you do. That makes you really hard to be acquired. Stick to the knitting. Do it really really well and somebody in trust that somebody would belong if you've got a good loan to long term business to go with. If you do get acquired, actually you've got a nice business to be part of, whether you want to stay with it long term or not, you've not set it up to fail, you've set it up to succeed long term. That's great. James? I think those are really good points there. I think it's quite interesting. Almost even though you're setting that you're running the business and your aspiration is to sell. Or may run it as if you're not going to sell it because what you don't want to do is make short term decisions, which you think will influence the price in the next 12, 24 months, that if that deal doesn't happen because the world goes into a global recession or something happens like that, our value destroying over the three to five years, you know, the process is a really nice thing that comes along because you're running a really cool business, not that you're bending everything into shape just to sell and you don't care what's happening to the business. That's great. And Sean, did it have advice for a founder or owner? I'll put maybe one slightly different feeling because you did say maybe take an investment rather than just selling. I think if you're looking at taking investment, even if it's a minority, just remember the dynamics of the business will change. Even though you will still have a majority amongst the founders, the dynamics will change because there's someone else sitting around the board table that you will have to listen to whether you agree with what they say or not and just bear that in mind, you know, because I think, you know, if you're bootstrapped, you know, or angel investor and you've been running the company and it's just you guys, maybe with a non-exec, but you know, things will change when you take an institutional investor on board. That's great. Well, listen, just that's been a fantastic conversation, really appreciate your joining us. If anybody wants to reach out, maybe put the, you're happy for them to get in touch once the best way to do that. Deem it. I'm happy if you want to. Absolutely. Yeah. Drop me an email. We'll have a chat. Yeah. Good. Well, we'll put that in show notes and that's it, so thank you again and enjoy the rest of your day and we'll talk to you soon. Yeah. Great. Great. If you found this episode valuable, there's more. Unlacking value is a six-part series designed to help you plan and prepare for a future transaction or investment. You'll find links to the other five episodes in the show notes along with access to our short but comprehensive digital book that complements the series. It's entirely free and available to download right now. It's our way of helping you plan what's next for your firm with clarity and confidence. Thanks for listening and hope to join us again.